Strategic Management and Information Systems: A Case Study of Amazon

This report provides a detailed analysis of Amazon's strategic management and the importance of its information systems. It begins with an overview of the e-commerce industry and Amazon's position within it, examining the company's value chain and value system. The report then assesses Amazon's strategic position, emphasizing the significance of information systems in maintaining its competitive advantage. Porter's Five Forces analysis is applied to understand the competitive landscape, followed by a PESTLE analysis to explore the political, economic, social, technological, legal, and environmental factors impacting Amazon. A SWOT analysis summarizes Amazon's strengths, weaknesses, opportunities, and threats. The report concludes by highlighting key factors contributing to Amazon's success and areas for potential improvement.

Running Head: MANAGEMENT 0
STRATEGIC MANAGEMENT
AND INFORMATION
SYSTEMS

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Table of Contents
PART A......................................................................................................................................2
Introduction............................................................................................................................2
Outline of E-commerce Industry............................................................................................2
Value chain and value system of Amazon.............................................................................2
Strategic Position of Amazon and Importance of information systems.................................3
Porter five forces analysis of Amazon...................................................................................4
PART B......................................................................................................................................5
PESTLE analysis of Amazon.................................................................................................5
SWOT analysis of Amazon....................................................................................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9
Appendices...............................................................................................................................11

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PART A
Introduction
Amazon is one of the prominent e-commerce corporation founded by Jeff Bezos in 1994.
Considering its e-commerce platform, Amazon has expanded its roots into several product
lines including some of their private labels products. For instance, their AWS cloud server is
one of the most used cloud computing platform and technology widely used by many big
organisation such as Netflix, NASA, Nokia and Adobe (Hern, 2017). Amazon has been
expanded to around 13 countries around the globe including emerging nations like INDIA
and with Amazon international shipping, most items can be shipped to over 100 nations
outside the U.S. The company had earned a total net sales of nearly 72.38 billion U.S. dollars
in the quarter 3 of 2018 (statista.com, 2018).
Outline of E-commerce Industry
History of e-commerce was begun on August 11, 1994, signifies buying and selling of goods
and services with the help of Web and network (Hernandez, Jimenez and Martin, 2010).
Hence, when a man sold a CD relating to band sting to his friend using website, an American
retail stand, consumption of e-commerce aspects grown significantly inclusive of various
retailers doing transactions in a global marketplace. It helps all sorts of sellers and retailer
including independent retailer, large scale and mid-scales firms, local shops, etc.
In this modern century, there is a drastic change take place in e-commerce and its channels
which helps customers to buy the products in a more realistic way with using of live chat,
voice assistance and chatbots.
Value chain and value system of Amazon
The applications of value chain are introduced by Michael Porter that include several phases
for process of transformation with inputs and outputs to a part of unique points (Etgar, 2008).
It helps in identifying various conventional activities help Amazon to attain competitive
advantage in the industry. The value chain of Amazon is divided into various activities
including primary and supporting such as inbound logistics, firm infrastructure, operations,
human resource management, etc. Their value chain effectively met the changing needs of
customer market including change in buying behaviour. In addition, their advancement in

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technology such as AI, dash button, prime air and many more fuelled the business success in
the entire industry (Sutija, 2018). Their value chain has gain efficiency in all the aspects such
as marketing and sales, operations, procurements, logistics and helps them in attaining
competitive advantage.
Moving to its value system, it extends beyond the boundaries of an enterprise. A value
system of Amazon includes their business supplier, firm itself, its distribution channels and
their business buyers (Kocher, 2017). There are both upstream and downstream elements as
per the profit pools in the market economy. All aspects of their value system are impacted by
competitive forces and industry structure.
Strategic Position of Amazon and Importance of information systems
Amazon has sustained its competitive advantage based on overall cost leadership strategy. In
addition, development of their information technology also drives the company towards
success including synergies between internal resources and external drivers. The company
cost leadership strategy is based on unified customer experience and help them to get to the
next level in customer satisfaction. Their main objective is to provide maximum value to the
customers at lower prices and enable customers to search for Amazon, shop with its portal
and fulfil the needs of online shopping.
Amazon incomes are derived incomes from is constant innovation and adaption of various
dynamic market elements and aspects (Trefis, 2018). The company was initiated in 1994 as
online bookseller however, expanded to various areas such as cloud computing, home device
manufacturers, movie studio and many more. The company majorly focused on customers’
needs and expectations and also focused on growth instead of profits. The company derived
its income from various domains such as AWS, retail third-party sellers, Amazon prime and
several retail subscriptions, retail products (majorly), and others (including ad services, co-
branding agreements, etc.). On the other hand, their major cost incurred on their shipping,
promotions and advertisements, employees training and recruitment, AWS management and
infrastructure. For instance, Amazon shipping costs amounted to 27.7 billion U.S. dollars in
the year 2018 (statista.com, 2018). Moreover, they also spend around 8.2 billion U.S. dollars
in the previous year.

