Strategic Analysis of Amazon: Comparing Strategic Perspectives

This report provides a comprehensive strategic analysis of Amazon, examining its business operations and market position. The report begins with an overview of Amazon, highlighting its evolution as a leading e-commerce platform and its global presence. It then delves into two key strategic m...Read More

Strategic
analysis

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK ..............................................................................................................................................1
1. Overview of Amazon.........................................................................................................1
2. Two perspectives in strategic management........................................................................2
2.1 Outside-in perspective in strategic management..............................................................2
2.2 Inside-out perspective of strategic management.............................................................6
3. Comparison and contrast of the two perspectives............................................................10
4. Contribution and limitation of the two perspectives........................................................10
4.1 Outside-in perspective ...................................................................................................10
4.2 Inside out perspective.....................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Strategic analysis is the procedure which includes the activities regarding research of
business environment where large number of organisation operates their functions along with
their own analysis. The two major aspects which helps in external and internal analysis includes
PESTLE and SWOT. It provides the opportunity regarding identification of path where they
faced least resistance in accomplishment of their goals. The main purpose behind all such
evaluation is build effective strategies and plans to bring changes in organisation which
contributes in attainment of competitive advantage and success in market. The main steps which
helps to make strong plans in organisation includes identification of mission and purpose, goals,
objectives, actual implementation and evaluation process. Strategy formulation includes
combination of three main processes which are known as situation analysis, self-evaluation and
competitor analysis. Amazon is e-commerce organisation which provides different types of
products and services through use of digital platform.
In the present report explain about porter five forces to analyse competition which is
present in market, Porter generic strategy to ascertain their internal strength to effectively use
their resources to accomplish objectives. Also, make comparison of both strategies to draw valid
conclusions in development core competence in functions.
TASK
1. Overview of Amazon
Amazon is an internet retailer which provides their functions in online shopping industry.
It was founded by Jeff Bezos in 1994. The main headquarter of organisation is in Seattle,
Washington, US. At present they covered all the areas of world where their business operations
are carried to effectively provide their different products and services. At first Amazon started
their business through providence of online books on their website which is known as
amazon.com. After the success in their business they start providing many other products such as
software's, electronic products, furniture, toys, food and jewellery. It is observed that in terms of
revenue and market capitalisation Amazon is biggest internet retailer in the word. But in terms of
sales it comes on second position after Alibaba Group. Amazon is also known as largest provider
of cloud infrastructure services. To conduct their business activities various retail websites are
designed for different nations includes United States, United Kingdom, Ireland, France, Canada,
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Germany, Italy, Spain, Australia etc. There are many big competitors of Amazon which provides
their functions in same industry. These competitors are known as Walmart, Alibaba Group etc. It
is analysed from the market that in 2015, Amazon surpassed Walmart and becomes the most
valuable retailer in United States in terms of market capitalisation. The total number of revenue
which is earned by organisation from diversified business offerings is around $177.86 billion in
2017. The total number of assets which are acquired by them in whole world till 2017 is around
$131.31 billion. The number of employees provides their effort in success of organisation till
2017 is around 566000.
The main aim of management of Amazon is to retain their position in market through
building effective strategies and plans which helps in improvement of their actual performance.
One of the basic aspect which provides the opportunity to attain sustainability in market is to
grab competitiveness in their operations. Performance these activities automatically helps in
growth and expansion activities of Amazon. This company is working on a coopetition based
business model where they are working with some of their competitors so the industry can grow
rapidly (Ritala, Golnam and Wegmann, 2014).
Strategic analysis is played an important role in the process of attaining competitive
advantage and success in market. It includes the activity regarding development of business
strategy after evaluation of the internal strength and external factors which are present in macro
business environment. Such type of analyse mainly used in the situation when the organisation
planning about bring changes in their structures and selection of the best method from large
number of alternative options which suited best to organisation in real scenario. This will
provides the opportunity regarding taking the advantages from such selected path where least of
challenges are arise while conducting business activities.
To analyse the competition which is present in business environment need to adopt the
model of porter's five forces. The different dimensions of this analyse different aspects of market
and provide the results regarding competition present in market.
2. Two perspectives in strategic management
2.1 Outside-in perspective in strategic management
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It is a model which plays supportive role in the process of formulating business strategies
which helps to attain competitive advantage in market. Through application of the provisions
provided by this model of management organisation able to understand about the different
competitive forces present in market to maximise their amount of return. It is simple and
powerful tool to ascertain the information about competitiveness of business environment and
determination of the profitability which is associated with potential strategies of company. This
level can be achieved by the organisation because it provides opportunity is to bring changes in
their plans according to the forces which are actually present in market. This will provides the
opportunity to the manager of Amazon is fairly take the advantage of their strong situations in
market or overcome from the weak situations. Jeff Bezos used outside-in strategy for coping up
with the challenges of rapidly changing business environment (Day, 2014). It improves their
decision making through which they can take more worthful decisions which helps in making
their future more secure. Through this analyse Amazon is able to ascertain strengths and
weaknesses to improve their long term profitability.
