Management Creativity and Innovation: Amazon's Strategic Analysis

Verified

Added on  2023/04/10

|19
|4733
|229
Report
AI Summary
This report provides a comprehensive analysis of Amazon's strategic innovation, examining the relationship between creativity and innovation within the company. It explores different categories and types of innovation, identifying Amazon's adoption of incremental innovation in its product offerings such as Alexa. The report critically evaluates Amazon's innovative strategy through SWOT and STEEPLE analyses, assessing its appropriateness and informing the evaluation with a theoretical model of creativity. It delves into Amazon's hybrid business model and highlights the importance of fostering creativity in the workplace. The report also discusses the complexities of implementing creativity and innovation and offers recommendations for enhancing these processes. The analysis covers various aspects of Amazon's operations, including product innovation, technology innovation, and business model innovation, alongside its strengths, weaknesses, opportunities, and threats. The report aims to provide insights into Amazon's strategic decisions and its approach to maintaining a competitive edge in the e-commerce market.
Document Page
Running Head: MANAGEMENT 0
CREATIVITY AND INNOVATION
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
MANAGEMENT 1
Table of Contents
1 Introduction.............................................................................................................................2
2 Explain relationship between creativity and innovation.........................................................2
3 Explain different categories and types of innovation and identify the category and type of
innovation adopted by Amazon.................................................................................................3
3.1 Types of innovation –.......................................................................................................4
3.2 Categories of Innovation –...............................................................................................4
4 Critically evaluate Amazon’s choice of innovative strategy. This.........................................5
Evaluation should be informed by a SWOT and STEEPLE analysis, as...................................5
Well as a theoretical model of creativity, to assess its appropriateness.....................................5
4.1 SWOT analysis of Amazon –...........................................................................................5
4.2 STEEPLE analysis of the company -...............................................................................6
5. Creative strategy process and Creative Strategy by Amazon................................................8
6. Complexities of implementing creativity and innovation....................................................11
7. Importance of fostering creativity within the workplace.....................................................12
8. Recommendations................................................................................................................13
9. References............................................................................................................................15
Document Page
MANAGEMENT 2
1 Introduction
Innovation and creativity are like two sides of the same coin. Often both the terms are used
synonymously, though there are some indispensable differences. Today’s business
environment is highly challenging and demanding due to higher level of expectations of
consumers from the firms and service providers. In addition, the technological advancement
and expansion globally offer various opportunities to the consumers in respect to superior
products and services (Zott, Amit and Massa, 2011). A business needs to adopt innovative
approach, as it is the golden keys for the success of organisation. Al this brings out the
significance of creativity and innovation to the business firms as with this opportunity,
business firms can effectively develop differentiation and also establish a unique competitive
edge over rivals (Giannopoulou, Gryszkiewicz and Barlatier, 2014).
The specific organisation that has been selected in performing analysis for the significance of
innovation and creativity is Amazon Corporation which is an e-commerce giant over the
globe. This analysis critically evaluates Amazon strategy towards creativity and significance
of fostering innovation and creativity in the workplace. Jeff Bezos founded the company back
in 1994 in Washington DC. The company had sold its first book in 1995 and in 1997,
Amazon opened its doors to investors while announcing its first IPO with raising $54 million.
The Amazon did not show any profit until 2001 however the sales were boosted even though
it started as mainly focused on selling books, later it was diversified into many product and
service portfolios. The company had a much-focused strategy emphasizing on creating value
for the customer. The company became the world largest online retailer with its strategic
decision of acquiring potential start up with freeing up the respective way. Currently,
Amazon Website Service (AWS), Prime and Marketplace are considered to be its bigger
pillar of sustainability and revenue.
2 Explain relationship between creativity and
innovation
There are always some misconceptions that stand in while defining the relationship between
creativity and innovation. Many individuals believe one needs to be creative in order to
deliver innovative products and service.
Document Page
MANAGEMENT 3
Therefore, firstly, it is required to acknowledge that creativity and innovation are not
synonymous. In this innovation-driven marketplace, business leaders need to understand the
distinction before attempting to offer an innovative imitative (Ahlstrom, 2010). But even
before considering the distinction, it is worth defining both the term.
