Comprehensive Analysis of a Fortune 500 Company -Amazon

Comprehensive Analysis of a Fortune 500 Company: Amazon

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Corporate Strategy for Competitive Advantage

Technological advances and increased product awareness by customers have forced businesses to advance their corporate strategies to gain a competitive advantage. As such, companies are turning to experiences that create customer loyalty and strategies that separate them from rivals. A strategy is a comprehensive master-plan detailing how a business wants to achieve its mission, goals, and objectives (Manral & Harrigan, 2018). Corporate strategies assist companies to keep up with the ever-changing trends in the market, increases competitive advantage, and provides a clear picture of the firm’s external environment. Corporate strategies are critical in motivating workers and strengthening decision-making. They also provide organizations with the basis for implementing actions.

The formulation of corporate strategy involves an alignment of strategy with the internal appraisal in addition to the external assessment of environmental threats and opportunities (Rothaermel, 2017). To achieve this, firms use technology as a strategic weapon and important source of competitive advantage. Therefore, corporate strategy creates on top of business strategy with resource allocation, strategic tradeoffs, organizational design, and portfolio management in mind (Onyusheva & Seenalasataporn, 2018). Corporate strategy helps companies attain the focus of their business, for example, competitor focus, product focus, business model focus, or technology focus. However, focusing on customers helps align the other focus into place. This paper aims to create an assessment of Amazon’s corporate strategy from its internal and external environments to determine how it can increase competitive advantage.

Amazon Inc.

Amazon was founded in 1994 in Washington and is the world’s largest online retailer. The company’s online platform began operations in July 1995. Amazon is the second largest e-commerce company after Google’s parent company, Alphabet, Inc. the firm has a brand value of US$70.9 billion and employs more than 647,500 people globally in addition to attracting over 2 billion sellers on its platform (Amazon, 2019a). Amazon’s success can be attributed to diversity in product offering and expansion to different countries worldwide in localized portals and globalized deliveries and logistics platforms. The online company leverages technology as a source of competitive advantage and has gained a lot from economies of scale and leveraging synergies between external drivers and internal resources (Sastry, Katvi & Tourani, 2019).

Amazon is guided by business principles of passion for invention, customer focus, long-term thinking, and commitment to operational excellence. In all these segments, the company strives to serve its customer sets of content creators, enterprises, developers, sellers, and consumers. Amazon serves these customers through its physical stores and retail websites with a focus on convenience, price, and selection (Manral & Harrigan, 2018). The company also has a mobile app, Alexa where customers can get products and transact from anywhere. Further, Amazon makes and sells electronic devices, such as Fire TVs, Fire tablets, Kindle e-readers, and Echo devices in addition to developing and producing media content. The company focuses on offering customers the lowest possible prices in shipping offers and product pricing.

External Stakeholders Evaluation

Amazon’s external stakeholders include competitors, vendors, customers, the industry, government entities, and communities. These stakeholders have a significant impact on the company’s corporate strategies since their interests are linked to Amazon’s business interests. The company is a leader in the e-commerce industry, which indicates that its success depends on the external environment in which it operates.

Competitors

Amazon operates in an environment characterized by different competitors and players. The company’s current and potential competitors include online, offline, and multichannel retailers, manufacturers, distributors, vendors, publishers, and producers of the products the company offers and sells to both businesses and consumers (Amazon, 2019a). Further, the company competes with web search engines, comparison shopping sites, web portals, and social networks, as well as other app-based platforms that sells and markets products online. Nowadays, people are selling products on Facebook, Instagram, and Twitter, which makes these platforms a source of competition for Amazon’s business.

Competition also include companies that provide website development, customer service, advertising, and payment processing (Sastry et al., 2019). Others include the firms that offer fulfillment and logistics products or services for themselves or third parties, both offline and online. Amazon also lists companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices too as competitors (Manral & Harrigan, 2018). However, Amazon matches these competitors in technology and innovativeness, which plays in its competitive edge.

