Amazon's Strategic Management: A Comprehensive Analysis

This report provides a comprehensive strategic analysis of Amazon, a leading multinational company in e-commerce, cloud computing, and digital streaming. It examines Amazon's internal and external environment using PESTEL and Porter's Five Forces analyses, identifies key resources and capabilities through the VRINE model, and evaluates the company's performance using the Strategy Diamond framework. The report concludes with recommendations for Amazon to maintain its competitive advantage and achieve sustainable growth.

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BAM050
Strategic Management

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Table of Contents
Overview Of Amazon 3
Company’s Environmental Analysis: Internal And External Issues 4
1. PESTEL Analysis 4
3. Resources And Capabilities 6
4. Performance Summary 7
Evaluation And Recommendations 8
1. Strategy Diamond Framework 8
2. Recommendation 9
References 11
Appendix 14

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Overview Of Amazon
Amazon is a US-based multinational company focused on cloud computing, e-commerce,
digital streaming, and artificial intelligence. This is one of the top five organisations within the US
information technology industry, accompanied by Microsoft, Apple, Facebook, and Google. The firm
has been described as the most well-known brand and the most persuasive cultural and economic
power across the world (Amazon, 2021).
Jeff Bezos founded this organisation in 1994. With total sales and market capitalisation, the company
is the largest web-based retailer in the world. In terms of market capitalisation, Amazon surpassed
Walmart as the most trusted retailer in the United States in 2015. Worldwide, online services and
North America are the three operational segments. Along with that, the company has three business
models, such as (1) Amazon Web Services that provide cloud computing services; (2) Its retail activities
are spreading throughout Amazon Retail in which the organisation acquires inventory stored at
distribution centres; and (3) Amazon Market where third-party vendors lists and sell its goods for a
fee (Amazon, 2021).
The mission statement of Amazon is to endeavour to provide its clients with the best choice, the
highest expediency, and the lowest prices. This claim states what the buyers would want from the
Amazon service that goes beyond to meet their preferences. Furthermore, it aims to give customers
the best deals on three shopping aspects: variety, price, and personal satisfaction. Apart from that,
Amazon tries to be an organisation that considers its client's spending (Amazon 2021). This company
executes it by offering the lowest price to its customers without compromising on the product or
service quality that it showcases. In addition, Amazon has also acquired this right through an online
marketing model that makes sure that the operating costs remain at the lease allowing the
organisation to facilitate such services and competitive prices. Amazon expands the variety of
products or services for all consumers to purchase for accomplishing this feature in the mission
statement. The existence of this product is one of the main factors why this company is gaining more
popularity as a place that is readily available (Kiu and Lee, 2017).
The vision statement of Amazon is to be the leading customer-centric organisation worldwide, in
which buyers can find and explore what they would desire to buy online. In a word, this statement
recalls the expected reputation it seeks to attain as a goal where every consumer worldwide is satisfied
and feels treated in every way. As an e-commerce organisation, Amazon seeks maximum influence in

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the global market (Elliott, 2018). While the organisation's strategic vision is directly associated with its
progressive enlargement effort, Amazon acknowledges its easy-to-navigate sites and approachable
services as a sign of how it addresses the requirements of this initial feature in its vision statement.
Moreover, Amazon emphasises the requirement to give customers the highest priority, which is one
of the reasons they pursue the desire for the best possible service. This is a value associated with
encouraging workforces to be innovative in what they generate and display to customers (Fainshmidt
et al., 2019).
Company’s Environmental Analysis: Internal And External Issues
1. PESTEL Analysis
Political Factors
Amazon is a global technology organisation based in Washington. The United States is the second-
largest democracy and has a stable political environment. As a global retailer, Amazon is not resistant
for political reasons. In this way, politically stable Western nations have allowed the Amazon to expand
with similar legislation to the United States. However, the organisation faces stiff competition in China,
in which the government supports Chinese e-commerce firms (Lev, 2017).
Economic Factors
Although the economic lockdown for several organisations globally has been devasting, Amazon
appears to be different and has required positive outcomes. The organisation efficiently meets
customers' demands regarding groceries, household essentials, gaming, crafts, entertainment,
streaming, news, and much more (Çitilci and Akbalık, 2020). Thus, customer spending is also rising.
However, it should be noted that higher labour costs and tax changes, especially in the US and the UK,
can directly impact long-term business growth and profitability (Anwar, Khan and Shah, 2018).
Social Factors
The behaviour of consumers around the world is changing rapidly. Currently, they tend to "getting
things done". In this regard, Amazon delivers everything at their doorstep, which is convenient and
easy for customers. Those who have the patience and technical knowledge have the opportunity to
open the world. In addition, several individuals become financially secure by trading on Amazon
(Elliott, 2018).

