Amazon Financial Perspective - Essay Example

?Question Amazon is one of those companies that were launched prior to the so called internet bubble and it has been able to maintain its position till today. The brand name of the company is the biggest asset the company has got. It is extremely famous in the internet circles and the young generation is completely aware of the brand name of Amazon. This means that the company has successfully attracted the future clientele for itself. The young generation will continue using the online retailer throughout its life because they have had a good experience with the company. This is one of the greatest assets of Amazon. The company is also following cost leadership strategy with great success. The shift in the policy came after 2001 as it was the time when company decided that it has gained enough clientele to follow a cost leadership strategy. This strategy is working and it is expected to work in future as well. This is because in future more online retailers will come and competition for Amazon is increasing. The future competitors will come up with new innovations but the only way through which the new competitors can be fought is through cost cuttings. Any new competitor will not be able to compete with Amazon in future if the company offers excellent services at lowest price. Amazon is also currently trying to pursue a long term strategy and this is a good approach. The company should not focus on short term profits rather it should capitalize its brand name in a better way. The company is still in the growth phase therefore it should follow a growth oriented strategy. The lower profits in the short run can be accepted in favour of long term growth. The company is focusing on customer satisfaction and retention, according to the case. This strategy is also commendable as customers are the main source of revenue. Amazon is known to be customer friendly and this should remain the case in future as well. Customer base of the company is strong and this shows that customers are responding to the policies of the company. There are also certain problems in the long term strategy of the company. The company has not accumulated enough cash that is should have and it is not prepared to face any unseen economic disaster. Any unexpected economic problem can drive the company out of business and this is serious concern in the short run. The lower profits of the company through services are also a concern. The company should try to earn more and more revenue through advertisement. This is an area where the company is lacking. Google and Yahoo are making use of their brand name and presence to earn massive advertisement revenue. Amazon should do the same thing and should attract companies by selling places on its websites. This is an area where the company is lagging behind and more can be done in this regard. Long term growth strategy is good enough but short term cash accumulation should also under focus. Question 2 Turnaround strategy refers to a set of steps a company takes in order to rejuvenate its business that was previously not working in a desired manner. Businesses when facing serious problems are forced to think differently and come up with strategies that can bring new life to their company. Turnaround strategies help the company change its normal path and do something in order to perform better. Turnaround strategies involve reallocation of resources and the most common resource that is reallocated is the management. Companies are sometimes faced with problems that can only be solved by complete overhauling the way the business is run. Amazon is facing problems from its competitors and although the company is enjoying a first mover’s advantage, still competitors are quickly catching up. This is a problem for the company so turnaround strategy will aim at solving the problem of increasing competition. The company should start to think in a different way in order to save itself from the increased competition. The company should immediately turn its focus on its core activity and that is online retailing. This is something that the company is known to do and this should be the main focus of Amazon. The first step of any turnaround strategy is to focus on its core activity and Amazon should do the same. The company is trying to follow a cost leadership strategy, which should be continued. Amazon can compete with the new businesses by lowering its costs. This can drive the new entrants out of the market. The cost leadership strategy of the company should also be reflected in its management Amazon should try to reduce its staff and should do away with operations that are not adding value to the company. A more stringent budget should be given to operational departments so that costs can be decrease. Innovation is another thing that can help the company turnaround. New ideas are important in order to attract the kind of customer base the company has. An innovative idea can easily put the company way ahead of its competitors therefore special attention should be given to innovation. The company should also continue to offer services to famous retailers. This is proving financially beneficial for the company therefore this should be continued. This should, however not, derail the company from its core activity. Amazon is an online retailer and it should continue its main business operation. But at the same time profits are important for the company therefore services should also be rendered to other retailers. Amazon can also implement a turnaround strategy by changing its business model. The company should have a flexible model and it should allow the company to hold other brands as well. In the virtual world it is relatively easy to start a company and therefore many new entrants will come in the e-retailing industry. Amazon should also look into buying some of the new entrants so that it can grow its brand and can also cater to a new type clientele. Question 3 Ansoff’s Matrix helps a company decide the product and market growth strategy it wants to pursue. The matrix is a very good strategic marketing management tool because it tells a company where it stands in the market and in turn helps decide the marketing strategy that company should adopt in order to gain maximum advantage. Ansoff’s Matrix also allows a company decide upon the future strategies of the company and this can help a company prepare for future marketing expense that may incur. Amazon can take a lot of help from Ansoff’s matrix as it informs the company about the growth phase in which it exists currently and also shows the next phase the company will be entering. There