Industry

Amazon.com is the leading player in the e-commerce retailing industry. The company boasts of having annual sales that are more than three times that of the second largest e-commerce retailer in the United States (Amazon, 2019a). Business environment in the e-commerce industry is the major determinant of whether a business will continue succeeding and maintaining its client base. As such, Amazon’s management and employees ensure that they meet the demanding responsibility of understanding all kinds of environments in which the online retailer operates to lay the necessary strategies to protect their organization from the adverse effects of the environments.

In the e-commerce industry, Amazon enjoys a strong brand loyalty from consumers for offering competitive prices and high consumer engagement score of 93 percent (Manral & Harrigan, 2018). This indicates that consumers trust Amazon’s brand more than they trust other competitors in the industry, which acts as a barrier to entry for newer competitors, thereby cementing the company’s grip of market share.

Vendors

Amazon has effective programs that enable its vendors and partners to grow their businesses, sell their merchandise in Amazon’s online stores as well as fulfill orders through the company (Amazon, 2019a). As such, Amazon has grown its share of the market through enabled partnerships and acquisition of a deal of firms in different sectors as well as the input of its vendors. The company has partnered with online stores, such as pets.com, wineshopper.com, living.com, and drugstore.com to reach more clients and cement its market share.

Amazon, further considers its providers and suppliers as the critical support of its business and is committed to working with them. However, the company’s suppliers in dominant positions have the potential to affect the company’s business and margins since it does not manufacture most of the products it sells online (Sastry et al., 2019). Further, these vendors could use their influence to get higher prices, which eat on Amazon’s profit margin.

Customers

Amazon’s customers are defined in three sets; core customers, seller customers, and developer customers. The company has over 76 million core customer accounts, while only 1.3 million are active seller customers in the company’s marketplaces (Amazon, 2019a). Amazon’s developer customers use its Web Services, for example, in hosting that developers can use to develop their own web services. The company encourages customers to join a loyalty programme known as Amazon Prime, which offers a fee-based membership program where members receive discounted or free express shipping, in countries, such as the United Kingdom, the United States, Japan, and Germany.

Amazon’s management understands that the company’s success is anchored in excellent customer service and product availability. To achieve the customer service, Amazon practices training and human resource processes in addition to the culture of customer obsession that places customers at the top of the stakeholder priority (Sastry et al., 2019). Its organizational culture ensures that employees learn corporate values that prioritize customer needs to increase competitiveness.

Governmental Entities

Amazon has partnered with over 5,000 government agencies with AWS, which places it at a position to understand the requirements of the government agencies in balancing economy and agility with reliability, compliance, and security (Amazon, 2019a). The program also involves special discounts once one buys through government package. Amazon prides itself as being the first to solve government compliance challenges facing cloud computing. The company also has a government leadership team that provides exclusive discounts, volume pricing, and rebates to AWS clients in the government. The competitively low prices for the government solutions program offers clients savings through volume pricing strategies.

Communities

Amazon works with the communities it operates to ensure that young adults and children, especially in the marginalized communities gain resources and skills necessary to build brighter futures. The company, through its corporate social responsibility focuses on building long-term and innovative programs that have lasting and positive effects in communities (Amazon, 2019b). Amazon seeks to inspire and increase access to computer science and Science, Technology, Engineering and Math (STEM) education through the Amazon Future Engineer initiative, which focuses on educating 10 million students from underprivileged and underrepresented communities annually (Amazon, 2019b).

Internal Stakeholders Analysis

Amazon’s internal stakeholders include shareholders, employees, management, and the board of directors.

Shareholders

Amazon, Inc. prides itself for having strong relationships with its shareholders. Jeffrey Bezos, the company’s Chief Executive Officer and founder is the main shareholder (Amazon, 2019a). External stockholders hold 24.36 percent of the company’s ownership while another 10.52 percent is held in mutual fund. Other key shareholders include Andrew R. Jassy, Jeffrey Wilke, and Jeffrey M. Blackburn. Further, institutional investors hold a majority ownership of the company through the 58.25% of the outstanding shares that they control (Amazon, 2019a). Such ownership is also higher than in any other company in e-commerce industry. Amazon, Inc seeks to maximize the shareholders’ wealth and reducing risk to ensure that the best value is realized for the company.

