Porters Generic Strategies Used by Amazoncom - Essay Example

E-commerce is significantly changing the way companies conduct business in the globalized economy. Amazon.com Company is an American international e-commerce that deals with varied online products such as books, software, furniture, and other products. It is a customer-centric company that dedicates itself to finding and discovering anything that customers want to purchase online. Amazon.com is one of the companies that employ Porter’s generic strategies for measuring the competitive level; thus competing with their competitors effectively in the global competitive market.

Despite the rapid e-commerce, Amazon.com Company has made significant efforts of building a customer base to augment their sales; thus generating higher profitability and revenue growth. This is through employing the three generic strategies of Porter to respond to the competitors; thus achieving a competitive advantage. One of Porter’s generic strategies that Amazon.com employs is the cost leadership strategy. Stonehouse and Snowdon (2007, p. 256) argue that an industry achieves low-cost leadership when it becomes the lowest-cost provider, which is meaningful for competing favorably with its competitors.

The industry has two alternatives for translating their low-cost strategy over their competitors to attract customers; thus increasing their profitability. Cost leadership is an effective strategy for Amazon Company because it enables them to compete effectively with other companies utilizing e-commerce in business activities. Amazon uses the trick of maximizing profits by underpricing its products about those of its rivals. They either maintain prices similar to that of their rivals or cut the cost of products in smaller prices less than those their rivals to reap benefits through incremental sales.

The second strategy that Amazon.com employs is the differentiation strategy and this is through differentiating their products from that of their rivals. Product differentiations are a way of differentiating the product features to attract many customers. Differentiation strategy is an effective technique employed by companies to achieve a competitive advantage. Wood and Wood (2010, p. 101) argue that product differentiation is a crucial strategy for companies that may want to sustain their business in the global competitive market. Amazon differentiates its product features by uniquely designing them to achieve the desired needs of its customers. They differentiate the product quality, offer innovative products, and often reduce the cost of their products to achieve their stated objectives. This is crucial because this strategy has enabled Amazon to survive in the highly competitive global market.

Lastly, the company also employs a focus strategy as an effective technique for achieving customer loyalty; thus improving its business performance. Focus strategy enables companies to charge a premium price for superior or high-quality products, or offer a low price to certain buyers. Although cost focus is difficult, especially for companies benefiting from economies of scale, it is effective because it enables the company to achieve superiority over its rivals (Wood and Wood (2010, p. 61). However, focus strategy can be in form of product line focus, target segment, and geographic area focus. Therefore, a firm can design effective market strategies using these focus strategies; thus achieving a competitive advantage. Read More