International Business Strategy Case Study of Amazon: Analysis

This case study analyzes Amazon's international business strategy, focusing on its strategic position, internal and external environments, and responses to global challenges. It examines Amazon's competitive advantages, including its diversified product lines, logistics network, and customer-centric approach. The study explores Amazon's responses to market challenges in regions like China and India, as well as its efforts to compete with rivals like Netflix. The analysis includes VRIO and value chain analyses, strategic alternatives, and an evaluation using the SAF strategy model. The report also addresses issues related to the implementation of strategic options and provides a comprehensive conclusion based on the findings. The study emphasizes Amazon's focus on customer satisfaction, technological advancements, and its evolution within the e-commerce industry, including expansion into retail outlets and cloud computing.

2020
INTERNATIONAL BUSINESS STRATEGY
CASE STUDY OF AMAZON
STUDENT DETAILS

INTERNATIONAL BUSINESS STRATEGY 1
Executive Summary
The E-commerce industry is preferred as the industry in which a business can easily
expand its operations and with minimum capital requirements. Amazon is among the
leaders in the global e-commerce industry. The organisation effectively develops
strategies to improve its performance within the international market, also Amazon
has focused on developing its core activities including website development and web
services but has also established its retail outlets to compete within the offline
industry and to establish as a brand for retail outlets.
Amazon has also developed an integrated logistics network that focuses on the
delivery of the orders directly to the customers without involving any third-party
channels. Amazon has also established an integrated network of suppliers that sells
quality products on Amazon and Amazon has also partnered with global brands to
sell their products directly through Amazon so that the customer can get the quality
products direct from the manufacturers. As Amazon has an experienced and
effective workforce therefore it is required to focus upon increasing its managerial
efficiency so that the workforce can be effectively managed within the organisation
and performance can be improved.

INTERNATIONAL BUSINESS STRATEGY 2
Table of Contents
Introduction...................................................................................................................3
Strategic Position Analysis...........................................................................................4
Internal Environment:................................................................................................4
External Environment:...............................................................................................5
Amazon response to Global challenges.......................................................................6
Sustainability of the Competitive Advantage of Amazon..............................................8
VRIO Analysis...........................................................................................................8
Value Chain Analysis..............................................................................................10
Developing Strategic alternatives...............................................................................11
SAF Strategy Evaluation Model..............................................................................12
Issues within the implementation of chosen Strategic option.................................13
Conclusion..................................................................................................................14
References.................................................................................................................15
Appendix.....................................................................................................................19

INTERNATIONAL BUSINESS STRATEGY 3
Introduction
The E-commerce industry is under the continuous developmental stage and has
transformed the business environment in recent years. The rise in internet usage has
also promoted the growth of the e-commerce industry. E-commerce can be defined
as conducting business transactions online through websites or the applications
developed by organisations. E-commerce is considered as the most preferred
source for conducting business activities as it eliminates the need and requirement
of the physical presence of the business, can be started with limited capital
investment and also does not have a geographical barrier. The organisation is
required to have an effective supply chain through which it can deliver product and
services to its customers and a supplier network that can provide quality products to
the customers (Bourlier & Gomez, 2016).
Amazon is an organisation based in the US, deals in various sector including e-
commerce, cloud computing and artificial intelligence. Amazon was founded by Jeff
Bezos in 1994 and it started its operations as an online marketplace for books, and
later it expanded its business operations and included apparel, electronics, foods
and furniture. Amazon acquired various business ventures and has partnered with
major brands to sell their products directly through the Amazon website. Amazon has
focused on the customers rather than on the competitors within the industry and
ensures that the customers are being provided with quality and satisfactory products
and services while dealing with Amazon (Amazon, 2020).
The report is focused on analysing the Amazon’s strategic position within the
industry, and its internal and external capabilities through which it can maintain its
competitive edge within the industry. The report also focuses on analysing how
Amazon has responded to the challenges within the industry and has sustained its
competitive advantage within the industry.

