Amazon's Business Model and Strategy

This assignment requires you to delve into Amazon's business model and strategic positioning. You are tasked with analyzing the company's operations using Porter's Value Chain framework and identifying its strengths, weaknesses, opportunities, and threats (SWOT). The objective is to evaluate Amazon's competitive advantages, potential challenges, and future prospects within the dynamic e-commerce landscape.

Project on
Research Project

Table of Contents
LO1 Understand how to formulate a research specification...........................................................3
1.1Rationale of the Research...........................................................................................................3
1.2Background and principles of the Research project...........................................................................4
1.3 Literature Review..............................................................................................................................4
1.4 Research Methodology......................................................................................................................6
LO2 Be able to implement the research project within agreed procedures and to specification.....7
Resources required for the Research and analysis of research data according to the research question
and objectives 2.1 2.2 & 2.3....................................................................................................................7
Internal Research.............................................................................................................................7
McKinsey’s 7s Strategic Model................................................................................................................7
External Research..........................................................................................................................11
PESTEL Analysis......................................................................................................................................11
The BCG Matrix............................................................................................................................13
GE-McKinsey Matrix....................................................................................................................14
2.2 Data collection by appropriate techniques......................................................................................15
2.3 Data collection in appropriate format.............................................................................................16
LO3 Be able to evaluate the research outcomes............................................................................17
3.1 Factors affecting the achievement of the project.....................................................................17
3.2 Data interpretation..........................................................................................................................20
3.3 Recommendations based on findings......................................................................................20
Conclusion.....................................................................................................................................22
References......................................................................................................................................23

Introduction
The purpose of preparing this report is to support the online retailer amazon.com to solve its
current problematic situation where the organization is losing its grab in the e-retail industry due
to immense competition especially from eBay, Walmart, Tesco and BestBuy (Hall M 2014). This
online retail giant has been facing more expenses than revenues as they are expending more than
their profits. Stats show that in 2014, amazon has started losing investors because lack of profits,
and shareholders return. For Amazon's situation, this disappointment was driven by the Seattle-
based organization posting a second from last quarter loss of £437m (£290m). (telegraph.co.uk)
The company had a forecasted revenue of 13.40 billion USD but that also decreased to 12 billion
USD that year and the share prices dropped almost 9% which took the share prices from £194.44
to £177.31 (Letzing Stu, n.d.). In this situation amazon.com needs to conduct an intensive
research in order to develop a new strategy to cope with the shortcomings and lack in its business
strategy. Firstly, the report will include information about amazon.com; secondly a deliberate
discussion will be made on the overall internal and external business environment of the
company which will help to analyze the current situation and support to form a strategic method
for the company to overcome this situation by proper recommendations revealed from key
findings of this report.
LO1 Understand how to formulate a research specification
1.1Rationale of the Research
The core target of this research project is to analyze the strategic management analysis of the
online retailer amazon.com. Amazon.com; who has been one of the leading online retailer and
famous brand, at present amazon is facing some strategic issues in the markets due to strong
competition with its direct competitors. The report is designed to evaluate and analyze the
critical issues and problems that amazon is facing and prepare a report that will have proper
information to resolve these issues and problems. The strategic analysis has been divided into
two major part which are internal analysis and external analysis. The internal analysis part
includes McKinsey’s 7s Strategic Model and Porter's Value Chain analysisin order to analyze the
internal environment of amazon.com and the external analysis part includes PESTEL Analysis

and Porter’s Five Forces Model to evaluate the external aspects of amazon.com. The total
structure of this report is formed to find out the reasons behind the struggle of amazon.com due
its competitors and try to recommend possible strategies that help to resolve the issues with
proper implementation.
1.2Background and principles of the Research project
This report is prepared with the core objectives of resolving some very critical issues and
evaluates recommendable strategies that are stated below:
 To collect proper information about the current status of amazon.com.
 To evaluate and examine the current internal and external environment of amazon.com.
 To select the best market strategy for amazon.com in current competitive situation.
Research Questions:
1) What are the potential reasons for conducting market research of Amazon.com?
2) What factors are affecting this research project?
3) What are the strategies and research specifications of this research project?
4) How this research is going to be helpful for the strategic development of Amazon.com?
1.3 Literature Review
1.3.1 McKinsey’s 7s Model
 Strategy
Strategy of a firm leads the firm to have e properly established plan that is effective enough to
gain competitive advantage in the market.
 Structure
Structure of an organization is the method of organizing the different departments and sectors to
have a properly managed strategy.

