Strategic Management Report: Analyzing Amazon's Key Challenges

This report provides a strategic management analysis of Amazon, focusing on the challenges it faces in the competitive e-commerce landscape and its investment strategies. It begins by outlining Amazon's business model and the characteristics of strategic management, highlighting its importance in maintaining competitiveness. The report identifies two key strategic issues: overcoming high competition in the e-commerce platform and balancing investment with profitability, particularly in areas like healthcare. The analysis incorporates Porter's Five Forces and the BCG Matrix to assess Amazon's competitive position and investment decisions. The report also touches on the PEST model to understand the broader environmental factors affecting Amazon's strategies. Ultimately, the report offers recommendations for Amazon to navigate these challenges and sustain its growth, emphasizing the need for unique competitive advantages and balanced investment strategies to ensure long-term success. The document is available on Desklib, a platform offering study tools and resources for students.

Strategic Management.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Presenting online retail organization and characteristics of strategic management....................3
Critically analysing the two strategic issues faced by the firm....................................................4
Analysing the impact of strategic issues on the firm...................................................................8
Presenting the comparison between the two organizations. .......................................................9
Recommendations for Amazon..................................................................................................10
REFERENCES..............................................................................................................................13

INTRODUCTION
Strategic management is related to the planning, analysing and implementing business
strategy so that business can remain competitive in the current era of tough competition. The
present report will analyse the features of strategic decisions that are taken by the big online
retailer firm Amazon while working in complex business environment. Moreover, the report will
also explain the role of strategic management in detail. Further, importance of organizational
stakeholders in making effective business strategy will also be explained in detail. Further,
structure and processes that shape the organizational culture will also be cover under this report.
Moreover, various concepts and principles of strategic management will also be discussed in
detail.
MAIN BODY.
Presenting online retail organization and characteristics of strategic management.
Amazon is big online retailer company introduced by Jeff Bezos that focus on selling
variety of goods that includes consumer electronics, beauty products, groceries, health and
personal care items, musical instruments etc. Further, all the goods are sell through e-commerce
platform all over the world. The company has been formed with the initial business strategy to
sell books through online medium but it gradually expanded with selling different products in the
market (Meyer , Neck and Meeks , 2017). Hence, a simple strategy by the owner worked very
well to become successful businessman in the whole world. Therefore, it can be defined as
strategic management is related with formulating and implementing various strategies that are
essential to remain ahead in the competition and develop better policies in the future. Moreover,
it defines the long term performance of the enterprise. There are certain characteristics that are
related the strategic management that are as follows:
 It is activity that is fully related with the involvement of the top management that is
responsible for all implementing all the best policies. Moreover, top management is only
involved in taking certain opinions from the lower levels when there is any urgency and
is not major.
 For implementing the successful strategic decisions within the firm it is required that all
the resources are made fully available to the company so that there is no delay in its
implementation. Also, all the available sources of the funds needs to be closely identified
so that best option could be selected form the rest available.

 Strategic decisions by the firm affects the long term prosperity of the firm as one major
decision taken might help the firm to stay ahead of the other competitors through
attracting lot of customers and generate large amount of revenues for the firm.
 Strategic management is future oriented and hence the results of the decisions taken are
not shown immediately but are shown at some future point. Also, quick results are not
shown because it ongoing process that is carry out for long period.
 All the strategy develop are dynamic in nature and as a result top management is always
involved in searching new options so that new sources could be found out that would be
advantages for the future growth (Moutinho and Vargas-Sanchez , 2018)
 Strategies are also the result of collective decisions and not an individual decision that is
taken independently. Also, the decisions are taken through successive meetings and
conferences where the opinions are taken form all the department heads so that effective
decision can be taken. Moreover, strategic decision are made keeping in mind that is no
major impact on any ongoing operations of any organizational department so that
company does not have to face any problems in the future relating to any loses or expense
because of this strategy.
Critically analysing the two strategic issues faced by the firm.
Strategic issues are types of issues that remain unresolved or are for important concern
for the firm as they could have major impact in operations of the business if they occurred in the
future. Moreover, these issues could be in form of series of events, strength, weakness or
opportunities depending upon its nature or type. For big organizations like Amazon that is
operating on large level around the world there are certain strategic issues that are been faced but
two major issues that are currently faced are :
Overcoming High competition on E-commerce platform:
One of the major challenge that is currently faced by the firm is that number of
competitors are increasing, and they are regularly coming up with new products that are unique
and different from those that is already present in the market. Also, competitors like flip-kart,
Walmart, Ali baba and many more are also very successful in expanding the business to large
level through better business strategies. Thus, there is extreme pressure on the company to
continuously come up with new ideas that would allow selling goods in the market in more
efficient manner than the others. Furthermore, it is seen that amazon is focused in providing

