Analysis of Amazon's International Business Strategy and Growth

This report provides a comprehensive analysis of Amazon's international business strategy, focusing on its structure, resources, and culture. The report begins by evaluating Amazon's approach to international business, examining its organizational structure, including the use of small, autonomous teams and geographic divisions. It then delves into Amazon's key resources, such as its innovative technology, human resources, digitally driven supply chain, and product development process. The report also explores Amazon's unique service culture, emphasizing customer loyalty and retention, and its impact on employee hiring and decision-making. Furthermore, the report examines Amazon's response to macro (PESTEL) and micro-environmental factors, including political, economic, social, technological, environmental, and legal considerations. Finally, the report analyzes Amazon's management of its value chain and its strategic approach to growth, highlighting acquisitions, partnerships, and customer-centric product development. The report concludes with an assessment of Amazon's overall business strategy and its effectiveness in the e-commerce market.

RUNNING HEAD: International Business Strategy
International Business Strategy

International Business Strategy 1
Contents
Answer 1....................................................................................................................................................2
Structure of Amazon................................................................................................................................2
Resources of Amazon..............................................................................................................................3
Culture of Amazon..................................................................................................................................5
Answer 2.....................................................................................................................................................6
Macro Environment of Amazon..............................................................................................................6
Micro Environment of Amazon...............................................................................................................8
Management of Value Chain...................................................................................................................8
Amazon’s Strategic Approach to Growth................................................................................................8
References.................................................................................................................................................12

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Question 1: Comment on Amazon’s approach to International Business Strategy by evaluating
its structure, resources and culture.
Answer 1- Instead of believing in the maximization of the short term profits, Amazon opted for
the strategy which encourages long term investment, value creation and market gains. Therefore,
reinvestment of the profits was made by the company in its own business and took investment
decisions by keeping in mind its objective of becoming a long term market leader instead of
focusing on the short term profitability. Since the inception of Amazon, its core strategy is to
offer persuasive value to its customers. This was done with the help of offering products to the
customers at lower prices with quick deliveries along with offering a variety of services that
attracts the customers the customers towards Amazon. In other words, the strategy of Amazon
was to make the customers as happy as possible. Therefore, for success of the strategy, the
adoption of a definite structure, resources and culture was required.
Structure of Amazon
Amazon adopted the ultimate divisional organizational structure with small teams with first-
level managers. A company- wide rule was instituted in the form of two- pizza team this meant
that the number of members in the team should be small enough such that they can be fed with
two pizzas (Hoffman, 2017). Therefore, pizza was used as a metric for the purpose of selecting
the size of the teams. If two pizzas were not enough for the purpose of feeding the team then the
size of the team was estimated to be too large. This concept imposed limitations on the number
of members in the team to 5 to 7 members. The basic purpose of the concept was to provide
autonomy and accountability to the team as small teams are capable of communicating
effectively and perform work better (Dyer & Gregersen, 2013). Also, they are easily able to test
and introduce innovation in ideas independently. This structure helped Amazon in terms of
setting their internal priorities, pursuing creative strategies and freely executing the ideas.
Moreover, Amazon has formed structure based groups for the purpose of facilitating successful
operations management in the entire organization. This function also supports in establishing
operations in new markets by taking into consideration its ongoing global expansion. Also,
geographic divisions are made in order to easily manage economic conditions of various regions.
Due to a variety of differences in the regional markets, geographical divisions are made such that
different issue and concerns can be handled appropriately.

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Resources of Amazon
The resources and capabilities of Amazon include its technology, human resources, digitally
driven supply chain, product development process, partnerships, customer service, etc. Such
capabilities are based on the internally developed strength of Amazon over the years.
Technology
The most important resource for Amazon is the use innovative technology. The use of best
technology was the primary requirement of Amazon as it operates in e- commerce business.
Amazon has found its ranking among the most innovative companies in the US. Even since its
foundation it has always been at the forefront of innovation by making the use of latest
technology in order to provide best experience to its customers. The achievement of competitive
advantage by Amazon was a result of the development of proprietary technologies by Amazon
itself along with use of technologies that was licensed from third parties. Moreover, the
transaction processing system of Amazon supported various methods for shipment, multiple
shipping addresses and therefore millions of items. Also, the customer recommendation system
was upgraded through its big data resources and was integrated with almost all the parts of the
process of purchasing starting from product search by the customer till checkout.
Human Resource
Human resources i.e. the employees are the biggest resource of an organization. Amazon had
1,83,100 employees reportedly in the year 2015. Amazon did not believed in group thinking and
preferred individual ideas and it is a decentralized company. At the time of hiring, Amazon
essentially looks for people who are smart and innovative in order to increase the productivity of
the team they will join. The organization is divided into small teams as it helps in working more
effectively along with bringing an ease in communication (Kantor & Streitfeld, 2015). Moreover,
decisions can be made faster and ideas can be tested quickly and more effectively. The business
model adopted by Amazon has helped it in attracting and retaining the best talent (Harrison &
John, 2009).
Digitally Driven Supply Chain

