Competitive Strategy Group project

This report discusses the competitive strategy of Amazon through Pestle, Porter's Five Forces, SWOT, and Ansoff Metrics. It analyzes the external factors affecting Amazon and its strengths, weaknesses, opportunities, and threats.

COMPETITIVE STRATEGY
GROUP REPORT

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................2
Pestle analysis..............................................................................................................................2
Porter's five forces model............................................................................................................4
SWOT analysis............................................................................................................................5
Ansoff metrics.............................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
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INTRODUCTION
Competitive strategy is defined as the long term plan of the company in order to gain the
competitive advantage over the other competitors after examining the strength,weakness and
opportunities in the industry in which the company operates. The competitive strategy focuses on
generating high return on investment. This strategy is useful where the there are more number of
competitors selling similar products in the market (Haiyan, et.al, 2021). Through the
competitive strategies the company can make modifications in its plans and policies according
the needs and demand of the market with the help of effective tools in order to gain competitive
advantage in the market. The report covers the strategic tool such as Pestle, Porter's five force
model, Swot and Ansoff matrix on the Amazon company case study.
MAIN BODY
Amazon company is the world largest online retailer established in 1994 and offers a
variety of products and services to its customers online. With the increase in the selling of the
products online , the owner of the company launched the online bookseller Amazon.com in the
year 1995. Every organization is affected by the changes which takes place in the environment.
Business environment consist of the internal and external factors that affects the functioning of
the company (Bonsu, S., 2019). It is very necessary for the company in order to survive in the
market need to make changes according to the changes in the environment which can be in any
form. The organization has to make modifications and changes according to the changes in the
environment.
Strategy models are the tools which helps the company to develop action plan. The
company uses the effective strategy in order to achieve the goals and objectives of the company.
Every company wants to gain competitive advantage over the other competitors by selling the
products in the market and also satisfying the needs and preferences of the customers as well.
Pestle analysis
PESTLE Analysis is a tool that examine how the external factors affect the Amazon
company. These factors include the political, economic, social, technological and legal factors
that affect the functioning of the company and also influence the strategic and operational
decisions of the company.
Political factors affecting Amazon
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The Amazon company is a well- established company which serves many customers by
offering the products and services online. The company has to face many challenges as there is a
lot of interference of the government and their policies which affect the success of the company.
If the government of the company should be stable so that the company can fulfil its objectives.
It has been observed that a country with the stable government also affect the functions of the
company (Neukirchen, et.al, 2019). Various laws have been made regarding the laws for the
company involved in e-commerce business. The company has the support of the government but
on the other hand the company has to comply with the rules and regulations of the government.
Economical factor affecting Amazon
If the economic conditions of the company is stable, the company will grow at faster rate.
Retailing is the medium on how the producers offer their products and services to the
consumers. The consumer disposable income is increasing which gives and opportunity for the
Amazon company to operate in the market (Rapo, 2019). Higher disposable income means
consumer will buy the products of their own choice which enable the company to expand its
business to increase their market share and also the brand image of the company.
Social factors affecting Amazon
Social factors, changing trends and behaviour also affects the company in negative and
positive way. The online facilities rendered by the company has enabled the people to stay at
home resulting into the changed habits of people which has affected their lifestyle. E- commerce
has made it convenient as there are no restrictions and consumers have access to the goods of
their choice (Griffiths, et.al, 2019). The government has taken various measures in order to
improve the lifestyle of the people.
Technological factors affecting Amazon
Technology is considered as the backbone of the success of any company. The scope of
the technology is increasing rapidly which has made the Amazon one of the most profitable
company worldwide. The company is continuously working on improving and using updated
technology in its operations in order to increase its profitability and also fulfil the requirements
of the customers. The company with the use of the latest technology minimized the operational
cost of the company for reducing the cost. This has led the company increase in its revenue of
$74.5 in 2013. The company has also released the smartphone application for their Kindle
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services which allows the customers to access the online sales platform. The company is working
also on securing the details of the customers and also the personal information of the customers.
Environmental factors affecting Amazon
As the company is involved in the online business so its operations can affect the natural
environment. The volume of packaging, traffic related emissions and environment damaging
products of the company negatively impacted the environment. The company is focused on
making improvement in its policies and products in order to reduce the negative environmental
impact. Various programs have been implemented in order to eliminate the negative impact
which is harming the environment.
Legal factors effecting Amazon
The Amazon company has expanded its business in various countries and in also in the
international market and every country has its own laws, rules and regulations for the company's
operating in different sectors. In order to survive in that market, it is important for the company
to abide by the rules and regulations of the country in which it operates. It is also mandatory for
the company to comply with the laws of the country. Various laws such as discrimination laws
and consumer protection laws which is basically designed in order to protect the rights of the
consumers and it is necessary for the company to follow the rules of that respective country.