high quality products along with best of the services to is customers so that it can stay ahead in
the competition. According to Bindra, Parameswar and Dhir (2019) better strategy had benefited
to quoted firm in way that is able to remain market leader in the e-commerce industry for longer
period. On the other hand Anatolievna and Anatolievna (2018)stated that amazon in-spite of
having various product categories and successful selling it is seen that sales charge is very high
than the rest others that might force the other people to switch to other options that are available
in the market.
Further, by applying the Porter five forces model it can be said that competitive rivalry
is very high in the market for the quoted firm but had been overcome through the advantage that
it is selling all the products online and is not having physical store that would lead to additional
advantage for the firm as costs would be saved. Moreover, Ansoff, H. I. and et.al.( 2018)argued
in regard to supplier power all the third party sellers have joined the online platforms so that
there goods could be easily sold without many efforts and avoid excessive competition in the
market. Thus, it has allowed the firm to easily gather all raw materials at the lower costs. Also, in
context of buyer power amazon is forced to cut down it costs so that it would able to sustain in
the market. Further, it is always concern in managing the resources in the best possible ways so
that threat of new entrants does not affect the revenues and sales of the firm. Furthermore, even
with availability of new substitute products in the markets does not create major impact on
quoted firm operations as it has the largest product mix that allows the people to consume variety
of the goods at the single place unlike the rest competitors that deals either in limited products or
are dealing in single product line.
Thus, it is seen that with the growing competition the firm is under pressure to develop
those techniques that are completely unique from competitors so that e-commerce website could
be efficiently used. However, this is the major issue for the Amazon that does not have physical
stores to generate extra revenues from the offline stores (Amazon five biggest challenge in 2019,
2021). Also, big competitors like Walmart have already taken the presence in the market and
reduce the share of customers for the amazon. Furthermore, due to extensive high competition in
the online world it is seen that various big retailer such as Ali-baba is benefiting more than
amazon because it is operating on separate businesses while in comparison to amazon that sold
all it goods under one roof. Also, smart and innovative ideas such as customers ability to bid on
various products on E bay website has allowed individuals to connect in better ways with the

sellers that the amazon has been unable to provide and is major threat on the overall performance
of the firm.
Thus, this strategic issue faced by the quoted firm could be linked to the PEST Model
that helps to analyse the various factors that business needs to consider while working in the
competitive environment. In the political factors' amazon would be able to identify various tax
issues, trade restrictions in some countries so that issues do not occur in future while any
decisions. Likewise, Siegel and Leih (2018) stated that economic issues like inflation rate will
help to understand various concepts so that actions can be taken accordingly by the firm.
Moreover, social factors such as trends, fashion and influences when taken into consideration
can avoid certain small issues that is required to be investigated in detail by amazon so that time
and costs could be saved to the large level. Further, technological advancements need to be daily
updated especially by amazon that is operating on online platform where there is stiff
competition. Also, for installing new technology the firm need to require additional funds that
have to be analysed beforehand so that there is no mismanagement. Also, this could be done
through closely analysing what are technologies are adopted by the rest of rivalries so that better
options and solution could be opted and generated by the firm in the specific time period so that
customers does not move to the rest others that have the fastest operating websites and unique
products as well as customer experience.
Balancing on investment and profits:
The next big strategic issue for the amazon was taking major investment decisions in
areas like healthcare. According to Wheelen (2017) such investment decisions might cause major
problems in the operations of the business as this might be either positive or negative depending
upon the future situation. Investment decisions are always critical for any company as they are
made out of amount of revenues that are generated by the firm during na year. In context of
maintaining balance between the investment and profits it is seen that it has been major issue for
amazon as final results are not guaranteed. Moreover, Schilling and Shankar (2019) stated that
the net income that is generated by the firm reported very low as the firm is interested in
investing in new business. By selling the goods on Amazon.com. It was seen that amazon was
not responsible for setting the prices as it was satisfied in keeping just the margin price for all its
products on the website. Thus, it was the weakest point for the firm as the growth of was totally
dependent on earning revenues just from the selling price or sometimes even on losses.