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Technological Factors
Amazon is a significant player in making online shopping a habit for consumers around the world. It
works on a fast delivery system known as Amazon Prime Air. It intends for delivering packages up to
5 pounds within thirty minutes or less using small drones (unmanned aerial vehicles). The goal is to
improve Amazon's delivery system's security and efficiency (Cusumano, 2017).
Environmental Factors
While it is hard to determine the impression of Amazon on the environment, some persons claim that
the organisation is giving to ecological impairment. The main criticisms are traffic-related emissions,
the volume of packaging, and environmentally hazardous products. Nevertheless, it must be noted
that Amazon will make 50% of its shipment zero carbon by 2030, along with net-zero carbon
throughout its businesses by 2040 (Sastry, Katvi, and Tourani, 2019).
Legal Factor
Amazon must follow the laws and regulations in all countries where it operates. If not, they will face
fines and lawsuits. Amazon was penalised $134,523 for selling services or goods to individuals in
sanctioned nations (Anwar, Khan and Shah, 2018).
2. Porter's Five Forces Analysis
The Intensity of Rivalry Among Competitors
The competition in the online retail industry is high. Traditional brands also provide online sales to
make these online retailers more competitive. The major competitors are Alibaba, Flipkart, and eBay.
For Amazon, this is not just these other giants that are delivering it a stiff time. Many brands, online
stores, and small-sized retailers are also aggressive for market share. This has made rival solid
competition for the company (Hern, 2020).
The Threat of New Entrants
New entrants must invest in research and development to stabilise the industry and create a threat
to Amazon. Amazon has continuously invested in research and development to offer online services
to its clientele most conveniently and innovatively. It has accumulated many funds over the years
because of its massive profitability. The cost of research and development per unit is low because of
its vast operation, so it is possible to gain experience in scale economics. New entrants are not

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expected to have such benefits. Thus, the threat of new entrants is minor (Onyusheva and
Seenalasataporn, 2018).
Bargaining Power of Suppliers
Amazon can select more suppliers due to its access to suppliers around the world. Amazon is a
foremost customer for its suppliers. Therefore, these suppliers rely heavily on Amazon for a large
portion of their revenue. Amazon has proficient employees who continue to provide information
about the supplier market. Therefore, Amazon is well-versed in the supplier market. Therefore, the
bargaining power of the supplier is less (Hern, 2020).
Bargaining Power of Buyers
Amazon puts countless pressure on product quality and customer satisfaction, ensuring that the
product is delivered on schedule and that any replacements or returns are appropriately handled,
converting the first-time consumer into a repeat customer. The switching cost of buyers is low. Since
shoppers know a lot and there are several options for shoppers because of growing online retailing
trends. Thus, customers have intense bargaining power (Patricof, 2018).
Threat of Substitutes
The substitution to Amazon is retailers, such as Wal-Mart, online brand stores, and branded outlets
that sell on Amazon. As Amazon does not sell unique items, it will have an excellent substitution
threat. Simultaneously, many people favour visiting the retail shop for their needs instead of shopping
online. It leads to a higher threat of substitution (Mirghani and Hajjdiab, 2017).
3. Resources And Capabilities
VRINE Model
Value
Expert staff, advanced technology, brand image, and customer awareness are valuable things for
Amazon.
Rarity
Amazon has excellent customer relationship management, a strong brand image, a wide range of
products, an extremely complicated but efficient network of distributors and suppliers, as well as
advanced technology are rare things (Arnett, Goldfinch and Chinta, 2018).