Jobs that exist today did not exist 10 years ago. Due to advancement in technology, it is
necessary for business enterprise to utilise various practices of innovation and creativity as,
without it, they may lack imagination to accomplish their vision for a future (Cabrita,
Machado and Cabrita, 2013).
Creativity is more widely defined as the mental ability to visualise unique and new ideas or to
identify the association amid seemingly unrelated or random things. Creativity can be a form
of expression or a technique to solve any problem. Allowing employees to be more creative
can inspire them to bring out more inspiring ideas as well as enhance their overall output
(Micieta, Gaso and Krajcovic, 2014). On the other hand, innovation signifies as a procedure
that changes creative and unique ideas into new realities in form of products, processes, or
services. In today contemporary world, such transformation can be proved to be as
incremental, radical and evolutionary considering their impact on various developments.
However, it is just simply a reaction to data and can simply learned by repetition and
sequence, not by intuition (Parveen, Senin and Umar, 2015). Every individual in this world
can generate an idea and innovating their idea into practice as it means everyone can
contribute their ideas into the process of learning and brainstorming so to add value towards
the innovation. (Kristensson, Matthing and Johansson, 2008)
In addition, exploiting both innovation and creativity in business can boost performance and
the bottom line, however, it involves lots of different strategies in the way to adapt working
environment. There is no guaranteed source of success, however, today's contemporary
business enterprises surely need to employ seeds of creativity and innovation into their
culture.
3 Explain different categories and types of innovation
and identify the category and type of innovation
adopted by Amazon.
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
MANAGEMENT 4
The term innovation is very versatile and is frequently inflated. Below, five types of
innovation are outlined –
3.1 Types of innovation –
Product Innovation – In product innovation, both material products and its related
intangible services are considered in provision of value to the user. It especially
concerns the product functionality rather than technology. (Baregheh, Rowley and
Sambrook, 2009).
Technology innovation – It is mostly used in place of “product innovation”,
however, both are different. This innovation renovates the enabling techniques and is
not particular to an application or product.
Process innovation –These may include production processes or IT technologies for
applications, quality enhancements and cost savings (Todtling, Lehner and Kaufmann,
2009).
Business model – It includes a firm innovative strategy, operating resource, types of
customer relationships, value creation, supply chain, pricing and cost structures. All
these elements are transformed and create a new value to current consumers or to
whole new customer base (Zhou and Wu, 2010).
Service innovation – Service innovation transforms how what and when service is
rendered, and who is being offered to (Lee et al, 2010). It improves a present value or
develops an entirely new value that was not possible below.
3.2 Categories of Innovation –
The next thing is the category of innovation. The three categories of innovation are –
Disruptive innovations – It signifies innovation that shapes a new market and is
mostly generated in the low-end segment (Norman and Verganti, 2014).
Incremental innovations –. It exploits the existing technology and thus raises value
to the consumer (with more feature and design) within the existing markets (Latzer,
2009).
Document Page
MANAGEMENT 5
Radical innovations - It includes a new product or procedures and includes change
and innovation. However, there is a greater impact as considering new markets, it can
be created as a result.
Amazon is known to be as world most innovative company of 2017. The main classification
will be based according to the object of innovation and the degree of innovation. The
innovation is made by Amazon across the customer experience; its products and processes. In
terms of product innovation, Amazon disrupts the market with its product Alexa, a voice-
responding virtual assistant released 5 years back in 2014. The latest price of these products
is around $129.99 (Faulkner, 2018). The company is doing incremental innovation by
utilising existing technology and creates value for the customer.
4 Critically evaluate Amazon’s choice of innovative
strategy. This
Evaluation should be informed by a SWOT and STEEPLE
analysis, as
Well as a theoretical model of creativity, to assess its
appropriateness
Amazon business model is using a Hybrid Business Strategy where their strategies depend
upon the particular business sector in which they are operating (Teece, 2010). Amazon, along
with keeping the cost low for the customers is providing quality products with the help of
good services. The success of Amazon can also be termed as its diversification that helps the
company in earning desired revenue.