This can be further linked to the BCG Matrix model that will allow the firm to identify
areas for better investments and which are not. According to this there is Star that means that
companies should identify products that will help in rapid growth rate and are currently having
dominant place in the market. On those products that are able to maintain the high image in the
market are basically turned to be cash cows in this model (7 business strategy for consulting ,
2021). For amazon products such as electronics, kitchen and baby products fall under this
category. Next in this model is dogs where the products that have very low market share and
generate very low returns on sales are placed under this. For the quoted firm goods such as
groceries cover a very less market share and hence are less useful for generating large amount of
revenues for the firm. Last in this model is question marks where those products are placed that
are uncertain and chances of earning profit from this is not guaranteed.
Also, it is seen that through new investment decision the firm might find issue in
retaining old customers and attract the potential customers as if not familiar with the new website
than would resist in buying certain products and will not educate others about the same. Also, to
develop the site in the similar manner amazon requires to keep the low price strategy on all it
platforms that would be difficult if the initial costing of new product lines very higher. This
could be further linked to SWOT model that would allow the firm to identify areas where the
firm is better than other competitors in the market like product quality and cost leadership
strategy (Trigeorgis and Reuer , 2017) Also, weak areas have to be completely analysed so that
better website user experience could be generated. Further, major threat in form of competitors
and developing quick and easy return process would be efficient for achieving the great height of
success in specified time-frame. Furthermore, company can identify new opportunities in the
form of ventures and collaborations that would allow carrying out all the operations in systematic
manner as all the revenues and expenses would be recorded in more appropriate manner. Other
opportunities such as opening store in the regions where the online delivery is impossible
through partnership might also enable the firm to develop competitive advantage in the long run.
Thus, if the quoted firm uses this model in the most effective ways than the large amount
of money could be saved that would help the firm in identifying new opportunities and enhance
the working through various strategic decisions in the future. Currently Amazon plans to invest
in digital healthcare through using efficient softwares so that better services would be provided

to its clients which will result in storing large amount of data and history relating to any of the
customers so that there problems would be solved easily.
Analysing the impact of strategic issues on the firm.
According to Lasserre (2017)strategic issues might create negative impacts of the firm
ability to introduce new changes in the organization. Also, through these changes company
might come up with new and better solution to overcome it or loose the current market base. For
Amazon impact of the above two strategic issues are as follows:
Moreover Knight , Daymond and Paroutis (2020) stated that from the beginning amazon
main motive was to sell anything that makes the customers happy. Also, all the investments that
are made are in accordance with the goals it wishes to achieve in the future. Further,Ginter,
Duncan and Swayne (2018) stated that with decisions such as investing in newer projects like
amazon prime and healthcare sector the firm would be able to have positive impact as better
image in the market will be developed. Moreover, it would be able to generate greater customer
satisfaction and develop competitive advantage in the long run. However, such issues might be
serious issue to the firm in the case where resources are not managed properly by the firm.
Amazon through investing in new projects would be able to generate large employment
opportunities in the market that would allow various individuals to improve standard of living
but on the other hands there are chances that the firm is not able to operate successfully due to
poor organizational strategies than the rest of the competitors that are already available in the
market. Also, the firm need to find the right sources through which the new sectors would be
operated in the market in efficient manner that again is very time-consuming process.
For the strategic issues of high competition in the market the firm efficiency has been
impacted to large level as all the policies have to now made in relation to the competitors.
Moreover, this issue has allowed the firm to create extensive research that will help to identify
the products that are best sold in market and is in demand so that more could be sold on the
amazon websites. Also, through adopting various search tools that are been shown on the website
it gives the option for easy search to small business person so that they could identify high
demand products currently demanded in the market.
Further Berisha Qehaja , Kutllovci and Shiroka Pula (2017) strategic issue faced by the
company are solved through mutual cooperation between all the stakeholders. Shareholders are
the major group of people on which the activities of the firm are based and hence all decisions

taken are in accordance with providing maximum benefits to them so that company would be
able to grow to vast level. In context of facing problem of facing high competition for the
rivalries it has improved the current e-commerce website and added several additional option
such as multiple customer reviews, automatic reordering option, recommendations based on past
purchases etc. that is far more superior to other retailers that are operating in the market.
However,Ongaro and Ferlie (2020) argues that it is seen that this strategic issue would be major
demerit for the firm as various small retailers are also working on e-commerce websites that are
selling their own brand label products. Thus, customers are finding such retailers more attractive
as they would allow more discounts on single product line than in comparison to the amazon
were some product might not be shown on sale on regular basis due to its large variety.
Further amazon has resolved this issue with better approach through allowing feature of
prime two day shipping that is not available on other small websites that allowed customers to
get products with convenience through eliminating the extra time in receiving the products in
times of emergency. Hence, it can be said that high competition strategic issue has allowed the
firm to come up with better strategies that were previously not present in the firm.
Presenting the comparison between the two organizations.
Strategic management principles of any company is all about to focusing on all crucial
aspects that are essential in achieving certain things in the future. Also, principle is also focused
on identifying the existing competitive advantages and discover ways to enhance the existing
strength for the organizational success. Further, the management principles states that the
organizations need to properly communicate all the ideas to the members of the firm so that there
are no future problems and complexities. Also, the management need to invite ideas from the
employees working in the firm so that questions regarding the success from the new strategic
decisions could be easily analysed (Wirtz , Müller and Weyerer, 2021). Further, in the context of
the strategic issue that the company is facing currently can be compared to other firms like
Walmart that is the biggest retailer company on the e-commerce platform. Also, it is seen that
both are having tough competition in relation to keeping the prices very low but amazon has
overcome successfully through keeping uniform prices on all its product unlike Walmart were
prices of foods and beverages are not under the cheaper product price category. Also, it has
overcome the challenge of intense competition through allowing the option of free same day
delivery that in absent in case of Walmart that allows free two day delivery. Moreover, this