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Inimitability
It is tough to imitate the advanced software technology of Amazon as it needs economies of scale
and funds. It is also hard to replicate the user recognition system as many new organisations do not
have the former purchase record of customers (Anwar, Khan and Shah, 2018).
Non-Substitutability
User recognition services prevent customers from going to alternative organisations. New
organisations would not be able to provide this service. So, customers' buying decision will become
problematic whether they moved to a new organisation that has no previous record of the purchase.
Amazon provides a variety and prevents customers from switching to other options that only give
certain products (Patricof, 2018). Further, the hard-earned reliability of Amazon prevents consumers
from moving on to other new substitutes, which are unreliable and nascent.
Exploitability
Amazon enhances the advantage of its brand reputation using its brand name in nearly every
product, like AmazonBasics, AmazonGo, Amazon Prime, and AmazonBooks, to conduct business on
its Brand Reputation. The organisation knows that the Amazon brand is enough for several
consumers to purchase from Amazon (Clemons, 2019).
4. Performance Summary
Brand name, technical expertise, and distribution network are factors of sustainable competitive
benefits for Amazon. The organisation has a provisional competitive edge with the quality of customer
service and the loyalty and trust of Amazon among its consumers. Amazon should explore ways to
keep the sustainable competitive edge that leads to it being a unique and robust player within the
market. In addition, the management of Amazon can develop various strategies to leverage and
differentiate some of the resources of a company that has momentary competitive benefits to create
long-term sustainable strength (Arnett, Goldfinch and Chinta 2018).

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Evaluation And Recommendations
1. Strategy Diamond Framework
Arena
Amazon's core competencies are providing a wide choice of products online, accompanied by
customer service and a state-of-the-art IT system. The organisation plans to efficiently do a better
business by transforming the short-term business cycle into a long-term one. The organisation's
primary strategy is to change the management system to direct it through its present renewal and
revolution process. Its main objective is to enhance performance in global and local marketplaces
(Bayon and Aguilera, 2020). Amazon's positioning and segmentation practice is linked to targeting a
widespread customer segment.
Furthermore, as a retail giant, Amazon applies a multi-segmented, anticipatory, and adaptive
positioning strategy. Amazon has a cost-effective outbound logistics system that is part of the
company's capability. It provides shipping service to dodge storage costs. The organisation pays
special attention to print and media promotion and elements of sales promotion in its marketing
communication channel (Clemons, 2019).
Differentiators
This is unique for the company because it provides them with a competitive edge in the present and
future arena. Amazon used the pre-purchase records of customers to make the user recognition
service that proposes products to customers according to their preferences. The organisation has
developed its advanced software technology, which allows the organisation to implement effective
customer relationship management by tracking the customer's buying behaviour and recommending
the similar kind of product customers want to purchase through user recognition. The products range
of Amazon is widespread between offline and online retailers (Bayon and Aguilera, 2020). The
organisation can provide its products at competitive prices because they save huge costs based on
online business operations.
Economic Logic
Amazon needs to avoid selling its products at zero margins because it will negatively impact its
profitability. To expand the public image, the organisation needs to sidestep its anti-competitive
activities and be reasonable on its prices. The product quality of Amazon can be enhanced by
developing the payment system (Prieto Sandoval et al., 2019). It will assist increase the credibility of‐

