Amazon's Strategic Management: External and Internal Analysis Report

This report provides a comprehensive strategic analysis of Amazon, examining its corporate and financial objectives. It utilizes PESTEL and Porter's Five Forces models to assess the external environment, including political, economic, social, technological, environmental, and legal factors, as well as competitive forces. The internal analysis focuses on a resource audit, identifying basic and unique resources, and evaluating core competencies. The report applies Bowman's Strategy Clock model to determine Amazon's competitive positioning. The report also examines the company's strategic choices using Ansoff Matrix and provides an evaluation of Amazon's overall strategy, offering valuable insights into its market position and future prospects. The report is a valuable resource for students to understand the strategic management of Amazon.

Strategic management

Executive Summary
Strategic management for any company means that developing and implementing strategies in
company in order to make the free flow of operations to achieve the companies objectives and aims.
The following assignment has been conducted in order to analyse the strategic management practices
adopted by Amazon. During the research it was observed that main corporate objective of Amazon was
to provide customers with best shopping experience online. Further, financial objectives of company
was to increase the revenue by 60% within six months. Amazon is mostly concerned with making all
types of products available to its customers under one head and allows them the choice with respect to
making the purchase. It has always worked on to avail customers with top-quality purchasing
experience on internet. PESTEL and Porters forces model are the best way to analyse the company's
external market. And internal activities can be assessed by making the resource audit. Furthermore, it
was analysed that unique resources were giving company more competitive advantage to sustain for
longer period. Later, by applying Bowman Strategy Clock model, tow positions on which business was
currently operating were identified that is low price and differentiations.

Table of Contents
INTRODUCTION ....................................................................................................................................5
Amazon corporate objectives ...............................................................................................................5
EXTERNAL ANALYSIS...........................................................................................................................6
3.1..........................................................................................................................................................6
3.2 .........................................................................................................................................................8
INTERNAL ANALYSIS: STRATEGIC CAPABILITIES......................................................................10
4.1........................................................................................................................................................10
4.2........................................................................................................................................................11
BASIS OF COMPETITIVE STRATEGY...............................................................................................12
5.1........................................................................................................................................................12
STRATEGIC CHOICE............................................................................................................................14
Ansoff matrix.......................................................................................................................................14
STRATEGY EVALUATION...................................................................................................................15
CONCLUSION........................................................................................................................................15
REFERENCES.........................................................................................................................................16

Illustration Index
Illustration 1: PESTEL factors...................................................................................................................6
Illustration 2: Porter’s Five Forces factors.................................................................................................9
Illustration 3: Bowman’s Strategy Clock.................................................................................................12

INTRODUCTION
Strategic management is the activity which is related with developing the strategies in order to mange
the organisational functioning in most effective and suitable manner. Therefore, it is the continuous
planning, evaluating, assessment and analysis of all the task and actions which are performed in order
to attain the goals and objectives of the organisation (Hill, 2014). The following assignment is a short
report about a leading technology and online organisation that is Amazon. Through this report the
researcher will discuss on the strategic analysis of both internal and external environment influences on
Amazon objectives and strategies.
Amazon corporate objectives
Amazon is one of the global leader in E-commerce activities. It consists of the wide range of the
activities and was founded in 1994 in USA.
Company's Corporate objectives
 To provide our customers with best shopping experience online
 To become most customer centric company.
 To build a place where people can come and buy anything they might want to make purchase.
 To provide customers with flexible price structure (Hitt, 2012).
Financial objectives
 To increase the revenue by 60% within six months.
 To sustain the financial position during the period of economic turmoil.
 To earn maximum profits by 80% in every year (Swayne, 2012).
EXTERNAL ANALYSIS
3.1
In order to conduct the external environment analysis, PESTEL analysis technique has been

used for AMAZON. The following is the pestle analysis:
(Source: Marketing theories – pestle analysis., 2015)
Political factors
 Some international policies and framework developed by government are coming in way of
Amazon.
 Expansion in certain countries is difficult for the cited company due to political influence
(Wheelen and Hunger, 2011).
 Certain online purchase rules and norms in countries are affecting the growth.
 For example, Google is banned in China by the government officials their.
Illustration 1: PESTEL factors

