MBA Capstone Project: Competitive Advantages Analysis of Amazon.com

This capstone project analyzes Amazon's competitive advantages in the online retail market. It begins with an introduction and company overview, highlighting Amazon's diverse product and service offerings. The project then delves into an internal environment analysis using VRIO, identifying valuable, rare, inimitable, and organized resources. A SWOT analysis assesses strengths, weaknesses, opportunities, and threats. The external environment is examined using PESTEL and Porter's Five Forces, evaluating political, economic, socio-cultural, technological, environmental, and legal factors, as well as industry rivalry, supplier power, buyer power, threat of substitutes, and threat of new entrants. The project articulates Amazon's core competencies, including brand strength and customer focus, and identifies strategic advantages such as low-cost leadership and technological expertise. A diagnosis of strengths and weaknesses, source availability, and future sustainability is provided, concluding with strategic opportunities and risks. The project uses various frameworks to comprehensively analyze Amazon's market position and competitive strategies.

Business Capstone Project
Competitive Advantages
Analysis: Amazon

Introduction
• Gaining competitive advantage in present business scenario is tough.
• Changing demand of customers and access to the internet enhanced
the scope of business opportunities
• This has also increased competition as new companies are entering
the markets
• Amazon.com and its Competitive Advantages in the online retail
market

Company overview
• Amazon.com, Inc., an American
multinational company.
• Focuses on: Artificial intelligence, Digital
streaming, cloud computing and e-
commerce
• Headquarters- Seattle, Washington
• Founded on 5th July, 1994
• Founder: Jeff Bezos (aboutamazon.com
(2019)

Company overview (continued)
• The company business has shockingly flourished over past few years
• The journey begins with selling goods on online platform
• Soon began the major force in the ecommerce retail market
• Started as Online bookstore and expanded afterwards to other product lines
• Enjoying the status of world’s number one online retailer in present time

Products and services
• Retail: Books, Consumer electronics, office and computer, automotive and tools,
household and food, home improvement, video games and toys, fitness and
sports, jewellery and clothing, baby and kid products, Kindle
• Non-retail: Referrals and AWS or Amazon Web series (aboutamazon.com, 2019)

Internal environment analysis
VRIO analysis
The VRIO analysis of Amazon explains how the company is doing in its business and
retaining its position in competitive markets
Valuable resources
• The company is growing its diversity in online services
• The brick-and-mortar presence of the company is continuously growing
• Most important part is the delivery network of the company. This company has
international, regional and domestic partnerships in delivery network (Brown 2016).
• Increasing warehouse and distribution hubs
• Brand equity is increasing every year over the world

Rarity
• The company has been successful to establish its uniqueness in the
online retail market.
• Delivery network that this company work with has rare success rate
• The recruitment process of his company has rare features
• Fulfilment centres
• Huge product range
• Unique partnerships instrumental in building reputation

Inimitable
• Amazon has a brand equity globally
that is remarkable
• It works on high market
capitalisations
• The AI technology that the company
uses in its delivery and operations are
beyond any organisations reach
• High brand equity attracts the current
customers globally

Organised to capture value
• This part is important to have a sustainable competitive advantage
• Amazon has an effective strategic management process through
which it operates
• Employees of Amazon enjoy an organised reward and motivational
system
• Innovative ideas are always cultivated and encouraged in this
company business
• The management and control system of Amazon is its plus point and
helps it to get competitive advantage in present market conditions

SWOT
Strength
• Strong brand awareness and equity
• Positive reputation
• Organisational infrastructure
• Consumer centric business approaches
• Diversified operations
• Operating through various third party
channels
• Low cost structure for competitive advantages

Weaknesses
• Addition of new categories sometimes confuses the customers about
choice making
• Amazon’s delivery systems are depended on their delivery partners.
The service charges are sometimes high for this reason (Hinterhuber
and Liozu 2017).
• The free shipping facilities of this company are not available in every
place. This compels the customers to choose other options over
Amazon.

Opportunities
• The group I selling its know-how to the key stores and cashing as an
online retailer
• The Luxembourg based unit is offering customised services in Europe
to its vendors.
• This company is coordinating and collaborating with the various
public sectors. Like its deal with British Library
• Amazon is increasing its market by buying renowned online retailers.
• They are buying shares of different companies to get control on their
online business

Threats
• Huge competition of the online business markets worldwide
• Maintaining the high position for long because of international
competition (Kiu and Lee 2017)
• This company may not be able to maintain its low price policy for long
because of the resembling of high price brands in it
• Transportation and delivery cost increase

External environment analysis
PESTEL
Political
• Political stability in developed countries like the USA, Europe countries gives Amazon the
opportunity to increase its business
• Governments are being alert of the ecommerce business opportunities and extending
their supports
• Cyber security aspects have increase that helps Amazon to operate smoothly

Economic
• Amazon developed its business in the economically balanced
countries that gives it great advantages
• In the developing country, the company is immensely increasing its
business
• This company bought the famous group in China
• China is considered to be a potential market. The economic recession
in this country is a threat to the business

Socio-cultural
• Increasing habit of online buying is a positive sign for Amazon’s
business growth
• Increasing the level of consumerism from developing countries.
• Increasing the stratum of disparity of wealth that have earned.
• Amazon has gained the capabilities to give tough challenges to its rival
company with its best performance.

