Amazon: Strategic Plan, Part 1: Environmental Scan
Amazon: Strategic Plan, Part 1: Environmental Scan
Environmental scanning strategy: Stanford
Amazon is known as a powerhouse in the “Online Commerce” industry. They continue to grow by catering to their current customer’s needs while venturing into new territories and expanding their customer base. The reason they have been successful day after day is because of their willingness and desire to scan continually what is happening or trending within the industry and its neighboring industries. “Through scanning, firms identify early signals of potential changes in the general environment and detect changes that are already underway. Scanning activities must be aligned with the organizational context; a scanning system designed for a volatile environment is inappropriate for a firm in a stable environment. Scanning often reveals ambiguous, incomplete, or unrelated data and information that require careful analysis.” (Pearce & Robinson, 2013)
Being able to analyze these trends or environmental scans, Amazon will determine what assets they will dedicate to evaluate making a strategic move. “The other companies in the technology pantheon may make the occasional strategic move, but most of their behavior seems to emerge from internal compromises, sudden impulses, pet projects, competitive anxiety, knee-jerk reactions or unexamined corporate values.” (Forbes, 2011)
The strategic surveillance has been a well-played game by Amazon, making it an intriguing organization and at times unpredictable. They will be looking for unexpected variations or changes that might affect them or become opportunities. “With Amazon, though, you get the sense that you are watching a chess game unfold, in which Amazon is thinking multiple moves ahead, along several fronts.” (Forbes, 2011)
External Environment: Devin
Amazon has several opportunities that they could take to increase their market share. Amazon also has many threats they could encounter as well. Fortunately, Amazon as large as they are, are still pretty young and are not as popular as what it could and soon will be. There are still several industries that Amazon has yet to harness in which they could be very successful. Amazon could look at more partnerships to increase their profits. They have lost several large partnerships over the years in which they have yet to replace. IT seems that anything that Amazon adds as a product or tool becomes successful. Amazon could collaborate with large manufacturers and make their website the only reseller of the manufactures product. Some of Amazons most significant profits still comes from digital media such as digital music and digital movies. Amazon could continue expanding their reach globally into other countries in the world.
Amazons biggest threat remains brick-and-mortar stores as people are moving towards the “need it now” mentality. Customers are willing to spend more to satisfy their needs immediately. With stores offering both brick-and-motor and online shopping to satisfy people’s needs consumers are moving away from Amazon.com. With other online competitors such as Buy.com and overstock.com continue to grow and take market share from Amazon while other competitors such as BestBuy and Walmart are partnering with other marketplace sellers to increase the variety of consumer goods sold along with low retail pricing.
Another threat that Amazon faces is the consumer feeling that their personal data may become compromised. Though this is true for any retailer large or small, it is the large companies that when targeted make the headlines in the news. Although you don’t need to shop online for your information to be compromised, there is still a tendency to believe you are more at risk while shopping online than when shopping at a physical store which is not necessarily true.
Industry Environment: Junior
Amazon contains a vast diversity of product types, service offerings, and delivery channels. Amazon’s industry type has a big international market in which the competition is growing very fast and is very competitive. Amazon has various competitors from different companies around the world. According to Amazon.com, Inc. (2015), their current and potential competitors are:
Amazon has an advantage in doing business such as their vast selection of books, DVDs, and other products. Also, Amazon has a reasonable price and convenience to order their products online and a fast delivery at customer’s doors.
- “Online, offline, and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to consumers and businesses;
- Web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers;
- Companies that provide e-commerce services, including website development, advertising, fulfillment, customer service, and payment processing;
- Companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline;
- Companies that provide information technology services or products, including on-premises or cloud-based infrastructure and other services; and
- Companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices.”
According to Amazon.com, Inc. (2015), “Some of our current and potential competitors have greater resources, longer histories, more customers, greater brand recognition, and greater control over inputs critical to our various businesses. They may secure better terms from suppliers, adopt more aggressive pricing, pursue restrictive distribution agreements that restrict our access to supply, direct consumers to their offerings instead of ours, lock-in potential customers with restrictive terms, and devote more resources to technology, infrastructure, fulfillment, and marketing.”
Amazon is in a very competitive industry, and they have to deal with some new business models and the entry of some new and strong competitors. Also, other companies will enter into this type of industry that it might take away Amazon’s control.
Evaluate the organization’s external operating environment: Brian
If we evaluate Amazon using the environmental segments, Amazon has done well in the external operating environment. Amazon started in a country full of consumers and offering them the convenience of shopping without leaving the house. While a threat in this segment may be people worried about their information that is being stolen or wanting to see and buy the item from a brick and mortar store. Amazon captured more of the market with prime by offering the library of books, free two-day shipping, and movies and TV shows for free or at a premium. The addition of these technologies shows their strength in the technological segment.
Amazon has a global presence, and while not all features are offered in these other markets, they are building an online industry around the world. Threats in these other countries can be cultures where online purchasing is little, non-existent, or where shipping is unreliable. They are not in many countries which may be a strength; they can put more effort in the markets they are currently operating in. Another threat to Amazon could be currency exchange, government regulations, and taxes. Currency exchange can hurt a business when transfer fund from one currency to another. Amazon’s strength in the currency exchange is that they are dealing with only a few countries. Fewer countries will mean fewer exchange rates to follow as well as learning the fewer rates better to start moving towards other countries.
Government regulations in other countries can be the biggest threat to a company. Government regulations for online business can be strict, but Amazon has chosen markets where government regulations still allow them to use some of their bigger operations. Taxes in other countries and even in America can be a big threat to a company as well as a significant expense. Each new country a business goes into it needs to learn a whole new set of taxes and tax laws which will vary from country to country. Learning new tax law and what needs to be done to do taxes right in other countries can be very costly. Amazon has many resources on its website for sellers on the taxes that may be charged by other countries.
Forbes. (2011, Winter). Why Amazon Is The Best Strategic Player In Tech. Retrieved from (http://www.forbes.com/sites/venkateshrao/2011/12/14/the-amazon-playbook/#6a36920e3378)
Pearce, J., & Robinson, R. (2013). Strategic Management: Planning for Domestic & Global Competition (13th ed.). New York, NY: McGraw-Hill.
Amazon.com, Inc. (2015). Retrieved from http://phx.corporate-