The Current Strategic Position of Amazon com - Essay Example

 The Current Strategic Position of Amazon.com Current Strategic position: The current strategic position is that it is the topmost online seller of educational items like books, DVDs, CD’s, music albums, etc in the world, with turnover crossing $ 137.6 billion and is expected to reach the $ 22 Trillion mark by next few years. The main reasons for the phenomenal rise of Amazon.com is its continued focus to its customers and highly innovative marketing strategies that may not be conceptualized, let alone implemented by their competitors. The plethora of innovative ideas and concepts and customer servicing devices has significantly reduced the anxieties of the consumers in exercising their discretionary choices and options and has considerably reduced the downtime for order booking and its execution. Due to these reasons, and also because of its strategic alliances with Yahoo and web guides in countries like Japan, Korea, Canada, Australia, New Zealand and many others, it has been able to reach out to an international internet audience . Moreover, its business associates are also swelling in ranks and may now be more than 900,000 members in over 150 counties of the world. Its strategic alliance with Dell Computers in co-branding endeavors has also yielded excellent results. Dell main strategic position has been due to its fundamental, or core concept, of devising a long-term strategy for its company, and all its efforts are being directed towards achieving a robust long-term leadership in this field. Current strategy: Its current strategy is seen in terms of achieving market leadership on a long-term basis by a portfolio of judicious investments that could consolidate its position and brand image in the global markets. Internet business is subject to ill effects of market vicissitudes, which strike without notice, and companies need to take previous safeguards to alleviate, if not eliminate the detrimental effects of such risks and threats. Problems facing amazon.com : The main issues that are now being faced by amazon.com are firstly, in terms of whether their present business model could be successfully implemented during the next five years of the company’s lifetime, or should grassroots changes need to be institutionalized to keep pace with market demands and changing business environments. Secondly, the idea of catering a large number of products and services to all strata of customers needs to be reviewed or not, and what the future holds for this kind of marketing strategies. Thirdly, it also needs to look into the matter of how marketing innovative techniques and methods could be successfully evolved to meet future leadership challenges, and how this could lead to increased levels of consumer satisfaction. Finally, whether the image of being an internet Wal Mart could be successfully sustained in the years to come. Major industry level forces which amazon.com faces: The major industry level forces, which the company faces, are with regard to its falling stock prices. The stock value, which once stood at $64.56, has even touched a low of $ 5.97 during September 2004. It is a matter of concern for the Board of Directors to arrest falling stock prices to restore investor confidence and bring investments into a new high. Besides, competitor activities are also present in form of Barnes & Noble, eBay, yahoo and priceline.com that are some of its active competitors. During 1997, amazon.com commanded a market share of 63% with yahoo.com commanding 29% , but as of 2002, amazon.com ‘s share has slipped to 53 % with priceline.com and yahoo.com sharing the spoils. It would be necessary for amazon.com to regain its market share through innovative marketing, building a stronger internet business model and adding exclusivity and high value products into its product portfolio. In addition, it would need to tap creative and hitherto untapped areas of internet supply applications to serve them better in later years. Amazon.com’s mission and vision in the case: Mission is to become the biggest internet bookstore in the world Vision has been in terms of creating strategic alliances and partnerships with leading internet and computer companies and service providers that could substantially generate value business and consolidate its position as the No.1 internet bookstore on a global level. The fact that strategic acquisitions of leading bookstores, in UK and Germany, only reinforces need to have alliances with Yahoo Chinese, Yahoo Espanola , Yahoo in Asia ,etc further strengthened and reinforced to serve the interests of users all over Asia and the other continents of the world, wherever internet reading is needed for business or entertainment. PESTLE Analysis factors Implication and importance Political Funding, grants and initiatives International pressure groups Government policies Shareholder/ stakeholder needs/ demands Time Frame: 0-6 months 6-12 months 12-24 months 24 + months Type: Positive + Negative - Unknown Impact: Increasing > Unchanged = Decreasing < Unknown Relative Importance: Critical Important Un-important Unknown Economic - SWOT Home economy situation Home economy trends Overseas economies and trends General taxation issues Taxation changes specific to product/services Social - SWOT Consumer attitudes and opinions Media views Law changes affecting social factors Brand, company, technology image Technological - SWOT Competing technology development Research funding Associated/dependent technologies Replacement technology/solutions Maturity of technology Legal - SWOT Current legislation home market Future legislation European/international legislation Regulatory bodies and processes Environmental regulations Environmental - SWOT Ecological Environmental issues International                               Aspects of VRIO in amazon.com: The acronym VRIO refers to: V – Valuable R- Rare I- Inimitable O- Organized A resource could be said to be valuable if it could desist a threat or assist an opportunity. In the case of amazon.com its valuable resource could be seen in terms of its innovativeness and customer centric focus. A resource of a company could be said to be rare if its competitors and rivals do not possess it. In the case of amazon,com, its associate network of over 900,000 members in over 150 countries could be a rare commodity, unmatched by its competitors A resource is said to be inimitable if it could not be genuinely copied or in imitated by rivals , and