Yahoo and Amazon: Building a Competitive Advantage - Case Study Example

Yahoo and Amazon: Building a Competitive Advantage An Introduction to Yahoo! and Amazon With its headquarters in Sunnyvale, California, Yahoo! Inc. is a multinational internet corporation known for its Yahoo search, Yahoo Mail, Yahoo Finance, Yahoo News, Yahoo Answers, Yahoo Groups, Directory, social media websites, advertising, and media sharing and so on. The company was founded in 1994 by Jerry Yang and David Filo. It has grown to employ over 12,000 employees. By 2013, the total revenue of the corporation was $4.68 billion. It was operating on an income estimated at $589 million (Miller & Rampell, 2013). According to the company, it attracts more than 500 million consumers each month. There is a variety of the company’s source of revenue. Advertisements have become the key for the sustenance of almost every online business. Yahoo offers graphical advertisements, text-based links to advertisers’ sites and so on. Other than the ads, Yahoo users may be allowed to access services such as internet broadband, premium mail, music, and personals offering, and so on. In advertising, an ad is normally placed on any yahoo or affiliate website and if an interested buyer clicks the ad, yahoo is supposed to receive some revenue from the owner of the ad. Amazon.com, Inc., on the other hand, is the largest internet-based retailer on the planet. Jeff Bezos founded the company in 1994. It has grown to generate revenue amounting to the excess of $74.45 billion. With an operating income of $745 million by the year 2013, the corporation has total assets averaging US$ 40.15 billion and a net income of US$ 274.0 million (Milberg, 2013). Amazon.com Inc. started as an online bookstore but later diversified to selling of VHSs, DVDs, CDs, MP3 streaming and downloading software, electronics, furniture, apparel, video games, jewelry, and so on. Currently, the company produces consumer electronics such as the famous Amazon Kindle e-book readers, Fire Phone, Fire Tablets, and Fire TV. The company offers cloud services too. The online presence of the company is huge; it also has several separate retail websites for the United Kingdom & Ireland, the United States, Canada, The Netherlands, Germany, Australia, Brazil, Japan, Mexico, France, Spain, and so on. Initially, the founder had named the store ‘cadabra’ but less than a year later changed that to Amazon.com based on the fact that he felt the name amazon would bring about more profitability as a name starting with ‘A’ appears in the beginning of every alphabetized lists. Strategies and Business Structures That Have Determined the Differences in Success between Amazon and Yahoo There are a number of strategic differences between Amazon.com, Inc. and Yahoo! The main difference, however, is how the two offer services to their customers. The latter offers the consumers the ability to build their online presence through web hosting services. Amazon.com, Inc. on the other hand gives the consumers the ability to sell their merchandise even when they have small inventories. While Amazon offers their customers free membership, Yahoo does not offer such services. It is imperative to note these differences that lead to the two companies generating different amounts of revenue. Amazon has had less competition as it initially majored on online sale of merchandise while yahoo focused on sale of ads and other services. Focusing on email services and sale of ads exposed Yahoo to fierce competition from companies such as Google, which, also, majors on all the services Yahoo offers. Since Google ventured in the market offering services that Yahoo did not offer, it attracted many consumers through its Google Search and it was only after some time that Yahoo started offering the services. To say the least, the initial structure of the company was not as favorable as it seemed and therefore gave other companies an edge over Yahoo. Amazon first debuted into the market with sale of books and later diversifying to almost every other commodity. Since it was the first of its kind, the company was better placed when it came to establishing its brand name. The other main differences between the two companies are that Yahoo supports third party credit card processing and the use of PayPal services. Amazon, on the other hand, does not accept credit cards and PayPal services. While Amazon is a very successful company, limiting the use of credit cards is not a good idea for a company. In addition, PayPal is a major online finance service as many people transact millions of dollars through the site. It would therefore be appropriate if Amazon let its consumers use finance services offered by other companies. Approaches to Competitive Advantages for Amazon and Yahoo A comparison between Amazon and Yahoo would not be complete without the mention of how the companies were founded. Yahoo is a lot more like Google and Microsoft. With these companies, their start depended on the development of a very new idea or product. They made use of software wizardly and other geniuses to develop the product. Amazon, on the other hand, had a game plan that revolutionized the retail business. Amazon did not develop a new product but changed an entire industry. When there are emerging issues such as the price comparison app, there are no dramatic reactions from the company as seen with the likes of Yahoo and other multibillion companies. Amazon focuses more on waiting up the storm. This strategy reduces the chances that the company develops measures that would later prove detrimental to them. Yahoo started out offering broadband internet services and email services. With Google’s entry in the market and offering more services, it became clear that Yahoo had to diversify their services bringing about the introduction of Yahoo Search and so on. While this may have been a little late considering that Google became a household name a few years after its inception, it helped cement Yahoo’s online presence. The main difference with how Amazon and Yahoo work is that one has created a brand name as an online retail store and is only diversifying in the same line. On the other hand, Yahoo had focused more on a specific service and only diversified following the introduction of similar services by other competitors. Furthermore, the services introduced were not in line with what the company majorly offered. The