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The well- developed supply chain of Amazon acted as a powerful resource for Amazon in the
implementation of its international business strategy. It included inbound and outbound shipping,
inventory planning, demand forecasts and warehouse and transportation management. The
adoption of advanced technology in terms of supply chain leads to the minimization of human
intervention in various processes. Moreover, the team managing the supply chain of Amazon
basically focused on vendor management along with the customer experience. Also, Amazon has
made the installation of robots in the warehouses in order to manage the quick the satisfaction of
the customers with the help of quick deliveries. Sortation centres are built by Amazon which
receives the packed orders from their nearest Amazon fulfillment centres for the purpose of
sorting them in accordance with the zip codes before sending them to the shipping carriers for
the purpose of delivery to the Amazon customers.
Product Development Process
The product development process adopted by amazon has acted in its benefit as a biggest
resource as it is customer centric and focuses on the value delivered to the ultimate customer
(Schermerhorn, 2010). A unique philosophy is followed by Amazon while developing the
products known as ‘working backward’. This means that the products are developed keeping in
mind the customer’s perspective such as the expectations of the customers from the product and
then allowing the team to meet such expectations (Lee & Yang, 2015).
Partnerships (Acquisition led)
The success of Amazon is also the result of its acquisitions and partnerships with the companies
of different sectors such as Pets.com (pet supplies), Living.com (furniture), Drugstore.com
(pharmacy), Wineshopper.com (wines), Kozmo.com (urban home delivery), Sothebys.com
(auctions) and HomeGrocer.com (groceries). Moreover, third parties are also enabled to sell their
products on Amazon under programs such as ‘Syndicated Stores’ and ‘Merchants@’. Such
partnerships and programs has acted as a resource for amazon as it provides its customers a wide
range of products and ultimate satisfaction which is the basic motive of Amazon (Zhu & Liu,
2016).
Proper utilization of these capabilities was a bit difficult but Amazon managed to properly use
these capabilities and achieved success with the help of it.

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Culture of Amazon
Amazon has adopted a service culture within the organization which has three important aspects
namely loyalty, customer service and customer retention (Byers, 2007). The core strategy of
Amazon is to provide compelling value to its customers since the time of its incorporation.
Amazon is completely consumer focused and tries to make them happy by offering lowest prices
with large variety of products and prompt delivery. The culture adopted by Amazon is dependent
upon its objective of achieving growth in the long run. Therefore it provides excellent customer
service and user friendly website in order to increase the customer base. Moreover, advanced
technological infrastructure is built and huge amounts are also spent on the customer loyalty and
service programs even when it significantly affected the company’s operating margins. This is
done with the view to promote its service culture within the organization (Quelch & Boudreau,
2016).
This culture is taken into account while hiring the employees for the company. They look for
smart and innovative people in order to increase the productivity of the company. the company
has also initiated a ‘bar raiser’ program in which selected employees of Amazon form a part of
the committee, they spent 20-30 hours a week in interviewing the prospective employees of the
company in addition to their duties and responsibilities. Bar raisers evaluate the best candidate to
be selected in the company. The basic purpose behind this approach is to raise the bar for the
next hiring such the talent within the organization is always improving (Clampitt, 2016).
The culture of Amazon is such that the employees are allowed to make decisions quickly.
Amazon has promoted individual ideas in employees over group thinking. They also promote
autonomy and accountability within the teams for better working, effective communication and
the generation of innovative ideas among employees. Therefore, employees are motivated to
bring innovative ideas such the e- commerce business can be brought to its maximum potential
(Kaufman & Stenburg, 2010).
Amazon also provides flexibility in the workings of employees through the introduction of
concept of Virtual Contact Center in order to enable the employees to work from home. The
employees of Amazon are held at an unreasonably high standards and the internal phone