Board of Directors

Amazon’s Board of Directors comprises nine experienced individuals. The board is made up of directors and executive members. These individuals include: The president, chief executive officer and chair of the Board who owns 20 percent of the company’s common stock. Other members of the board are outsiders from established companies, which provides Amazon with a vast wealth of experience in decision-making in its corporate strategies to increase competitiveness (Sastry et al., 2019). The board directs the company concerning obsession with customers rather than competition, thus helping the company to stay ahead in offering value to customers.

Management

Amazon, Inc. has stuck with most of the top-ranking managers, which has ensured that the company carries on the tradition of customer obsession. The management has been critical in ensuring that the company practices good process management techniques which ensure sound corporate strategies that have helped the company increase its market share and profit margin. The online retailer has made progress in areas, such as procurement, training, administrative processes, and distribution.

Further, Amazon’s management keeps on improving its processes and monitoring any changes happening in the e-commerce industry to ensure that they implement the best corporate strategies to ensure competitiveness. Amazon’s management is instrumental in coming up with improved ways of spreading the principles of effective process management to other processes throughout the organization, which boosts its competitiveness in the supply chain (Sastry et al., 2019). The e-commerce giant has a continuous improvement team involving workers with successful feats in various departments.

Employees

Amazon relates well with its employees and independent contractors. As of December 2018, Amazon had employed nearly 647,500 full-time and part-time employees. However, the company’s employment levels change depending on the season of the year. The company also makes use of independent contractors and temporary personnel to supplement its workforce (Sastry et al., 2019). Amazon has works councils, statutory employee representation obligations, and union agreements in various countries outside the United States as well as their operations within the United States. However, Amazon’s success story can be attributed to its talented, hard-working, and smart employees.

A Comprehensive SWOT Analysis

Since it was founded in 1995, Amazon, Inc has dominated its rivals and continues to be the go-to portal for customers due to the vast assortment of products it offers online and in the physical stores. However, the online giant has various weaknesses and faces threats that need constant assessment even with its strengths and opportunities to help increase its competitiveness (Sastry et al., 2019). The company’s SWOT analysis reveals how the biggest online store utilizes its competitive advantage to become one of the dominant platforms in the e-commerce industry. Amazon is the leader in online retailing and its success has inspired other traditional businesses to venture online to attract more business from the ever-changing consumer.

Amazon’s follows an aggressive pricing strategy that makes a preferred choice for most online shoppers. It leverages on various opportunities in the emerging economies coupled with its presence in global supply chain of networked warehouses to deliver value to its stakeholders and itself. Moreover, Amazon, Inc needs to rethink its strategy of operating at near zero margins to make it more competitive and earn more profits (Sastry et al., 2019). It should take advantage of the opportunities in the market and industry and avoid the threats to ensure that it continues to be a leader in the next decade. The following SWOT analysis details the strengths, weaknesses, opportunities, and threats of Amazon, Inc.

Strengths

Market leadership in the global scale.

Amazon enjoys the title of the undisputed global market leader in online retailing. The company continues to increase its earnings year and year with sales amounting to over 40 percent of all e-commerce sales in the United States (Bell, 2015). The company has seen an increase in the total sales from 2018 to 2019, compared to other years. Further, the online retailer has an unmatched global presence, especially in the emerging economies, such as India and Brazil, which presents an advantage for long-term growth prospects. The Amazon Prime subscribers are also growing rapidly, signaling a strength against its rivals.

Experience in widespread use of the pioneer advantage.