are four phases in Ansoff’s Matrix; market penetration, market development, product development and diversification. There is also a division based on markets and products; existing products, new products and existing markets, new markets. Amazon is currently in the in the market penetration phase because it is operating in existing markets and is selling existing services to customers. Ansoff’s matrix tells Amazon that the next stage is of product development where the company will have to produce a new market in order to capture customers of the existing markets. It is said clearly in the case study that there are many retailers in the market who have replicated the services offered by Amazon. This is why the next phase will of creating newer services for clients. Ansoff’s matrix helps Amazon plan for the next stage as in product development phase cash would be required to start a marketing campaign which will create awareness for the new product. Also the company should now look for a new product because other companies are copying Amazon and have similar services in place. Question 4 Strategic control in marketing management refers to controlling the overall strategy and assessing its importance and efficacy of marketing from time to time. Marketing managers have to regularly assess whether their strategies are working or not. It is also important for managers to analyze whether their marketing strategy is having a desired effect or not. All this come under strategic control in strategic marketing management. Tactical control on the other hand refers to tactics used by the managers to achieve their strategy. Managers also have to assess the tactics that are used to attain strategic goals. Tactical control therefore is about managing course of action while strategic control is all about assessing the overall strategy. Strategic controlling happens at a higher level than tactical controlling. Amazon is currently using internet to market its brand name and it has been successful in making people aware of the brand. However any change in the marketing environment can force the company to alter its strategic marketing plan entirely. For example if countries place restriction on internet then it will change the marketing environment drastically. This is not something impossible because many of the Middle East countries have dictator regimes and they can impose such restrictions. If there is a ban like this then the Amazon will have to change the medium of its marketing. The company will have to search for avenues through which the message is sent across to customers. Marketing environment can also change if any search engine companies like Google and Yahoo can come in the retailing sector. This will change the dynamics of marketing as it is through search engines that Amazon is currently running its marketing operations. Google and Yahoo may use techniques to hinder the marketing plans of Amazon and if that happens then company will have to change its marketing plan. Question 5 Porter’s 5 forces include threat of new competitors, threat of substitute product, the bargaining power of buyer, the bargaining power of seller and competitive rivalry. The threat of new competitors is great for Amazon because the services the company is offering can easily be replicated by competitors. This danger is quite large also because virtual world has made companies to launch easily. The only solace for the company is its brand name that is quite famous. This will benefit the company when new entrants will come in the market. Threat of substitute product is also high for Amazon as the services can easily be copied. The company is an online retailer and it is not doing anything extremely unique. This is threat because customers can be stolen by a similar online retailer. The bargaining power of buyer is relatively high in the online retailing industry. Buyers can switch to other companies if they want to buy stuff so nothing is stopping them. The services Amazon is offering is not such that it can attract customers like a magnet. Initially it was something new but gradually many companies have come up. This has increased the bargaining power of buyers. The bargaining power of sellers is relatively small in the industry. This is because of the companies that exist in the industry. Amazon has some bargaining power as it is an old name so it can charge more from customers than the rest of the company but this amount cannot be considerably high because substitutes are available easily. Competitive rivalry is high in the industry and Amazon is facing problems from fierce competitors who are trying to capture the market and clientele of Amazon. Online retailers are also trying to offer lower rates and this shows that competitive rivalry is high in the online retailing industry. Question 6 It is extremely important to monitor any marketing campaign so that it can be ensured that it is yielding the desired effects on the customers. Monitoring is an important responsibility for a marketing management specialist. Marketing is something very fluid. Consumer demands change on a daily basis therefore it is important to monitor whether the advertisement and marketing is having the desired effect on consumers. For this reason monitoring is very important when it comes to marketing management. Amazon also has to observe the changing patterns of consumer demand so that it can make sure that marketing is having a desired effect. Evaluation is another important element of strategic marketing management. Time to time it is essential for marketing managers to evaluate the effectiveness of the marketing campaign. This is to ensure that marketing campaign is still effective or not. Clients may change their preferences so it is important for marketing managers to evaluate marketing strategy. Amazon also has to evaluate its marketing strategy and campaign time to time. There are different times at which demand for different items is high. This is where evaluation plays its part. Control involves keeping a check on the both marketing budget and reach. It is important to know the economic worth of a marketing plan. It is important for Amazon to conduct a cost benefit analysis for any marketing strategy. Marketing today costs a great amount and Amazon have to make it sure that it is spent in the right way. Control also involves seeing that no extra money is spent on marketing and only enough money flows in marketing. Sometimes online companies can over market and this can become a financial burden. Question 7 Customer analysis is extremely important because Amazon is not offering some high involvement product or service. It