Amazon.Com (Strategy)

In order to accomplish their company goal -to become the world’s largest online retail store”-, it versified its operation to include the retailing of toys, electronics, music, and other consumer goods. Through this paper, we first aim to analyses the internal capabilities of Amazon as an organization and discuss a sustainable future trend for the organization to follow. The analysis which follows is aimed to first identify Amazon. Coma’s Internal strategic capabilities explained as ‘resources’ & secondly ‘competencies’ (which will be aimed to summaries the manner in which the Identified resources are deployed to effective use). . 1 The ‘Resource Based View’ will be used s the strategic tool to hence sum up the firm’s Internal strategic capability. Strategic capableness of a firm would be defined as Its resources & competencies to survive and prosper in the business environment. We will first begin by identifying the tangible & intangible resources of Amazon. Com. Typically, its resources can be considered under the following broad categories – Physical resources – Amazon’s many fulfillment distribution centers were strategically located near the main airports of the cities it operated in.
Such choice of strategic location of distribution centers not only improved efficiency but also effectively erring the operating costs thereby enabling the company to offer lower prices to its customers. Differentiated Into two, Other non-tangible resources can be Internal non- material: continual enhancement of customer experience on the website through continuous Software and technology development External non-material – this included the positive image of the Amazon’s brand name as a result of a customer base running into millions and the company’s Associate Program.
Human Resources – Amazon always took a tactical approach to employing its staff. Amazon’s global work force comprised of 20,700 employees. Its top brass management included names such as Richard Dalzell (previously Vice- President of Wall-Mart) who bought in expertise in supply chain management, international retailing, data mining systems and merchandising & logistic systems. Other senior managers had been recruited from various companies such as Apple, Microsoft and Laddering, whom added value with their various skills & capableness to the firm.

The founder of Amazon, Jeff Bozos himself was a Princeton graduate with previous experience as the Senior Vice-President of D. E. Shaw, a Wall Street hedge fund firm. From which he exploited the Information he rendered about the incredible growth of the internet retail industry which was prelate to grow at a mammoth 23 per Mont Financial Resources – By 2008, Amazon had a market capitalization of $29. 4 billion with its net profit growing from $190 million in 2006 to $645 million in 2008.
Amazon was also able to maintain a strong cash flow position to enable the company focus on its ‘Long term sustainable growth’ of the firm by investment in continuous technological innovation. It achieved by substantial increase in its working capital via offering shorter credit terms to its consumers and longer payment terms to its appliers with the value been typically 26 days. How Amazon has really deployed its resources, gives it unique capabilities that the competitors would find hard to imitate. This is primarily as the firm has resources that critically underpin competitive advantage that others cannot obtain.
The efficiency of a firm does not just end on it possessing large capital, physical resources, good work force or an advanced technological platform but how they are managed and deployed. The below analysis is aimed at depicting how well Amazon has exploited its resources to command the market they are in. 2. 2 Another method of analysis e think as appropriate for this case study is the, The Value chain which describes the activities within and around the organization that help create a product or service.
It helps analyses the organization in terms of a set of activities which managers undertake to create value for its consumers. This analysis will help us conclude how well Amazon functions as firm to be competitive in the industry – Primary Activities: Are directly related to creation/delivery of product Inbound Logistics: Receiving, Storing and Distributing Inputs to product. Amazon tied up with numerous leading companies that offered their final goods and services to hem which could be sold through the Amazon forum. It added different brands on a worldwide level which helped the company gain popularity.
Operations: Amazon’s frustration-free packing is the transformation of the final goods to a deliverable condition to the end user which created an image in the consumers mind as an initiative to be consumer friendly. Outbound Logistics: Distribution of Product to Customers. Amazon strategically placed their centers near airports and in larger cities as Products needed to be physically shipped to customers. They have done well in acquiring land in convenient locations and hence eve on transportation costs thereby benefiting the end consumer with lower prices on the end product.