It also contributes their efforts in the process of keep watch over their competitors and
strategies adopt by them. It motivates the manager of Amazon is to look beyond the actions of
competitors and evaluate the factors which have significant impact upon business environment.
This can be understood from the analysis of five forces through which competitive environment
is build are defined below:
Competitive rivalry: First step of competitive analysis where number of competitors and
their strengths are identified which are performs their functions in same industry. Thee also
identified about the threat of the quality of their products and services over their own business
functions (Brandts, Riedl and Van Winden, 2009).
Amazon is already very big organisation in terms of profit and market capitalisation. But
still having many competitors in market which impacts their customer base. There are few
competitors which are big in size and nature includes Alibaba Group and Walmart. But having
several competitors in electronics and general merchandise sector includes Best Buy,
RadioShack, Sears, Big Lots, Delia, Family Dollars etc. These small organisation are severe
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threat for Amazon because they have good reach towards the customers through which they can
build effective relation with them which adversely effects the customer’s of Amazon. It is
observed that rivalry is high in online shopping industry. The only option through which
customers should attracted towards organisation is adoption of aggressive price cuts and
promotional campaigns. So, it contributes in influencing the behaviour of customers through
providing good deals to them in comparison to their competitors.
Supplier power: It is the process where power of supplier is determined regarding their
impact on the prices. Amazon in online organisation which takes the order from the customer
through of their websites and applications. But they are dependent upon their distributors which
prevails in different nations for the purpose of final delivery of their products. But the
availability of distributors is large in number at market which provides the alternative to the
management is to choose different distributors whenever they needed in difficult situation. So,
the process of switching from one supplier to another is not much expansive procedure and takes
least cost (Cox, 2011.). So, it is understood from the analysis that the power of suppliers in
market regarding influencing their pricing strategies is difficult in nature. It does not have much
impact upon their profitability.
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Illustration 1: Porter five force model

(Source:- Porter five force model, 2013)
Buyer power: This will includes the process of identification of the power of buyer
about their impact upon the pricing strategies and profitability of organisation. Here, also
includes about identification the number of buyers and size of their orders and what cost is
required to pay by the customers while switching from their products to such which are provided
by competitors. This analysis improves the understanding of manager about ascertaining the
position of buyers in respect of dictating the terms to organisation. In terms of sales, Amazon
comes on second number after Alibaba Group (Inderst and Wey, 2017). This will depicts that the
customer base of Amazon is large in all over the world. They get the big orders from the every
region of country which shows the power of buyer is low regarding influencing of their terms,
prices and profits of Amazon. Also, buyers is mandatory to pay the significant amount of cost
because Amazon is large organisation provides various discount offers which are not availed
while switching to local organisation. They also bears the consequences in regards to the low
quality of products also. It provides that the power of Amazon is higher regarding determination
of their own terms and pricing regulations to gather large number of profits.
Threat of substitution: It is the process where substitution of their products are
identified to analyse their impact upon their number of sales and profits. There are many other
rivals are operating their functions worldwide and provide same kind of products which are
delivers same kind of utility and features in comparison to Amazon. Due to having huge amount
of threat of substitution, it makes the position of Amazon weaken in market which has direct
impact upon their profitability as the customers have the option is to buy the products from
different online retailers (Xin and Pearce, 2016). To reduce such negative impact Amazon is
required to adopt effective approaches which provides the opportunity to attract more number of
customers through development of the unique features in their products which are not available
at any other place. This will also includes designing of innovative offers to cater their various
needs.
Threat of new entry: The position in market is largely affected by the threat of new
entrants in market. In this regard, required to analyse the conditions and regulation which needed
to follow for setting up their online business. In the present report, Amazon is internet retailer
which conducts business through use of digital platform. While assessing the threat of ewe
entrants aspects are required to evaluated such as cost required to get on digital platform,
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regulations apply on sector etc. It is evaluated that hue amount of investment is required because
it involves the implementation of advance technology to carry business activities through cloud
computing and digital technologies. Also, the conditions which are set by the government for the
purpose of regulation of the activities in this sector are tight and strict (Clemons, Croson, and
Weber, 2016).
This shows that threat of new entrants is low in nature which has positive impact upon
Amazon regarding retain same position in market and takes large number of advantages which
are associated with such functions.