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directory presented employees the manner of sending confidential feedbacks to the bosses of
others (Rogelberg, 2016).
Question 2: With regards to its E-commerce business since 1994, how well has Amazon
responded to macro (PESTEL) and micro (Internal control) environment factors and managed its
value chain?
Provide a critical analysis of its strategic approach to growth.
Answer 2- Amazon was started in the year 1994, the internet was evolving as a potential
business medium and started gaining popularity. Ever since its inception it faced unique
challenges in its external environment.
Macro Environment of Amazon
The macro environment also known as the external environment of Amazon relates to PESTEL
factors i.e. political, economic, social, technological, environmental and legal factors. It always
comes up with unique challenges in the growth of Amazon which need to be dealt with in order
to proceed with the way to success.
The regulations framed by the governments of the countries in which Amazon operates have
always been a matter of concern for Amazon. . With the passage of time, the disposable incomes
of people have increased and the ongoing economic trends benefitted Amazon. But stable
economic conditions also developed competition for Amazon in the market.
Since Amazon is a retail business, its growth was completely associated with the social and
cultural trends due to different tastes. Over a period of time, the use of mobile and digital
technology has set trends of online shopping which has significantly boosted the sales of
Amazon. Moreover, the increasing use of smartphone has even made it easier to shop online
from anytime, anywhere. The demographics of customers have changed a lot after the
incorporation of Amazon which has positively affected it. Consumers now believe in getting the
best product at the lowest price at their doorstep. Therefore, Amazon has stroked deeper
connections with the customers by offering the same.
The first country where Amazon started its business in the year 1994 was Seattle and was
selected by Bezos due to its technology cluster. It always makes the use of modern technology in

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order to provide hassle free experience to their customers in a way such that they receive the
product through a simple order process as quickly as possible. In the year 2006, the costs
associated with the Amazon’s technology and development investments were found to be
growing a large pace. As a result, the stock of Amazon sank due to high operating expenses and
technology and content cost. This led Amazon to drop the rates of its technology. But this did not
stop Amazon from pursuing growth. In the year 2012, it made an investment of 6% of its
revenues in technology and content which includes licensing for music, new product
development and video streaming.
Amazon has also focused on areas such as waste reduction, packaging and energy consumption
in order to conduct the business sustainably.
The rates of sales tax varied from state to state and averaged about 6% of the sales. The major
advantage of Amazon over others bookstores was its lack of sales tax. Wherever the books were
shipped in the United States by Bezos, he would not have to levy sales tax. The warehouses of
Amazon in the United States were originally located in the states with no sales tax as it was
exempted by the laws from the collection of sales tax in those states where it does not have
factory locations. This helped Amazon in keeping its prices low and having a kick start for its
new business. Basically, Amazon was just testing the international market in the US.
With the passage of time, the market demand of Amazon increased, disrupted other online
retailers and traditional stores and leveraged its e-commerce operations in order to become a
retail monster. The competitors of Amazon include Wal-Mart, Alibaba.com and Google
Shopping. Amazon was also facing tough competition from tech giants such as Google Inc. and
Apple Inc. The development of path breaking products became the requirement for Amazon in
order to stay competitive. In order to grow in the less friendly macro-economic environment,
proper compliance of the laws and regulations of different countries are required to be made
along with constant innovations for staying competitive and analyzing the latest trends to
identify the opportunities on time.

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Micro Environment of Amazon
The internal environment or micro environment of Amazon encourages the success of company
with the help of innovative ideas and collaboration with other companies. The success of
Amazon was the result of its internal activities such as first mover advantages by constantly
analyzing the trends and opportunities in the market (Mennen, 2010). Amazon is a customer
friendly website with low cost structure which provides a wide range of products. Therefore, it
has necessary skills in relation with website, customer relationship, e- commerce and related
services. Moreover, the hiring, retention and performance of employees has played a major role
in the internal environment of Amazon (Stone, 2013).
Management of Value Chain
Delivery businesses such as TNT, FedEx, and UPS are relied upon by Amazon. The
management of value chain is also dependent upon internal and external resources and
accordingly FDI and assets are arranged. Location advantages has been beneficial for the
purpose of effective management of value chain (Dudovskiy, 2017).
Amazon’s Strategic Approach to Growth
Amazon came up that time with the idea of selling books with the help of internet to a mass
audience. Its business model was based on the strategy “sell all carry few” where more than
millions of books were offered online while it actually stocked only around 2000. Moreover,
Amazon Associates Program was launched by Amazon in order to attract more customers. This
program allowed the posting of links of the books on the smaller websites and in return these
websites received commission on the purchase made by the customer through that link and
therefore the program gained popularity (Edelman & Brandi, 2015).
With the passage of time, Jeff Bezos, the founder and CEO of Amazon, realized that the business
model which was earlier adopted was not capable of providing the kind of growth that he was
looking for and therefore he opted for diversification (Zott & Amit, 2008). In the year 1998, the
business of Amazon was expanded beyond goods and started to include almost all kinds of
shippable consumer goods such as toys, videos, electronics and games (King & Baatartogtokh,