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customers in the company. In addition, regular and older customers ought to get a discount. It will
decrease the sum of customers shifting to another brand. The organisation should commence
manufacturing its products by opening factory outlets in emerging nations where labour costs are
lower. Then, to increase sales, Amazon needs to market it online worldwide (Prieto Sandoval et al.,‐
2019).
Vehicles
Amazon should remain to innovate and drive the industry in the age of cloud computing. To increase
the revenue, Amazon must effort on other deals with the large retailers to utilise Amazon's software
for their websites. Furthermore, Amazon must continue to attain more retail stores or manufacturers
to use to sell its products. The company builds a strategic partnership with Unilever, Toys R Us, Lyft,
Microsoft for the Climate Pledge, etc. Amazon acquired Zoox, Wondery podcasts, and autonomous
vehicles. The acquisition would help Amazon gain market share, experienced employees, and core
competencies without the hazard of entering a new marketplace (Prieto Sandoval et al., 2019).‐
Staging and Pacing
Amazon can follow the regional diversification approach. It could expand into developing markets,
such as India and China. This is due to the possibility of spending and growing internet awareness in
such nations. If Amazon expands its operations in those countries, it will be the first-mover benefit as
no other company has extended in these nations. The first-mover benefit would mean that Amazon
will supply the entire market because of low competition. It is possible to gain experience in the
economics of scale because of many activities (Moreno-Izquierdo et al., 2016).
2. Recommendation
The product quality of Amazon should be enhanced by improving its payment system. It will
help Amazon increase the credibility of buyers in the brand. The management of Amazon must work
on overcoming the subsequent weaknesses. It can begin producing its products and thus reduce
reliance on third-party suppliers. In addition, it should make a contingency plan to counterbalance any
unexpected losses, like that experienced when launching Amazon's Fire phone (Moreno-Izquierdo et
al., 2016). A large part of the populace does not become aware of how to use the internet. In this
regard, ordering centres should be set up in each area with competent staff. These highly competent
professionals will manage the Amazon website for free for others who are computer illiterate.

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Computer illiterate people are welcome to visit, and Amazon workers will inquire about the product
they prefer and want.
Additionally, Amazon employees will display a variety of goods and their pictures online. Consumers
can then select and order. It will extend the number of customers. Amazon should also begin
manufacturing and marketing its products (Zhao et al., 2016).
Customers need to make sure that their online transactions are secure. Amazon must agree with the
insurance company to protect its customers from losses. The safety of online buyers should also be
considered by securely storing their data. The market environment is essential for the business since
it facilitates the company to operate business competently. While the marketplace environment of
the firm is multifaceted enough to regulate, Amazon must attempt to regulate it because it is essential
for its accomplishment (Zhao et al., 2016).
Amazon needs to improve its marketing strategies with an effective marketing plan. Similarly, this is
significant to mention that Amazon ought to improve maximum services and improved the technical
factor for the effectiveness of its service provision. It is an imperative factor in improving the service
and providing effective online services in line with the pool's customers' needs. Quality assurance is
another effective recommendation for Amazon. The organisation's mandate is to deal with the
situation positively because it sources practical alternatives supportive in this regard (Pfarrer et al.
2019). The problem of competition should not endure diverting the competence of an organisation
because there are attempts to fix it. The quality department must also ensure that the web stores,
books, electronics, webinars, press coverage solutions, and case studies made by the organisation are
used efficiently. Thus, the business will address the quality requirement identified by the way.
To stay competitive and relevant in the industry, Amazon should consider these provisions in the
whole production (Zhao et al., 2016).

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References
Amazon 2021. Amazon Prime Air, Available at: https://www.amazon.com/Amazon-Prime-
Air/b?ie=UTF8&node=8037720011 (Accessed 13 September 2021)
Anwar, M., Khan, S.Z. and Shah, S.Z.A., 2018. Big Data Capabilities and Firm’s Performance: A
Mediating Role of Competitive Advantage. Journal of Information & Knowledge Management, 17(04),
P.1850045.
Arnett, J., Goldfinch, B. and Chinta, R., 2018. Multi-Dimensional Nature of Innovation at
Amazon. International Journal of Business Innovation and Research, 15(1), PP.1-13.
Bayon, M. and Aguilera, P., 2020. Managerial Perceptions of the Strategic Relevance of Resources and
Capabilities and Its Configuration for Firm Competitiveness: An Exploratory Study. Competitiveness
Review: An International Business Journal.
Çitilci, T. and Akbalık, M., 2020. The Importance of PESTEL Analysis for Environmental Scanning
Process. In Handbook of Research on Decision-Making Techniques in Financial Marketing, PP.336-357.
IGI Global.
Clemons, E.K., 2019. Resources, Platforms, and Sustainable Competitive Advantage: How to Win and
Keep on Winning. In New Patterns of Power and Profit, PP.93-104. Palgrave Macmillan, Cham.
Cusumano, M.A., 2017. Amazon and Whole Foods: Follow the Strategy (And the
Money). Communications of the ACM, 60(10), PP.24-26.
Elliott, L. 2018. Even Amazon Isn’t Immune to Political and Economic Pressure, Available at:
https://www.theguardian.com/technology/2018/oct/02/even-amazon-must-heed-laws-politics-and-
economics (Accessed 13 September 2021)
Fainshmidt, S., Wenger, L., Pezeshkan, A. and Mallon, M.R., 2019. When Do Dynamic Capabilities Lead
to Competitive Advantage? The Importance of Strategic Fit. Journal of Management Studies, 56(4),
PP.758-787.

