Corporate Strategy Analysis: Amazon's Diversification and Acquisition

This report provides a comprehensive analysis of Amazon's corporate strategy, examining its diversification into the offline retail market with a focus on the Amazon Go store concept. It assesses the strategic framework used, including Porter's three tests, to evaluate the attractiveness, cost of entry, and overall benefits of this expansion. The report also offers strategic advice to Jeff Bezos regarding corporate parenting advantages to ensure the long-term success of Amazon Go. Furthermore, the report delves into the competitive advantages of both Amazon and Whole Foods before the acquisition, evaluating the acquisition from a corporate strategy perspective and highlighting potential issues. The analysis includes discussions of portfolio management, resource allocation, and the application of VRIO framework to assess Amazon's competitive advantages, providing a detailed overview of the company's strategic moves and their implications.

Running head: CORPORATE STRATEGY
Corporate Strategy
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Table of Contents
Introduction......................................................................................................................................2
Part A...............................................................................................................................................2
1. Assessing Amazon’s diversification into the offline world using an appropriate strategic
framework........................................................................................................................................2
2. Strategic advice on creating a parenting advantage to Jeff Bezos to ensure the long-term
success of Amazon Go.....................................................................................................................6
Part B...............................................................................................................................................8
1. Competitive advantages of each of these two companies created in their markets before the
acquisition........................................................................................................................................8
2. Evaluating the acquisition of Whole Foods by Amazon from a corporate strategy point of view
.......................................................................................................................................................13
3. Potential issues with the acquisition would highlight................................................................15
Conclusion.....................................................................................................................................16
Reference List................................................................................................................................18

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Introduction
Corporate strategy is about long-term vision of the organisation and clearly defined goal
in order to create corporate value through motivating the employees. As stated by Rothaermel
(2016), corporate strategy of the organisation strives for the continuous development of the
organisation and it tries to achieve customer satisfaction. In this study, there are two parts; the
first part is based on case study of Amazon Go and the second part is based on food market chain
of Amazon. Amazon Inc is one of the largest online retailers in the globe. This study aims to
highlight Amazon's diversification strategy to enter offline world and Amazon's competitive
advantage through acquisition.
Part A
1. Assessing Amazon’s diversification into the offline world using an appropriate strategic
framework
Initially, Amazon followed the online business model under the idea of a retail business
where they could grow in the market. As stated by Sull et al., (2018), Amazon always measures
the programmes and effectiveness of the investment in different sectors analytically and they
want to learn from both the success and failure. Amazon always focuses on the customers'
experiences as this one is the marketing message of the organisation in the online value
proposition. Recently, Amazon has completely revised the business model and it has been
combining the offline and online business. This time, Amazon opened its Amazon Go store and
it is a new type of ‘no-checkout' required store. Amazon followed the technological innovation in
opening the new store where the customers do not need to wait in line in the physical stores to

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pay the bills. The customers can just walk out after the purchasing process is over without paying
the bill. Amazon has introduced the Just Walk Out Technology using the senor vision, computer
vision and deep learning as this technology will help to detect the products and it will add the
products to the virtual cart.
Figure 1: Amazon Go store at Seattle
(Source: Cnbc.com, 2018)
Amazon is taking the diversification strategy in order to increase the market share in the
offline retail market. Therefore, Amazon has taken the diversification strategy as they are
thinking it may generate the greater profit margin with providing competitive advantage
(Amazon.com, 2018). Amazon GO strategy of Amazon Inc can be taken as the mixture of
heterogeneous and concentric diversifications. Amazon is taking the help of technologies and
this decision would help to lead towards additional opportunities. In concentric diversification,
the company adds new services or products to utilise the potentiality of the organisation. When
the company is moving to new service, it can provide the benefit of synergies the diversification