Amazon benefits from being the pioneer in online retailing as well as other business segments. For instance, Amazon Kindle is one of the revolutionary products in the market. Further, Amazon Web Services (AWS) provides consumers with over 516 services and features which are quite innovative. The company is also a leader in warehouse automation, which has contributed immensely into its bottom line. Amazon has a first in air cargo network, leasing 20 Boeing 767s and thousands of 53-foot trailers. Therefore, the company is set to benefit from an array of market innovative products and services.

Efficient cost structure and leadership.

Amazon uses a lean cost structure as a competitive advantage tool. The company operates on thin margins and still makes profits, which is an advantage over its rivals. The strategy is possible due to its economies of scale, making it a lethal competitor for physical stores, especially with the growing cost of doing business (Mazzei & Noble, 2017).

Efficient customer relationship management.

Amazon utilizes efficient customer relationship management practices, which come as a strength to its business. The company provides customers with every product they need in one place and at the click of a button. The “Amazon Effect” enables the company to manage relations with its customers without physical interactions (Hinterhuber & Liozu, 2017). The relations integrate Big Data Analytics from customers’ browser history for personalized shopping.

Significant cloud player.

The online retailer is a leader in the cloud industry with the AWS being the leading provider of cloud-based services. The brand has introduced a wide array of cloud-based services geared toward maximizing efficiency in client experience.

Weaknesses

Weak operating margins.

Amazon has lost its margins in areas, such as India. This can be attributed to shipping of products to consumers in foreign countries, which exposes it to the risk of margin losses.

Easy to imitate business model.

Amazon operates in a platform where it is easy to imitate its model since the Internet remains unregulated (Bell, 2015). Online retail businesses have also become common even in the third-world countries with a similar model as Amazon. These businesses are giving Amazon a hard time as they can relate to their markets more than a foreign Amazon. Some of the global competitors include Netflix, eBay, Hulu, and Barnes & Noble.

Seasonality of the business.

The company’s revenues and scope of operations are quite seasonal which has direct implications on its business processes and practices, especially human resources practices. Online retailers’ sales tend to pick on the fourth quarter, when they experience the need for extra personnel (Hinterhuber & Liozu, 2017). These fluctuations in workforce presents a weakness due to the increases in costs of training and developing employees.

Product failures.

Although Amazon has rolled out successful products, others have not made the cut due to the fast developments in technology and huge competition (Onyusheva & Seenalasataporn, 2018). The failed products are a weakness to the company as it gears to compete with other businesses.

Opportunities

Acquiring new businesses.

Amazon can benefit from the acquisition of new businesses to steer growth. The company acquired Whole Foods market and Ring whose operations are dominant in the home security. As such, the company can expand into newer markets to grow its market size and sales.

Forward integration.

The company can also achieve faster growth with forward integration strategy (Hinterhuber & Liozu, 2017). This would include developing its logistics and distribution network in addition to opening brick-and-mortar stores to grow sales and competitive edge as well as bring it business closer to customers.

Diversification.

The company has diversified into different operations, which presents valuable opportunities to its business and e-commerce. The company can further venture into new and related technological areas to realize increased growth (Bell, 2015). Amazon can roll out products on its brand name rather having third parties sell on the platform. This opportunity will offer Amazon a global footprint to open stores in countries other online retailers have not ventured.

Online payment system.

Amazon can benefit from its own online payment system to mitigate issues, such as customer privacy and security, which could attract more customers to its site. The move would also improve the company’s profit margins as it gains from own payment platform.

Technology.

Amazon should use technology to improve its inventory management and supply chain to outwit competitors. The integration of technology would create opportunities in the inventory management and increase inventory turnover (Hinterhuber & Liozu, 2017).

Threats

Government regulations.

Amazon has been subject to government regulations, which are a threat to its the business proceedings in some critical countries.  Amazon is restricted from shipping products to countries, such as North Korea, Iran, Syria, and Sudan.

Increased cyber-crime.

The increase is online identity theft and phishing presents a challenge to Amazon’s business. Such crimes can affect its network security systems, driving away customers who are more concerned about their security and privacy (Bell, 2015).

Heavy Competition.