4.1 SWOT analysis of Amazon –
Strengths Amazon established strong goodwill globally due to its superior
customer service as well as long lasting product portfolio. In terms of product
diversification, the company penetrate almost all segments of markets with their
different sorts of products considering technology, grocery, book store and many
more. Amazon also has a strong logistics system which helps their third-party sellers
drastically improving their ability to serve customers and deliver goods. The company
Document Page
MANAGEMENT 6
innovation and creativity are also boosted by its huge capital investment in R&D as
last year the company spent nearly $23 billion on R&D.
Weakness – Amazon already hit $1 trillion in market value, however, their profit
margin is still low. Company have to face huge cost on delivery and with
improvement in gross margins, its operating expense also raised. Amazon also let its
network be flooded by the sellers of Chinese and that is considered to be the major
setback by the brand.
Opportunities – One of the biggest opportunity for Amazon is to expand via physical
stores to grow its reach. This will also help the company to further grow its sales as
with varieties of products available offline, Amazon stores can be a major attraction
for the customers. Extending the market into emerging countries like India will also
be proved beneficial for Amazon in respect of economy of scale.
Threats – One of the biggest threat to Amazon success is the rising concern over
online shopping as of hacking and identity theft. In November 2018, Amazon has
already been agonised with a major data breach that causes names of customers and
email address to be revealed on its website just two days ahead of Black Friday.
Hence, the company need to ensure the tight privacy and security.
4.2 STEEPLE analysis of the company -
Marketers use this framework to analyse and evaluate the impact of external environmental
factors on an organisation. It is presented below,
Political - Due to different political environment in various nations, it increases
problems to do business in respective markets. Similarly, in several markets, local
restrictions may be favour to domestic players and thus create business difficulty for
global organisation like Amazon.
Economical - In emerging markets, there is strong GDP growth and this impact
highly on success of Amazon. In comparison with last 10 years considering the
emerging markets, real GDP growth has been noticeably faster than in developed
marketplaces considering annual growth of 4.2% nearly four times the 1.1% recorded
in the developed country. However, real earnings per share growth have been very
similar (Mee, 2017).
Social - There is a shift in the retail and e-commerce landscape, which brings various
opportunities for Amazon to expand its operations. With the help of Social
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
MANAGEMENT 7
networking sites like Facebook and Twitter, E-commerce business can easily expand
their business using various strategies. It is noted that brand that engages with
customers with the help of social media gain 20 – 40 % more revenue per customer
in relation to organisations that do not (Wertz, 2018). Aligning digital marketing
strategies with their marketing plan can help them in their growth from all sorts of
perspective in
Technological – The retail channels is being transformed with Big data analytics.
Retail data analytics help enterprise to stay up-to-date in respect with many trends in
shopping with application of consumer analytics to interpret, uncover and act on
significant data insights storing online shoppers and in-store patterns. This provide
various opportunities to Amazon as the company is capable to invest in technological
advancement so as to move with the trends.
Legal - There are certain legal challenges and regulations that need to be taken into
account effectively by Amazon. For instance, European Union regulators examine
Amazon over antitrust settlements in extent with deals of books and its tax provisions
with Luxembourg. In 2018, Amazon's pre-tax profits more than tripled last year to an
extraordinary $11.2bn however the enterprise has paid not a single cent in US federal
taxes. As per ITEP, the whole organisation has been explicitly constructed so they
were not require to pay any sort of tax. Adoption of various vague by Amazon such
as “'tax credits' as well as a tax break for executive stock options. It is not about
Amazon as all other tech giants like Netflix have gone to exceptional lengths to avoid
paying tax, causing European legislators in specific to build up new regulations that
would bring end to these tax loopholes (AFP, 2019).
Environmental - Amazon needs to fulfil sustainability standards as the company
before already faced such issue of transparency. Amazon repels pressure to
contribute to carbon footprint disclosure plan. To prevent this threat in relation with
company success, the company pledge in 2019 that half of its shipments would be
“net zero” – also called as carbon-neutral – by 2030 (Chasan, 2019).
Ethical - The Company is required to follow adequate ethical practices relating to
customer expectations, government taxes, employees commitments, etc. For
instance, Amazon is paying an average median pay of $28,446 which is low in
relation to other tech giants such as Google or Facebook. This indicate that the
company has lot of warehouse-type jobs and lower wage, that have higher turnover
rates much higher paying tech roles (Mautz, 2018).