 Systems
Systems are the strategic procedures, decision makings, processes and approach to attain the
target of an industry.
 Skills
Skills are the efficiency of completing a task with expertise and firm abilities.
 Staff
Staffs are the core element of a firm’s human resources that creates strong workforce to perform
and attain organization goals.
 Style
Style is the policy of how the top level of an organization operates their duties and
responsibilities and methods of maintaining the organization.
 Shared Values
Shared values are the major element of McKinsey’s 7s strategic model and is constructed by the
standards of both the employees and employer’s actions and approaches towards the
organization.
1.3.2 PESTEL Analysis
 Political
Political environment of an organization is very critical due to the relation to specific rules-
regulations, legislation, standards and policies, laws and tariffs and etc.
 Economic
The economic environment of an organization has vital effect on the betterment of that
organization by the balance of supply according to demand.
 Social
The social environment of an organization usually refers to the facts that surrounds the society or
is frequently used in the society.

 Technology
An external element that affects ecommerce the most is technology. Technology is the current
pioneer of the world of internet and ecommerce.
 Environment
Positive environment is required to reach to the specific goals. It is the harmony of the physical
surroundings and the individuals which drives the individuals to a specific course of action.
 Legal
Ecommerce trades and business are run in the UK according to the Electronic Ecommerce
Regulations 2002 and is implemented by the ECD 2000 regulations formed by European Union.
1.4 Research Methodology
Research design of a study is a basic strategy to the method of answering the research questions.
It is a general structure which lies on the concept of conducting research. It contains data
collection, measurement of data and also the data analysis. Research design of a study also
includes the elements such as surveys, questionnaires etc. for the collection of data where survey
is a tool to data collection by asking a specific number of questions just like questionnaire
(Creswell JW 2014, n.d.). There is a common confusion about the accuracy of the data collected
through surveys and questionnaires is the reliability of results evaluated from the surveys and
questionnaires, the solution of this problem can be ensuring the collection of data from unbiased
and trusted source of data (Osborn DR 2014, n.d.)
Methodology used in this research:

 Primary Data:
- Surveys
- Questionnaire
- Interviews
- Case Studies etc.
 Secondary Data:
- Focus Groups
- Internet data
- Experiments
- Content analysis etc.
LO2 Be able to implement the research project within agreed procedures
and to specification
Resources required for the Research and analysis of research data
according to the research question and objectives 2.1 2.2 & 2.3
Internal Research
In this phase of the report, aspects of internal analysis are evaluated to examine the internal state
and capabilities of amazon.com and also discuss the strategy of amazon.com in creating value for
its customers(Ihsan Y 2012).
McKinsey’s 7s Strategic Model
McKinsey’s 7s strategic model is a very powerful model that helps to analyze the total picture of
the internal environment of the organization(Peters T 2011). In order to analyze the critical
internal issues of amazon.com, application of McKinsey’s 7s model is a must.
Figure: McKinsey’s 7s Model
 Strategy
Amazon.com performs its activities in the basis of low cost strategy that gives it an edge over the
competitors and fulfills the target of aggressive investment in newer products and increase brand
awareness but this also creates problems in increasing revenues(Hoium Travis, n.d.).

 Structure
The structure of amazon.com’s business is immensely based on low cost and products are sold
on lower prices as possible so that it can be an advantage in the e-retail industry. But this low
cost structure is causing harm to the profits(Mourdoukoutas Panos, n.d.).
 Systems
Amazon has recently upgraded their core database system into oracle and adopted the latest
technologies which is good for the system but increases the expenditure(Novak Jake, n.d.).
 Skills
In the context of skills, amazon.com recruits skilled workers for its database management system
but 53% of the recent customer queries show that the amazon website faces problems, 28% of
the queries are related to logging in and 17% of check-out(downdetector.com, n.d.).
 Staff
The organization is also repeatedly reported to have unhappy staff as their workers are paid low
in rate but also have complaints that they over-work (Young Angelo, n.d.).
 Style
The CEO’s managerial style is very much central and he is the ultimate disrupter of this
organization. Centralized style of amazon is working well enough, there is no such problem in
this aspect.
 Shared Values
In the context of shared values, amazon.com is behind Walmart. Researchers say that the biggest
problem of amazon.com is Walmart. Recently amazon.com have acquired twitch to increase
their shared values but still Walmart is ahead.
Gantt chart for activities which has to be done in this project