Marketing and Sales: Sales and Awareness of Product. Amazon sells their product through the Amazon website, retail websites and Amazon web services to their different customers. They sold shoes and handbags through a website called Endless. Com. They also launched their Jewelry and Watch stores in the I-J, German, France and Japan and launched its Office Supplies Stores in 2008. Other expansions included Automobile parts that were made available at a single destination which provided arts from all top brands; Software en Epola Store and PC Casual Gaming Store.
Amazon made it clear that they are looking at customer convenience whilst selling their products. They made all their products available at a single destination or forum at relatively low prices. This also gave customers a wide range of selection which enabled them to compare and contrast different products and brands. Service: Enhance or maintain value of product. Amazon emphasized on quality service to customers. I nee always looked to alt I T ten easels AT customers Ana nonce create a product line based on customer needs rather than their specialization and revived after sale-services via email to keep them happy.
Support Activities: Help to improve effectiveness and efficiency of primary activities. Procurement: Acquisition of resource inputs. Amazon is not involved in the actual production of the product. Technology Development: R&D, process/product development. Amazon always looked to innovate and test out new markets through continual investments in technology. This reduced costs and improved efficiency. An investment in R&D meant that it could add further value to the customer experience through recommendations of similar products and acting as a virtual legman which was available at the customer’s fingertips.
Segmentation was also not required as each customer that logged in gave Amazon an idea as to which sector he/she is interested in. It also helped Amazon diversify to different markets with the introduction of Kindle, Amazon Web Services and Digital Content Offerings. An improving technology base reflected high growths and cost reductions annually. An emphasis on technology meant that Amazon always looked at long term benefits. Human Resource Management: Recruitment, Training and Developing skills of staff. Amazon focused a lot on recruitment.
They brought in an experienced management team headed by Richard Dalzell who is highly qualified in several fields. They required managers with expertise in computer software and were recruited from companies such as Apple and Microsoft. This was essential as any website-based company requires a strong management team with expert knowledge and capable of satisfying the customer needs as well as maintaining a strong foothold in the market. Amazon did a fantastic Job in attaining the services of such experienced and qualified personnel which has been one of the key reasons to their success.
Infrastructure: Formal planning, Finance and Structure of Organization. Amazon initially acquired finance from a private investment from Bozos and Silicon Valley funding. They also raised capital through an PIP. Technology plays a huge part as they are structured on heavy investments in R&D sector. Amazon’s infrastructure is fairly sound. They are a capital intensive company and the figures show that they are achieving high growth, sales and profit levels which enables them further investment and diversification opportunities.
Generic Activities: Merging a Cluster of activities that benefit customers. Amazon business model is a cluster of activities. As Amazon does not assemble the final Product and simply enters into a contract with the brand that does produce it, it should primarily focus on satisfying customer needs with heavy sales, marketing schemes and after sale services. Technology and human resource management play an essential role in achieving these goals. Amazon has a successful Value chain which has laid the platform for future success as well.
Its weakness obviously lies with the fact that it doesn’t manufacture the goods directly but has to rely on various vendors for the end product. Such reliance can cause issues of dry supply for a product in high demand. 2. 3 Amazon initially ventured out as a firm with an aim to become the world’s biggest and best online bookstore’ which it successfully achieved a few years after it was set-up. However in order to maintain a sustainable growth, a competitive advantage, became necessary Tort Amazon to expand ten Dustless Deanna online KICK retailing.
I nose Nellie teem in managing costs efficiently and achieve a competitor’s advantage over other aspiring firms As Amazon’s marketing activities spread quickly across the world, the intention level increase as well. In order to survive and keep sustaining in the global market, it is pertinent for Amazon to enhance its capabilities and competitive advantages. Since the company was established in 1994, it has continued to expand and achieve some sustainable competitive advantages.
