Yahoo and Amazon: Building a Competitive Advantage - Assignment Example

Yahoo and Amazon: Building a Competitive Advantage of the Contents Contents 2 Introduction 3 Discussion 3 History and Core Business of Yahoo 3 History and Core Business of Amazon.com 4 Mission and Vision of Yahoo and Amazon 4 Key Strategic differences of Yahoo and Amazon 5 Comparing and Constructing the Strategic Competence of Yahoo and Amazon 7 Distinct Competitive Advantages of Yahoo and Amazon 8 Functional Level Strategy of Yahoo and Amazon 9 Conclusion 9 10 References 11 Introduction Yahoo and Amazon are two globally renowned US based companies. Yahoo is basically a search engine provider and along with that the company also offers services such as Yahoo Mail, Yahoo News, Yahoo Finance, Yahoo Answers and many more (Yahoo.com, 2015). Amazon on the other hand is the largest electronic commerce retail company in the United States. The company has expanded and diversified its online shopping, web hosting and content distribution business so well that it has now successfully operates with its retail websites across the globe. Furthermore, Amazon is also involved into production of various consumer electronics such as Amazon Kindle e-book readers, Fire tablets, Fire TV and Fire Phone (Amazon.com, 2015). In this paper, the competitive advantages of Yahoo and Amazon will be analyzed alongside critical evaluation of their mission, vision, business objectives and strategic initiatives. Discussion History and Core Business of Yahoo Yahoo was founded by Jerry Yang and David Filo at Stanford University in January, 1994. Initially, the company was named as “Jerry and Davids Guide to the World Wide Web". Later it was renamed to Yahoo. With the diversification of web portal, Yahoo experienced sharp growth as a result of several high profile acquisitions. However, in early 2012, the company experienced the largest layoff in the company’s history when more than 14% of the workforce was retrenched. During that period, the company had remodeled its core business whereby it had taken the initiative to make the content, media and communication experiences to be of world-class standards through innovative products that can satisfy the knowledge of next generation (Eisenhardt & Martin, 2000). Efforts have been shifted to construct the core platform and systems in such a way that can create leverage for Yahoo to expand at a massive scale and infuse personalization in using platforms. Emphasis has been put on for authentication of data provided by Yahoo to build competitive advantage over others and to encourage and expand their 700 million customer base. According to the reports from comScore, exercising such core values in its business process enables Yahoo to overtake Google by a 21% increase in website visitors in the United States (Business Insider, 2012). History and Core Business of Amazon.com Amazon.com was founded in the same year in which Yahoo was established i.e. in the year 1994. The present CEO, President and Chairman Mr. Jeff Bezos launched the company to make use of the lucrative opportunities in the online retailing segment (Amazon.com, 2015). After extensive research, Bezos aimed to make the world’s largest online bookstore and named it after Amazon River which is the largest river in the world. Eventually, the company expanded its business from online bookstores to 35 other categories. With a vast inventory, the core business of Amazon is directed towards fulfilling its promise to deliver quality products on time. The company drives traffic by providing best deals and hassle free browsing facilities. Mission and Vision of Yahoo and Amazon Though the mission and vision statements of Yahoo are not clearly documented, the strategic decisions taken by Yahoo can be considered as their mission statement. Yahoo aims to provide its users an ultimate experience of using internet aspects such as mailing, sharing, storing and browsing with their diversified service base. The vision of the company is to deliver and present the customers’ world according to their own preferences and to create an outstanding digital experience through uniquely combining science, arts and scale. The mission and vision statement of Amazon.com better reflects the company’s objective behind current strategy formulation and future business prospective. The mission statement of Amazon describes the company’s effort to leverage technology and proficiency of their employees in providing the best shopping experience to worldwide customers through the internet. The vision of Amazon.com is to become the most customer-centric company of the world by building an online platform where people can find anything of their requirement. The company does not believe in offering discounts on a small number of products and for a shorter period in order to maximize sales. Rather, it tends to offer a wide range of products at a low price and for a longer period of time to ensure customer loyalty (International Business Times, 2011). Key Strategic differences of Yahoo and Amazon Strategic differentiation may be defined as a company’s approach to place its strategies and competitive advantages in such a way that will create significant differences in terms of products, services and brand visibility as compared to its competitors. Though both Yahoo and Amazon are from internet industry, strategic differences are significant in their business practices. Strategic Difference #1: Product and Service Differentiation The main strategic difference of Yahoo Inc and Amazon is attributed from the core business of the two companies. Yahoo is a service oriented company whereas Amazon.com is product based and focuses more on sale of products. Though the key business of Yahoo is its globally famous web portal and search engine, the area of services are well diversified which include Yahoo Directory, Yahoo Mail, Yahoo Finance, Yahoo News, Yahoo Sports, Yahoo Answers, advertising, online mapping, video sharing and many more exciting aspects. In contrast, Amazon focuses only on its ecommerce segment; however, Amazon brings diversification in terms of enhancing collaboration with more and more companies producing different kinds of products and allowing those companies to sell their products through Amazon’s online shopping portal which includes DVDs, CDs, MP3, electronics, apparel, software, video