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(Johnson, 2016). Diversification of Amazon will provide value depends on how the markets
would function. Amazon has taken the strategy of diversification of their resources. Amazon has
diversified products range and it has good resources, warehouses and customer database.
Figure 2: Diversification strategy
(Source: Exposito & Velasco, 2018)
Many of the firms find diversification to gain synergies within the related business for the
economic scale and scope (Bowen, Baker & Powell, 2015). This type of synergy helps the
business to share the resources and core competencies as well. In addition, diversification
provides a power to build a market as it avoids dependencies on parent organisation and threat to
the competitors.
Porter’s three Tests:

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Figure 3: Porter’s three entry tests of Amazon Go
(Source: Self-developed)
1. Attractive test: Amazon aims to ensure that its diversification targets towards an
attractive industry of offline retail. Amazon assesses the external environmental factor to
determine the attractiveness of the offline retail since Amazon has been researching about new
technologies for four years. This diversification is about investing in the pipeline for more
opportunities and Amazon Inc has taken the same strategy where the parent brand follows the
structure to access the potential opportunities without overlooking the performance of the present
(Grewal, Roggeveen & Nordfält, 2017).
2. Cost of entry test: Amazon ensures the cost of entry in the new market does not
capitalise the future profits. Amazon has been spending money on technologies and cost of entry
to offline retail takes money to set up the physical stores as well. Amazon needs to take the test
as it is the culling point of diversification of business. Amazon has had no previous experience to

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manage physical stores and in a cyclical business, the strategy of Amazon's diversification can
help to regulate the cash flow.
3. Better of the test: Amazon's new business Amazon Go is new on the market and
Amazon will try to ensure the competitive advantage in the market. The competitive advantage
of the Amazon Go is the amalgamation of technology and offline market. Competitive advantage
needs to be fit into the firm's portfolio and Amazon needs to go with the diversification. Amazon
will definitely share the resources and capabilities with Amazon go in the long run. Amazon is
trying to capture the emerging opportunities and Amazon takes the venture of AI and
technological innovation in order to generate the substantial profit in near future (Johnson,
2016). The biggest competition in the USA market of Amazon is Walmart and Walmart has both
online and offline presence in the retail market.
2. Strategic advice on creating a parenting advantage to Jeff Bezos to ensure the long-term
success of Amazon Go
Corporate parenting and portfolio management strategies
There are mainly four types of portfolio management, restructuring, transferring skills
and sharing activities (Rothaermel, 2015). Amazon Go is the corporate development of Amazon
Inc where Amazon Inc revised the online business model by portfolio management. The Amazon
Go store that has already opened in Seattle is large and it has 1800 soft and it is good for
conveniently shopping for the customers (Amazon.com, 2018). Portfolio management is the art
of investing in the business to earn a maximum profit within the right time frame. Jeff Bezos
needs to expand the business into a different genre. Amazon Go is a unique concept where the
customers do not need to stand in the queue. The customers can save their time and they can

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purchase with ease. Amazon Go shops will also have the sales executives and people will also
work in the kitchen. Amazon Go will also provide ready-to-eat, help customers executives and
stock shelves. Amazon has been working on the technology and Artificial Intelligence to bring
success in the offline retail market. The customers just need a Smartphone with Android or iOS
platform.
Three types of strategic analyses may help Amazon to find parenting advantages.
 First, Amazon needs to make a list of challenges facing in their business. Each of the
challenges needs to evaluate for containing parenting opportunity by an organisation
(Grant, 2016).
 Second, Amazon needs to analyse the strategy which can influence most on the business.
 Thirdly, Amazon needs to find out the similar parent companies to see they can discover
the similar types of parenting advantages.
Figure 4: Corporate parenting strategy
(Source: Grewal, Roggeveen & Nordfält, 2017)