even if it were, it would involve large costs and efforts to do so, which may not be feasible in all cases. In the case of amazon.com, its inimitable resource would be executive leadership drawn from top management executives who have, on an average more than 20 years of experience in top-notch companies. Its managerial pool combines intellectual acumen with business sense and a practical approach to problem solving and decision-making. Ideas that could be implemented and well executed by management could be said to be organized. It is seen that most of the decisions taken by leadership of amazon.com are executed well within time, and they also prove to be effective and efficient models for future growth. Internal analysis of use of value chain in amazon.com : All the efforts of amazon.com has been made customer centric and useful for repeat and potential customers. It ensures hassle-free browsing and deciding on purchases including mode of internet payment. Moreover, it is seen that amazon.com offers the largest rate of discounts being 30% on Hardcover books and 20% on paperback editions. Even in some cases, forwarding charges are free for customers and it is now being proposed to offer the same to outside customers. The effective value chain offers value addition for customers at each stage of their interaction with the company and offers tremendous value for money, which is one of the main attractions of amazon.com. amazon.com’s financial structure: When Jeff Bezos, the pioneer of amazon.com commences operations back in 1996, he began with a private investment of $1.2 million and a Silicon valley funding of $ 8 Million. Shareholders’ position in case study: During the next year (1997), Initial Public offering (IPO) was made for 3 million shares totaling $ 50 million. Balanced scorecard framework: The balance scorecard was initiated by Kaplan and Norton and is primarily designed for management to realize corporate goals and ambitions through the use of four perspectives; Financial perspectives 2. Customer perspectives 3. Business processes perspectives 4. Learning and growth perspective. Under financial perspective, while the importance of financial aspects cannot be denied, it need not be an obsession in which the balance could be upset. While timely accounting and financial data are needed for preparation of financial statements, it may be necessary for amazon.com to also consider the quantitative implications of certain non-accounting precepts like cost benefit analysis, risk assessment, enhancing customer goodwill, retention and reordering, etc. Coming to the next perspective, it is dealing with the customer perspective that is of crucial importance to internet Bookselling Company like amazon.com. It is necessary to gauge the different typos of customers and their behavior pattern before making any commitments, failing which losses may occur to the company and its employees. This acquires a serious dimension because there is no personal interfacing with the customers and all transactions are routed through internet, which thus has an added risk element. The third perspective deals with business processing in which two aspects are considered – first the mission critical aspects and the second the support system. Under the mission system, the aspects that need to be considered are with regard to critical aspects like strategic management, supply chain management and internet servicing logistics by amazon.com. The use of knowledge and experience professional managers and senior executives to provide service and satiation to the clients would be needed in order for amazon.com to achieve its success over a period of time The next aspect deals with learning and growth perspectives: KP, or knowledge processing, which is the main line of business of amazon.com, is a continuous learning process and needs to be upgraded regularly. In such industries, the people or work force are the main strengths and needs to be continually trained and skill enhanced in order to provide the best services to customers. The use of the Intranet is also suggested which could vastly upgrade knowledge and skill sets. In tune with the customers requirements. Strategic clock : Amazon have several options to determine their pricing strategies keeping in view the strategic clock. They could go in for low price and low added value , but this could only be done if amazon.com would be able to make specific segmentation of their business . The second would be in terms of low price and low margins, which is done to attain market leadership. In the case of amazon.com, this would not be suitable since their market leadership is already established The third would be in terms of terms of low cost base and further investments in low prices, which again may not be appropriate for amazon.com since they need to maintain high process for differentiation. The fourth would be in terms of differentiation without premium pricing or with premium pricing. In the case of amazon.com, it needs to opt for premium pricing to increase its profits and turnover to be ahead of its competitors and also offer higher returns to stakeholders. The fifth would be in terms of focused differentiation, which considers projected price differentiation in terms of price increase in segments, which justify price increase. This option could be used in premium segments of amazon.com The sixth would be in terms of increased prices and standards by which the margins would either increase or alternatively, share of market would reduce. The seventh in terms of monopoly where prices are increased but standards are reduced. This may not be applicable in amazon.com case. Finally the eighth would be in terms of low value and standard price in which cases loss of market shares are imminent. Ansoff’s matrix- strategies for growth There are four aspects in this matrix – Market penetration, market development, product development and diversification. The most suitable for amzon.com would be product development by which new innovative products or services are marketed to existing customers and territories. Diversification may also be used by amazon.com to cater to new innovative products to new customers and markets. Strengths Weaknesses Opportunities Threats Strong leadership Investor confidence indicated in lowering stock prices Internet industry in boom period and expected to remain for some time Whether business model could sustain for next 5 years Innovative ness and risk bearing Competitive aspects from