Innovative Strategies in Amazon's Product Innovation Management

The provided content consists of academic articles and online sources on product innovation management. The topics covered include the relationship between HRM, employee creativity, and organizational innovation; the role of spatial ability in creativity and technical innovation; how creativity complements today's currency of innovation; metrics and sample validation for creativity and innovation; team composition and climate for innovation implementation; organizational creativity climate and perceived innovation; and servant leadership fostering creativity and innovation. Additionally, online sources discuss Amazon's innovative strategies, highlighting its dominance as a global marketplace.

STRATEGY
[HOW INNOVATION CAN BE USED USED
AS A SOURCE OF SUSTAINED
COMPETITIVE ADVANTAGE]
1

Table of Contents
Introduction .........................................................................................................................................3
Background of the company.......................................................................................................3
Critical analysis of the organization's external environment and an assessment of how it impacts its
choice of strategic position in its innovation strategy .........................................................................3
SWOT analysis............................................................................................................................4
PESTLE analysis.........................................................................................................................4
Porter's analysis...........................................................................................................................5
Critical analysis of the internal environment of the firm and how it impacts its strategic position in
its innovation strategy ..........................................................................................................................6
Value Chain Analysis..................................................................................................................7
How the organization currently addresses innovation strategy ...........................................................9
Recommendations to adjust or re-invent a new strategy that takes advantage of innovation
opportunities.......................................................................................................................................10
Implications for stakeholders ............................................................................................................12
Conclusion .........................................................................................................................................13
References..........................................................................................................................................14
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Illustration Index
Illustration 1: Porter's five forces ........................................................................................................7
Illustration 2: Value chain analysis ......................................................................................................8
3

INTRODUCTION
Innovation is the method through which new techniques can be adopted for business
purposes for achieving more opportunities of growth and success (Lewis and Wright, 2012).
Business entities who emphasizes more on innovative strategies generate more opportunities of
sustainable competitive advantage. The present research study been made on Amazon which has
range of products and services due to focus on innovation and creativity. Thus, regarding this
external and internal environment of the organization has been scrutinized through using strategic
models. Furthermore, researcher has also discussed the ways through which challenges and issues
related of organizational strategies are managed. Apart from this, several recommendations are also
stated in the study regarding reinvention in innovative strategies. Lastly, implications for
stakeholders have been stated regarding organizational innovative strategies.
Background of the company
Amazon plc is an American electronic commerce and cloud computing company which
delivers wide range of products to customers through the internet based retailing system. Amazon
has its separate retail websites for many countries in the world and along with this, it also offers
international shipping to certain countries for some of the products (Amazon.com Continues to Be
the Most Innovative Retailer in the World. 2014). From historical point of view, Amazon started its
business as a online book seller; however after a certain period of time, the company started
producing consumer electronics. Thus, Amazon is now considered as a world's largest provider of
cloud infrastructure services. In the year 2015, Amazon surpassed Walmart as the most valuable
retailer in United States by market capitalization (Why Amazon wins | Innovate the core, innovate to
transform. 2015). At present, company is considered as the best e-commerce entity in terms of
service delivery as it make sure that product ordered by the customers are delivered within the
specific period of time or even before.
CRITICAL ANALYSIS OF THE ORGANIZATION'S EXTERNAL ENVIRONMENT AND AN
ASSESSMENT OF HOW IT IMPACTS ITS CHOICE OF STRATEGIC POSITION IN ITS
INNOVATION STRATEGY
Amazon has been working in competitive market place where numerous business entities
sells same sort of products and services. As per the market situation, environment keeps on
changing and it also brings varied opportunities for business entities. In the below mentioned
section, information about macro and micro environment has been included so as to get clear idea
about external environment.
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SWOT analysis
Opportunities
 Amazon can come up with its own
brands in different product categories
(Lewis and Wright, 2012).
 Expansion in Asia and developing
economies will enhance success aspects
because of low competition in E-
commerce industries (Why Amazon wins
Innovate the core, innovate to transform,
s2015).
 It can also acquire E-commerce
companies so as to decrease the
competition level (Baer, 2012).