Porter's five forces model
Threat of new entrance (Low)
To create and set up the online store is not a difficult task but to compete with the
existing company and to reach its level is difficult one as it requires huge investment and
customer base. The rapid growth of the technology has resulted in various changes in the retail
industry as well (Werth, et.al, 2020). Many bands have established and expanded its market but
is not able to compete with the Amazon company. It requires a lot of investment in
warehousing,distribution and marketing. The company has invested in new warehouses and
fulfilment centres worth $300 million in the late 1990s. Thus, the threat of new entrants is low
for Amazon company.
Competitive rivalry (High)
The rivalry in the retail industry is high as there is increase in number of the players in
the retail market. It has been also observed that the traditional brands have switched and started
offering online sales giving tuff competition to the online retailers. The main competitors of
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Amazon company are Flipkart, eBay etc. These are not only competitors giving tuff competition
but small scale companies are entering into international business which enable the company to
make improvements in its strategies in order to maintain its position among the competitors.
Bargaining power of the suppliers (Low)
Suppliers of the Amazon company provides with the products that is required for its e-
commerce business. The role of the suppliers is core in the e-commerce business as without the
suppliers the retailers will fail to serve the customers. The company has large chain of suppliers
but it is mandatory to follow the rules and regulations which is laid by the company (Ujakpa,
et.al, ). The company ensures that suppliers are following the ethical working standards at the
work locations and no suppliers can think of forward integration in the supply chain. As a result
the bargaining power of suppliers against the company is low.
Bargaining power of the buyers (high)
The company mainly focuses on the customer satisfaction and also maintain the quality
according to the requirements of the customers. Amazon company also ensures that products are
received to the customers on time and replacements are also done on time(Malhotra, et.al,
2019) . The switching cost of the buyers is low in case of the company and buyers have lot of
options and can switch to other company due to the competitors it has which offers the similar
products but at low prices.
Threat of substitutes (high)
As the Amazon company does not sell any unique products so it faces the threat of
substitute as there are many other companies which offers similar products which enable the
customers to switch to other brands (Kopacz, 2020). The substitute of Amazon is the Wal-mart
and other branded stores which supply the similar products as man of the people prefer visiting
the stores rather than shopping from the online sites.
SWOT analysis
Strength-
It has been analyzing that amazon has strong brand name that also consider has e-commerce
platform and position in the market also the brand value of company is 2nd position after google
and apple with 250 billion Alshmrani, (2021). Th company started as the early entry in the field
of online selling. It has large number of customers who are purchasing on daily basis in
expensive prices because it made customer-oriented brand. Also, amazon actively bring
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innovation and creativity ideas in order to increase the product and services such as drone
delivery services within aura smart sleep system which is help for creating different from other
company. Amazon does not maintain the physical retail store for selling the product or services
because everything selling online. According to economies of scale it helps to control efficiently
cost and decreases inventory time. There are different type of strategic alliance by many
companies such as the orange chef, Evi technologies etc. that help to maintain low cost structure
on the basis of strong value chain system Sadq, Sabir and Saeed, (2018)
.
Weakness-
The weakness of amazon is related to the easily imitable business model that are quite common
in the digital world also there are many businesses that become biggest competition for the
company such as eBay, Netflix, Flipkart, Snapdeal etc. in few areas like India organization has
faced loss in order to provide free shipping to the customer so that it exposes the risk by losing
margin in the company. In US fire phones become big failure of amazon that affect the company
in growing as well as maintaining brand image. The tax avoidance controversy in UK, JAPAN
and US sparked negative publicity for amazon that impacted tax charging on social media as
order of president trump Baker-Brunnbauer, (2021)
.
Opportunity-
At the time of establishment Bezos consider online book selling as the great opportunity in
theyear 1995. Some of the external factors are help amazon by expending its operation in
developing market. It also has improving competition by providing product at offline stores or
physical stores so that it helps to engaging with customer easily. It improves the technology
measures and policies of organization by reducing sells. Also, it can launch electric rickshaw in
India for pledging positive impact on environment by the year 2025 Sadq, Sabir and Saeed,
(2018). Further, it has opportunity of improving the services of amazon prime so that customer
can easily opt the application also at the time of festive season it can offer product at good
discount by selling accessories clothing, wallet, shoes, bag etc. according to the taste of
customer.
Threat-
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Some of the biggest threat related to government regulation in some countries where no product
or services shipped to north Korea, Iran, Syria, Cuba etc. in which government not allow for
expanding the business. Bezos were commented in a Fortune article profiling the company, “We
were investors in every bankrupt, 1999- vintage e-commerce start-up. Pets.com, living.com,
kozmo.com. So that it affects critically by increasing competition in such countries. Further,
amazon also face link for exploitative labor from us in order to maintain supply chain and labor
sources with human right abuse also it affects reputation of amazon by increasing legal risk.
