Amazon's Strategic Management

The assignment content is a case study on Amazon, analyzing its strengths, weaknesses, opportunities, and threats. It suggests that Amazon can make the most of its strengths by making its products and services more customer-centric and providing distinctive quality products at lower prices. To circumvent its weakness of offering free shipping to customers, Amazon can charge a little amount for shipping in distant places. Additionally, it can capitalize on available opportunities by rolling out its online payment system that introduces cash-on-delivery option, bringing more products under its own brand, and making arrangements for providing security to its online shoppers.

Strategic management

Executive Summary
Strategic management for any company means that developing and implementing strategies in
company in order to make the free flow of operations to achieve the companies objectives and aims.
The following assignment has been conducted in order to analyse the strategic management practices
adopted by Amazon. During the research it was observed that main corporate objective of Amazon was
to provide customers with best shopping experience online. Further, financial objectives of company
was to increase the revenue by 60% within six months. Amazon is mostly concerned with making all
types of products available to its customers under one head and allows them the choice with respect to
making the purchase. It has always worked on to avail customers with top-quality purchasing
experience on internet. PESTEL and Porters forces model are the best way to analyse the company's
external market. And internal activities can be assessed by making the resource audit. Furthermore, it
was analysed that unique resources were giving company more competitive advantage to sustain for
longer period. Later, by applying Bowman Strategy Clock model, tow positions on which business was
currently operating were identified that is low price and differentiations.

Table of Contents
INTRODUCTION ....................................................................................................................................5
Amazon corporate objectives ...............................................................................................................5
EXTERNAL ANALYSIS...........................................................................................................................6
3.1..........................................................................................................................................................6
3.2 .........................................................................................................................................................8
INTERNAL ANALYSIS: STRATEGIC CAPABILITIES......................................................................10
4.1........................................................................................................................................................10
4.2........................................................................................................................................................11
BASIS OF COMPETITIVE STRATEGY...............................................................................................12
5.1........................................................................................................................................................12
STRATEGIC CHOICE............................................................................................................................14
Ansoff matrix.......................................................................................................................................14
STRATEGY EVALUATION...................................................................................................................15
CONCLUSION........................................................................................................................................15
REFERENCES.........................................................................................................................................16

Illustration Index
Illustration 1: PESTEL factors...................................................................................................................6
Illustration 2: Porter’s Five Forces factors.................................................................................................9
Illustration 3: Bowman’s Strategy Clock.................................................................................................12

INTRODUCTION
Strategic management is the activity which is related with developing the strategies in order to mange
the organisational functioning in most effective and suitable manner. Therefore, it is the continuous
planning, evaluating, assessment and analysis of all the task and actions which are performed in order
to attain the goals and objectives of the organisation (Hill, 2014). The following assignment is a short
report about a leading technology and online organisation that is Amazon. Through this report the
researcher will discuss on the strategic analysis of both internal and external environment influences on
Amazon objectives and strategies.
Amazon corporate objectives
Amazon is one of the global leader in E-commerce activities. It consists of the wide range of the
activities and was founded in 1994 in USA.
Company's Corporate objectives
 To provide our customers with best shopping experience online
 To become most customer centric company.
 To build a place where people can come and buy anything they might want to make purchase.
 To provide customers with flexible price structure (Hitt, 2012).
Financial objectives
 To increase the revenue by 60% within six months.
 To sustain the financial position during the period of economic turmoil.
 To earn maximum profits by 80% in every year (Swayne, 2012).
EXTERNAL ANALYSIS
3.1
In order to conduct the external environment analysis, PESTEL analysis technique has been

used for AMAZON. The following is the pestle analysis:
(Source: Marketing theories – pestle analysis., 2015)
Political factors
 Some international policies and framework developed by government are coming in way of
Amazon.
 Expansion in certain countries is difficult for the cited company due to political influence
(Wheelen and Hunger, 2011).
 Certain online purchase rules and norms in countries are affecting the growth.
 For example, Google is banned in China by the government officials their.
Illustration 1: PESTEL factors

