Amazon Global Strategy - Essay Example

?Amazon Global Strategy Amazon, the leading online distributor, is a global electronic trading company that also provides a wide range of products and services all over the world. In addition, the company is also the leading supplier of cloud computing services all over the world. The company’s ratings by the year 2008 suggest that it had gone global with a market capital of approximately US$29.4 billion, and a working staff of around 20,700 employees (Stockport 2009, p.573). At this very time, the company had expanded across national borders beyond its original home in the United States; other countries in which Amazon had established its websites include Germany, the UK, France, Japan, Canada and China. Statistics also show that approximately 47% of the company’s sales were coming from the outside markets beyond the US home business. The company had also diversified its business interests, and it sold nearly everything including, but not limited to books, digital music and jewellery. Despite its acclaimed success and impeccable international reputation, Amazon has undergone through a number of challenges, which have been weathered successfully and efficiently. Some of the challenges that have bedevilled the company over the years include the failing shareholder attitudes and the current global financial crisis. The firm has continuously taken strategic decisions and actions geared towards sustainability and financial prosperity; this has seen it grow with an edge above its rivals in the electronic trade industry. This paper will dwell on, among other things: the dominant strategy-shaping economic and competitive characteristics of Amazon, qualitative assessment of amazon.com by use of Porter’s five Forces model, critical success factors of amazon.com, and the SWOT analysis of amazon.com. What are the dominant strategy shaping economic and competitive characteristics of Amazon? Any business is obliged to meet its obligations to both the shareholders and consumers respectively, that is, it should be profitable as well as cater for consumer satisfaction needs. In this regard, Amazon, like any other business in the world, has such obligations to meet. Since its inception in the year 1995, the company has experienced tremendous growth that has long surpassed its primary goal of becoming the largest and best bookstore in the world. However, according to Amazon’s CEO Jeff Bezzo, it is up to others to determine if the Amazon has achieved its goal of being the most ‘customer-centric’ company in the world (Stockport 2009, p.574). Amazon aims at providing consumers with their needs, introducing consumers to innovations and store personalization to cater for diverse consumer tastes and preferences. In order to achieve these goals, Amazon has adopted a number of strategies that act as a roadmap to economic prosperity and sustainability. Firstly, Amazon has adopted a three pillar strategy that comprises of ‘selection’, ‘price’ and ‘convenience’ (Stockport 2009, p.575). The selection pillar entails offering a diversified range of products and services; for instance, this includes retail products, software and cloud computing services. Under the price pillar, Amazon commits to price leadership with due regard for quality of products and services. For instance, the firm provides free transport to customers with expedient delivery. The convenience pillar dwells on ensuring customer satisfaction through the provision of relevant and effective goods and services. Amazon strives to understand customer needs and requirements through customer review and feedback reports on its products and services. Amazon’s staff recruitment process has also been tailored to promote achievement of the company’s primary goal (becoming the world’s most ‘customer centric’ company). The company does not choose employees on the basis of their skills, but rather on the basis of their need to meet customer needs and expectations. Bezzo argues that in the changing world, skills that are needed today may not be needed tomorrow; therefore, companies that focus on customer-needs are more sustainable as opposed to those that focus on skills (Stockport 2009, p.576). In this regard, Amazon focuses first on what the customer needs, then goes ahead to provide exactly what is required. Technology and innovation have been significant distinctive factors between Amazon and its rivals; whereas other retail firms are concerned with location, Amazon focuses on technology. Technological innovation has enabled Amazon to lower its operational costs, thus, offering the lowest prices to its customers (Stockport 2009, p.576). Apart from that, technological innovation has also bolstered research and development, thus, leading Amazon to discover novel ways of improving customer experience in online stores. It is this emphasis on technological innovation, which led to the major breakthroughs for the company such as Kindle, improved Amazon web services, digital contents and enhanced accessibility. As noted earlier on, Amazon has also diversified its market and range of products, a feat that has been achieved and favoured by the increasing technological innovations. For instance, the company runs several new sites all dealing with different kinds of products all over the world. Endless.com, which deals with shoe and handbag accessories, is one of them (Stockport 2009, p.578). Other sites include but are not limited to jewellery and watches stores, music stores, automobile stores, office supply stores, software stores and inauguration stores. Amazon has also increased its global presence by expanding its global network to reach out to other countries other than the US such as the UK, France, Germany and Japan, among others. Another vital business strategy for Amazon has been that of acquisitions and alliances; this has enabled the firm to pursue its technological innovation goals as well as diversify its products and services. For instance, Amazon has recently acquired companies’ such as Fabric.com, Reflexive Entertainment and AbeBooks. How does Porter’s five forces affect the books industry and which one is the strongest? The books industry can be analysed using Porter’s five forces analysis model; this is a tool used to analyze an industry's competitiveness and business strategy development. Porter’s five forces model outlines five forces that affect the level of competition in, and feasibility of a market. According to the Porter’s framework, the attractiveness of a market depends on the resultant effect of a combination of all these five forces. In this context, attractiveness of a market refers to its overall profitability, and a combination of the Porter’s five forces can either result to increased profitability or reduced profitability in any given industrial market. In other words, these forces affect and determine the ability of a company to honour its responsibility to the shareholders and customers accordingly. A variation in any of the five forces calls for market reassessment and evaluation to determine the new market situation; this is because the resultant effect of such a change trickles down to the whole industry. However, the different companies adjust to these forces differently, and this leads to variations in their profit margins either below or above the