Increasing cybercrime also affect network security system of organization that are very common
for nowadays also it can expose the data to the competitor which can be misuse by them Okunola,
(2021). There is aggressive competition seen in detailing firm such as Walmart, eBay, Target,
Home Report can become tough time in the future.
Ansoff metrics
Market Penetration-
This strategy company can sell their existing product in existing market for expanding the
business it also helps in increasing the market share by uses of product to the existing customer
also, competitive strategy for pricing and campaign will be help for by amplecting market
penetration strategy efficiently. Amazon come up with attractive offers on different products so
that it can help for increasing the sales. By this strategy by profit margin also increases that can
help the website for increasing traffic. Amazon is largest retailer in the global market but
increasing loyalty of customer for retaining them.
Product development
Product development is important strategy that help the company by growing and it can
identified opportunity of introducing new product in existing market so that it can help for
developing on label for product and services Verhoef, Broekhuizen and Haenlein, (2021). There
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are many products of amazon that can differentiate the market by this strategy. When the
company come up with own version of product the suppliers of top brand that more power for
negotiation. Manufactures of organization get more chance for developing new product in
existing market. At the time of initial stage, the cost of the product is in comparatively high so
that consumer will think after buying the product.
Market development
Market development is one of the important stages because it helps current business operation
with the help of new product in new market Sastry, Katvi and Tourani, (2019). There are some of
the factors such as product strategy, Dimension and distribution channel which are help for
attracting new customer in order to building new market. The majority supplier of amazon is UK
as well as other countries so that each country understand market as well as customer segment.
To create and maintaining an edge you need innovative people and you need to empower them
Diversification-
This strategy usually very difficult for implementing but at the same time selling new product to
the new customer cannot be easy but amazon has good brand name that directly attract customer
whether it can be grocery business. Due to pandemic organization stated selling groceries in
order to attract more and more consumer that can be help increasing profit margin also the
diversity strategy sometimes fails Chintalapati, (2020)
CONCLUSION
From the above it can be concluded that competitive strategies is the long term action
plan which enable the company to gain competitive advantage over the other competitors
operating in the retail industry. The report is summarized into the external factors that affect the
Amazon company such as political, economic, technological , social and legal factors that affect
the company. Porter's five forces model is done in order to analyse the market forces which
impact the company. Apart from this Swot and Ansoff matrix is also summarized in the report.
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REFERENCES
Books and journals
Alshmrani, H.M., (2021). An analytical view of amazon success in the worldwide. Life Science
Journal, 18(6).
Baker-Brunnbauer, J., (2021). Amazon Go Store Implications for the Traditional Retail Market.
Bonsu, S., 2019. Integrating Community Involvement Programs into the Strategic Management
Process. Journal of Economic Development, Management, IT, Finance &
Marketing.11(1).
Chintalapati, S., (2020). BankBuddy. ai—Business Expansion and Marketing Dilemma: A Case
Study to Discuss the Ansoff Growth Matrix Concepts Combined with Business
Expansion Strategies for Expanding into Emerging Markets. Emerging Economies
Cases Journal. 2(1). pp.44-53.
Griffiths, et.al, 2019. 4.1 Competitor analysis. Strategic Digital Transformation: A Results-
Driven Approach.
Haiyan, et.al, 2021. Life Cycle, Competitive Strategy, Continuous Innovation And Firm
Performance. International Journal of Innovation Management.25(01). p.2150004.
Kopacz, M.A., 2020. Theories of Media Management. The Rowman & Littlefield Handbook of
Media Management and Business. 2. p.39.
Malhotra, et.al, 2019. Growth prospects of e-retailing in electronic goods markets. International
Journal of Management & Entrepreneurship Research.1(2). pp.71-88.
Neukirchen, et.al, 2019. Marketing Concepts and Instruments in Supply Chain Management. In
Operations, Logistics and Supply Chain Management (pp. 97-129). Springer, Cham.
Okunola, M.A., (2021)The Future of Amazon: Coopetition, Big Data and EU Antitrust. A
Mixed-Method Single Case Study-Realist Review Arranged in a Series.
Rapo, N., 2019. Marketing the high street: a solution to the British retail crisis?.
Sadq, Z.M., Sabir, H.N. and Saeed, V.S.H., (2018). Analyzing the Amazon success
strategies. Journal of process management. New Technologies. 6(4).
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.
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Ujakpa, et.al, Use of Competitive Intelligence Tools in Corporate Companies.
Verhoef, P.C., Broekhuizen, T., and Haenlein, M., (2021). Digital transformation: A
multidisciplinary reflection and research agenda. Journal of Business Research. 122.
pp.889-901.
Werth, et.al, 2020. Influencing factors for the digital transformation in the financial services
sector. Zeitschrift für die gesamte Versicherungswissenschaft.109(2). pp.155-179.
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