Economic factors
 Currency Variation: In some countries where currencies is highly devaluated in connection with
dollar, then it can lead to adding cost for company that is Amazon. This leads to increase in
price of some products which affects the company sales.
 Economical tendencies: Natural and economical behaviour of people of buying the goods from
nearby stores rather than going for online shopping (Eden and Ackermann, 2013).
Social factors
 Restriction of use of internet in some areas because of religious and ethical concerns in an
community. This will affect the sales of cited company.
 There has been a tremendous increase in the internet users day by day, this can be positive sign
for Amazon to increase its market share (Amit and Schoemaker, 2012).
 Started giving their ads in social websites like Facebook and twitter. This can give an advantage
to companies like Amazon to expand its customer base.
Technological factors
 Being an online retailer has always searched for new and innovative ideas for attracting
customers and take a step ahead of its competitors like Barnes and noble and Alibaba.
Environmental Factors
 Amazon has taken a step to reduce the use of hardware and storage devices by working on and
storing its data on cloud computing and cloud storage.
 Also, company has shown a positive mark towards environment issue of pollution. This means
that online purchase can be done even by sitting at homes. This reduce the movements of
vehicles for going to the physical stores (Sedlak, 2013).
 Amazon is making efforts to towards a greener solution for shipping their goods at the time of
making delivery.

Legal factors
 Being an online retailer has to make the delivery of the goods overseas and this can affect to
company to keep in mind the trade and tariffs policies and regulations.
 Also, certain articles to be delivered in some country even have different legislations and
regulations depending on state in which it is delivered. These certain goods like alcohols and
chemicals. (Amazon’s PEST, SWOT and Porter’s five forces analysis., 2009).
3.2
Porters five force model helps Amazon to understand the strengths of the current competitive
position and factors affecting strategy development.
The factors used in porter's analysis are:
(Source: Porter’s Five Forces., 2015)
Illustration 2: Porter’s Five Forces factors

Suppliers power
 Amazon has marked benefit with most of its suppliers who provides them goods (books, Audio,
technology) the reason for this is that these companies do not charge their commodities until the
moment Amazon makes a sale of them.
 Payment to suppliers is made by Amazon only for those products, after 35 days the item has
been sold (Hair, 2012).
Buyers powers
 In case of bargaining power of customers, it is usually high. As consumers can switch to
physical stores or other online shopping websites.
 Amazon provides its customers with a very low price products often surrounded by the offers
and discounts. These gives and advantage to this cited firm to make a strong relation with
customers and sustain them for longer time (Hodgkinson, 2011).
Competitive rivalry
 Amazon was the first company to enter into the e-commerce activity.
 This gives to Amazon a certain level of tranquillity into the market.
 Due to its advanced and innovative ideas over the years, has made company to reach at the
highest level of customers satisfaction.
Threats of substitute
 There is a moderate threat of substitution for Amazon, as it has made its brand name well
recognized and trusted into the eyes of customers and community.
 This is the fact that Amazon do not face threat of substitution for short time (Arline, 2015).
Threats of new entry
 There is a huge threat of new entrance of online retailers. This is because internet has shown