average industry estimate. The Porter’s five forces model can be used to carry out a qualitative evaluation of Amazons strategic position in the books industry. To begin with, the bargaining power of Amazon’s suppliers has been put in check by the company; many suppliers are willing and ready to offer their products and services to amazon.com, thus, more strength for the company. This is the reason why amazon.com enjoys a number of advantages with most of its suppliers. For instance, many suppliers do not charge amazon.com for their products until they have been sold. Even so, amazon.com only pays for the products 35 days later, after the sales have been made. Amazon enjoys greater power over its suppliers because many of them consider amazon.com to be an influential and prestigious company. The bargaining power of Amazon’s customers has been considerably reduced too as a result of the low price offers, ease of purchase and the wide selection of products available in Amazon stores. Amazon has high potential to retain its conventional customers while attracting others at the same time due to its low pricing. The number of customers switching from amazon.com products to products offered by its rivals has been kept satisfactorily at the minimum, thus giving amazon.com more power than its customers. The threat of new competition is high given that the industry has low entry barriers and relatively low capital requirements for online trade. This can be seen from the sudden influx of new firms in the industry such as facebook.com, Youtube.com and dealfish.com among others. The online bookstore industry is constantly changing and growing, and this also attracts new competition into the industry. The threat of substitution is relatively low and has continued to decrease over the years; this is partly because amazon.com has innovated their products and services all along these past years and continues to do so. Another factor that ensures amazon.com against substitution is the fact that the company is a globally reputable brand in the industry, that enjoys the trust of both suppliers and consumers world over. Finally, competitive rivalry in the industry is relatively low, given that amazon.com, being one of the pioneers of e-commerce field, enjoys a monopoly of trade in the market. In addition, amazon’s customer-centric strategies have enabled the company to innovate over the years thereby reaching the highest levels of customer satisfaction. Amazon.com enjoys a most strategic position in the field, which is bound to ensure the company’s sustainability in the long term. Are the changes acting to make the industry more or less attractive from a profitability standpoint? The changes affecting these forces discussed above are increasingly rendering the field less profitable and less attractive accordingly; however, this does not mean that the revenues of amazon.com will automatically go down. The company needs to address several strategic success factors that will ensure its sustainability. Some of its key success factors include diverse cultural and local constrains; for instance, feasibility of the use of local mail in diversified markets. Even though, this delivery channel may be sufficient in some countries, it may be deficient in others. Emerging threat from other firms such as google.com, coupled with amazon’s performance is a key success factor for amazon.com. These new developments have the capacity to compromise amazon’s success in the coming years if they are not countered in advance. One way of countering this threat is through diversification and standardization of products and services. What are the SWOTs of Amazon? A SWOT analysis of amazon.com provides a preview into what should be the company’s most beneficial targets and goals to be prioritized for utmost success at the moment, and in the long term. Strengths Amazons strength lies in the superiority of the brand name ‘amazon.com’; the company is globally reputable in the online sales field. Other strengths include the company’s ability to increase revenues without high direct costs, diversification of its products and services and its evolution nature through innovative technology. Weaknesses Amazon.com has a number of weaknesses such as the following: its low prices market strategy is not sustainable as it could be challenged by new competition with better deals. Distribution of amazon’s diversified range of products to diversified geographical locations presents difficulties to the company’s line of distribution. Nevertheless, amazon’s free delivery strategy is extremely expensive and not sustainable due to financial and time constrains. Opportunities Opportunities for the company exist in areas such as pre-ordering, increased number of suppliers, web services and in the form of international markets for amazon.com through the use of internet. Threats Threats to the company are in the form of increasing competition (from new entries such as eBay), performance sustainability and negative attitudes towards online trade. Poor inventory could also be a potential threat in that it could give false information about market needs. Amazon’s Value Chain analysis Value chain refers to the continuous process through which a company increases the net worth of its products to make them more appealing to the customers than those of rival companies. Companies engage in a host of activities that are aimed at adding value to their products and these include but are not limited to invention, marketing strategies and the provision of after sale services to customers. Amazon’s value chain has been modelled on Michael Porter’s framework and customized to give the company a competitive edge in the books industry. The value chain is made up of primary activities and support activities which act together to give Amazon competitive advantages as discussed here below. Primary activities are aimed at producing products and services for the end consumers and they include: inbound logistics (collecting products from providers and storing them), Operations (producing or assembling goods), outbound logistics (distributing the products to the market), promotion of sales (popularising suitability of products to the market) and after sale services (support services such as delivery, installation and training). Support activities on the other hand are those activities that complement the primary activities in the production of goods for the end customers. These activities include the procurement of resources, human resource management (involves recruitment, training and development of staff), technological advancement through research and development, and infrastructure (involves legal framework, internal administration, public relations among other activities). Ultimately, Amazon’s value chain can be witnessed in the company’s strong technological infrastructure and its customer-centric goals and strategies. The company has invested heavily in technological research and development, and it also undertakes regular product evaluation and routine market needs assessment. This is what gives Amazon a competitive edge over its rivals in all the whole line of Amazon products, thus making the company a preferable destination for customers. Reference Stockport, G. J. 2009. “CASE STUDY: Amazon.com”. 2007- Early 2009. Print. Read More