Document Page
MANAGEMENT 8
Evaluating creative work has been a bugaboo for a good long time. There are various
theoretical models that help in evaluating creativity. One such model is The Guilford Model
that measure how creative a person is (Nusbaum and Silvia, 2011). Here is an outline of these
procedures:
Fluency: how many responses
Flexibility: how many types of responses
Originality: the unusualness of the responses
Elaboration: the detail of the responses
Taxonomy of Creative Design model is used to measure how creative work is. The
Requirements model is a way to measure creative work with a program. In similar way,
Csikszentmihalyi System Model is used to measure creative work’s social value (Lin and
Cho, 2011). These four models propose four ways to evaluate creativity or creative strategy.
Creativity’s bottom line: How winning companies turn creativity into business value
and growth
Source: (Brodherson, 2017)
Document Page
MANAGEMENT 9
Below these are the financial metrics on which creative leaders outperform their peers -
Creativity Score (ACS), an index based on the prestigious Cannes Lions awards given yearly
for marketing excellence.
67 per cent had above-average organic revenue growth.
70 per cent had above-average total return to shareholders (TRS).
74 per cent had above-average net enterprise value or NEV/forward EBITDA2.
5. Creative strategy process and Creative Strategy by
Amazon
Marketing communication message is considered a significant component of an integrated
marketing communication programme (Keller, 2009). Creative strategy helps in determining,
what the marketing communication message is required to communicate and necessary
creative tactics that have to be implemented or executed (Berthon et al, 2012). There are four
phases in the process of strategy includes (Hotho and Champion, 2011) –
Planning a creative strategy – It required in-depth research and evaluation of target
audience in extent with communication media to build advertising message to address
the target audience. As per the business objectives of the advertiser, it considers
various decision-making in relation to product positioning, advertising appeals, type
of media and so on (Couldry and Turow, 2014).
Development of creative strategy – Unique-selling propositions is framed for the
advertiser products based on the input received from the planning stage. At this point,
a detailed and systematic analysis is conducted in extent with consumer approaches,
market conditions and creative tactics. It also comprises building of financial as well
as creative strategy for the advertising campaign.
Executions of creative strategy – In this phase, all significant efforts are taken out
by marketing team to execute the strategy planned before.
Evaluation of creative strategy – With the help of post-testing methods, this stage
evaluates effectiveness of the executed strategy. Post evaluation is also made to
identify advertising campaign effectiveness and net return on investment (Ashley and
Tuten, 2015).
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
MANAGEMENT 10
Amazon creative strategy in advertisement entices shoppers to visit their product detail page,
but the product detail page is what will ultimately turn those shoppers into customers. The
company is using various tactics in form of creative strategies such as Amazon Sponsored
Ads, Amazon native Ads and Amazon video Ads. With the help of Sponsored Products Ads,
one can identify keywords having low conversation rates and thus flag them negatively.
Source: (AmazonAssociates, 2018)
On the other hand, Amazon is also offering native advertisement that can be placed on brand
own website. It includes three sorts of Ads – search ads, recommendation ads and custom
ads.
Source: (Agrawal, 2018)
Document Page
MANAGEMENT 11
In the same way, Amazon video ads placed on Amazon-owned sites like Amazon.com and
IMDB and across various properties on the web.
Source: (Wholsen, 2012)
6. Complexities of implementing creativity and
innovation
The modern business world is highly creative and competitive and there are some challenges
also in order to implement a pragmatic system of creativity and innovation into the
organisation culture. Many organisation faces internal complexities, which hinders the
progress of innovation. One of the major challenges that are faced by management while
implementing creativity and innovation is associated with the employee where employees are
not empowered to innovate (Zhu and Engels, 2014). Sometimes management feels that
innovation will distract employees from their day-to-day roles. It is necessary to support
internal innovation with the help of leadership and managerial roles.
One of the barriers in implementation of innovation may be lack of funding as not every time
management is committed to funding ideas at beginning of innovation project. They are more
chevron_up_icon
1 out of 19
circle_padding
hide_on_mobile
zoom_out_icon
[object Object]