that simple idea well developed can offer an extraordinary results such as Facebook, YouTube,
and so on. These firms have developed their websites in a short time period with outstanding
results. (Martin., 2014).
INTERNAL ANALYSIS: STRATEGIC CAPABILITIES
4.1
A resource audit can be defined as the activity in which employees makes sure that business of
project has all the resources it needs to complete its task and operations in most effective and efficient
manner. Thus is the process which helps in improving the efficiency of the company.
Basic and unique resources are the two categories of all types of resources which are available
with Amazon. Basic resources are those which are available with the company in present scenario.
Such as human resources in terms of employees, financial resources, basic infrastructure facilities and
so on. Amazon has to make sure that these resources are available with the company so that its business
operations are not hampered in case of non-availability (Boyd, 2012).
Whereas, on the other side, being an online retailer, Amazon has to identify certain uniqueness
in its operations in order to tap the customers and make them sustain for longer period. Therefore,
company has started using the cloud computing as an improved version for storing its data on servers.
This gave an advantage to firm to make a cost cutting in further arranging for hardware storage devices.
Cloud computing storage is a unique resource which is adopted by cited company. Another example, of
unique resource is high experience professional staff who has invented the new application of kindle
for Microsoft users.
There is not much difference between both the types of resources, but both of them has their
own importance. Basic resources are the necessity and unique resources are used to get a step ahead of
its competitors. Similarly, other difference between basic and unique resource is that in case of basic
resources less cost is incurred by company as no research work is required. But on the contrary, huge
cost has to be incurred by Amazon to bring unique resources in company. As market research and
highly professionalised people are hired which adds to an additional cost for cited company (Priem,
2012).
4.2
Functions
 E-commerce business Selling services to vendors
Core competencies

 It is earth's most customer centric firm.
 The uniqueness of Amazon makes very hard for competitors to imitate the activities of Amazon.
 The high and most likely brand image in eyes of targeted audience.
 Excellent websites skills serves company with greater advantage.
 Amazon core competency lies in its first mover advantage fact that is it was the first company
to sell books online.
 Company delivers large selection of gods at the most economical price.
 It provides its customers to make an online purchase at a very ease (Spainhower, 2006).
BASIS OF COMPETITIVE STRATEGY
5.1
Bowman's Strategy Clock is a model which is used in marketing to assess the competitive
position of the company comparison to the competitors like Barnes and Noble and Alibaba. Following
are the eight positions which are available for the company to analyse the competitive advantage. These
are:
(Source: Bowman’s Strategy Clock., 2015)
Low price/low added value
This is less likely chosen strategy. It is selected at the time by companies when their products
lacks differentiated values. The product quality under this strategy is inferior type of gods and services.
This aids in lacking customer loyalty. But, the prices are so attractive tat it helps in attracting the users
Illustration 3: Bowman’s Strategy Clock

(Ahmed, 2014).
Low price
This strategy can be selected by companies by offering goods and services at low price. If the
companies dealing in low cost have large enough volumes or strong strategic reasons for their
positions, then this will help hem to sustain and become a powerful force in market.
Hybrid
The companies which comes in the category of hybrids are the one who offers low price
products but with high perceived value to its customers than its other low cost rivalry firms. The only
issue with this strategy is quantity but companies manage to solve this problem. For example, discount
department stores (Keupp, 2012).
Differentiation
Under this strategy, some unique featured products are offered to customers in addition to the
superior quality and value. This strategy helps the companies to gain higher competitive advantage.
Therefore, branding plays a crucial role in this type of action plan.
Focussed differentiation
In this type of strategy companies offers high quality and value products with high price. This is
adopted by those companies whose buyers wants to buy the commodity based on the perceived value.
Increased price and standard product
This is the strategy in which companies increase the prices of their products suddenly without
increasing the perceived value. This is the balancing situation for firm in which if consumers accepts
the high price than it is an advantage for company and vice versa.
High price/ low value
This is monopoly type of market in which only one company is offering the products. They
adopt the strategy of usually high price and delivering low value (López, 2011).
Low value/ standard price
By adopting this type of strategy companies usually fails in enhancing market share. The reason
is that company delivers low quality products and the only way by which it can make a sale is by
setting its price at a standard rate.
Available positions with Amazon and key market segments targeted by cited company
The available position for Amazon is low price. Herein, the main strength of the company lies
in being most customer centric. This is the reason, they provide almost all types and categories of
products to their customers at low price. This has made the company to attain and achieve success
above its competitors. By adopting this strategy company mostly target people on the basis of income