Distinctive Competencies that shape Amazon and Yahoo! Strategies Yahoo has had many problems in the recent past. The main setback, however, is lack of a clear optimization on a given service, whether technological, or media. This has brought about difficulty in the company indulging with either and hence posing as a fence sitter. While compared to Amazon, it is clear that Yahoo needs to identify a certain line of business that it needs to be associated with. With a 700 million reach to consumers around the globe, it is evidence that the company already is established enough to promote a certain product and see it fetch as much revenue as possible (Yang, 2011). Yahoo was almost in the verge of losing Flickr as a media promoter. Initially, the company was the largest player in the media industry. However, it has since aged behind the likes of Facebook and Google. The new Yahoo vision focuses on building virtual places where visitors can revisit every day since there will be guaranteed enjoyment through the continued innovation and use of modern technology by the company. Yahoo, in its mission, seeks to be the first choice for every individual looking for e-mail, news, leisure, and purchase of goods, and fast and relevant search content. The company is also looking forward to offering best advertising solutions Amazon is undoubtedly the largest online marketplace on the planet. The services offered by the company have come to change the value of online marketing. Online purchase of products and commodities needs be simple (one-click) and should be pocket friendly. Amazon offers these two and it is the same reason the company has become such a success. Amazon teams up with other industries such as IMDb and Alexa, askville, and so on to offer low cost solutions to customers. Such strategies have placed the company on the helm of internet innovation. Functional Strategies and SWOT analyses for Amazon and Yahoo The best way to deal with this is to consider SWOT analyses for both companies. In Amazon, the strengths include a strong IT system, a strong brand image, extensive product lines at low prices, and new skills through acquisition. Amazon’s weaknesses, on the other hand, are a lack of product differentiation, low profits margins, and a loss of focus. In terms of opportunities, Amazon has a chance in global expansion, online movies, growth in the cloud computing, and the expansion of the technological service market. The threats that face the company include dependence on retailer, there is also the government policies may not favor the company while fierce competition. To ensure the growth of the company, Amazon is currently focusing on maintaining long-term profitability and finding new area of growth. The company should consider eliminating Kindle Fire and expanding to the Scandinavia. Yahoo on the other hand also has some measures that it should adopt if at all there is any growth that the company expects. Looking at the SWOT analysis will greatly help. In terms of strengths, yahoo has the maximum number of visitors and a lot of revenue comes from the ads in yahoo mail. The company is also considered the most powerful marketing company due to its large mail subscriber base. Also, it has numerous products and services it offers increasingly cementing its presence in the online arena. Like any other company, Yahoo also has several weakness. The main weakness is the loss of search engine market share where it lags behind Google with 6%. Google has about 83% (Purcell, Brenner, & Rainie, 2012. The fact that Google has an increased portfolio complementing search engine services has continually decreased the number of e-mail subscriptions in yahoo, as more people prefer Google. In terms of the financial health, the company is the least appealing to investors due to a decline. The fact that Google is now the leading service provider in the internet is grabbing many ads affecting Yahoo’s main source of revenue. Some of the opportunities yahoo has as a company includes the Yahoo directory, which is very authentic and projected to be the newest source of revenue for the company. Secondly, yahoo has a number of business segments that it can expand on and that will fetch good revenue. The company should be focusing on the increased of web services in the developing world thus tap on the opportunity. The biggest threat faced by the company is an increased local internet service provider in companies such as China. To add on that, yahoo faces a threat addressing cultural issues while going to foreign markets. In addition, there is also an increased competition in the internet space as new and young entrepreneurs are venturing into the market. Lastly, a strong Google presence in the market has led to the decline of the company market share as a search engine service provider. For the companies to really do well in the industry, they need to foster their efficiency in delivering services and products to consumers. Amazon, for instance, delays in delivering products to a customer; they should greatly improve on that. Yahoo on the other hand has to be as robust as Google is and should also focus on majoring on specific services so as they can improve a lot on that and in return attract more and more customers. Conclusively, it is evident that Yahoo is still lagging behind, as it is not as powerful as it was before. The above SWOT analysis shows that it is facing quite some stiff competition and that its online presence is dwindling. Most people use Google as a search engine and therefore prefer to place their ads on the site, as it is the most visited by people. Amazon on the other hand has grown over time to command a very strong consumer base and competition is not too stiff to reduce how well the company does in the near or distant future. References Milberg, W. (2013, April). Industrial policy when global value chains matter. In Presentado en Multi-year Expert Meeting on Enhancing the Enabling Economic Environment at all Levels in Support of Inclusive and Sustainable Development, UNCTAD (pp. 16-17). Miller, C. C., & Rampell, C. (2013). Yahoo orders home workers back to the office. The New York Times, 26, A1. Purcell, K., Brenner, J., & Rainie, L. (2012). Search engine use 2012. Yang, C. Y. (2011, July). Cross-Language Instant Messaging with Automatic Translation. In Ubi-Media Computing (U-Media), 2011 4th International Conference on (pp. 222-226). IEEE. Read More