2.2 Inside-out perspective of strategic management
The main purpose behind the adoption of this strategy is to satisfy the different needs and
preferences of customers which are located in different regions of countries. The demand among
the customers is changed according to locations and locality. Some of the customers wants that
products are available at affordable price and on other hand, some customers having the demands
of variety in products. This strategy is called generic because it applies on all the products and
services of any industry irrespective of their nature and size. The benefits which are derived
through application of the provisions of this strategy includes competitive advantage and creation
of superior performance. This strategy includes three different aspects where need to provide
more emphasis to attain competitiveness in operations which are known as Cost Leadership,
Differentiation and Focus.
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(Source:- MATRIX OF COMPETITIVE ADVANTAGE, 2018)
The aspect of Focus is further segmented into two types which are considered as Cost
focus and Differentiation focus. From the competitive analysis of Amazon is observed that they
have good position in market and few factors are present which impacts their place in industry.
The results interpreted from this analysis improves the understanding of management of
organisation regarding acceptance of strategy through higher results are gathered. All the three
different aspects of this strategy are assorted from each other and having different impact upon
the behaviour of customers and organisational success. All these different strategies are defined
below:
Cost leadership strategy: The main aim behind adoption of this strategy is to reduce the
costs of products and or provide discount offers which helps in development of the edge which
boost up their sales and takes it away from the competitors. It is one of the best method which
provides the possibility regarding reaching of agonistic advantage. The agonistic advantage can
be attained in two ways through adoption of cost leadership strategy are defined below:
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Illustration 2: MATRIX OF COMPETITIVE ADVANTAGE

 One of the method which helps in improvement of the number of profits includes
reduction in costs and charging of industry average prices. So, earning of higher number
of profits helps to take some kind of competitive advantage in market.
 Due to reduction in the amount of costs the profit margin which is attached with the sale
of each and every product is increased. This will have direct contribution in improving
the number of revenue. It creates the possibility regarding repulsion of more customers
which assist in rising their market share (Brenes, Montoya and Ciravegna, 2014).
This is one of the best strategy to adopt by Amazon in actual to win agonistic advantage
in market. There are many aspects which helps in successful implementation of this strategy
within the organisation. From the analysis of market position of Amazon observed that all such
important aspects are possessed by organisation which are mentioned below:
 Availability of the huge amount of funds with Amazon which allows them is to
effectively implement the advance technologies and techniques which contributes efforts
in the process of bringing down the costs through optimally utilise their resources and
removal of actions which leads wastages.
 The logistics and distribution system of Amazon is very strong. They have large number
of distributors which render the chance about effectively reach towards their customers. It
is analysed from supplier position of Amazon that switching from one to another is
become more cost efficient which not effects their potions in market if they bring in
changes in supplier. This will provides the flexibility to their structure.
 Also, observed that Amazon has low cost base due to having their operations at huge
level. The main intermediaries which are responsible for conducting business activities
includes labour, materials and facilities. All these aspects are easily available to them
which helps in cutting of costs below to their competitors.
The risk which is attached with the adoption of this strategy that it is not unique strategy
which is not copied by others. The competitors of Amazon are free to adopt this strategy and cuts
off their prices as per their choices. So, Amazon is need to find out the innovative ways of
reducing costs not only which directly related to product. One of the basic techniques which
helps to do this task effectively is continuous improvement.
The Differentiation Strategy: The basic rule as per this strategy is formation of their
goods and services different from their competitors in all respects such as design, features,
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Functions, durability, support and brand image that valued by customers. There is huge
importance of this strategy in making their optimum position in market through satisfaction of
the various needs of customers from one single platform. This will saves the time and cost of
customer to go on market to local shops and find different products. All the nature of products
are available on Amazon which includes Furniture, electronics, books, toys and Jewellery etc.
Amazon provides common platform from where products are selected by the customer as per
their own choice.
This strategy is almost achieved by Amazon as they covers every product. This will
shows that Amazon has all the necessary aspects which are needed in the process of
implementing this strategy. These are defined below:
 Amazon has good research and development team which identifies the preferences of
customers in appropriate manner to provide products as per demand.
 Amazon is also having the good ability about delivering the high quality products and
services.
 Having appropriate sales and marketing team which disburse the importance of their
different offerings in market.
While adopting this strategy need to make innovations in products and offerings in
development of effective processes.
The Focus strategy: While using this strategy by organisation they are need to provide
emphasis on particular market. This will includes the process about understanding of unique
needs of customer’s and provide their functions as according to such nature. It provides the
opportunity regarding serving the specific needs of individuals of particular community through
which they can build their effective brand position in market. It makes the particular segment of
market less entrancing for challengers (Parnell, 2013).
It can be further classified into two types which are known as cost focus and
differentiation focus. This can be approached after selection of one strategy. The focus helps to
serve into particular segment of society to make it more attractive for the purpose of earning
more profits from such place.