strategic issue of the company has been resolved as amazon sells more than 250 million products
that is relatively more than Walmart that sold only 4 million products through its online website.
Further, in context of reduction in amount of profits through new investing options by the
amazon it can be said that it has option for membership fees option that allows the firm to
generate extra cash from those who wish to opt for this option. However, it is seen that in
Walmart does not have any membership option or fees associate with it. Moreover, it is seen that
in comparison with the amazon the Walmart has launched various new services such as Walmart
fulfilment services and plus that might be also major threat in the continuous operations of the
business on amazon as new source of investment in both might reduce the profits of either of one
of them.
Thus, both are the greatest competitors of each other and to overcome strategic issue by
the amazon it has to continuously monitor the activities in regard of its rivalries so that corrective
actions could be taken on time. Moreover, the strategic decision of the firm need to be taken on
timely manner through conducting extensive market research that would allow the firm to
analyse the changes happening in the business environment along with certain changes in the
digital technologies' so that sustainable growth could be achieved.
Recommendations for Amazon.
In last years, the growth of Amazon has been one of a kind. This growth gave them many
opportunities to expand their business which has been a success. Yet with growth there were
some challenges that could not be ignored. Below are the recommendations to resolve those
issues:-
Dealing with High Competition:
The E-commerce market is growing day by day, welcoming new competitors. The high
competition in the market is making certain industry to sustain in the market place on Amazon.
To sustain there place and deal with high competition they should focus on raising reviews.
Reviews are the best way to influence consumers to the said product, and more number of
reviews can increase conversion rate. Good reviews make people buy those products and that
create a cycle Baboolal-Frank, (2021). Product mix should also be evaluated by the
manufacturers, this strategy can determine the availability, demand and supply and also
determine price. With product mix manufacturers can analyze the brand image, more products
and product will reduce the risk and give more opportunities to grow the profit and fulfil any

other requirement that can make it stood out from the competitors. Furthermore, they can opt for
paid advertisement strategy. Advertisement is the best way to boost up the sale and stood out
from the competitors. It can also strengthen the brand image, more traffic will ensure more
people to check out the company and increases the changes of increase in sales. Lastly, focusing
on corporate social responsibility can also build trust among consumers, with more duty towards
the society is fulfilled people appreciate it more. This can strengthen their brand against other
competitors.
Balancing On Investment:
With big profit in last several years, Amazon has been expanding its business. Amazon
operates in more than 200 countries and territories with more exceeding 300 million global
customers Furnelli, (2021). They have not only created a strong customer foundation for online
retailing but for other sectors too by acquisitions and opening new subsidiaries like Amazon
prime. Although it is profitable for them, it created a new issue. Each year because of excessive
investments here and there for more future returns made company's revenue ran short for the
present year which affected profit making. They should avoid these situations or this cycle will
continue to happen. It would recommend that, they should evaluate all the other field they want
to invest in and ultimately decide which will more profitable and will have more returns to them.
Choosing and filtering the fields of investment will retain some revenue and also ensure there
future growth. They should also consider the sale of those investments that are not giving them
expected profit, in that case, they will be able to have more capital in their hands and also can
avoid future losses coming from those side. Even if the sale of that investment is going to minor
loss they should still go for it and invest where it could be more profitable.
CONCLUSION.
From the above report it can be concluded that strategic decisions are very important to
solve major issues that majorly impact the performance and growth of the firm in the long run.
Further, the report had closely analysed two major issues that are faced by the Amazon that
operates on the large level. Further, the strategic issue such as challenge of high competition and
balance in investment decisions had been explained through applying various strategic models
and tools so that get overview could be achieved.
Moreover, the negative and positive impact of such issues on the operations of the
business had also been analysed in detail. Further, the report had given detailed comparison on

the Walmart and amazon on the basis of two strategic issues. Lastly, the report had presented
certain recommendations that the quoted firm need to follow so that future challenges could be
overcome in better ways through better business plan and strategies against its competitors.