Strategic Management of Amazon: Porter's Five Forces and Value Chain Analysis

This essay discusses the strategic management of Amazon through Porter's Five Forces and Value Chain Analysis. It includes an evaluation of the company's competitive position and areas for improvement. A strategic plan is also provided, along with a reflection on the importance of strategic management. The essay concludes that strategic management is crucial for enhancing organizational efficiency and maintaining competitive advantage.

STRATEGIC
MANAGEMENT-
ASSESSMENT 2

Table of Contents
INTRODUCTION....................................................................................................................3
TASK.........................................................................................................................................3
CONCLUSION.........................................................................................................................7
REFERENCES.........................................................................................................................8

INTRODUCTION
Strategic management is the ongoing process of planning, monitoring, analysis and
assessment of all requirements of an organization through which the objectives of the
organization can be met (Linda Tucci, 2020). Strategic management is helpful for an
organization to plan strategies and set directions through which an organization can work
towards meeting targets and enhance their performance, efficiency and increase their market
share. The company which has been selected for the essay is Amazon. Amazon is a leading e-
commerce American multinational company which offers various services. The company
offers cloud computing, digital streaming, e-commerce and AI. The essay will define the
competitive strengths, market position and area where the company can improve their
operations. The essay will define a strategic plan which will define strategic choices and
competitive advantage which can be gained by the selected organization. Lastly, the essay
will be concluded with reflection which will involve learning and development throughout
the module.
TASK
Part A- (1)
According to statistics, Amazon has a 41 % ecommerce market share and is the
largest online retailer as of October 2021. As a matter of fact, technical improvements and the
usage of online channels for business, Amazon's revenue is expected to increase by 50% in
2021. Amazon is able to draw customers since it offers products through ecommerce and
digital streaming platforms. Amazon Prime has almost 15 million subscribers in the United
Kingdom.
Porter five forces is a model which is used by an organization to evaluate their
competitive forces through which they can identify their strengths and shortcomings (THE
INVESTOPEDIA TEAM, 2020). This framework can be incorporated by any company which
assist them in identifying the level of competition within industry and supports in working on
their long term- profitability. In context of Amazon, the company treats their suppliers as
their partners ad for that the company selects their suppliers very carefully. The bargaining
power of suppliers is low to moderate, as these forces plays a crucial role in enhancing the
competitive position within the industry. The bargaining power of customers is high which is
responsible for creating an impact on the competitiveness of company. Therefore, Amazon

offers various products and services through online mediums and the demands of consumers
can crate a huge impact on the performance, profitability and competitive advantage of the
company. The threat of new entrants of low for Amazon, as the company have created a
strong position within the industry through which new entrants cannot created an impact on
the competitiveness and position of Amazon within the global marketplace. Moreover, the
threat of substitution is high for products and services offered by Amazon as there are various
other rivalry companies which have been creating a huge threat for the company. The rivalry
companies such as- eBay, Walmart and many others can also offer similar quality products
and services at comparatively different prices which can negatively influence the customer
base and competitiveness of Amazon within the marketplace (Amazon Company’s Porter’s
Five Competitive Forces, 2021). The competition within the e-commerce industry is rapidly
growing which creates the force from moderate to high. As the number of competitors are
increasing, this results in incline in risk of customer turnover through which the competitive
position of company can be enhanced.
Value chain analysis is an approach of evaluating the companies value chain where
improvement opportunities can be evaluated. In case of Amazon, value chain analysis of the
company defines the support (firm infrastructure, human resources, technology development
and procurement) and primary (inbound logistics, operations, outbound logistics, marketing
and sales and service) activities of the organization. With the helps of value chain analysis,
Amazon must organize diverse delivery and service channels through which they can
generate a source of higher revenues. The outsourcing activities followed by Amazon must be
executed by following the line of actions through which they can add value to operations of
the organisation (Amazon Value Chain Analysis, 2022). As automation is the key to success
in modern world, Amazon must focus on well researched investment through which they can
focus on their marketing and sales results which will be helpful in generating higher
revenues.
Part A- (2)
Strategic plan comprises of various stages, which defines the position, objectives,
plan, execution and review of the action plan of an organization. As per the evaluation of
Amazon with the help of Porter Five forces and Value chain analysis, the strategic plan for
Amazon is addressed below:

In order to understand the competitive position in the industry, Amazon will use
SWOT analysis, which is discussed beneath:
SWOT analysis is a tool which helps in understanding the micro and macro
environment factors of internal business environment, through which an organization can
evaluate their strengths, weakness, opportunities and threats. As per SWOT analysis of
Amazon, strong brand name, customer-oriented approach, differentiation, innovation, cost
leadership strategy and large number of third-party sellers are the strengths of e-commerce
giant which helps the company in generating value from their operations and maximising
their competitive position within the industry. By following easily imitable business model,
this affects the profits and competitive position of Amazon in the industry. Some of the other
weakness of Amazon involves- product failures, tax avoidance controversy, limited brick and
motor presence and decline in consumer safety which creates a huge impact on the customer
base of the company. The opportunities of Amazon can be driven by focusing on improving
their technological measures and organizational policies which will be helpful in minimizing
the counterfeit sales (SWOT analysis of Amazon, 2022). The company can also implement
backward integration through which they can make their products and services unique from
their competitors which will drive opportunity for business growth and profitability. The
company can also expand their physical stores which will be helpful in expanding operations
in developing countries, through which fresh talent can be attracted and greater employment
opportunities can be developed. On the other hand, controversies, government regulations,
cybercrime, aggressive competition and labour exploitation are some of the factors which can
possess threat to the position, brand image, customer base, employee base, profit margin and
turnover of the company. Such threats can make business face huge loss.
The objectives of Amazon with this strategic plan are to focus on their supply chain
and logistics services through which they can ensure no customer can face any issue. This
plan is the medium through which Amazon will focus on investing in research and
development trough which they can plan innovative measures which will be helpful in
enhancing their supply chain and logistic process within 6 months of time period by 30%.
The strategic plan of Amazon will focus on sustainable logistic measures which will be
adopted by the company through which they can create as sustainable future together.
Ansoff matrix is a marketing planning approach which is followed by e-commerce
companies through which they can evaluate their product and market strategy. Ansoff matrix

