Amazon Inc. Strategic Management Report: Business Analysis

This report provides a comprehensive analysis of Amazon Inc.'s strategic management. It begins with an executive summary and a background of the company, including its history and industry position within the e-commerce sector. The report then delves into the application of Porter's Five Forces model to assess the competitive landscape. It also examines the various strategies employed by Amazon, including specific approaches like joint ventures, entry strategies, and competitive advantages. Furthermore, the report explores Amazon's leadership style, industry life cycle stage, and related diversification strategies. Finally, the report offers recommendations for the company and concludes with an opinion based on the analysis, supported by references and an appendix containing financial statements. This assignment is a detailed exploration of Amazon's business practices.

Running head: AMAZON INC. STRATEGIC MANAGEMENT
AMAZON INC. STRATEGIC MANAGEMENT
Name of the Student
Name of the University
Author Note

AMAZON INC. STRATEGIC MANAGEMENT
Executive Summary
The report aims to throw light on the company Amazon Inc. Amazon Inc. is a global leader in e-
commerce industry. It has been in the market since years and has established itself as a strong
competitor. With low costs and good service, the brand has become a global name. The report
provides a background of the company followed by the other relevant details such as current
management. It has also given the strategic analysis of Porters Five Forces Model. The
strategies used by the company have been given along with six specific strategies. The report
also provides Recommendations and Opinions.
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Table of Contents
Company name, website and Industry.............................................................................................3
Background......................................................................................................................................3
History.........................................................................................................................................3
Five Forces Model...........................................................................................................................4
Stratgeis used by Amazon...............................................................................................................6
Specific Strategies...........................................................................................................................7
Recommendations............................................................................................................................8
Opinion............................................................................................................................................8
References......................................................................................................................................10
Appendix 1.....................................................................................................................................12
Income Statement......................................................................................................................12
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Company name, website and Industry
The company chosen for this assignment is the Amazon Inc. It is a company based in the
United States with its operations all around the globe (Dess, Lumpkin & Eisner, 2016). The
company belongs to the e-commerce industry, which stands for electronic-commerce industry,
which involves selling the products on a website, making use of the Internet.
The website of the company - www.amazon.com
Background
Amazon.com Inc, which is an e-commerce and computing based business, has its
headquarters based in Seattle, Washington. The company was found by Jeff Bezos on 5 July
1994. The technological giant is the largest internet seller globally. The company started as a
bookseller but later on, it became video, MP3, audio book, software, games, clothing,
electronics, toys, furniture and jewelry (Hollensen, 2015). The company also sells its own
products like the Fire Tablets, Echo, Kindle and others. The company has separate websites for
different countries within which it operates. These range from Italy, Spain, India, Canada,
Australia and China.
History
The company was found because of a `regret minimization framework` conducted by Jeff
Bezos. He left his job in 1994 as a vice president and began working on a business plan, which
turned out to become Amazon.com.
The name of the company was Cadabra Inc but later on changed to Amazon. The
company went online during the year 1995 as Amazon.com. The idea to create the company
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AMAZON INC. STRATEGIC MANAGEMENT
came to Bezos after he read in an article that the e-commerce industries grow rapidly at the rate
of 2300%. He started it with around 20 products that he thought could be marketed online. He
concentrated on selling books, which would be easy to send (Klaus, 2013).
The company was sued by Barnes and Noble in 1997 claiming that the claim that it was
the largest bookstore was false as it was not a book store at all (Amazon, 2015). It was a broker.
It received similar allegations from various allegations from other companies like Wal-Mart also
for stealing its trade secrets.
Initially the company suffered from a slow growth rate however later on it started
growing post 2011. It had 30000 employees in United States itself and a total of 3,00,000
employees worldwide.
Recently, the company had build convenience stores and developed curbside locations for
food pick up (Amazon.com. ,2018). They have opened a new concept where the company
delivers fresh food services too. Amazon Go and Amazon Prime have also been launched by the
company (Kotler et al.,2014).
Jeff Bezos is the current Ceo. The company has been doing extremely well and its share
prices are priced at 1290$. In the last year the company reported a revenue of 135987000$ and
profit of 2371000$ in 2016. (Refer to Appendix 1for Financial Statements)
Five Forces Model
Michael Porters five forces model is a strategic tool, which is utilized to analyze the
external environment of the business. The given section tends to elaborate on the porter`s five
forces model of the company Amazon Inc.
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Competitive Rivalry – High
As the e-commence industry is an extremely competitive industry , it is extremely
popular and very profitable hence the rivalry in this industry is extremely high. Traditional
brands have also entered the race and thus the rivalry has increased. There are various
competitors of Amazon like Alibaba in China, Flipkart in India and others. Apart from these big
retailers, Amazon faces competition from other small retailers who sell particular products like
electronics, apparels and auto parts. These factors tend to increase the competition in the
industry.
Threat of New Entrants – Low
Entering the online market is extremely easy. Creating an online store is not difficult but
matching to the level of Amazon is not easy. Matching to the level would require too much time
and effort. The retail industry has been faced with quite a few changes with the age of digital era.
New brands have entered the new field (Laudon & Traver, 2013). Taking on Amazon would
require high amount of powers like distribution, logistics, marketing and brand name. Reputation