Cost and resource required of project according to activities
Activities Resource required Cost
Developing research
aims and objectives
Old Research Project
(Information resource)
100
Literature Review Published articles,
journals and books
(Information resource)
300
Determination of RM Experts suggestions
(Human Resource )
150
Questionnaire Web links (Financial
resource)
250
Data analysis Experienced person
(Human Resource)
200
Total Cost 1000 Pound

External Research
The External analysis of an organization basically means the evaluation of those aspects of the
environment that affect the organization from outside. It is also called as the analysis of the
macro-environment (Saunders R 2001).
PESTEL Analysis
PESTEL analysis is a strategic pattern that identifies the political, economic, social,
technological, environmental and also legal aspect of the business environment which influences
the organization. This framework is widely used to determine the macro factors in the business
environment of an organization (Ihsan Y 2012). In this report, PESTEL is analysis is very much
required to access the macro factors that are affecting amazon.com and creating problems in the
e-retail market.
Figure: PESTEL Analysis
 Political
Amazon.com is greatly influenced by the ecommerce legislations of European Union (Politics
And The Amazon, n.d.). The EU have formed some rules and policies for ecommerce e-retail
business all over the world and the e-retailers has to follow them which reduces the possibility of
abusive business structure and enforces or allows firms to be developed without any dominance
from others (Research and M 0009). The World Trade Organization also affects the ecommerce
aspects by the proper classification of the products and some specific rules and regulations which
facilitates the e-retailers and makes the international trade processes very simple.
 Economic
E-retailers like amazon.com who are struggling in increasing profits definitely have to focus on
both the international and national situations of economy. But also the ever-growing situation in
the use of internet in the UK is enlarging the scope of e-retail business and this growth is creating

better opportunities for amazon.com to compete with its competitors (Financial Statements -
Businessweek, n.d.).
 Social
Amazon.com along with other e-retailers has been using these social networking websites as
their major source of customers (Ihsan Y 2012). With the ever-growing population all over the
world, the scope of ecommerce is growing radically and loads of new customers and online
businesses are forming day by day which is a good element for amazon.com to use to expand
itself (Marc Gunther).
 Technology
From 2011 to 2012, broadband internet connections in the UK has increased more than 6% and
most of the internet users also have tabs, smartphones or androids that’s shows the effect of
technology all over the UK. Amazon.com is expanding their market and spending huge
investments in the technology aspects which are increasing the expenses but don’t improving
revenues (Venkatesh, n.d.).
 Environment
Amazon.com can take these environmental issues under their consideration so that they cope
with the present struggling situation better where the organization should save energy resources,
reuse or recycling of wastage products and also follow corporate social responsibility.
 Legal
Ecommerce regulations are established with the target to building strong customer confidence
towards their products. Amazon.com is fully followed by these regulations which clears the legal
issues of this organization and supports amazon to build their business all over the UK with
better consumer confidence (Grove Jennifer and googleplus, n.d.).

The BCG Matrix
The BCG Matrix is a portfolio framework created by Bruce Henderson of the Boston Consulting
Group in the mid 1970's. The perception of this model is that an organization's specialty units
can be arranged into four classes taking into account of business sector development and piece of
the overall industry with respect to the biggest contender named “growth share"(Jurevicius
Ovidijus 'BCG Matrix: How to Perform It?, n.d.). Market development serves as an intermediary
for industrial engagement quality, and relative piece of the pie serves as an intermediary for
upper hand. The development offer grid in this manner maps the specialty unit positions inside of
these two vital determinants of success in the business.
Figure: The BCG Matrix
Henderson contemplated four classes of BCG Growth-Share Matrix was. They are:
Stars create a lot of money in view of their solid relative market share growth, additionally gain
a lot of money due to their high development rate. The arrangement of anexpansion of