Threats
 Low entry barriers affects the current
business through competition, price wars
and shrinking margins (Stylianou-
Lambert, 2012).
 Issues in multi branding retailing is a big
hurdle for Amazon's success (Lewis and
Wright, 2012).
 Local competition from Snapdeal and
Flipkart are taking away majority of the
market (Dul and Ceylan, 2014).
PESTLE analysis Political: Due to political stability, Amazon has the opportunity expand the business more in
new markets. At the same time, Amazon can also manage trade related practices in effective
manner due to political stability. Economical: Amazon should consider Asian markets as entry in such market could enhance
economic capacity of the business. Amazon has to adopt new economical tendencies so that
business may survive in this market place for longer time period. Social: Amazon has the opportunities to amend the market share because the company has
wide range of products and services. According to needs and preferences of customers,
Amazon is making changes in company's processes (Enachescu and Damasaru, 2013). Technological: Amazon has been using technological sources so that innovation and
creativity in the business practices can be increased. All the products and services are
distributed to the customers through electronic sources; hence this depicts that the business
is making adequate use of technological sources. Environmental: Amazon is managing the business activities in adequate manner through
adopting different methods for environmental protection. In order to manage the business
activities, Amazon is focusing on eco- packaging so that products can be properly delivered
among the customers.
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 Legal: Issues related to taxes and other subsidies are increasing because Amazon is adding
range of products in company's product list. Legal issues are increasing due to copyright
management and environmental aspects (Anderson, Potočnik and Zhou, 2014). Operating in
such a competitive environment it is important for cited firm to undertake all the legal
policies and legislations so that each and every operation is executed in ethical manner.
Porter's analysis
Forces Description High / Low / Moderate Risk
Risk of entry by potential
competitors
In the sector of E-commerce,
intensity of competition is
increasing several entities are
operating in the marketplace.
Economy of scale, new market
players, potential new market
entrants, innovative features
and capabilities are some of the
challenges which business
entities are facing from existing
firms.
High Risk
Rivalry among current
competitors
There are various companies
operating business in the same
sector; hence Amazon has
competition (Baer, 2012). The
major competitors are Barnes
and Noble.com and eBay.
Moderate Risk
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Bargaining power of buyers Bargaining power of customers
is considered to be relatively
high as customers have many
options which they use from
their mobile devices. Since,
Amazon does not have a
physical store; hence it offers
low prices goods to the
customers through internet
services. The company also
manages to use buyer power as
a source to attain competitive
advantage because products are
more valuable.
High risk
Bargaining power of suppliers Suppliers have a high power
and Amazon cannot compete
with the suppliers since they are
important and committed to the
company. Therefore, it is
important for the management
to maintain relationship with
suppliers so that they provide
quality of raw materials through
the means of which Amazon
can enhance customer service
(Dul and Ceylan, 2014).
High risk
Threat of substitute products Threat from substitute products
is increasing as there are
various entities that deliver
same sort of services to the
customers at the same
marketplace.
Moderate risk
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Hence, from the discussion it is clear that external environment of the business is changing
rapidly due to many factors. Market scenario in this sector is transforming because of range of
substitute products and services (The Innovations That Took Amazon From Online Bookseller To
Dominant Global Marketplace, 2013). Due to this facet, Amazon is required to focus more on
innovative and creative aspects so that its brand image can be developed.
CRITICAL ANALYSIS OF THE INTERNAL ENVIRONMENT OF THE FIRM AND HOW IT
IMPACTS ITS STRATEGIC POSITION IN ITS INNOVATION STRATEGY
Amazon is more focused towards innovative approaches so that long term sustainability and
competitive advantage can be acquired. According to company's vision, all the employees manage
their roles and responsibilities in prominent manner and this also assists them to utilize
organizational resources in prominent manner. In the below mentioned section, several tools are
stated through which internal environment of Amazon can be accessed.
Value Chain Analysis
With the help of this model, Amazon can analyse the business activities that create value and
competitive advantage to the business.
