Strategic Planning for Amazon: Analysis, Recommendations, and Change Management

This report provides a strategic plan for Amazon, including an analysis of its current status, recommendations for merger and acquisition and cost leadership, and strategies for change management. It also evaluates the macro and micro environment of Amazon through PESTLE analysis and Porter's Five Forces.

STRATEGIC MANAGEMENT & CHANGE SMCH6061
STUDENT NAME/ID NUMBER
AMAZON
DEADLINE
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Executive Summary
The present report deals with the strategic planning of Amazon. The first section carries out
micro and macro analysis to assess the current status of the organisation. Presently, Amazon
is one of the market leaders in the online business. However, the organisation faces
competitions and the pressure of the customers. The second part evaluates the environment of
Amazon through the SWOT analysis. The third section offers a strategic recommendation of
merger and acquisition and cost leadership. Finally, the fourth section offers strategies and
models of change management.
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Table of Contents
Introduction................................................................................................................................4
Section 1- Environment analysis................................................................................................5
Section 2 – Evaluation Report....................................................................................................9
Section 3 – Strategic Plan........................................................................................................11
Section 4- Change Management..............................................................................................13
Conclusion................................................................................................................................16
References................................................................................................................................17
Appendix 1...............................................................................................................................19
Appendix 2...............................................................................................................................20
Appendix 3...............................................................................................................................20
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List of Figures
Figure 1: Market Share of Amazon and its Competitors...........................................................8
Figure 4: Porter’s Generic Strategy..........................................................................................13
Figure 5: Lewin’s change management model........................................................................15
Figure 6: ADKAR model.........................................................................................................16
Figure 2: the Growth rate of Amazon comparing to r-commerce sales growth in U.S...........20
Figure 3: Amazon synergies.....................................................................................................21
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Introduction
The purpose of the report is to develop a sound strategic plan for Amazon. Amazon.com, Inc
known as Amazon is an international technology organisation operates in cloud computing,
consumer electronics and electronic commerce industry with its 613300 employees as of
2018. It is the biggest cloud computing platform and e-commerce marketplace by means of
market capitalisation and revenue in the world. Amazon has so many rivals, and many
competitors are mortar and brick retailers including Walmart, Best Buy, Family Dollar and so
forth. With the increasing intensity of competition, it is becoming even more difficult for
companies satisfying growing expectations of customers. Further, in spite of the rapid
development of e-commerce, it is smaller in number as compared to physical stores
(Amazon, 2018b). Therefore, the study involves carrying out a thorough analysis of external
and as well as internal environmental factors.
Section 1- Environment analysis
Robson (2015) commented that strategic planning is the part of the organisational process
that helps to define the strategy and the direction and undertake decision for the allocation of
the resources for pursuing the strategy. Strategic planning is important because it helps in
guiding organisational activities and creating financial benefits and reduce the risks of
business failure. However, the main limitation of strategic planning is that it lot of knowledge
of knowledge, financial assistance and interdependence of units. However, for a leading
online business player like Amazon, the limitations can be overcome, and effective strategic
planning can help n further business development through innovation and utilisation of
resources (Hill, Jones and Schilling, 2014).
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The macro environment refers to the external environment which exists in the economy as a
whole. Microenvironment refers to the small forces within the company that influences its
ability to serve customers and can be easily controlled (Grant, 2016). The environmental
analysis would help Amazon to assess its current strength, weakness, competition,
opportunities and the ability to survive and grow. The PESTLE analysis is significant for
evaluating the external environment, and Porter's Five Forces would help to evaluate the
internal organisation.
Macro Environment
Political The political affairs and the government activity influence the business
of Amazon. The UK has political stability that has helped Amazon to
grow and develop its business. However, the formation of Brexit has
changed the taxation laws and business policies. The EU has targeted
the technological firm, for instance, Amazon has been targeted for its
deals of E-books with the EU publishers (Ritala, Golnam and Wegmann,
2014) However, the government has provided the improved condition
for the online business and cybersecurity.
Economic The UK is the eight freest economies in the world with a score of 78.0.