organization dependably ought to have stars that will turn into the following cash cows and
guarantee future money era(Jurevicius Ovidijus 'BCG Matrix: How to Perform It?, n.d.).
Question marks are becoming quickly and along these lines devour a lot of money, but due to
low market share they don't create much money. The outcome is a huge net money consumption.
A question mark can possibly pick up market share and turn into a star(Academy Professional
'Marketing Theories - BCG Matrix', n.d.).
Cash cows display an arrival on resources that is more prominent than the business sector
development rate, and in this way create more money than they devour. Such specialty units
ought to be "drained", separating the benefits and contributing as meager money as could
reasonably be expected(Academy Professional 'Marketing Theories - BCG Matrix', n.d.).
Dogs have both low market overall industry and development rate and in this way neither create
nor devour a lot of money. On the other hand, they are money traps due to the cash tied up in a
business that has minimal potential. Such organizations are possibility for divestiture(Jurevicius
Ovidijus 'BCG Matrix: How to Perform It?, n.d.).
GE-McKinsey Matrix
McKinsey & Company added to a nine-cell portfolio grid as a device for screening GE's
extensive arrangement of key specialty units (SBU). Industry attractiveness and business unit
strength are figured by first distinguishing criteria for every, deciding the estimation of every
parameter in the criteria, and increasing that esteem by a weighting component('The GE-
McKinsey nine-box framework' 2008). The outcome is a quantitative measure of industry appeal
and the specialty unit's relative execution in that industry. The core elements of the Industry
attractiveness are market growth rate, size of the market, variability, rivalry and profitability in
the market and also macro factors of the business environment. On the other hand, the elements
of determining business strength are brand equity, distribution channels, production capacity and
also profit margins.

Figure: The GE-McKinsey Matrix
2.2 Data collection by appropriate techniques
On the basis of above presented research methodologies part, primary research has to be
done in this research project. Qualitative and quantitative are two main research methodologies
which are used to conduct a research. Qualitative research is used to gain public opinion on a
particular topic and quantitative method is used to collect numerical data. This research is based
on the regular customers of the company to gain knowledge and information against the
research topics. Around 20 sample size will be used in this research which can help to collect
accurate data. Qualitative research method will be used in this and a questionnaire will be made
on the basis of research questions;
Questionnaire
01. From how much time you are connected with the Amazon?
a. less than a year
b. more than a year

02. Is organization has a impact of external environment on it's customer assistance?
a. Yes
b. No
03. Is Amazon change their trade style according to social needs?
a. Yes
b. No
04. Is internal organization environment pleasant for it's customers?
a. Yes
b. No
05. Is company's market strategy effective for them to gain higher market share?
a. Yes
b. No
2.3 Data collection in appropriate format
Frequency table
01. From how much time you are connected
with the Amazon?
Frequency
a. less than a year 15
b. more than a year 5
02. Is organization has a impact of external
environment on it's customer assistance?
Frequency
a. Yes 16

b. No 4
03. Is Amazon change their trade style
according to social needs?
Frequency
a. Yes 14
b. No 6
04. Is internal organization environment
pleasant for it's customers?
Frequency
a. Yes 12
b. No 8
05. Is company's market strategy effective for
them to gain higher market share?
Frequency
a. Yes 18
b. No 2
LO3 Be able to evaluate the research outcomes
3.1 Factors affecting the achievement of the project
 Amazon.com is facing intense competition from its fellow e-retailers especially from
Walmart, Barnes and Noble and also EBay.

 Amazon has very low threat of new entrants but have higher threat of substitute products
and services.
 Low cost strategy is working well for amazon but unable to ensure continuous increase in
revenues of the firm.
 Switching to newer database system has decreased expenditure but increased the
expenses of recruiting new skilled workforce.
 Staffs have complaints about low salaries and overwork.
 More than 50% of the customer queries and complaints are related to the amazon.com
website.
 Technological sector is the field where amazon is spending so much which has increased
the expenses by 38%.