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Illustration 2: Value chain analysis
(Source: Yeh-Yun Lin and Liu, 2012)
Primary activities Inbound logistics: Generally, Amazon do not have long term contracts or arrangements with
its vendors to guarantee the availability of products especially in the area of making
payments for products and services. Fulfilment by Amazon is the cornerstone of Amazon's
inbound logistics for company- owned retail business (Why Amazon wins | Innovate the
core, innovate to transform. 2015). The business is entirely responsible for logistics,
customer service and product returns. Further, the use of FBA is an optional choice for
sellers and this choice makes the products of third party sellers eligible for Amazon Prime
free two day shipping, free shipping and other benefits. Operations: Market place is one of the main sources of Amazon revenues. Hosting
merchants from more than 100 countries assist Amazon to make deals with different entities.
All the operations of Amazon are globally operated; hence this helps the business entity to
adopt more approaches for creativity and innovation. Nonetheless, the business is also able
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to offer fast and free shipping which enhances profitability such as economies of scale
(Amazon.com Continues to Be the Most Innovative Retailer in the World. 2014). Amazon
Web Services is also launched and it also provides a platform for building applications. Outbound logistics: Amazon operates 109 fulfilment centres around the globe and the
company uses robotic technology in an extensive manner to manage picking and shipment
of products. The company has willingly invested in massive financial investment which also
aids in managing the logistics facilities. In order to manage organizational operations,
Amazon has bought trucks and trailers as well. Marketing and Sales: Marketing budget of Amazon has been continuously increasing for
the last five years. Several components of marketing communication mix such as public
relations, direct marketing, sales and promotion are used in an integrated manner to
communicate the marketing message to the target customer segment (Yoshida and et.al,
2014). This not only generates awareness about the products; but also assists the business to
promote the services to diverse market places.
 Services: Amazon has been focusing on better customer services so that existing customer
base and satisfaction level can be increased. This is yet another approach through which
competitive advantage and long term sustainability can be acquired. At the same time,
services should be prominently delivered for customer retention. For example- Amazon has
started
Support services
 In terms of support services, Amazon is investing more in firm's infrastructure so that all the
products and services can be arranged in effective manner (Yeh-Yun Lin and Liu, 2012).
 Further, human resources of Amazon are managing their roles and responsibilities in
prominent manner which helps the business to deliver adequate services to the clients.
Similarly, HR also ensures that all the employees are taking part in organizational decision
making system so that to enhance the frequency of innovation and creativity.
 Amazon is getting huge assistance from technological facets which assists the business
entity to deliver convenient services to the customers. Moreover, extensive use of
technology also assist Amazon to amend the degree of innovation and creativity (Stylianou-
Lambert, 2012).
For continuous improvement, Amazon emphasizes on user survey through which the
business also acquires feedback from the customers regarding the effectiveness of products and
services. Amazon know that customers do not pay for waste services; thus the business focuses
more on waste prevention under the concept of lean. Company's information technology is good
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which understands the needs and preferences of customers. Thus, from the discussion it can be said
that innovation is the major aspect that needs to be considered so that competitive edge can be
created among the rivalries. At the same time, it has also been observed that Kaizen philosophy is
adopted by the business entity for continually improving the products, processes and activities of
the business (Somech and Drach-Zahavy, 2013). This also assists in meeting the changing
requirements of the organizational standards.
Core competencies and capabilities of Amazon
Amazon has the capability to retain the customers on higher extent because of the quality
and variety of products. Further, the business is also growing due to focus on innovative products
and services. All the process of Amazon are innovative from business point of view and it also
ensures that organization is creating competitive edge over the rivalries.
Strengths
 Amazon has wide range of products
which helps in acquiring greater benefits
from the market place (Yoshida and et.al,
2014).
 In order to differentiate itself, company
has created strategic alliances with other
business entities to offer superior
customer service.
 Amazon has created a deep and
structured network to make product
available to the customers.
Weaknesses
 Amazon's margins are shrinking due to
extensive delivery network and price
wars.
 In many developing nations, Amazon is
still struggling to make the business
profitable thereby it affects overall
profitability (Somech and Drach-Zahavy,
2013).