INTERNATIONAL BUSINESS STRATEGY 4
Strategic Position Analysis
Internal Environment:
Amazon being an organisation operating within the e-commerce industry has its
product line as its key resource, as the diversified product categories available at the
website provides the organisation with a competitive edge within the industry.
Amazon focuses on introducing new products within its product line so that the
needs and requirements of the customers can be satisfied. As of April 2019, Amazon
has a total of 119,928,851 products available at its global website (Amazon.com)
(ScrapeHero, 2019). Apart from the products, Amazon’s resources include its
warehouses as well as the customer database, on which Amazon continuously focus
to improve the logistics services so that the product can be delivered effectively to
the customer. At present Amazon has a total of 1099 warehouses around the globe
operating so that the products can be delivered to the customers effectively. Also,
Amazon partners with third-party service providers to improve the efficiency of the
distribution network (MWPVL International, 2020).
Amazon’s organisational culture was highly criticized in 2015, as the employees
within the organisation were focused on providing innovative ideas and due to
ineffectiveness of the leaders, the ethics and the disciple was not the part of the
Amazon’s culture, to move forward within the organisation, the workers were
required to provide ideas better than their teammates, which promoted the use of
unethical means within the organisation. As a result, the organisation was not able to
meet the employee’s satisfaction level while working within the organisation (Kantor
& Streitfeld, 2015). To improve the organisational culture and to provide employees
with a sense of satisfaction, Amazon announced in October 2018, that it will provide
all U.S employees with a minimum of $15 as a wage. Also, the organisation focused
on implementing effective leadership within the organisation so that the internal
efficiency can be ensured (Schwantes, 2019).
Amazon is focused on being the world’s largest customer-centric organisation and
therefore acts accordingly. Amazon has become one of the most agile organisations
and also the most valuable organisation. As at Amazon the organisational strategies
are formed focused on customer satisfaction and along with maintaining the

INTERNATIONAL BUSINESS STRATEGY 5
competitive edge within the edge, such strategies develop the competences of the
organisation (Denning, 2019). Also, the organisational structure of Amazon is flexible
enough to deal with the changes within the industry. The organisation has achieved
success in its core business but also has expanded in different sectors thus
achieving its core competencies with the period (Fredkin, 2018).
External Environment:
The global sales of Amazon have reached $11.59 billion as compared to $0.60
billion in 2015 (Risley & Young , 2020) (See Appendix 1- Figure 1). Amazon not only
competes with the online websites but also provides competition to the brick and
mortar business by establishing its stores. Also, apart from opening stores at
different locations, Amazon’s business strategies that are focused on customer
satisfaction provides a competitive edge to the company. The one-day delivery
services and diversified product portfolio of the Amazon is an important aspect of the
Amazon competitive advantage.
Amazon has established itself as a competitive entity in the global industry. As the
organisation controls about 40% of the e-commerce market of US and around 75%
of the smart-speaker market through the sale of its Echo devices, also the Amazon
Web Services (AWS) covers around 40% of the cloud computing industry (Cohan,
2018). To provide the customers with better service experience, Amazon focuses on
investing specific amounts in the technological advancements within the
organisation, in the FY 2018 Amazon has invested around $28,837 million in the
technology and content which is much more than that invested in 2016 ($16,085
million) (Amazon, 2018).
The acquisition of Wholefoods in 2017 has made Amazon the fifth largest of
groceries within the UK. The establishment of cashier-less Amazon GO stores has
also provided the Amazon with a competitive edge within the industry where
Walmart, Arkansas and Bentonville were operating their business from a brick-and-
mortar store. In 2018, Amazon accounts for 3.7% market share within the groceries
and registered a sale of $695B (Day & Gu, 2019). With the technological
advancements made by Amazon, the Fast Company magazine has listed the
organisation as the most innovative organisation of 2017, whereas Forbes as listed
Amazon 3rd among the most innovative companies of 2017 (Singh, 2020).