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Hern, A. 2020. Amazon Faces €1m A Day Fine for Selling ‘Non-Essential’ Goods, Available at:
https://www.irishtimes.com/business/technology/amazon-faces-1m-a-day-fine-for-selling-non-
essential-goods-1.4229733 (Accessed 13 September 2021)
Kiu, C.C. and Lee, C.S., 2017. E-Commerce Market Trends: A Case Study in Leveraging Web 2.0
Technologies to Gain and Improve Competitive Advantage. International Journal of Business
Information Systems, 25(3), PP.373-392.
Lev, B., 2017. Evaluating Sustainable Competitive Advantage. Journal of Applied Corporate
Finance, 29(2), PP.70-75.
Mirghani, S. and Hajjdiab, H., 2017, November. Comparison Between Amazon S3 and Google Cloud
Drive. In Proceedings of the 2017 2nd International Conference on Communication and Information
Systems, PP.250-255.
Moreno-Izquierdo, L., Ramón-Rodríguez, A.B. and Perles-Ribes, J.F., 2016. Pricing Strategies of the
European Low-Cost Carriers Explained Using Porter's Five Forces Model. Tourism Economics, 22(2),
PP.293-310.
Onyusheva, I. and Seenalasataporn, T., 2018. Strategic Analysis of Global E-Commerce and
Diversification Technology: The Case of Amazon. Com Inc. The EUrASEANs: Journal on Global Socio-
Economic Dynamics, 1(8), PP.48-63.
Patricof, A. 2018. The Amazon Effect Could Potentially Leave All Americans Neighborless, Available at:
https://www.cnbc.com/2018/05/02/the-amazon-effect-could-leave-all-americans-neighborless-
commentary.html (Accessed 13 September 2021)
Pfarrer, M.D., Devers, C.E., Corley, K., Cornelissen, J.P., Lange, D., Makadok, R., Mayer, K. and Weber,
L., 2019. Sociocognitive Perspectives in Strategic Management. Academy of Management
Review, 44(4), PP.767-774.
Prieto Sandoval, V., Jaca, C., Santos, J., Baumgartner, R.J. and Ormazabal, M., 2019. Key Strategies,‐
Resources, and Capabilities for Implementing Circular Economy in Industrial Small and Medium
Enterprises. Corporate Social Responsibility and Environmental Management, 26(6), PP.1473-1484.

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Sastry, V.V.L.N., Katvi, S. and Tourani, P., 2019. Amazon’s Strategic Analysis and It’s Enterprise Strategy
for The Cloud. Advance and Innovative Research, P.186.
Zhao, Z.Y., Zuo, J., Wu, P.H., Yan, H. and Zillante, G., 2016. Competitiveness Assessment of the Biomass
Power Generation Industry in China: A Five Forces Model Study. Renewable Energy, 89, PP.144-153.