The business freedom is 91.1 which is a positive opportunity for the
growth of Amazon. The tax burden is 65.2 which can lower the
profitability. However, increased consumerism is a positive factor for
Amazon in the developing and the developed countries. The trade
freedom is 86.9 which aid Amazon to grow and develop its business
(Heritage, 2018).
Social The ageing population in the UK is increasing, and it is expected to
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reach 74 million by 2039. This has brought changes in the purchasing
habit of the customers. This has also increased the income disparity that
threats the growth of Amazon for probable stagnation of the disposable
income. However, the increased online purchasing habit has created a
positive effect on Amazon. Online sales have increased by 15.3% and
one in every five found is spent in online shopping (Morley, 2018).
Technological Rapid technological development has created opportunities but at the
same time create pressure on Amazon to remain updated and enhance
its technological assets. Amazon has optimised its business by
increasing its investment on information technology thereby creating a
competitive advantage. The increased threat of cyber is also a negative
influence on Amazon's business.
Legal The UK is a nation with accountable democracy that has impartial and
efficient judiciary looking after the laws and regulations of the country.
The UK government has less price control that is a positive factor for
Amazon. The increased product regulation creates opportunities for
Amazon by declining counterfeiting sale on its online website. The
regulation for intellectual property protection is also crucial for
Amazon (Heritage, 2018).
Environmental The government of UK as well as in other countries has increased the
interest in environmental programs. Considering this factor, Amazon
has developed its CSR policies that have helped to increase business
sustainability. The low carbon emission laws have influenced Amazon
to get engaged in energy saving policies thereby increasing its corporate
image (Amazon, 2018).
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Micro Environment
The threat of New Entrants – Low
The process of adopting the online business model is easier, but the brand development is quite a
costly affair. The brand identity development is crucial to generate the trust of the customers and
influence them to purchase online. This increased investment and time reduce the number of new
entrants in the business. Amazon has a strong brand presence that makes it a leader in online business
(Greenspan, 2017). The high economies of scale of Amazon have helped it to compete successfully in
the market.
Competitive Rivalry- High
The competitive force in the market is quite high. The aggressive of the online firms like eBay, Argos,
Next and others are increasing. Moreover, all the physical stores are adopting the online model to
increase their reach to the customers. The market share of Amazon and its main competitors are
illustrated below:
Figure 1: Market Share of Amazon and its Competitors
(Source: (Ft, 2018)
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The market share of Amazon has increased over the years and is expected to reach 50% by 2021 in
the United States (Ft, 2018). However, the increasing number of the established business is coming
online that is creating significant competition. Moreover, the increased number of substitutes has
resulted in price wars among the leading online brands that are creating downward pressure on the
price.
Bargaining Power of Customers- High
The Internet has increased the accessibility of the customers towards information and more products.
Thus, the customers can get easy alternatives for the online services offered by Amazon. Moreover,
the low switching cost makes it easier for the customers to shift to other online sites. Moreover, the
substitutes like the local shops and the supermarket have increased the power of the buyers. The
increased power of the buyers creates downward pressure on the prices of the product sold by
Amazon. Since the last three years, there has been an increase of 30% online business thereby
increasing the purchasing opportunities for the buyers (Ft, 2018).
Bargaining Power of Suppliers- Medium
The leading online shopping players like Amazon, eBay and others focus on the quality of the
suppliers. The number of quality suppliers is low, and this increases the power of the suppliers.
However, Greenspan (2017) commented that the moderate forward integration reduces the power of
the suppliers on Amazon by reducing the degree of control on sales of products of Amazon. The size
of the suppliers is also moderate which help in limiting the influence of the suppliers on Amazon.
Threat of Substitute-High
Amazon has encounter competition from its substitutes. There is a large number of local shops and
supermarket in the developed as well as in the developing countries. The switching cost for the
customers is low, and this increases the threat of Amazon. For instance, customers can easily travel
and purchase from Wal-Mart, Asda or retail shops. The low cost of the substitutes and their increased
availability increases the power of the substitutes thereby hampering the business of Amazon (Smith,
Rupp and Offodile, 2017).
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Section 2 – Evaluation Report
Strengths-
 Biggest selection of products, a large
number of third-party sellers and the
low-cost structure (Appendix 2).