INTERNATIONAL BUSINESS STRATEGY 6
Amazon has invested in the development of a research centre in Germany in
October 2017, the research centre has been established with a focus on the
development of Artificial Intelligence in the working of the organisation (Lomas,
2017). Also, Amazon has partnered with Microsoft for the development of tools that
the developers and software experts working for Amazon can utilise to improve the
software and to provide its customers with satisfactory service within the industry
(AWS, 2019).
Amazon response to Global challenges
In 2014 Q3, Amazon has received 40% of its revenue from the international markets
and mostly from the economies of Germany, UK and Japan. The major challenge for
Amazon in 2015 was to focus on the markets like China and India and invest within
the economies to ensure the future growth of the organisation. As in India as well as
in China, Amazon has to face competition from domestic companies such as Flipkart
in India and Alibaba in China. The major threat for Amazon was its decline in
revenue in Q3 of 2014 within the international market, the company recorded a
growth decline of 13% in the third quarter of 2014 (D'Onfro, 2015).
Amazon focuses on the introduction of its Amazon Prime services, which included
the one- and two-day delivery facility to the customers. In 2016, Amazon introduced
Prime within China as well as in India, but in China, despite the efforts of Amazon.cn,
the organisation was not able to compete with the domestic leaders including
Alibaba and JD.com. Therefore, Amazon announced the shutdown of its china
marketplace and shift its focus on the Indian marketplace. As a result, Amazon
becomes a competitive player within the Indian E-commerce Industry and in 2016
Amazon has increased its market share from 14 to 21% (Shah, 2016).
Another external threat Amazon was facing within the industry in 2016 was the
competition from Netflix. As in global market, especially in US customers prefers
Netflix more than Amazon Prime Instant Video; therefore, it was a major challenge
for Amazon to compete with the likes of the Netflix, and to respond to the competition
Amazon announced that the next major film of director Spike-lee will be produced
and distributed by the Amazon network, and focused on collaborating with top-tier
distributors and developed marketing approaches to attract the customers within the

INTERNATIONAL BUSINESS STRATEGY 7
industry (Hobbs, 2015). Amazon’s initiative to focus on developing a market share
for prime has increased in the number of prime members to 105 million in June 2019
from 54 million in December 2015 (Clement, 2019).
Amazon also worked to overcome the challenge of delivering its orders through third-
party courier services, as delivering through the third-party couriers involves huge
cost for the company and also Amazon was not able to control the delivery period for
the orders. Therefore, Amazon focused on launching its own logistics services and in
2019, Amazon emerged as a major competitor for FedEx and UPS in US market,
and it was able to deliver about 26% of its orders directly to the customers (Hankin,
2019).
Irrespective of the competition and challenges within the external environment
Amazon has to deal with the internal challenges as well. As the organisation goal
was to achieve the customer excellence and to achieve the goal the employees
within the organisation were working with unreasonably high expectations and
standards due to which the employees were resulted in creating distress within the
organisation, also such culture has promoted an unhealthy competition within the co-
workers, and the employees were just trying to beat each other up to get promoted
within the organisation. The internal culture or the management of the Amazon was
the major threat for the organisation to expand its business operations (Becker's,
2015).
Jeff Bezos, founder of Amazon identified the internal issue within the organisation
and has developed strategies and policies to deal with the issues so that the
organisational effectiveness can be ensured. The HR innovation within the Amazon
is considered as the most important innovation within the organisation. Bezos
introduced a Two Pizza Rule to manage the workforce of the organisation and to
introduce stability within the organisational culture. The two-pizza rule by Jeff Bezos
suggests that every team within the organisation should be small enough to be fed
by two pizza. The Hr innovation within the organisation helped the organisation to
develop cultural values and innovativeness within the organisation (Forbes, 2017).

INTERNATIONAL BUSINESS STRATEGY 8
Sustainability of the Competitive Advantage of Amazon
Amazon.com is among the world’s most innovative organisation and is focused on
providing its customer with better and quality services. Amazon has focused on
various developments within its internal and external operations to improve the
effectiveness of the organisation and to achieve a competitive advantage within the
industry (CB Insights, 2020).
VRIO Analysis
Resources Value Rarity Inimitabilit
y
Organisatio
n
Competitiv
e
Advantage
Market
Capitalizati
on
Amazon
market
capitalisati
on creates
value for
the
organisatio
n
The level
of
Amazon’s
market
capitalisati
on is rare
as it is
among the
most
valuable
business of
the world
The
imitability of
the market
capitalisatio
n is difficult
within the
industry.
The
capitalisatio
n of the
market by
Amazon is
done in an
organised
manner so
that it can
be managed
effectively
As the
market
capitalisatio
n of
Amazon
contributes
towards
value, is
rare, is
imitable
within the
industry
and is
organised
therefore it
contributes
towards
competitive
advantage
within the
industry.