also challenges the ability of other firms to match up with the standards of Amazon. Hence,
threat of new entrants is extremely low.
Bargaining Power of Suppliers – Low
As Amazon is an established company in the industry , the bargaining power of the
supplier is extremely low. Amazon has a large supplier base and has a specific set of rules for
their management. The company also ensures that the practices undertaken by the supplier
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brands are ethical and abide by the policies (Dekker et al., 2013). They leave no chance for their
suppliers for forward integration. The switching cost for the suppliers of Amazon is extremely
low. The supplier power is extremely low in the given that they are in no position to determine
the price.
Bargaining Power of Buyers – High
Amazon puts a lot of stress Amazon lays a lot of stress on customer satisfaction and
product quality. It ensures that the products are received on time and any returns or replacements
are properly handled to convert first-timers into repeat customers (Aguirre et al., 2015). The
buyers switching cost is low. In addition, buyers are well aware of price comparisons and
competitor pricing . Hence, the bargaining power of the customers is extremely high.
Threat of Substitutes – High
Amazon has various substitutes like Wal-mart, other branded outlets, online stores and
local markets where the company sells the product. Since the offerings made by Amazon are
unique, the threat of substitution is high.
Strategies used by Amazon
Amazon Inc leads the e-commerce industry and applies an innovative approach to the
online retailing. They have been re-inventing the essence of ecommerce. To attract the customers
they tend to come up with new ideas for the development of the business. They have come up
with a variety of ideas like Amazon Home services whereby they provide local and professional
services to the consumers. They have also taken out Amazon Go. The Go store is a shop
whereby the customers can pick up what they want and walk out without any queues. Available
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in Seattle, Washington and just for Amazon employees. They have also introduced Amazon
Echo, which is a smart speaker with personal assistant software. They also have Amazon Dash
Bond and Fire stick for users. In simple terms, it can be said that the company aims to become
the ultimate preference for all the customers by providing whatever they need.
Specific Strategies
 Joint venture- Amazon apart from engaging in its online retail store also takes part in
various other ventures to increase its operations in various countries around the world.
Recently, it had started a joint venture named Taurus Business and Trade Services along
with the Infosys Company in India. The given business would be operating in cities and
towns, which would help the offline sellers by training the in online tools I order to
improve the customer base online.
 Entry strategy- It uses soft strategy to enter the various business countries. It launches
through its sister companies, checks out for the market conditions in a short span and then
launches the primary website (Keller & Kotler, 2016). A similar strategy was followed by
the company for India.
 Competitive advantage- The Company dominates the online industry and aims to throw
out any competition that t faces. Amazon Company’s main sustainable advantage is that
it has the ability to provide lowest prices and best quality. It also provided worldwide
shipping. It has a good service facility, which makes it a leading company. It has vast
credit card users in the company, which then makes it greater than its competitors do.
 Related diversification strategy- This diversification strategy is the least significant
among the strategies adopted by Amazon (Floyd et al., 2014). The company instead of
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using diversification strategy, makes use of acquisition strategy to achieve its objective. It
diversified by applying the low cost concept in every offer it makes.
 Leadership- Amazon indulges in a cost leadership strategy. The cost leadership strategy
is one of the most popular strategies of the company. It has gained its sustainable
advantage through the cost leadership strategy. The reason why Amazon is able to
supply this strategy is because, it engages in economies of scale. By doing so, the
company is able to establish its position in the developed as well as the developing
countries alike.
 Industry Life cycle- The life cycle phase of the e-commerce industry has been going
through an immense change. The company started its operations in 1990s and started
picking up post 2000s (Bresler & Lubbe, 2014). Presently, the country is in its growth
stage and nearing the peak. This is because the online store is popular among all countries
in the globe and s able to provide one-stop solution for all the customers.
Recommendations
The given recommendations can be given to the Amazon Company;
 It needs to conduct a competitor analysis which will help the company to analyze what
the other competitors have been ding in order to achieve the target audience attention
 It also needs to open retail physical stores, which shall then build up the trust in the
company and encourage the customers to avoid the cyber problems they face while they
shop online.
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Opinion
Amazon is one of the biggest countries around the globe. The given case study gives an I
insight into the company and helps the student to understand the mechanisms of online industry.
It has provided the background of the country, competitor and external environmental analysis
along with the company’s generic strategy. The given case study was extremely useful in
strengthening the knowledge of the students by giving them real life examples.
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References
Aguirre, E., Mahr, D., Grewal, D., de Ruyter, K., & Wetzels, M. (2015). Unraveling the personalization
paradox: The effect of information collection and trust-building strategies on online
advertisement effectiveness. Journal of Retailing, 91(1), 34-49.
Amazon, E. C. (2015). Amazon web services. Available in: http://aws. amazon. com/es/ec2/(November
2012).
Amazon.com. (2018),Amazon.com: Online Shopping for Electronics, Apparel .... Retrieved 24 January
2018, from https://www.amazon.com/
Bresler, M., & Lubbe, I. (2014). Marketing management.
Dekker, R., Fleischmann, M., Inderfurth, K., & van Wassenhove, L. N. (Eds.). (2013). Reverse logistics:
quantitative models for closed-loop supply chains. Springer Science & Business Media.
Dess, G., Lumpkin, G.,& Eisner, A. (2016). Strategic Management (8e). Boston: McGraw-Hill
Irwin.
Floyd, K., Freling, R., Alhoqail, S., Cho, H. Y., & Freling, T. (2014). How online product reviews affect
retail sales: A meta-analysis. Journal of Retailing, 90(2), 217-232.
Hollensen, S. (2015). Marketing management: A relationship approach. Pearson Education.
Keller, K. L., & Kotler, P. (2016). Marketing management. Pearson.
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AMAZON INC. STRATEGIC MANAGEMENT
Klaus, P. (2013). The case of Amazon. com: towards a conceptual framework of online customer service
experience (OCSE) using the emerging consensus technique (ECT). Journal of Services
Marketing, 27(6), 443-457.
Kotler, P., Keller, K. L., Ancarani, F., & Costabile, M. (2014). Marketing management 14/e. Pearson.
Laudon, K. C., & Traver, C. G. (2013). E-commerce. Pearson.
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