factor in which middle income earners and high income earner group is covered (Gee, 2013.).
In addition to this, the company follows the position of differentiation. In this way the company
offers wide variety to its customers with some unique feature which makes it different from other retail
segments. This gives company to make competitive position in market. Since being the first one to
introduce E-commerce activity, it has a strong brand image which attracts customers towards it. The
key market segmentation of Amazon in this position is lifestyles and changing fashion trends. Also, age
criteria is also a segment which is targeted by Amazon. These segments give company a unique
advantage to tap the large audience (Clarke, 2012).
Practices firm adopts to sustain their competitive advantage and meet customer needs
The practices adopted by firm to sustain competitive advantage and meet customers need:
 Offering economical price products and services.
 Expanding its business lines by several categories.
 Expertise technologies adopted such as one click system.
 Free delivery to certain locations and countries.
 Introducing kindle as lowest price E-reader.
STRATEGIC CHOICE
Ansoff matrix
Usage of Ansoff matrix for Amazon is explained in following points
Market Penetration
This strategy focuses on selling the existing commodities to the selected target audience to
attain enhancement in market share. If Amazon adopts this strategy than it will allow the company to
maintain less risk factor by focussing on selected target group of people. This will also help company
to hold back and develop its market share. The main advantage the company will have by adopting this
strategy is that it will allow Amazon with the lowest amount of risk factor. For example, Amazon target
s middle income earners group, than this strategy will help company to develop products and sell more
to this group (Hill, 2014).
Market development strategy
The new market development strategy entails that selling the existing commodities to the new
market. The ways by which company can develop new market is by expanding market to outside your
region or selling to a new country. Another way is by repackaging the products by adding new
dimensions. This adoption of the strategy will require a lot of market research and detailed market and
competitors intelligence.

New product development strategy
This strategy will allow Amazon to conduct a complete market research with respect to
consumers buying behaviour and competitors strategies and availability of the products. This is the
time when company wants to launch the new product in its business in order to fulfil the customers new
demands and preferences (Swayne, 2012).
Diversification strategy
This type of strategy will allow Amazon to achieve growth only when it is offering a complete
new product within new market. This strategy serves company with high risk factor, because company
does not have knowledge about new market. Further, new investments in terms of new human resource
and equipments will be required by company.
STRATEGY EVALUATION
The one option which can be selected out of the options of Ansoff's matrix is new product
development. The option recommends the addition of contact lenses to Amazon products range. The
various levels that is suitability, acceptability and feasibility can be assess in the following manner.
Suitability:
 Analysing competitors, it has been identified that Wal-Mart and Tesco offers customers with
this service. Therefore, adopting this strategy Amazon will able to compete.
 There has been seen a rise in market of eyeglasses and contact lenses by 3.8% since 2003.
 According to survey it has been found that 60% of US population requires vision correctness.
And still there is a rise in this percentage (Amazon Strategic Plan., 2015).
Feasibility Amazon activities include successful co-operation and joint ventures with other companies like
Microsoft, Firefox and so on. For the purpose of launching eye contact lenses, a partnership
with health care professional is necessary.
Acceptability
 Looking at the statistics and percentage of use of contact lenses by US population, it will be
acceptable by large audience.
 Though initially it will require a huge investment by company, but its long-term profitability
will decrease the overall financial risk (Sedlak, 2013).
CONCLUSION
From the above report of strategic management it can be concluded that Amazon can make the
most of their strengths by making its products and services more customer centric and providing

distinctive quality products at lower price. Therefore, in order to circumvent their weakness like offers
free shipping to its customers. This will affect the margin of firm and hence might not be able to
optimise on cost. This can be avoided by charging a little amount of shipping in case of distant places.
Similarly, it can capitalise on available opportunities by rolling out its online payment system that
introducing cash on delivery option. Also, it can capitalise on by bringing more products under its own
brand. Finally, it can be concluded that company can manage its threats by making arrangements for
providing security to its online shopper.
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