INTERNATIONAL BUSINESS STRATEGY 9
Technology
Adaption
Technolog
y Adaption
adds value
to the
organisatio
n
developme
nt as it
promotes
customer
experience
and
improves
product
quality
Amazon
has
developed
research
centres to
develop
technologie
s that
enhance
the
products
and
services,
Technologi
es
developed
at Amazon
has a
unique-
features
and are not
imitable
The
technologica
l
advanceme
nts at
Amazon are
conducted in
an
organised
manner so
that the
customers
can be
provided
with a better
experience
Technology
Adaption at
Amazon
fulfils all the
requiremen
ts and adds
value to the
organisatio
n;
therefore, it
adds
towards a
competitive
advantage
for the
organisatio
n.
Human
Resource
Amazon
has an
effective
and trained
human
resource
that
contributes
towards
adding
value for
the
organisatio
n
The
effectivene
ss of
human
resource of
the
organisatio
n is
developed
by
providing
training
and
developme
nt
programs,
The human
resource
within the
organisation
is organised
and
managed
effectively
through
experienced
leaders and
managers of
the
organisation
The human
resource of
Amazon
can be
imitated
through
effective
training and
developme
nt, but still,
the
effectivene
ss of the
human
resource
contributes

INTERNATIONAL BUSINESS STRATEGY 10
therefore it
can be
considered
as rare
within the
industry
towards
value
addition;
therefore, it
can be
considered
as a
competitive
advantage
for the
organisatio
n
Value Chain Analysis
Value Chain Analysis is a strategic analysis tool that helps in analysing the firm’s
internal capabilities to evaluate which factor contributes to the development of the
organisational competitiveness within the industry (Gereffi, 2011).
The primary activities of Amazon include Inbound logistics, industry operations,
outbound logistics, sales and marketing activities and the services offered.
Inbound Logistics: Amazon has a highly integrated global supply chain through
which the customers can effectively shop for required products and services.
Amazon has established fulfilment centres through which the products and services
are being routed and delivered to the customers effectively and efficiently (Leblanc,
2019).
Industry Operations: It includes Amazon’s global websites, on which the customers
search for products and services, amazon web services that provide services such
as cloud storage facilities, computing, database and other services for enterprises,
start-ups, government enterprises (AWS, 2020).
Outbound Logistics: Amazon’s outbound logistics includes its co-sourced and
outsourced delivery arrangements, the online product and services that can be
downloaded directly from its website, the order handling and dispatch facilities.

INTERNATIONAL BUSINESS STRATEGY 11
Sales and Marketing: Amazon sales and marketing activities are focused on
providing the customers with quality products and services and as per their
requirements. Segmentation of the products, Amazon Prime, easy return services
and effective customer services (Amazon, 2020).
Services: Amazon web services, customer support, education and training, amazon
verified products and devices.
The Support activities include HR, Finance and legal activities, Technology and
Procurement.
HR, Finance and Legal: Amazon focuses on hiring talented people within the
organisation, taking steps to ensure sustainable cashflow and adopting measures to
mitigating risk within the organisation (Amazon, 2018).
Technology: Adoption of advanced technologies within the operations of the
business, fully optimised warehouses and distribution centres equipped with robotic
technology, delivery systems through drones and the introduction of devices such as
Alexa AI and Echo.
Procurement: Amazon procures its products from the vast number of integrated
suppliers.
Amazon has focused on the development of its competitive factors within the
industry, human resource management and the technological advancements by the
organisation effectively contribute towards a sustainable competitive advantage for
the organisation. Amazon invests in developing technologies that can promote
customer satisfaction within the industry and also the strategies and policies
developed by the organisation effectively manages the human resource of the
organisation. Therefore, such factors contribute towards the sustaining the
competitive advantage of the organisation.
Developing Strategic alternatives
Amazon is among the leaders within the e-commerce industry but still, there are key
areas where Amazon can improve its effectiveness and efficiency and can promote
business growth within the international market.