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As a potential investor, I would like to measure the performance of the company with some
of significant metrics such as delivery reliability, inventory turnover, customer surveys and
using approaches like balance scorecard (Bonney and Jaber, 2011). For instance, delivery
reliability is the perfect order fulfilment that will help to evaluate the processes in place and
make adjustments as seen. Moreover, with using a balanced scorecard approach, the
performance and strategy can be evaluated from multiple dimensions including financial,
customers, process and learning and growth.
Management information system of Amazon aids business firms and its system to integrate in
an effective and efficient manner to carry out synergy between the information system and
interactions of the people. The major information system of Amazon constitutes as Amazon
web services (AWS) by which Amazon maintains its vast number of products and millions of
active consumers. The Amazon global information system is reliable, scalable and robust that
develops global domination by allowing the company to extend its market place into a broad
section from a single product (Jackson et al, 2011).
Porter five forces analysis of Amazon
Porter model of Amazon signifying five competitive forces that shape the e-commerce
industry. These include -
 Competitive Rivalry – There is an intense competition in an e-commerce industry
due to the rising numbers of online players in these recent years (Assuncao et al,
2015). Some of the major rivals of Amazon in this industry are Wal-Mart, Alibaba, e-
bay and Flipkart. Along with this, the company is also getting opposition from small
scale brands and retailers. This force Amazon to promote more research in their
development centres to sustain competitive advantage in the industry.
 Threat of New Entrants – Threat of new entrant is low in case of Amazon as the
company already have touched the level of success in relating to financial
management, brand recognition and service differentiation. The company also spent
around $23 billion in the last year on R&D (Molla, 2018) and for any scale
organisation, it is difficult to touch the level of Amazon or be its competitor as it
needs of much capital, effort and time.

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 Bargaining power of Suppliers – Amazon consists of 2 million global sellers and
thus switching cost of supplier is also negligible for Amazon. Moreover, the company
brand goodwill helps them to take over total control on its supply chain as many of
suppliers seeks Amazon as a major proportion of revenue and thus they need to accept
all the policies and rules incorporate by the company.
 Bargaining power of Buyers – There is a high bargaining power of buyers in spite of
Amazon is focusing highly on customer satisfaction and quality products. The reason
is the rising awareness among customers about all latest trends in shopping and retail.
Hence, Amazon needs to be high in terms of innovation, and also use all sorts of
aspects of social media to retain and attract new customers.
 Threat of substitutes – In case of Amazon and other retail channels, the threat of
substitute is high as consumers can buy the products from well-known stores and
websites. Moreover, some buyers still prefer traditional way of shopping i.e. from
local shops, offline retailers and physical bookstores.
PART B
PESTLE analysis of Amazon
In every business environment, there are certain aspects that include both opportunities and
threats having significant impact over the growth and success of an organisation. For
explicitly analyse these aspects, management and organisation use PESTLE tool that helps
them in identifying those aspects with from six dimensions (Hanisch and Wald, 2011).
In case of Amazon, there are many certain factors in their business environment that impact
directly or indirectly on the decision making of management, their practices, policies and
products. These are outlined below using of PESTLE framework –
 Political factors – Stability in political environment always help the business to
diversify in the international markets. Though, there are several political aspects that
might impact Amazon considering their growth and development. Some of them
involve, tightening of data regulations, political red tape and EU accusing of
disposable income, etc. In addition, due to tightening regulations over online data,