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Appendix
1. Macro-Environmental Analysis (PESTEL)
Environmental Factor
Events, Trends, and Possible
Developments for the Foreseeable
Future
Potential Significance for the
Focal Organisation
Political /Geopolitical & Regulatory
▪ Stable political
environment
▪ Second largest democracy
▪ A great destination for
the foreign direct
investment
Economic (National and
International)
▪ Strong GDP growth in
developing market
▪ Addressing the customer
demands efficiently
Social / Cultural Phenomena
▪ A shift in the e-commerce
and retail landscape
▪ Open up the world of
opportunities
Technological Developments
▪ Big data analytics
renovating retail
▪ Enhance the efficiency
and safety of Amazon’s
delivery system
Environmental (Ecological) Issues
▪ Limited disclosure on
environmental
sustainability and initiative
▪ Make its business net-
zero carbon by 2040 and
50% of its most
shipments zero carbon by
2030

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Legal Issues
▪ General data protection
regulation in the EU
▪ Legal and regulation
challenge against the
technology sector
▪ Would face lawsuits and
fines

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2. Porter’s 5 Forces Framework
Sectors
Five Forces
Industry
High Low
Buyers
▪ The Concentration of Buyers Relative to Suppliers (Industry) is
▪ The Volume of Purchase is
▪ Product Differentiation is
▪ The Threat of Backward Integration by Buyers is
▪ Buyer’s Knowledge About Supplier’s (Industry) Cost Structure is
▪ Percentage of Total’s Buyer’s Cost Spent on the Industry’s Output is
High
Suppliers
▪ Concentration Relative to the Industry is
▪ Availability of Substitute Products is
▪ The Importance of the Industry to the Supplier is
▪ Differentiation of the Suppliers Products / Services is
▪ Switching Costs for the Industry are
▪ The Threat of Forwarding Integration by the Supplier is
Low
Substitutes
▪ Profitability of Industry Producing Substitute is
▪ Rate of Improvement in Price-Performance Relationship of Substitute
Product is
High

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New Entrants
▪ Economies of Scale are
▪ Product Differentiation is
▪ Capital Requirements
▪ Switching Costs
▪ Incumbent’s Control of Distribution Channel is
▪ Incumbent’s Proprietary Knowledge is
▪ Incumbent’s Access to Raw Materials is
▪ Access to Government Subsidies is
Low
Rivalry
▪ The Number of Competitors is
▪ Industry Growth is
▪ Fixed Costs are
▪ Storage Costs are
▪ Product Differentiation is
▪ Switching Costs are
▪ Exit Barriers are
▪ Strategic Stakes are
High

3. Resources and Capabilities Analysis – VRINE Framework
No. Resource Valuable Rare Inimitable Non- Substitutable
1 Artificial
Intelligence
Yes Yes Yes Yes
Offer Improved Customer Experience and Product Enhancement
2 Financial Resource
Yes No No No
Sustainable Financial
Position
Market Liquidity and
Financial Instruments
Are Existing to Each
Nearest Competitor
3 HRM
Yes Yes Yes Yes
Hired Proficient and
Skilled Employees
Invest In Training of
Staff
4 Technical Expertise
Yes Yes Yes Yes
The Organisation Has
Highly Skilled Staff
The Organisation
Invested in The
Research and
Development
Difficult to Imitate
Amazon's Software
Technology
Difficult to Imitate

No. Capabilities Valuable Rare Inimitable Non- Substitutable
1 Brand Image
Yes Yes Yes Yes
Amazon Has One of
the Leading Brands in
the Industry
Attracts Customers
to Its Current and
Emerging Products
User Recognition
Service
2
Customer Network
And
Loyalty
Yes Yes Yes Yes
25% of Its Customers
Contribute to Above
85% of the Revenue
The Organisation Has
Invested to Establish
a Strong Customer
Loyalty
Difficult to Intimate
Has Been Tried by
Competitors but
None of Them Are as
Successful
3 Brand Equity
Yes Yes Yes Yes
High Brand Equity High Brand Equity Difficult To Imitate
The Organisation
Already Has a Strong
Presence
4 Marketing Expertise Yes No Yes No

Amazon Is
Competing Based on
Differentiation
Within the Industry
Most Competitors
Also Have Good
Marketing
Knowledge
Differentiate and
Leverage Its Certain
Resource to Make
Competitive
Advantage
Competitors Often
Matched Pricing
Strategies