Amazon faces competition from both established and emerging e-commerce platforms, such as eBay, Microsoft, Alibaba, and Flipkart. It is also facing competition from movie and TV show companies, such as Hulu and Netflix. Apart from online stores, Amazon has competitors in the offline stores from whom customers like to try and sample products physically before they buy them. Physical stores also have experienced salespeople who can convince a customer to make a purchase as opposed to online shopping where one can abandon shopping midway through the process (Hinterhuber & Liozu, 2017).

Stronger dollar.

The strengthening of dollar affects Amazon’s profits globally. Further, fluctuations in the foreign currency exchange rates present a threat to the company’s business.

Amazon’s Corporate Strategy and Competitiveness

From the analysis, it is apparent that Amazon will continue to stay ahead of its rivals, given its innovativeness in corporate strategy which adds to its competitive advantage. The company provides easy-to-use functionality, timely customer service, and reliable and fast fulfilment. Further the Amazon Prime offering, the annual membership program has helped grow its customer loyalty with unlimited free shipping of items and access to unlimited instant streaming of TV episodes and movies (Onyusheva & Seenalasataporn, 2018). As such, the primary competitive factors for its businesses include convenience, price, selection, as well as fast and reliable fulfillment (Amazon, 2019a). Other factors giving the business a competitive edge include speed, quality, customers’ willingness, and ability to alter business practices as well as reliability of its tools and services.

The company’s corporate strategy involves concentric diversification whereby Amazon leverages technological capabilities for business success in addition to a cost leadership strategy with the aim of offering customers maximum value at the lowest prices possible. It also involves a customer-centric plan to ensure that consumers find Amazon as the go-to portal for their online shopping needs. Further, to increase competitiveness, Amazon emphasizes principles, such as long-term thinking, commitment to operational excellence, passion for invention, and customer obsession (Hinterhuber & Liozu, 2017). The strategy has paid off well given that the company is the world’s largest online store and leads its competitors in all market segments. Unlike its rivals, Amazon has found a niche in following the cost leadership strategy to sustain its growth and increase profitability.

To attain its corporate strategy, the company focuses on steep discounts for its regular members on Amazon Prime in addition to timely and express deliveries with waived off shipping charges. Amazon passes on the benefits to avert state taxes to its customers, which further lowers the product cost for consumers (Bell, 2015). The strategy also helps customers enjoy seamless and smooth services. Therefore, the cornerstone of Amazon’s corporate strategy to realize competitiveness has been the focus on technology, leveraging efficiencies, and actualizing the benefits of economies of scale. The use of Big Data analytics has also been helpful for the company as it maps consumer behavior (Mazzei & Noble, 2017). Shoppers encounter a list of recommended products according to their browser history as well as mapping of their purchases with what they are likely to buy in future. Technology, is thus the selling point of the company.

Conclusion

This paper sought to examine Amazon, Inc.’s internal and external environments, the corporate strategy and how it can increase competitive advantage. Amazon’s corporate strategy gives a thorough understanding of its mission, objectives, and performance standards making it easier to analyze its operations (Rothaermel, 2017). The company also exemplifies successful corporate strategy with diversified ventures into the emerging economies and Western markets. Further, Amazon aims at creating value for its stakeholders through corporate strategies that increase its competitive advantage. The company adapts itself to the external environment, taking advantage of the opportunities to grow its business and mitigate threats.

Amazon’s strategy of putting customer first has seen it outwit its rivals and maintain its position as the leader in the e-commerce industry. However, the company needs to adopt a global approach in its international markets as it expands on logistics supply chain. Implementing the corporate strategies will ensure that it creates a globalized business value chain where consumers anywhere can buy products anytime and every time. As such, the company’s future looks brighter than ever given its innovativeness and the need to monetize the opportunities present in the market. This will be realized if the company keeps on focusing on its core competencies and expanding its global value chain.

References

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Bell, P. C. (2015). Sustaining an analytics advantage. MIT Sloan Management Review, 56(3), 21.

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