is helpful in understanding the market penetration, product development, market development
and diversification strategy. In case of Amazon, the company follows marker penetration
strategy where the company offers variety of products through different channels and
business medium. The e-commerce company is focusing on personalising the user experience
through the efficient use of data science and machine learning which will be helpful in
boosting current product sales in existing regions (Amazon Ansoff Matrix, 2020). One of
Amazon's primary strategies is product development. Amazon, the world's largest online
retailer by sales, sells over 500 million goods, including those sold by third parties on its site.
Clothing, shoes, jewellery, home and kitchen appliances, literature, technological gadgets,
sports and outdoor things and others are among the diversified range of product portfolio of
Amazon. When it comes to market development, Amazon takes a methodical approach.
Amazon originated in the United States and has now expanded to Canada, United Kingdom,
China and India. Additionally, Prime Free Same Day and Prime Free One Day services are
available in more than 8000 cities and towns worldwide. Prime Now is available in more than
100 locations across nine countries (Alyoubi, 2015). Diversification is the highest risk
strategy since it requires the creation of new products to sell to new clients. Amazon uses
variety to some extent. As a result of its diversification strategy, Amazon today operates in
the media, hardware, advertising and other business areas which supports the brand in
targeting customers at larger glance.
The KPI which have been sleeted for evaluating the strategic plan of Amazon are-
Evaluation of profit margin of the company and the analysis of number of customers retained
(Bondarenko and et.al, 2017). The execution of strategic plan will be done through strategic
plan which will be followed appropriately.
Part B
From this module, I was able to understand the concept of strategic management
which plays a crucial role in the organization for planning, developing and executing the
strategy. This essay was helpful in understating the competitive advantage and position of
company with the help of porter five forces and value chain analysis framework through
which the needs of improvement was also evaluated. This essay supported me in gaining the
understanding of current position of company with the help of SWOT analysis framework.
Therefore, this strategic plan was helpful in understanding the requirement of systematic
procedure which must be followed through which the required strategic change can be

successfully driven by ensuring successful implementation of strategies within the
organization.
From the essay, I evaluated that defining a clear set of strategic objective plays a
crucial role which must be strategically communicated within the organization through which
a business can successfully manage their strategic operations and ensure competitive position
of the company within domestic and global business environment. As per the evaluations, I
observed that strategic management is the composition of various factors which are helpful in
defining the planning, designing, implementing and analysing the strategic plan through
which an organization can evaluate efficiency and progress of the plan. All the steps and
procedures are carried strategically through which the company can sustain their competitive
position within industry and ensure higher revenues and profits are generated with their pre
planned objectives and strategic actions.
CONCLUSION
After detailed analysis of above essay, it can be concluded that strategic management
is the approach of identification and description of strategies which helps in enhancing the
performance and drives competitive advantage of the company. As per the essay, this can be
summarized that strategic and systematic plan of actions is helpful in enhancing the
organizational efficiency of business through which an organization can maintain their
competitive position within the industry and ensure effective performance through which
they will generate higher revenues. There are various factors which are present in a business
environment, such factors are broadly classified under internal and external factors which are
responsible to cater impact on the operations and profitability of companies. Strategic plan is
a systemic series of actions which are defined by an organisation for meeting their targets
which will assist the companies in enhancing their performance and efficiency within the
industry.

REFERENCES
Books and journals
Alyoubi, B. A., 2015. Decision support system and knowledge-based strategic management.
Procedia Computer Science. 65. pp.278-284.
Bondarenko, T. G and et.al., 2017. Optimization of the company strategic management
system in the context of economic instability.
Online
Linda Tucci, 2020. Strategic management. [Online]. Available through
<https://www.techtarget.com/searchcio/definition/strategic-management >
THE INVESTOPEDIA TEAM, 2020. Porter's 5 Forces [Online]. Available through
<https://www.investopedia.com/terms/p/porter.asp>
Amazon Company’s Porter’s Five Competitive Forces, 2021 [Online]. Available through
<https://ivypanda.com/essays/amazon-companys-porters-five-competitive-forces/?
Amazon Value Chain Analysis, 2022 [Online]. Available through
<https://www.edrawmax.com/article/amazon-value-chain-analysis.html>
SWOT analysis of Amazon, 2022 [Online]. Available through
<https://bstrategyhub.com/swot-analysis-of-amazon-amazon-swot/ >
Amazon Ansoff Matrix, 2020 <https://research-methodology.net/amazon-ansoff-matrix-2-2/>