Graphical analysis of collected data which can help to interpret data
01. From how much time you are connected
with the Amazon?
Frequency
a. less than a year 15
b. more than a year 5
02. Is organization has a impact of external
environment on it's customer assistance?
Frequency
a. Yes 16
b. No 4
a. less than a year b. more than a year
0
2
4
6
8
10
12
14
16
15
5 Column B

03. Is Amazon change their trade style
according to social needs?
Frequency
a. Yes 14
b. No 6
04. Is internal organization environment
pleasant for it's customers?
Frequency
a. Yes 12
yes no
0
5
10
15
20 16
4 Column B
yes no
0
5
10
15
14
6 Column B

b. No 8
05. Is company's market strategy effective for
them to gain higher market share?
Frequency
a. Yes 18
b. No 2
yes no
0
2
4
6
8
10
12
12
8
Column B
yes no
0
5
10
15
20 18
2
Column B

3.2 Data interpretation
On the basis of above collected data, most of the respondent which are used in this
research are recently connected with the company. 75% of people are new which are involved in
this research which can help to gain fair information from them about the organization. 16 out of
20 respondents has said that company is having a huge impact of the external factors, after
BREXIT company has putted a lot of efforts to survive in the market and accomplish the needs
of people. 70% of sample size has agreed that company effectively change their trade style in
festive season and provides a lot of offerings to them. 8 out of 20 has disagreed on this that
company is having a pleasant environment so Amazon has to work on it. The organization is
using market penetration strategy and 90% people agreed on it and said that company is using it
effectively to complete needs and desires of it's customers.
3.3 Recommendations based on findings
After the evaluation and analysis of both the internal and external aspects of amazon.com’s
strategic position in the market, several recommendations can be made according to the two
matrix model discussed earlier to seek out the problems that the company is dealing with:
Recommendations based on the analysis of BCG Matrix:
Amazon.com currently is in the position of Stars in the relative market share and growth index
but it has to adopt the evaluation of innovation to compete with its competitors. The organization
has to eradicate the threat of substitute products by improvising their services and advertising.
Low cost providing of amazon is fine but it needs to be ensured that the strategy is not harming
the increase of the revenues and also have to minimize its over-spending habits.The firm needs to
be efficient to maintain the workforce through proper HR management.Recruitment of skilled
workforce is good but the firm also have to concentrate on the satisfaction of its employees.The
company has to improve their technological sector and eradicate the website and server’s issues,
check-in and login issues by proper T&D process and ensure the decrease on these problems.
Recommendations based on the analysis of GE-McKinsey Matrix:

The analysis of those two matrix model have cleared some aspects which are required to be
resolved for eradicating the problems regarding shareholders of amazon.com. The GE-McKinsey
matrix have signified the need for attracting the investment decision for the stakeholders whose
interest on the company have been decreased currently. The online firm has to at first protect or
retain the existent shareholders and also refocus on the decreased shareholders so that the
reduced investment can be reinvested and company have ensured increase on relative market
share index and business strength index and also achieve industry attractiveness in all cells of the
matrix.
Recommendation on the basis of primary data research
Amazon has to retain their market strategy which can help to them to provide better
products and services. This is providing them a competitive advantage which can help to them to
retain their market position. The company is having huge impact of external factors so they have
to conduct quarterly external analysis in different sectors which can help to them to make a better
change according to the external factors. They have to develop flexibility in their operations
which can help to be more better for the customer satisfaction. They have to use some effective
market strategy like; differentiation market strategy which can help to him to show their
specialty in the retail market. It can help to them to gain more market share and make a
competitive edge in front of market rivalry. As Amazon has started their retail stores in UK and
USA so they have to provide a pleasant environment to it's targeted customers which can help to
attract more people towards them because many grocery and retail chains are available in the
market. Each and every product which is sold by the Amazon store, they have to provide a
facility to their customers that they can use their wanted products practically for a sample which
can help to them to be different from other retail stores.
Conclusion
In the end of this report, the outcome of this study is the strategic managerial tactics of
amazon.com is working or not and effective or not. The report was designed to evaluate and
design the core aspects of the internal and external environment of the organization and thus find
out the problems that are releasing the affectivity away from the market. The core target of this
report was to determine the problems from different sectors and make necessary

recommendations by which the organization can compete with big competitors like EBay and
Walmart.

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