eBay, yahoo, priceline.com Greater market share through Diversification , penetration etc Competitors could encroach market share Wide networks And robust associations Accounting system combines revenues from internet business with physical store business Could form strategic alliances with other providers and computer companies Business may be affected by large scale layoffs and retrenchments Financially sound investments Lowering market share Purchase other firms whose business integrated with amazon.com Difficult to predict future business trends Profit making company Lack of specialized business product lines Growth rate could be enhanced through strategic planning and organizing Image of internet Wal Mart needs to be sustained for long SWOT Analysis of amazon.com: Boston Consulting Group: This group took up the task of narrowing the digital divide, which is the lack of communications that inhibit the growth of environments, in which there is a pronounced lack of computer, or digital communication. In the matter of amazon.com it would be with regard to increasing the scope and range of its operations throughout the globe especially in countries where internet facilities are absent or severely lacking Porter’s five forces This takes into account the different strategy options available to firm, and is considered as follows: 1. Rivalry – In terms of amazon.com, it would take into account the competitors available and their impact, low or high on this company’s bottom line and sales figures. 2. Threats of substitutes: Although amazon.com has reached a position of market leadership, there is always a threat of newer companies coming up in future, which could severely test the viability of this company. 3. Buyer power: In a buyer’s market to which the dotcom industry belongs, it is necessary to remain competitive in terms of quality, service and delivery. For this reason, it is needed to Constantly upgrade technology and meeting customer needs as far as is possible. 4. Seller power : In the case of amazon.com it would mean in terms of its market share and reputation gained over the years of its existence 5. Barriers to Entry/ Threat of entry: The dotcom industry is subject to newer players entering the field to make quick profits. These’ fly by night operators ‘ could endanger the reputation of the existing and established players and therefore it is necessary that amazon.com takes necessary legal protection and precautions to pre-empt any perceived or future threats to their business . Internal analysis exploring Amazon’s value chain: In order to achieve competitive advantage, amazon.com focused totally on its customers and their need satiation by offering them a plethora of products and services, which were as contemporaneous as it, was useful to the users. They began to offer unique patented software designed for goods and services for new customers. Even in the case of repeat customers, new security measures during computer transactions ensured that high level of customer satisfaction was made available with new products or categories. The top management were pragmatic enough to grab opportunities that came their way and they realized the enormous potential for selling financial software packages like intuit, quicken, turbo tax and other accounting software that took good care of corporate accounting and taxation transactions without much hassles. The aspect of one-click purchases dispensed with the need for order forms in the case of repeat customers and the customers were also introduced to user-friendly credit cards payments, which were only a click away. It is indeed to the credit of amazon.com, that they were able to introduce several remarkable and path-breaking conveniences for their customers, including a wireless e-commerce system, by which constant tracking of orders could be made even when the customers were not at their desks. Recommended strategy and action plan for amazon.com’s future: These would include in terms of entering into as many strategic partnerships and critical alliances that could be profitable to them in the long run and also enter into deals with other major book stores and music shops, including profitable acquisitions It is also necessary for amazon.com,s future growth to also concentrate of sales and distribution of books of the Harry Porter series which are worldwide bestsellers It is necessary that due to the need to preserve market reputation, amazon needs to stay clear of any intellectual property rights (IPR) controversies Further, it could also introduce many more other languages-internet services It has been observed that amazon does not post its toll-free telephone numbers on its websites. It would not be necessary to include it in order to have better sales, etc It is also necessary that it should stay clear of controversies regarding violation of US Federal laws in the sale of books and videos, which could enhance its market image and goodwill in the international markets Amazon’s resources and capabilities: (A) Resources: Professional leadership management with wide experience and expertise Robust associations with computer companies and service providers Wide equity capital base with high market capitalization and accumulated reserves A cohort of loyal customers and well wishers all over the globe Investments in key areas which are designed to produce long term benefits keeping in mind the present value (PV) of future cash flows rather than book profits Sound technical platform including state-of-the- art technology in book business (B) Capabilities : Innovative thinking and executing programs for customers A wide array of books, magazines, CD’s DVD’s and MP3 music systems. Planning diversification programs in new ventures Profit making company Customer-focused and belief in creating value additions to product lines Constant up gradation of skills It is necessary that amazon.com needs to view competitive abilities and skills seriously and device strategies to overcome them. The dotcom companies are susceptible to changing fortunes and amazon is no exception. Therefore, it needs to take challenges very seriously and strategize methods to overcome, or neutralize them. This is more apparent in the 21 st century method of conducting global business As has been rightly commented by the owner, Mr.. Jeff Bezos, risks and uncertainties remained as the company continued to enhance its business model and the way it serviced end users and also businesses, some of which were its competitors. Read More