 Product flops is the most common
weaknesses of Amazon.
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Mission and vision statement
Amazon's vision is to be the most customer centric company and also to build a place where
people can explore anything they want to buy online.
Mission of Amazon is to offer quality products and services through using best technology
available at reasonable price.
HOW THE ORGANIZATION CURRENTLY ADDRESSES INNOVATION STRATEGY
Amazon is considered as the most innovative retailer in current scenario due to the product
categories and services. It is the result of innovation only that the business is able to make rapid
transformations in the existing practices. As per company's philosophy, innovation is part of the
Amazon's DNA and over the past 15 years, the company is constantly adding and refining
technology that can amend and improve the experience of customers (Oman and et.al. 2013).
Regarding this, the main focus of the company is to provide proper services to the customers so that
they can find right product for them. Apart from this, Amazon should also ensure that they are
ordering and delivering the services as fast as possible in a seamless process. Amazon has been
emphasizing on innovative prospects so that long term strategies can assist the business entity to
grow and prosper more. Amazon has been searching for more opportunities so that it can reinvent
its business models and can find new ways to create value for the business.
Innovation is also there in the area of corporate culture where in Amazon involves different
products and services so as to meet the requirements in best possible manner. The Amazon
marketplace allows thousands of UK businesses to sell their products to customers across the UK
and all over Europe through providing independent sellers (Lewis and Wright, 2012). Organization
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currently addresses several innovation strategies such as “1-click” which is a fast and easy way of
ordering things from Amazon with one click of button. It is automatically enabled after the
customer places their first order with the company. Another strategy that is used by Amazon is
recommendations in which customers can show their feedback to others through posting their
feedbacks. According to the feedbacks, Amazon compares their activity so as to check the
requirements of customers. Using this comparison, Amazon is able to recommend other items that
may appeal the customers. At the same time, customers can also submit written or video reviews for
any products listed on Amazon which influences purchase decisions of other customers (Kell and
et.al, 2013). Furthermore, customers are also encouraged to share to share their opinions both
favourable and unfavourable. This also assist the business entity to identify the areas where changes
can be made.
In the area of online services, Amazon has been managing all the aspects in adequate
manner and later this, several new amenities are also included in the product list. Amazon Wish list
is one such method through customers can add personalized items which they prefer to purchase
form Amazon. With universal wish list, customers can add products from any website to their
Amazon wish list merely with one click. In terms of innovation, it can be said that Amazon has also
started AutoRip in which customers are given free MR3 versions of CDs and vinyl music for every
purchase they made from Amazon (Jiang, Wang and Zhao, 2012). In addition to this, customers who
have purchased AutoRip albums at anytime can enter in company's cloud music library. Hence,
from the discussion it is evident that Amazon has been emphasizing on innovative and creative
strategies so that customer base and market share can be enhanced.
In order to compete with existing business organizations, Amazon has to ensure that the
services they are delivering to the clients are value and quality associated. For business innovation
and continuous improvement, Amazon should ensure that new products and services are introduced
at higher extent so that customer switch over aspects can be reduced. Apart from this, it is also vital
for the organization to focus more on technological grounds for bringing new and innovation
service standards. Amazon is aware about the needs of clients; hence according to that new business
services are brought up at the market place (Im, Montoya and Workman, 2013). In order to drive
success opportunities for the business, Amazon ensures that client satisfaction ratio is maximizing at
higher extent. However, on the other hand, while Amazon is busy in developing its market share
and increase in customer satisfaction, innovations do come at a cost. The company is well-known
by investors for not making money; hence this can be regarded as a issue for Amazon in
contemporary scenario. On the other hand, Amazon's growth is expected to be significant and this
may also increase 20% profit margin in next couple of years.
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Amazon has been focusing on product and process innovation in which the business entity is
extending the product line so as to grab the attention of more customers. In terms of product
innovation, Amazon is bringing varied products so that to meet the needs of customers. At the same
time, under process innovation, Amazon is also focusing on adding new services for customer
satisfaction. These efforts specify that the business is highly concerned about development and
innovation. Product innovation can be seen by observing the product line as earlier Amazon used to
sell books only; however now the organization is selling other category of products as well.