games, furniture, foods and many more. Another strategic difference that can be stated in this regard is that all the services provided by Yahoo are the company’s own product and such service expansion shows Yahoo’s capability to utilize technology extensively and in an innovative manner. However, Amazon concentrates on selling products of third party producers. Hence, the company attempts to use technology extensively to upgrade their online portal to make the shopping experience of customers most enjoyable (Mellahi & Johnson, 2000). Strategic Difference #2: Revenue Generation Another important strategic difference between these two companies is the source of revenue generation. Yahoo focuses on advertisements as a key source of revenue and accordingly it encourages companies with online presence to put more advertisements and help them to evaluate the level of responses from the advertisements. According to the reports from BBC News (2013), the revenue generated by Yahoo from advertisements constitutes of 13% to 20% of the net revenues. However, sharp competition with Google drove the company to lose market share in 2013 but still the company managed to source revenue of more than 9% from advertisements. However, the main source of revenue of Amazon comes from selling of products and services. Previously, the company neglected the scope of advertisement as a source of revenue generation. In the recent times however, it has started counting advertisement as an important source of revenue (Smith, 2007). Comparing and Constructing the Strategic Competence of Yahoo and Amazon The core objective of formulating strategic planning and operations starts from providing easy solutions to the end users (Zwick and Rapoport, 2005). The strategic competitiveness of these two companies can be constructed through evaluating SWOT Analysis for Yahoo and Amazon. Distinct Competitive Advantages of Yahoo and Amazon Both Yahoo and Amazon experience some distinct competencies which have enabled both the companies to sustain in the global competitive market and enjoy their respective market position for so many years. The primary competitive advantage of Yahoo is the company’s capability of understanding complex customer needs and its focus towards continuous innovating and production of great services. Creating strong brand awareness and brand visibility as well as having an integrated and strong culture within the organization are the other competitive advantages of Yahoo. Yahoo’s leadership development capabilities are visionary for any company working in a multinational context and thus it largely contributes towards the competence of the company. Amazon has also matured and diversified and has bridged the transitional gap through practicing its competitive advantages rigorously. Strong IT integration and continuous innovation is the main competitive advantage of Amazon. For instance, Amazon ecosystems developed for writers, publishers, reviewers, analysts and journalists facilitates developing competitive advantages. Moreover, the launch of Kindle Paperwhite enhances the degree of diversification and capability of Amazon to compete with Apple (The Conglomerate, 2006). Functional Level Strategy of Yahoo and Amazon Functional Level Strategy shows the nature of decision making rules incorporated by the management of a company. Decision making is related to the quality of leadership that an individual organization possesses. Considering Yahoo’s Functional Level Strategy, contribution of the present CEO, Marissa Mayer is important, because of her significant and constant input towards incorporating leadership skills into the future prospect leaders. In fact she introduced the unorthodox leadership style in Yahoo and infused the same with the decision making capacity of employees. Several times, Yahoo has changed its strategic direction through restructuring its leadership model and such strategy has enabled Yahoo to survive on several occasions such as competition with Google. Coming to Amazon, Bezos’s insight regarding market changes and strategies the business of Amazon, reflects strong functional level strategy formulation of the company. The whole point of the platform is to tear business away from the outdated idea of core competency – the straight jacket of old management theory and enhance the company’s decision making ability for exploiting new resources and continuous penetration into market segments (Eisenhardt and Martin, 2000). Conclusion After discussing the core competencies of Yahoo and Amazon, it can be sated that both the companies have been able to sustain their competitive positions in the market due to smart utilization of resources. The strategic advantaged the superior market presence is likely to continue providing growth and high profits to both the company. However continuous up gradation and indulgence in research and development is essential. References Amazon.com. (2015). About Amazon. Retrieved from: http://www.amazon.com/Careers-Homepage/b?ie=UTF8&node=239364011 BBC News. (2013). Yahoo revenue falls on slow ad sales. Retrieved from: http://www.bbc.com/news/business-23337176 Business Insider. (2012). These Are Yahoos Three Core Businesses Going Forward. Retrieved from: http://www.businessinsider.com/these-are-yahoos-three-core-businesses-going-forward-2012-4?IR=T Eisenhardt, K. M. & Martin, J. A. (2000). Dynamic Capabilities: What Are They? Strategic Management Journal, 21(1), 1105-1121. International Business Times. (2011). Amazon: The Most Competitive Business Ever Built? Retrieved from: http://www.ibtimes.com/amazon-most-competitive-business-ever-built-818659 Mellahi, K. & Johnson, M. (2000). Does it pay to be a first mover in e.commerce? The case of Amazon.com. Management Decision, 38(7), 445-452. Smith, R. H. (2007). Strategy as Action: Competitive Dynamics and Competitive Advantage: Competitive Dynamics and Competitive Advantage. Oxford: Oxford University Press. The Conglomerate. (2006). Amazons Core Business. Retrieved from: http://www.theconglomerate.org/2006/02/amazons_core_bu.html Yahoo.com. (2015). Press Centre. Retrieved from: http://info.yahoo.com/press-center/#all Zwick, R. & Rapoport, A. (2005). Experimental Business Research: Volume II: Economic and Managerial Perspectives. Berlin: Springer Science & Business Media. Read More