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Jeff Bezos’ concept of offline retail will be a major threat to the conventional retailers;
however, this can eliminate the employees from the retail stores. In long-term this Amazon Go
shops can be beneficial for Amazon as in recent time, the customers do not spend time waiting in
the queue. The customers are now tech-savvy and they use the Smartphone on daily basis.
Amazon has amalgamated technologies with the offline retail shopping. Amazon R&D team
needs to take the advantages of a multi-channel environment. Amazon can transform the new
technology and the concept of Amazon Go can push the conventional grocers to mix
technologies into the customer satisfaction. Amazon can also define disruption as it mixes the
online platform with physical shopping (Cusumanno, 2017). Amazon should collaborate with
automakers in order to use the technologies to help the automation. Therefore, Amazon needs to
improve the technology and they need to assemble the technology with the human resource in
order to be successful. Technology needs to be improved as it transforms human to the software-
based personalised app.
Part B
1. Competitive advantages of each of these two companies created in their markets before
the acquisition
Amazon made the acquisition of Whole Foods in 2017, August at $13.7 billion. Whole
Foods has been swiftly transforming under the control of Amazon. Both the companies have
been doing the changes immediately from internal restructuring to cutting the costs.

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Figure 5: Amazon's acquisition of Whole Foods
(Source: Self-developed)
Competitive advantage of Amazon
Amazon is a global retailer and the organisation has been taken the strategy of cost
leadership and products offering to have a competitive advantage. Amazon operates in the global
market with a thin profit margin for innovation of business process. Amazon has its own
principles in to focus on the competitors', operational excellence, invention, long-term thinking
and customer obsession. Core competencies of Amazon come from the resources they have, core
competencies of Amazon are IT equipment, warehouses, stocks, online retail experiences,
relationship with suppliers, brand and supply chain.
Tangible resources
Physical Technology, fulfilment centres
Financial Long-term sustainable growth in free cash flow
Technological Amazon web, cloud computing Artificial intelligence, currency

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converter
Intangible resources
Human Culture, trained employees, training, talented workforce
Reputation Innovation, creativity, EMI records, continuous growth, global presence
Table 1: Resource and competencies of Amazon
Value Rare Imitability Organisation Competitive
implication
Service No No Yes Yes Competitive
parity
Application Yes No No Yes Disadvantage
Operating
technologies
Yes Yes Yes No Competitive
advantage
Resources Yes Yes Yes No Competitive
advantage
Diversified
products
Yes No Yes Yes Competitive
advantage
Table 2: VRIO Framework of Amazon
(Source: Self-developed)
Amazon provides valuable and rare service in online retail, in product ranges and
partnership with suppliers. Amazon gains competitive advantage through regularly penetrate to
new niche customers' segments (Rugman & Verbeke, 2017).

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 Amazon tries to reach new customer base through increasing the products delivery to far
section. Amazon has a good relationship with sophisticated global logistics and it has
done successful business diversification.
 Diversification of Amazon is related to the Amazon Today, Amazon E-book reader,
Kindle and recently Amazon Go. Amazon owns the sites like 6pm.com, DPreview.com,
Diapers.com, Zappos and IMDB.
 In addition, Amazon has its warehouse across the globes and it has its own aeroplane.
Amazon has been using the robotics technology in supply chain and logistics. Amazon
provides ‘same day’ delivery at the very low price and in special cases; Amazon also
gives 4 hours delivery also.
 Moreover, Amazon has started Prime memberships to whom it offers special services.
Amazon online sales touched the growth of 31% and 26% for the e-commerce sales in
the year 2016 (Grewal, Roggeveen & Nordfält, 2017).
 Amazon has strong bargaining power with the suppliers and it matters as it shows the
numbers of people go to Amazon online shopping. Jeff Bezos’ strong leadership
capability is another reason behind the gaining maximum resources from investors and
employees.
Competitive advantage of Whole Foods
Whole Foods Market has been selling the food products in the USA without flavours,
colours and sweetness. It had its stores in North America and the UK. Amazon bought this
organisation and it has it's headquarter located in Austin, Texas. Core competencies of Whole
Food are the highest quality, brand reception, dedication to the social ethics, industry best service
and strong supply chain.