Cited firm should make use of differentiation strategy in which they will aim at providing
their customers with options in which customers will be able to use the application of Amazon
without internet connection. This way firm will be able to make differentiation with other
competitors.
RECOMMENDATIONS TO ADJUST OR RE-INVENT A NEW STRATEGY THAT TAKES
ADVANTAGE OF INNOVATION OPPORTUNITIES
There different type of strategies which can be adopted by the Amazon. It is important for
cited firm to make use strategies as there are many competitors which are raising. The main purpose
of employing different strategies is that it will assist the course of Amazon to maintain competitive
advantage within the changing corporate environment of e-commerce sector. Thus, it is of great
importance that as per the change in trends and environment of target market, cited firm should
adopt different strategies and tactics to execute operations in appropriate manner/ In this context,
following are few strategies that top level management of Amazon can incorporate:
ERP (Enterprise Resource Planning): This a type of software which enables to provide all
the information relate to market and the changes with the customers needs and requirements. For
any organization, ultimate aim is to gain maximum profit and this possible company will be able to
satisfy their customers. Through ERP, Amazon will be able to keep a note over the changes which
take place within the customer's preference and accordingly changes can be made with the help of
which services users can be satisfied (Fojo, Mailankody and Lo, 2014).
Research and development: Organization can conduct market research with the help of
which managemwent will be able to know the customers preference and accordingly services can be
provided through which they can be satisfied.
Ways to innovate plan: Organization can take suggestions from employees. They are the
face of company as they have direct interaction with customers. They know the issues which they
face. Services can be improved accordingly.
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Open innovation: Banners and posters can be developed by the Amazone which will enable
to grab attention of people and this way they will be able to attract customers.
Type of innovation which Amazone use: Amazone make use of process innovation. In this
type of innovation frim make continious innovations and this is done by frequent research which is
conducted by the organization.
Market research: As stated above, there are many organizations which provide their
customers with similar service and in order to make changes as per the changes in taste and
preference of customers, it is important for Amazon to conduct market research. In addition to this,
suggestions should be taken from employees as they have direct interaction with customers.
Workers know the issues which are faced by customers. Firm can develop those services and
provide better service to customers.
Application for free: Amazon can provide their customers with application which can be
used for free that means without using internet. This will be helpful to attract large number of
customers. However, there are many negative impact like other firm will have to face losses. There
are cases in which people do not make use of services as they have to pay for it but when Amazon
will provide its services for free, there will be many people who will start using the services which
are provided Amazon.
Discounts: Currently, Amazon provide discount offers during festival time. In this context,
when firm will provide frequent discount offers to customers, then firm will be able to develop
strong customer base (Escribá-Esteve and Montoro-Sánchez, 2012). Service users make use of
those services which are provided to them at low cost. This is a type of promotional strategy which
organization can adopt. Further, there are many organizations. Other organization also provide their
customers with discount offers at festivals and if Amazon provide their service users with frequent
discount offers, then firm will be able to attract more and more customers. This will also help in
achieving organizational goals and objectives.
CRM (Customer relationship management): This a type of system in which Amazon can
maintain proper record of customers. When proper records are maintained, then firm will be able to
provide their service users to develop a feeling of trust and confidence among their mind. This will
be helpful in creating positive perception (Enachescu and Damasaru, 2013). In addition to this, cited
firm can also make use of social media in which they will be able to develop strong relationship
with their customers. Further, this will also help in understand the issues which are faced by them.
Accordingly, suitable steps can be taken with the help of which customers can be satisfied.
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Free delievery: amazon should provided free delivery facility to their regular consumer for
purpose of create attractive image in the mind of consumer. Further, it should open their new
storage in small city so that it is convenience for organisation to delivered item within short time
period along with organisation save delivered cost so that amazon can gives free delivery facility to
their consumer. Further, this strategy create value in the mind of consumer (Dul and Ceylan, 2014).