is a simple online retailing company and its customers can easily switch to other places. It is important to understand customers so that their preferences can be understood. It is important for Amazon to know what customers like and what they not. For example a movie of ‘The Da Vinci Code’ is likely to increase the demand of the book. This is why it should be on the main page of the company so that customers can easily access it. Also it should be shown to customers that are of an age to enjoy the book. This sort of filtering is a must when it comes to any changes in customer demand. These small things can make a lot of difference and this is why customer analysis is important for Amazon. Competitor analysis is also important in any online running company. Web is a platform that is accessible for everyone and this allows many people to come and set up companies similar to Amazon. Also the online retailing industry is growing because more and more people are now trying to buy things online. This is why Amazon is, and is expected to face many competitors in future. A thorough competitor analysis will tell the company whether the competitor is stealing the market share of the company or not. It will also give an idea to Amazon as to how other companies are responding to customer demand. This will give an idea as to how Amazon should change its approach. Competitor analysis also informs about the trends that are prevalent in the market. It tells Amazon what customers are demanding and helps the company if it has missed something in the customer analysis. Question 8 Porter’s value chain analysis explains the working of an organization as system. The system is made up of many units and each unit is adding some value to the customer. According to the model there are primary activity and secondary activities in a firm. Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and services. Secondary activities are procurement, human resource management, technological development, and infrastructure. The value chain model tells us that every activity can be seen as adding value to the final product or service. This model helps a company or services break down its overall business into units and in this way firms can focus individually on each and every activity. The model is valuable in giving firms a method through which maximum value can be achieved. This model can also help us better understand organization operations associated with strategic marketing management. When it comes to marketing management there are also primary and secondary activities. Marketing management should be seen as a system with many subsystems. Inbound logistics require colleting thins necessary for a marketing plan. Operations involve designing the marketing campaign itself. Outbound logistics requires making relations with the mediums through which marketing will be done. This is an important step in marketing management so that marketing campaigns can run smoothly. Marketing and sales may refer to the marketing itself that will be inducing the customers to buy the product or service. Service involves making sure that marketing campaign is running effectively. Procurement may refer to the resources that are needed to design the marketing campaign. Human resource management involves hiring and firing the people involved in making the marketing plan. Technological development and infrastructure involve using technology and infrastructural resources for developing a marketing campaign. In this way strategic marketing management can be viewed as value chain. Question 9 Balance scorecard is a strategic management tool through which performance can be measured and managers can monitor the activity of the employees. The basic purpose of balance scorecard is to keep the activities of employees and managers aligned with the overall business strategy and vision of the company. The model of balance scorecard views the organization from four different perspectives. The learning and growth perspective, the business process perspective, the customer perspective and the financial perspective are these four perspectives. All these four perspective help manage the performance of the firm. The learning and growth perspective emphasize the role of employees in the firm. This perspective views employees as the main asset of the organization. This perspective argues that knowledge seeking is extremely important for employees and they should be learning continuously. Amazon can apply this model by educating its employees by informing them about the needs and demands of its customers. By doing this Amazon can provide better services to the customers. This knowledge of customer base will allow employees to react and respond to customers in a way that is desirable for employees. The business perspective focuses on the internal business process of the company. This perspective calls for metrics that ensure smooth functioning of organizations according to its aims and goals. Amazon should try to set metrics within its organization so that managers know whether company is going in the direction they want or not. These performance metrics can be very helpful for Amazon because the company is still going through problems. This will ensure that the company is going in the right direction and business operations are not deviated from the mission and vision of the company The customer perspective, as the name suggests, focuses on customer satisfaction. It views that the main aim of a firm should be to concentrate on customer because they are the main source of revenue for any company. This perspective argues that customer satisfaction is an important indicator for future growth and stability. If customers are not satisfied then company is not expected to grow in future, even though the financials may look good. Amazon is doing well according to this perspective because its financials are bad but customers are satisfied. This shows that the company is set to grow in the long run. The financial perspective focuses on the financial performance of the company. This perspective attempts to measure the performance of the firm through financial lens. This includes cost benefit analysis and risk assessment. In this regard Amazon is not doing well because its financial performance is quite weak. According to this perspective the company is not working in the desired manner and may require improvement. Amazon should also try, according to this perspective, to focus on short term profits as well because continuous losses will not lead the company anywhere. The short term focus of the company is on customers but it should be on financials. Read More