Economic factors
 Currency Variation: In some countries where currencies is highly devaluated in connection with
dollar, then it can lead to adding cost for company that is Amazon. This leads to increase in
price of some products which affects the company sales.
 Economical tendencies: Natural and economical behaviour of people of buying the goods from
nearby stores rather than going for online shopping (Eden and Ackermann, 2013).
Social factors
 Restriction of use of internet in some areas because of religious and ethical concerns in an
community. This will affect the sales of cited company.
 There has been a tremendous increase in the internet users day by day, this can be positive sign
for Amazon to increase its market share (Amit and Schoemaker, 2012).
 Started giving their ads in social websites like Facebook and twitter. This can give an advantage
to companies like Amazon to expand its customer base.
Technological factors
 Being an online retailer has always searched for new and innovative ideas for attracting
customers and take a step ahead of its competitors like Barnes and noble and Alibaba.
Environmental Factors
 Amazon has taken a step to reduce the use of hardware and storage devices by working on and
storing its data on cloud computing and cloud storage.
 Also, company has shown a positive mark towards environment issue of pollution. This means
that online purchase can be done even by sitting at homes. This reduce the movements of
vehicles for going to the physical stores (Sedlak, 2013).
 Amazon is making efforts to towards a greener solution for shipping their goods at the time of
making delivery.

Legal factors
 Being an online retailer has to make the delivery of the goods overseas and this can affect to
company to keep in mind the trade and tariffs policies and regulations.
 Also, certain articles to be delivered in some country even have different legislations and
regulations depending on state in which it is delivered. These certain goods like alcohols and
chemicals. (Amazon’s PEST, SWOT and Porter’s five forces analysis., 2009).
3.2
Porters five force model helps Amazon to understand the strengths of the current competitive
position and factors affecting strategy development.
The factors used in porter's analysis are:
(Source: Porter’s Five Forces., 2015)
Illustration 2: Porter’s Five Forces factors

Suppliers power
 Amazon has marked benefit with most of its suppliers who provides them goods (books, Audio,
technology) the reason for this is that these companies do not charge their commodities until the
moment Amazon makes a sale of them.
 Payment to suppliers is made by Amazon only for those products, after 35 days the item has
been sold (Hair, 2012).
Buyers powers
 In case of bargaining power of customers, it is usually high. As consumers can switch to
physical stores or other online shopping websites.
 Amazon provides its customers with a very low price products often surrounded by the offers
and discounts. These gives and advantage to this cited firm to make a strong relation with
customers and sustain them for longer time (Hodgkinson, 2011).
Competitive rivalry
 Amazon was the first company to enter into the e-commerce activity.
 This gives to Amazon a certain level of tranquillity into the market.
 Due to its advanced and innovative ideas over the years, has made company to reach at the
highest level of customers satisfaction.
Threats of substitute
 There is a moderate threat of substitution for Amazon, as it has made its brand name well
recognized and trusted into the eyes of customers and community.
 This is the fact that Amazon do not face threat of substitution for short time (Arline, 2015).
Threats of new entry
 There is a huge threat of new entrance of online retailers. This is because internet has shown