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2015). This led to the change in the business model adopted by Amazon to “sell all, carry more”
model from “sell all carry few” strategy (Grant & Jorden, 2015).
In the year 2000, technology services were started to be offered by Amazon through a platform
called Amazon Enterprise Solutions. Partnerships with traditional retailers such as Borders, Inc.
and Target Corporation were entered and e-commerce platform were offered to them along with
customer service infrastructure for the purpose of selling their products.
New areas of growth were identified by Amazon by the launch of Amazon Web Services (AWS)
which offered a platform of computing services for other websites. Amazon’s technology
infrastructure could be accessed by the developers with the help of these web services that could
be used for the purpose of running any sort of business virtually (Varia & Mathew, 2014).
Different resources, processes and therefore a new business model were required in order to meet
the needs and demands of these developer customers. Bezos took proper steps and launched
AWS even when it was considered to be a risky investment for Amazon. The risk taking
ultimately turned into a successful venture for Amazon within five years of its launch and made
Amazon one of the biggest platforms of computing services in the globe (Smith & Linden,
2017). The growth of Amazon suggested that there is scope of growth in the international market
as it has outgrown the national market.
The focus of Amazon on growth and innovation disturbed the entire online retail industry while
it transformed itself to a strong digital media platform from an e- commerce player. With the
motive of achieving constant growth, continuous reinventions were made in its business model
and new ways were founded in order to create value for their respected customers. Bezos was
aware of the fact that there is constant need for modification in the business model of the
organization in order to survive in this extremely competitive online retail market. Therefore,
Amazon is always engaged in continuous evaluation and experimentation in terms of its business
model by the way of developing proficiency in e- commerce innovation and making investment
in diversified businesses with the view to differentiate itself from traditional businesses.
Amazon belongs to an industry which is super sensitive to market changes therefore, it needs to
act responsively according to the demands of the market. The success of Amazon was considered
to be a result of its exceptional growth in the new markets.

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The net income of Amazon was estimated to be US $79 million with the market value of US
$262.7 billion with 17% rise in the shares in the year 2015. The greater market share achieved by
Amazon was the result of its cost saving measures which include closing of warehouses, shutting
down of customer care centres and lower overhead costs as it did not have physical stores. Costs
were also saved by taking the maximum advantage of technology.
Amazon captured growth with the help of innovative disruption on which its business model was
entirely based as the company believed that sustainability is the result of innovation. The main
pillars of the business model were- wide selection, low prices, customer service and
convenience.
Wide Selection
Amazon was started as an online bookstore and quickly expanded beyond books and started to
include all types of consumer goods. Diversification was adopted and therefore the biggest range
of products offered by Amazon which include the categories such as games, music, movies,
electronics, clothing, health and beauty, tools, toys, home and garden, shoes and jewelry, sports
and outdoors, grocery, computers and automotive and industrial (Lussier & Hendon, 2018).
Amazon allowed the sellers for conducting advertising program by the way of uploading their
catalogue on the website of Amazon thereby promoting their products. Such kind of ads
provided a wide range of products among which selection can be made by the customers.
Low Prices
With the view to provide best deal to its customers, Amazon believed in keeping its prices low.
For the purpose of attracting more customers, Amazon offered free shipping on products and
proactively cut prices. This was done by the way of leveraging its fixed costs, bring about
improvements in the operational efficiencies and allowing third party sellers to sell their products
on the website of Amazon and the savings they made were passed on to the customers in the
form of lower prices.
Customer Service
The growth of Amazon was a result of its customer service, customer retention and loyalty.
Amazon took all possible steps in terms of enhancing its customer service by offering low prices,

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quick delivery and a wide range of product and services. It continuously developed innovative
ways to provide better satisfaction level to its customers which significantly resulted in the
repetition of buyers (Moore, 2017).
Convenience
Convenience was one of the pillars of the Amazon’s business model which supported in growth
by the way of providing hassle free services to the customers anytime, anywhere with the help of
modern technology which ensured that the product ordered by the customer easily and is
delivered on time. It was easy to search products on Amazon’s website with the help of product
recommendations, customer reviews, browsing options, etc.
The above pillars of the business model acted as a flywheel and allowed more customers to visit
the website which made the growth of Amazon even faster.

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