Value of strategic capabilities One of the key factors needed to ensure an organization is successful in the global market is to provide products that add value to customers, which gives them an incentive to pay a premium price for its products. As long as customers feel they are aging advantage of the prices of Amazon’s products or services, which leads to consumer satisfaction and brand loyalty. The idea of Amazon’s customer strategy called ‘customer-centric’ consists of three kind of consumers – ‘Consumer customers, Seller customers and Developer customers’.
It is wise for Amazon to focus on the satisfaction of all these customer groups who add value to them on the basis of distinctive capability which competition is unable to offer. However, the company should not only consider the value to customers, but also it needs to ensure the organization’s activities have a positive investment return. When Amazon uses advanced technology to provide their customers convenience services, it is necessary for the company to take into account all the cost related to such an activity to enable it make financial projections.
According to the case, in 2008, the activities of investment and expenses were supported by Amazon’s shareholders due to positive returns being delivered to the market. Rarity of strategic capabilities If a company possesses a unique or rare resource, it is described absolute competitive advantage for this company. Amazon makes invests a fair bit to Research ND Development of Technology. It is the company’s belief that this emphasis on development of advanced technology will give them an edge over other organizations. Competition has found it difficult to imitate Amazon in this sphere.
However, the rarity could be temporary, especially under this modern business circumstances. Other organizations might figure out the same technologies and strategies eventually, which is why Jeff Bozos lays great emphasis on continuous innovation. Maintainability of strategic capabilities Possessing advanced technology and skills are not enough to sustain a company’s success. Strong maintainability ensures the creation of sustainable competitive advantages for a company. Organizations are able to differentiate themselves from their competitors by developing activities focused on customer needs.
For example, Amazon attracted its initial customer base via its online bookstore, and then went ahead to expand its product categories such as electronics, beauty and digital media. The speed of expansion of Amazon’s products globally via its international network created barriers to imitation by other competitors. Non-substitutability of strategic capabilities An important competitive advantage is a low level of substitution. Using the five forces model to analyze we observe that substitutes will create an effective threat when the price and performance of the substitute is more valuable for customers.
There are two dimensions in this area. Firstly, the company needs to consider possible product or service stimulation Trot a Deterrent Ministry. Amazon Autocue on online retailing, its direct substitute threats are mainly from “off-line” stores as Customers may prefer purchasing products from stores rather than waiting for few days for their goods in the post. Secondly, if the company struggles at the competence level, the organization could lose customers due to dissatisfaction .
Amazon has several direct and indirect competitors in the global market, a possible threat to the company is the possibility of these competitors offering customers better products or services and being more efficient in their services provided. Although widening its business beyond online book selling could increase Amazon’s strategic capabilities and competitive advantages in the global market to achieve sustainable success, it is not advisable to digress completely from the initial goal of he company to . The original vision of Amazon has in most parts been fulfilled, as it has a major market share in the online bookstore industry.
Nowadays, Amazon. Com has an online marketplace for books with over 110 million primarily used all over the world and with millions of people Joining through its global websites 2. 4 Recommendation & Conclusion Amazon. Com is currently one of the finest in its industry. It has created a bundle of resources & strategic capabilities that has enabled it to build multiple sources of sustainable competitive advantage. The company though needs to block opportunities for its impetuous like Microsoft aspiring to create a substitute who took advantage of Amazon’s ‘Rigidities’.
This should be considered as a potential threat which may account for their decrease in growth. Amazon’s emphasis upon technological innovation has enabled it to launch new sites that serve customers with specific needs. Strategic alliances & acquisitions have been a key method for the company to penetrate the market by offering a wider choice of goods and services. This strategic capability could be enhanced and developed further to gain a wider share of the market for sustainable competitive advantage & is thus directing the company towards a route of diversification.
We believe that focusing on Just online retail of books, would limit the growth of the company to only one product in a wide industry. However focusing on all with equal emphasis and with scope of enhancing the customer experience will give the company a positive platform of growth. It has already achieved the strong foothold in the online retail of books which it should endeavourer to consistently maintain but at the same time exploit other avenues which the wide industry has to offer