 The second biggest retailer in the
world by means of revenue
 Synergy among Marketplace,
Amazon Prime and Amazon Web
Services (Appendix 3).
 Amazon mainly obtains its
competitive strength from e-
commerce and leveraging IT as an
ascendable and easy to raise the
platform, which ensures that the firm
is well forward of the competition.
 Strong brand recall among customers
of worldwide that facilitates its entry
into new markets (Amazon, 2018b)
Weaknesses-
 In recent time, as a part of the
diversification approach, the company
is dispersing itself too thin by shifting
its focus from selling books online to
new focus areas. Although it can be a
good strategy, the company has to be
aware of losing its competitive
advantage by moving its focus away
from the core competencies.
 As Amazon is only an online retailer,
the sole-minded focus on online
retailing may act as an obstacle of its
extension plans specifically in the
developing markets.
 The firm operates in around zero
margin business model that has
affected the profitability severely (In
About Amazon, 2018b)
Opportunities-
 The stable political and economic
environment of the developed nations
 The increasing effort of government
in strengthening cybersecurity
Threats-
 The possible economic slump in
China
 Rising wealth inequality
 The increasing threat of
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 Rising disposable income and
growing consumerism of developing
nations
 Growing habits of shopping online
 Growing IT efficiency
 Increasing interest in environmental
programs and business sustainability
 The increasing acceptance of low-
carbon lifestyles
 Easing import-export rules (Falk and
Hagsten, 2015)
cybercrime(Falk and Hagsten, 2015)
The evaluation makes it evident that Amazon is a leading player in the online business
market. The growth of Amazon seems to be unstoppable for its customer service and the vast
range of products. However, the most threatening factors that have been identified in this case
is the increased competition in the online business. It is true that it is quite tough for the new
entrants to create the position in the market, but the established brick and mortar business are
adopting the online strategy for increasing its reach to the customers. The threat of cyber
security is also a major problem in this case. Hence, Amazon needs to revise its business
models and focus on strategic planning. The merger and acquisition strategy can be a crucial
strategy react to the threats and grasp the opportunities.
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Section 3 – Strategic Plan
 Purpose
The current strategic plan purposes to aid Amazon to create a strong market presence and
attaining long-term sustainability in future (Cassidy, 2016).
 Benefits of planning
The prime benefits that would be obtained by Amazon are listed below:
1. It would aid in foreseeing the future of the company and allocate resources
accordingly.
2. It would help to create operational efficiency
3. It would help to attain a competitive advantage in the market.
 Objectives
Objectives Specific Measurable Attainable Relevant Timely
To increase the
market share of
Amazon
This is specific
for creating
future
sustainability.
It can be
measured by
reviewing the
market share
and profits.
Diversification
can help to
attain the
objective.
Increase in market
share would help
Amazon to create
a strong position
in the market.
Three years
Increased
economies of
scale
It would help in
lowering the
average cost of
production.
The increased
percentage of
profitability
would help to
measure the
success of the
Merger and
acquisition can
help in
attaining the
objectives.
This would help
to increase the
market share and
create a
competitive edge.
Two years
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objective.
 Strategy
Increased competition is creating a significant threat to Amazon. The power of the substitutes
and buyers are increasing. Considering this fact, Amazon can opt for Merger and
Acquisition in different countries. Bena and Li (2014) commented that merger is the
collaboration of the two businesses together while the acquisition is the takeover of firms.
Amazon can acquire the Whole Food Supermarket that can help to increase the variety and
customer base. Merging with the different technological firm has helped to expand its
business wings.
Porter’s Generic Strategies aids in describing the ways in which the business attains
competitive advantage in the market (Solberg et al. 2018). Considering the current situation
of Amazon, Porter's Generic Strategy model has been applied to select the best strategy.
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Figure 4: Porter’s Generic Strategy
(Source: Solberg et al. 2018)
Technology has increased the scope of the business organisation and the buying power of the
customers. Hence, this would create downward pressure on the price of online retails. This
attaining cost leadership would help to create a competitive advantage in the market.
Furthermore, the merger and acquisition strategy would help to attain economies of scale
thereby reducing the overall cost. This would help Amazon to keep the prices low and attain
cost leadership in the market and fulfil the above two objectives.