that simple idea well developed can offer an extraordinary results such as Facebook, YouTube,
and so on. These firms have developed their websites in a short time period with outstanding
results. (Martin., 2014).
INTERNAL ANALYSIS: STRATEGIC CAPABILITIES
4.1
A resource audit can be defined as the activity in which employees makes sure that business of
project has all the resources it needs to complete its task and operations in most effective and efficient
manner. Thus is the process which helps in improving the efficiency of the company.
Basic and unique resources are the two categories of all types of resources which are available
with Amazon. Basic resources are those which are available with the company in present scenario.
Such as human resources in terms of employees, financial resources, basic infrastructure facilities and
so on. Amazon has to make sure that these resources are available with the company so that its business
operations are not hampered in case of non-availability (Boyd, 2012).
Whereas, on the other side, being an online retailer, Amazon has to identify certain uniqueness
in its operations in order to tap the customers and make them sustain for longer period. Therefore,
company has started using the cloud computing as an improved version for storing its data on servers.
This gave an advantage to firm to make a cost cutting in further arranging for hardware storage devices.
Cloud computing storage is a unique resource which is adopted by cited company. Another example, of
unique resource is high experience professional staff who has invented the new application of kindle
for Microsoft users.
There is not much difference between both the types of resources, but both of them has their
own importance. Basic resources are the necessity and unique resources are used to get a step ahead of
its competitors. Similarly, other difference between basic and unique resource is that in case of basic
resources less cost is incurred by company as no research work is required. But on the contrary, huge
cost has to be incurred by Amazon to bring unique resources in company. As market research and
highly professionalised people are hired which adds to an additional cost for cited company (Priem,
2012).
4.2
Functions
 E-commerce business Selling services to vendors
Core competencies

 It is earth's most customer centric firm.
 The uniqueness of Amazon makes very hard for competitors to imitate the activities of Amazon.
 The high and most likely brand image in eyes of targeted audience.
 Excellent websites skills serves company with greater advantage.
 Amazon core competency lies in its first mover advantage fact that is it was the first company
to sell books online.
 Company delivers large selection of gods at the most economical price.
 It provides its customers to make an online purchase at a very ease (Spainhower, 2006).
BASIS OF COMPETITIVE STRATEGY
5.1
Bowman's Strategy Clock is a model which is used in marketing to assess the competitive
position of the company comparison to the competitors like Barnes and Noble and Alibaba. Following
are the eight positions which are available for the company to analyse the competitive advantage. These
are:
(Source: Bowman’s Strategy Clock., 2015)
Low price/low added value
This is less likely chosen strategy. It is selected at the time by companies when their products
lacks differentiated values. The product quality under this strategy is inferior type of gods and services.
This aids in lacking customer loyalty. But, the prices are so attractive tat it helps in attracting the users
Illustration 3: Bowman’s Strategy Clock

(Ahmed, 2014).
Low price
This strategy can be selected by companies by offering goods and services at low price. If the
companies dealing in low cost have large enough volumes or strong strategic reasons for their
positions, then this will help hem to sustain and become a powerful force in market.
Hybrid
The companies which comes in the category of hybrids are the one who offers low price
products but with high perceived value to its customers than its other low cost rivalry firms. The only
issue with this strategy is quantity but companies manage to solve this problem. For example, discount
department stores (Keupp, 2012).
Differentiation
Under this strategy, some unique featured products are offered to customers in addition to the
superior quality and value. This strategy helps the companies to gain higher competitive advantage.
Therefore, branding plays a crucial role in this type of action plan.
Focussed differentiation
In this type of strategy companies offers high quality and value products with high price. This is
adopted by those companies whose buyers wants to buy the commodity based on the perceived value.
Increased price and standard product
This is the strategy in which companies increase the prices of their products suddenly without
increasing the perceived value. This is the balancing situation for firm in which if consumers accepts
the high price than it is an advantage for company and vice versa.
High price/ low value
This is monopoly type of market in which only one company is offering the products. They
adopt the strategy of usually high price and delivering low value (López, 2011).
Low value/ standard price
By adopting this type of strategy companies usually fails in enhancing market share. The reason
is that company delivers low quality products and the only way by which it can make a sale is by
setting its price at a standard rate.
Available positions with Amazon and key market segments targeted by cited company
The available position for Amazon is low price. Herein, the main strength of the company lies
in being most customer centric. This is the reason, they provide almost all types and categories of
products to their customers at low price. This has made the company to attain and achieve success
above its competitors. By adopting this strategy company mostly target people on the basis of income