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Amazon had to sell its various clouds assets in China. Moreover, the company is also
on target by EU for disputable causes. Therefore, it is necessary for Amazon to
undertake all these aspects before moving their feet to new and emerging
marketplace.
 Economic Factors – The success of any company is highly depending on the stability
in economic environment. Similarly, Amazon can have various opportunities when
the economy presents more disposable income to population and offer benefits to
online retailers. This stimulates larger population to spend more on luxurious items. In
2017, the growth of E-retail was seen as massive increase with 21% and in future,
more growth is proposed from the side of various online retailers (Hilmola and Tolli,
2018). One of the major economic threat, the company might face from Wal-Mart in
future as Walmart is moving towards enhancement of their online system and
presence for selling the products online. This causes Amazon to undertake all
particular economic environment to retain and grab more market share.
 Social Factors – In this contemporary world, social and cultural aspects plays a major
role in the success of any enterprise. There is a rise in internet usage and online
shopping trends, however, it totally not become part of many cultures. Many people
do not seek online retailers and channels for buying any products due to several
reasons such as safety, uncertainty and habits (Maia et al, 2018). For instance, people
in India tend to go for offline retailers and local shops for buying grocery products,
clothing and electronic items. As per their belief, they like to purchase products by
seeing with their eyes including hand touch. This requires Amazon to focus more on
individual needs and various cultural aspects so as to build deeper connection with the
consumers.
 Technological factors – In this dynamic business environment, technology is an
important aspect that helps organisation to sustain competitive advantage in every
industry. Over the globe, Amazon is considered to be one of the most innovative and
tech enterprise. In terms of technological development in online retail sector, big data
analysis and cloud computing constitute a major trend having various applications
help in customer and their needs analysis. Therefore, Amazon needs to cover
themselves with all these insights in order to be equipped with latest technology and
expertise.
 Legal factors – As Amazon is operating in many markets and countries, there is
various legal compliance that is important for Amazon to undertake. There are several

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legal challenges enforcing by government at multinational level. For example,
European Union regulators evaluate Amazon against antitrust settlements in relation
to selling of books and its tax provisions with Luxembourg (Zell, 2014). Moreover,
GDPR (General Data Protection Regulation) also impact their cloud platform i.e.
AWS with approval with European Commissions in 2016. Hence, it increases the cost
of the company and thus Amazon tweaked its cloud service infrastructure for support
of customers. This shows that laws and legislation can be a major pressure for any
corporation functioning internationally.
 Environmental factors – In this competitive business scenario, it is necessary for
every organisation to follow certain standards in relation to sustainability and
environmental practices. These include consumption of energy, reduction of waste
and packaging practices. In earlier times, Amazon already faced issues related to lack
of transparency and data linked to climate change management. Hence, the
organisation attitude to carbon disclosure reflects from the business model of
Amazon.
SWOT analysis of Amazon
SWOT analysis helps in attaining goals of organisation with exploring of both external and
internal aspects influence the decisions making considering the growth of business (Steptoe-
Warren, Howat and Hume, 2011). Below is the SWOT analysis of Amazon –
 Strength – The strength of Amazon lies in its approach and strategy of overall cost
leadership, customer-centric, delivery network and GLOCAL tactic which stands outs
for “Go global & act locally”. The company possess a string brand offering huge
selection of products. Their business model is also based on low-cost approach and
their initiatives towards customer-centric. The company is also leveraging IT
applications and e-commerce with full potential and thus gain first mover advantage
in the industry.
 Weakness – Amazon weaknesses can be seen in their dwindling strategic advantages
in relation to their core competencies. The company also saw not able to effectively
deal with Chinese counterfeit products. Moreover, many research believes that the
business model of Amazon is weakened against the Chinese commerce giant i.e.
Alibaba as they not directly sell goods to the customers. The company also have a

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history of various biggest flops and failures such as fire phone, Amazon local,
Destinations, Amazon Wallet, music importer and Amazon Askville.
 Opportunities – Some of the major opportunities in case of Amazon includes In-
house brands in various products categories. Moreover, Amazon has not emerged and
expands into many emerging nations and thus this provides opportunity for Amazon
considering global expansion. The company can also invest in grocery and pharmacy
sector with rolling out its own payment gateway. In addition, they can also invest in
brick and mortar stores.
 Threats – There are low entry barriers in the e-commerce sector and thus Amazon
can get tough competition from other players. As Amazon operates in many
international countries, the company may face threat relating to scalability and data
security. Various lawsuits by rivals also impact Amazon business operations in a
particular market.
Conclusion
Amazon is an organisation that has grown exponentially from its beginning with eBookstore.
In addition, the success of Amazon gets boosted with internet and the company innovation
tactics. Some biggest competitors of Amazon includes Wal-Mart and Alibaba having key
influence on Amazon business environment from various perspectives. Overall, the company
has developed into one of the most significant and successful business organisation in the
world today.
As the first-mover in the e-commerce business, Amazon was able to get a head start and
effective online buying offers a convenient platform to the customers backed with security
and reliability.