Technological
• Increasing the IT sources for the better growth of this reputed
company.
• Innovative thought process with new technology is applied by this
reputed company to achieve the best.
• Grabbing attention of customers with the uses of interesting way of
technology.
• Increasing the measurement of selling products after implementation
of new technological strategy.

Environmental
• Increasing the opportunities to develop the environmental impacts.
• Rising the interests to create some environmental programs for better
growth.
• Increasing the system of low carbon life that is more popular in now
days.
• Uses and selling of ecological products are not able to influence the
environment badly.

Legal
• Increasing the product regulations that are the opportunity for this
reputed company Amazon.
• Import and export regulations are changed day by day. Positive bench
marks are set with these changing regulations.
• Environment protection regulations are rising smoothly on business.
• Increasing the abilities of accessing sellers and expand its business.

Porters Five Force
Industry rivalry
• The stratum of rivalry industries are
growing fast day by day.
• Various online dealers have entered the
market
• Some of the rivals of Amazon are
Walmart, E-bay, Target and Groupon
• In spite of all the competition, Amazon
has been successful to maintain its
number one position in online retailing

Bargaining power of suppliers
• The bargaining power of the suppliers are low to medium categories
• Amazon has always maintained its supply chain strategically
• Huge number of suppliers base
• Amazons management makes sure that the suppliers maintain the
rules of the company
• Amazon deals in fair and ethical way with its suppliers abiding a non-
discrimination policy

Bargaining power of consumers
• The consumers or buyers of Amazon
have medium to high bargaining power
• The company focuses on customer
satisfaction through their quality
products
• Some of the physical retailers are
creating pressure, resulting reducing in
customers
• Customers get sufficient information
while searching for the products online
• Customer retention is focus area of this
e-retail company

Threat of substitutes
• Threat for the substitute products are high for Amazon
• People are buying from physical retailers
• Other companies have also entered the market with various product
ranges
• Customers could switch between these brands easily (Lev 2017)

Threat of new entrants
• Growth of technology has increased the threat of new entrants in
market
• E-retailing is easy to build in the online platforms
• Though Amazon empire is much ahead of its competitors
• The unique strategy of this company has built a strong base that is
hard to match

Articulation of competitive
advantage
Core Competencies
• Brand Amazon. Com has its strong presence in the International
business market from any other rivalry companies.
• The customer bases are also stronger from its rivalry company
Wallmart.
• This reputed company has the capabilities to give proper answers to
them who put some artificial allegations about this reputed company.

Non-core competencies
• Walmart has more stores than Amazon in the business of online
retailing.
• Amazon has collected private labelled products to compete with the
others.
• Amazon has adopted some dynamic strategies. Therefore this reputed
company has the abilities to give challenges to other rivalry
companies.

Internationalization
• Amazon has implant internationalization strategy for the better
growth.
• After implementation of internationalization the customer level is
growing fast.
• The business profits are gained with the implementation of
internationalization strategy.
• Developing a system of purchasing products with implementation of
this dynamic strategy of internationalisation

Localisation
• Amazon is able to reach the people’s mind by implanting localisation
strategy.
• The business professional of this reputed company has able to reach
the mind of those people who have different background and
language.
• With online business people who are from different area have got the
chances to purchasing their products easily.

Customer satisfaction
• To attract customers Amazon has started some reward and offer
facilities.
• The business experts of this reputed company have started reward
systems to its old customers and offers to new customers to grab the
attention of other customers.

Competitive advantage
Strategic advantages
• Jeff Bezos has implied and maintained uniqueness in its working process
• Use of technology expertise has increased company value to the
customers
• It has established itself as “lowest cost and customer-centric online
marketplace”
• Use of smart AI- delivery of the products through drone services
• Technology usage in an organised way has reduced the production cost
and increased the sales margin

Low cost leadership
• Amazon adopted low cost market
leadership to gain competitive
advantage in online markets
• Talented and efficient workforce is a
plus point of this company
• Quality and cost is maintained.
Customers are offered extensive
products in the best price

Diagnosis
Strengths
• Attracting customers to buy from their online marketplace
• Brand equity and long-term customer base
• Increase in sell

Weaknesses
• Some rivals are copying the business model
• Difficulties in differentiating products

Source
• Availability of a number of variations in products in terms of style and
cost
• Skilful workforces
• Shipping and delivering advantages
• Developing private labelled products

Future sustainability
• As new competitors are entering in this online business market
Amazon has tried to bring the variations in its products.
• Amazon has successfully build a business model and strategy that will
help it retain it competitive advantage in long run

Conclusion
• After implementation of some dynamic
strategy, it is clear that Amazon has gained
the abilities to expand its business.
• This reputed company has also placed its
benchmark in the international level.
• On the other hand with the changing cycle
this company may face some product issues
that may come from the competition with its
rival companies.

References
• aboutamazon.com, (2019), aboutamazon available at:
https://www.aboutamazon.com/
• Brown, T., 2016. Leaders Can Change Creativity Into Competitive Advantage. Harvard
Business Review.
• Hinterhuber, A. and Liozu, S.M., 2017. Is innovation in pricing your next source of
competitive advantage? 1. In Innovation in Pricing (pp. 11-27). Routledge.
• Kiu, C.C. and Lee, C.S., 2017. E-commerce market trends: a case study in leveraging
Web 2.0 technologies to gain and improve competitive advantage. IJBIS, 25(3), pp.373-
392.
• Lev, B., 2017. Evaluating sustainable competitive advantage. Journal of Applied
Corporate Finance, 29(2), pp.70-75.
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