Offer and discount: amazon should not offer discount at regular time further, enterprise
should gives offer occasionally or at specific time period. It is because of regular discount not
attract more consumer but occasional discount attractive to more consumer within the short time
period. Therefore, it should also consider the psychology of consumer because they spend for good
and service because of some reason (Dubina, Carayannis and Campbell, 2012).
24 hour delivery: Amazon should provided 24 hour delivery facility to every consumer. It is
because of attract more consumer. Further, many of consumer demand good at urgent so that they
prefer local shop etc. in addition, this strategy not only provided more consumer but also gives
competitive advantages.
Handicraft item: Amazon should link with handicraft seller for fulfilling requirement of
person who is lover of this item. Further, handicraft market are limited but in the modern time
period it largely demanded. So that this strategy help to reach new market.
Everywhere delivery: Amazon should increases their market by delivering item in new
market or rural market. Further, it should conducting a market study for purpose of knowing the
market condition (Çokpekin and Knudsen, 2012). Furthermore, if any area internet users are in
large number along with they have good economic condition than Amazon should provided delivery
facility in new emerging market.
IMPLICATIONS FOR STAKEHOLDERS
The major stakeholders of Amazon are its customers, owners, suppliers and employees and
all these stakeholders are required to be included in company's processes so that they can give their
valuable suggestions. All these people play significant role in the organization; therefore it is
essential for Amazon to include these people while adopting new changes in the business. Since,
market research is suggested to Amazon; therefore it is essential to engage stakeholders so that they
can also enhance company's success and growth facets. With the help of this, interest of
stakeholders can also be protected in the organization (Černe, Jaklič and Škerlavaj, 2013). Company
should also get advice from the stakeholders regarding the introduction of new products and
services as that can also enhance growth and prosperity facets. In order to increase sales, Amazon is
16

suggested to give discounts to the customers; hence this information should be provided to the
stakeholders as well.
Customer relationship management can work properly in the case when all the work
processes will be managed according to the structural aspects. Positive perception can be created
among customers regarding Amazon's services; therefore stakeholders have to ensure that service
delivery process is optimum. Further, this is useful in retaining the stakeholders for longer time
span. By considering the verdict and viewpoints of customers will assist the course in developing
products as per the needs and enhancing the satisfaction of customers (Baer, 2012). To develop and
maintain long term relationship with customers, Amazon need to make use of effective channels of
communication so that they can easily understand the expectations of clients and accordingly
function in the market.
Herein, Customer Relationship Management System play vital role for Amazon as
management is able to record the information about the customers so that emphasize can be given
on their taste and preference on different products and services. Apart from customers, employees
are the major stakeholder for Amazon as they are the backbone of the company and work hard to
satisfy the expectations of customers by delivering quality of products and services. In order to
enhance the loyalty of employees towards Amazon managers need to provide quality of working
environment where they are given proper freedom and space to work effectively and execute the
operations in the best possible manner (Anderson, Potočnik and Zhou, 2014).
All the stakeholders of the company are required to be involved in organizational work
processes so that they can also contribute in company's strategic processes. At the time of
introducing innovation in the business, it is vital for Amazon to engage stakeholders so that policies
and practices can be modified accordingly (Dubina, Carayannis and Campbell, 2012). This is vital
so that strategic dimensions of the company can be managed in sustainable manner. Information
related to company's technological aspects should be given to the stakeholders so that they can also
invest in the same source. Hence, from the discussion it is evident that stakeholders of Amazon
should be adequately included in organizational processes and activities.
Further, in order to solve the conflicts among management can be personal interaction which
will help in knowing the issues which each of the employees face. Accordingly, appropriate
decision can be made with the help of which conflicts can be solved.
CONCLUSION
From the entire study, it can be concluded that innovation and creativity are the major
aspects of any business organization which helps to generate more opportunities of growth and
17

success. Amazon is investing in innovative practices and this assists the business entity to
emphasize more on introducing new products and services. Moreover, business competency is also
enhancing because organization is considering the policies and strategies of competitors as well. On
the basis of above study, it can be articulated that Amazon needs to continuously emphasize on
external and internal environment as that can support the business to focus more on better services.
This is also useful in terms of adopting new practices for more development.
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