From the analysis of all of the above three strategies, assessed that one of the best
strategy which helps to get the competitive advantage in market includes adoption of cost
leadership strategy because the aspect of differentiation is already achieve by them. All the
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necessary aspects are have by Amazon which aids to get the maximum results after
implementation of this strategy.
3. Comparison and contrast of the two perspectives
The two perspectives which are used in the report for effective strategic analysis are
known as outside-in and inside-out. The strategies which are used in this regard includes porters
five forces and porters generic strategies. Both the strategies are different from each other.
Strategy of porters five forces having outside perspective which helps indetermination of the
competitiveness of market and the forces which reduces the power of organisation in respect of
taking competitive advantages in market. On the other hand, strategy of porters generic strategy
helps in determination of approaches after analysis of the internal strength and weakness of
organisation which aids in achievement of competitive advantage.
It is observed from the analysis of porters five forces that Amazon has good position in
market and having competitiveness in their operations. Amazon is already deals in diversified
products which can be purchase by the customers from the use of online platform. The
information of this analysis is used in the process of evaluation of porters generic strategy and
provides about that approach of cost leadership is best which helps in achievement of
competitive advantage in market.
4. Contribution and limitation of the two perspectives
4.1 Outside-in perspective
The perspective which is used in outside-in strategy includes porters five forces. It is
important approach which helps to determine the competitiveness of market. The contribution
and limitation which is associated with this approach are defined below:
Contribution
 It helps in determination of the number of competitors which are actually present within
the market along with their size. In terms of competition, e-commerce industry is highly
competitive.
 The power of buyer is also determined to ascertain their impact on the pricing policies of
Amazon. But due to having large customer base Amazon has large power in comparison
to buyers.
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 It also helps in assessment of threat of entrants in market. The regulations of government
are moderate which allows many medium sized organisations is to enter into e-commerce
industry.
Limitations
 One of the major limitation which is associated with this model that not taking in account
strategic alliance and value chain aspects of organisation.
 It only helps in analysis of the simple market structures
 Ignorance of inside out strategies
4.2 Inside out perspective
The strategy which is used in this regard is porter generic strategy. It helps in assessment
of internal strength of organisation and application of most appropriate approach which aids in
process of taking competitive advantage. The contribution and limitation of this strategy is
defined below:
Contribution
 Helps to attain competitive advantage through application of best strategy which suits
more to the internal strength of organisation
 This will provides the opportunity to Amazon become leader of market through
satisfaction of the needs of customers
Limitation
 The competitors have the option regarding adoption of such approaches which helps to
beat them in market to becoming low cost leaders
 Requirement of lot of sources in the process of development of core competencies in their
processes
CONCLUSION
It has been concluded from the above report that Amazon is big organisation at digital
platform which is continuously grow with effective rate. Some the challenges which impacts
their profitability and sales figures includes competitors and threat of substitution. Strategic
analysis is the important aspect which includes planning actions after analysing conditions of
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market and internal strength of organisation. Cost leadership is effective strategy which
contributes their effort is achievement of competitive advantage and higher position in market.
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REFERENCES
Books and Journals
Ritala, P., Golnam, A. and Wegmann, A., 2014. Coopetition-based business models: The case of
Amazon. com. Industrial Marketing Management. 43(2). pp.236-249.
Day, G.S., 2014. An outside-in approach to resource-based theories. Journal of the Academy of
Marketing Science. 42(1). pp.27-28.
Brandts, J., Riedl, A. and Van Winden, F., 2009. Competitive rivalry, social disposition, and
subjective well-being: An experiment. Journal of Public Economics. 93(11-12). pp.1158-1167.
Cox, A., 2011. Understanding buyer and supplier power: a framework for procurement and
supply competence. Journal of Supply Chain Management. 37(1). pp.8-15.
Inderst, R. and Wey, C., 2017. Buyer power and supplier incentives. European Economic
Review. 51(3). pp.647-667.
Xin, K.K. and Pearce, J.L., 2016. Guanxi: Connections as substitutes for formal institutional
support. Academy of management journal. 39(6). pp.1641-1658.
Clemons, E.K., Croson, D.C. and Weber, B.W., 2016. Market dominance as a precursor of a
firm’s failure: emerging technologies and the competitive advantage of new entrants. Journal of
Management Information Systems. 13(2). pp.59-75.
Brenes, E.R., Montoya, D. and Ciravegna, L., 2014. Differentiation strategies in emerging
markets: The case of Latin American agribusinesses. Journal of Business Research. 67(5).
pp.847-855.
Parnell, J.A., 2013. Uncertainty, generic strategy, strategic clarity, and performance of retail
SMEs in Peru, Argentina, and the United States. Journal of Small Business Management. 51(2).
pp.215-234.
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