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References
Assunçao, M.D., Calheiros, R.N., Bianchi, S., Netto, M.A. and Buyya, R. (2015) Big Data
computing and clouds: Trends and future directions. Journal of Parallel and Distributed
Computing, 79(1), pp.3-15.
Bonney, M. and Jaber, M.Y. (2011) Environmentally responsible inventory models: Non-
classical models for a non-classical era. International Journal of Production
Economics, 133(1), pp.43-53.
Etgar, M. (2008) A descriptive model of the consumer co-production process. Journal of the
academy of marketing science, 36(1), pp.97-108.
Hanisch, B. and Wald, A. (2011) A project management research framework integrating
multiple theoretical perspectives and influencing factors. Project Management
Journal, 42(3), pp.4-22.
Hern, A. (2017) Amazon Web Services: the secret to the online retailer's future success
[ONLINE] Available from: https://www.theguardian.com/technology/2017/feb/02/amazon-
web-services-the-secret-to-the-online-retailers-future-success [Accessed 02/03/2019].
Hernandez, B., Jiménez, J. and Martín, M.J. (2010) Customer behavior in electronic
commerce: The moderating effect of e-purchasing experience. Journal of business
research, 63(9-10), pp.964-971.
Hilmola, O.P. and Tolli, A. (2018) Evaluation of Chinese E-commerce Cost and Lead Time
Performance to Estonia. Quality Innovation Prosperity, 22(1), pp.14-26.
Jackson, K.R., Muriki, K., Ramakrishnan, L., Runge, K.J. and Thomas, R.C. (2011)
Performance and cost analysis of the supernova factory on the amazon aws cloud. Scientific
Programming, 19(2-3), pp.107-119.

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Kocher, C. (2017) Disruption Amazon Style: Lessons from the Masters - Part IV Value
Delivery Systems [ONLINE] Available from: http://sandhill.com/article/disruption-amazon-
style-lessons-from-the-masters-part-iv-value-delivery-systems/ [Accessed 02/03/2019].
Maia, C., Lunardi, G., Longaray, A. and Munhoz, P. (2018) Factors and characteristics that
influence consumers’ participation in social commerce. Revista de Gestão, 25(2), pp.194-
211.
Molla, R. (2018) Amazon spent nearly $23 billion on R&D last year — more than any other
U.S. company [ONLINE] Available from:
https://www.recode.net/2018/4/9/17204004/amazon-research-development-rd [Accessed
02/03/2019].
statista.com. (2018) Amazon's shipping costs from 2012 to 2018 (in million U.S. dollars) (in
billion U.S. dollars) [ONLINE] Available from:
https://www.statista.com/statistics/806498/amazon-shipping-costs/ [Accessed 02/03/2019].
statista.com. (2018) Net revenue of Amazon from 1st quarter 2007 to 4th quarter 2018 (in
billion U.S. dollars) [ONLINE] Available from:
https://www.statista.com/statistics/273963/quarterly-revenue-of-amazoncom/ [Accessed
02/03/2019].
Steptoe-Warren, G., Howat, D. and Hume, I. (2011) Strategic thinking and decision making:
literature review. Journal of Strategy and Management, 4(3), pp.238-250.
Sutija, D. (2018) The Dash Button was just the beginning: Expanding commerce everywhere
[ONLINE] Available from: https://martechtoday.com/dash-button-just-beginning-expanding-
commerce-everywhere-210826 [Accessed 02/03/2019].
Trefis. (2018) Amazon Continues To Impress With Rapid Growth [ONLINE] Available from:
https://www.forbes.com/sites/greatspeculations/2018/02/02/amazon-continues-to-impress-
with-rapid-growth/#794f3cdd5cbb/ [Accessed 02/03/2019].
Zell, A.M. (2014) Due Protection in the Federal Republic of Germany and the European
Union: An Unequal Playing Field. German LJ, 15(1), p.461.

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Appendices
Figure 1: Amazon Value Chain (Source: https://www.researchgate.net/figure/Amazoncom-
Value-Chain-Analysis-In-technology-stream-has-important-role-to-drive-
and_fig3_326132044)
Suppliers /
Community
Value Chains
Business
Value Chain
Transport /
Channel
Value Chains
End-users/
Society Value
Chains
Upstream
Value
Downstream
Value

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Figure 2: Amazon Value System