 Monitoring and Evaluation
(Appendix 3)
Section 4- Change Management
After analysing the internal and external environmental factors affecting Amazon, the major
areas that need to be taken into consideration are improving cybersecurity and changing the
business model from zero margins for increasing profitability. For implementing the changes
successfully, the employees may need attending training programs for improving their skills
and abilities to perform in the changed environment efficiently. It may also affect their
working style and schedule that can make them resisting the proposed changes. Hence, to
overcome the resistance, Amazon needs applying suitable methods for getting employee
commitment to the change process.
According to West, Ford and Ibrahim (2015), for addressing the weaknesses and threats, it
requires implementing necessary changes to the processes. Further, effective change
implementation needs the engagement of employees of all the levels positively. Hence, the
manager needs to be prepared beforehand for managing resistance and gaining employee
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support and commitment to the change process. The common issues associated to change
resistance can be the following:
 It can create business obsolescence. If employees reject to adopt the new system and
processes positively, it can affect the sales and business growth of the company
harshly.
 Spanjol et al. (2015) stated that change resistance often makes the current business
processes inefficient to cope with the changing demands of the marketplace. For
example, if Amazon fails increasing its cybersecurity, the firm may lose its consumers
noticeably, as no one wants to become the victim of cybercrime.
 Failing to make necessary changes in the business process often leads to declining
industry influence. Being an industry leader, Amazon must make necessary changes
at times for matching the needs and demands properly.
Lewin’s change management model can be discussed here that include three stages of
managing change and gaining positive employee participation. Unfreeze; change and refreeze
are the three stages of the model. In the unfreeze stage, Amazon requires showing the
necessity of bringing change in its existing cybersecurity system and the zero margin
business model. This is the most challenging stage and hence must be managed properly for
overcoming employee resistance. This is because here employees are afraid of the uncertainty
regarding their job role and responsibilities. In the change stage, Amazon needs encouraging
employees to develop their own problem-solving skill and accepting the change. In the freeze
stage when employees start being familiar with the new business process, the change needs to
be supported entirely (Proctor, 2014).
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Figure 5: Lewin’s change management model
(Source: Proctor, 2014, p.96)
ADKAR model can also be used in this context. The model suggests that a company must
obtain cumulative aims at the time process to attain the overall change objective. The model
talks about five stages. During the awareness stage, the necessity for the change needs to be
recognised. The merger and acquisition will bring several changes in the business processes
in Amazon that is the need for the company to ensure growth. Then the desired stage appears
where Amazon requires inspiring employees for taking part and supporting the change.
Further, in the knowledge stage, the needed behaviours and skills for making the change
successful require to be identified. Further, the ability stage appears where the change needs
to be implemented regularly, and in the reinforcement stage, the change needs to be
sustained (McDonald, 2016).
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Figure 6: ADKAR model
(Source: McDonald, 2016, p.82)
Conclusion
Carrying out a comprehensive environmental analysis has made it clear that, several
opportunities and threats are there for the company that can affect its strategic plan.
Although, economic and political stability and government support act as opportunistic for
the company, rising income inequality and cybercrime affect the business negatively. Further,
rising competition in the e-commerce industry is also threatening. Therefore, Amazon is
suggested for merger and acquisition, improving cybersecurity ad changing the business
model for increasing profitability. Further, for managing change successfully, the company
needs to apply the change management models.
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References
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2018].
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2018].
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https://www.heritage.org/index/country/unitedkingdom [Accessed 19 Dec. 2018].
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Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an
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West, D.C., Ford, J. and Ibrahim, E., 2015. Strategic marketing: creating a competitive
advantage. Oxford University Press, USA.
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Appendix 1
Figure 2: the Growth rate of Amazon comparing to r-commerce sales growth in the U.S
(Source: https://www.nasdaq.com/symbol/amzn/earnings-growth)
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Appendix 2
Figure 3: Amazon synergies
(Source: https://www.nasdaq.com/symbol/amzn/earnings-growth)
Appendix 3
Figure 7: Monitoring and Evaluation
The above steps would help to evaluate the success of the strategic planning of Amazon in
future.
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