SMGT3356: Amazon's Strategic Situation and Pandemic Response Report

This report provides a detailed analysis of Amazon's strategic situation relative to the COVID-19 pandemic. It begins with an executive summary and introduction, followed by an examination of Amazon's mission statement, core values, and a comprehensive SWOT analysis. The report then evaluates Amazon's value chain, including inbound and outbound logistics, operations, marketing, and services. A review of Amazon's financial position, including revenue, profit margins, and cash flow, is also included. The core of the report assesses Amazon's strategic situation, identifying key factors like consumer trends and government policies, and then outlines the expected impacts of the pandemic, such as reduced profit margins and supply chain disruptions. Finally, the report explores potential mitigation strategies, including product prioritization and cost-cutting, as well as opportunities available for Amazon, like increased online shopping and strategic acquisitions and partnerships. The analysis uses quantitative measures such as revenue figures and profit margins to support its findings, and the report concludes by summarizing Amazon's resilience and strategic adaptations during the global crisis.

Running Head: Amazon and the COVID-19 pandemic

Amazon and the COVID-19 pandemic 2
Executive summary
The effective globalization and interconnection of the business environment over the last decade
due to technological advancements; has made the global economy more vulnerable to the
COVID-19 pandemic more than ever before. Heavy losses have been incurred by business
owners and the investment community all over the world. Additionally, global supply chains are
a higher risk of disruptions and will continue to increase depending on the geographical spread
of the virus. The focus of this report will be Amazon; the largest online retailer in the world. The
theme of the paper will be to analyze the backbone of Amazon’s business activities relative to
the pandemic. This will be done by illustrating the mission and vision statement, SWOT and
value chain analysis, moreover the impact and potential mitigation strategies will also be
depicted as well as the available opportunities for Amazon during the pandemic.

Amazon and the COVID-19 pandemic 3
Contents
Introduction......................................................................................................................................4
Amazon mission and core values....................................................................................................4
Amazon’s SWOT analysis...............................................................................................................5
Value chain: Amazon......................................................................................................................7
Financial position: Amazon.............................................................................................................8
The strategic situation......................................................................................................................9
Expected impacts of the Pandemic on Amazon............................................................................10
Potential mitigation strategies........................................................................................................10
Opportunities available for Amazon..............................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

Amazon and the COVID-19 pandemic 4
AMAZON STRATEGIC SITUATION RELATIVE TO THE COVID -19 PANDEMIC
Introduction
The dramatic spread of COVID-19 which is mostly referred to as the coronavirus has
become a serious threat to the investment and business community all over the world. Moreover,
the effective globalization and interconnection of the business environment over the last decade
has made it more vulnerable to the pandemic more than ever before (Reeves et al, 2020). The
global supply chains are a higher risk of disruptions and will continue to increase depending on
the geographical spread of the virus. This will eventually lead to huge revenue loss impacting the
global economy negatively which could have a ripple effect and causing another a global
financial crisis in the long run.this begs for companies and organizations to adjust their business
activities to control losses and remain relevant in their respective markets(Fernandes, 2020).
Therefore, this report will address this context from Amazon Inc. perspective which will be
essential in illustrating its strategic situation relative to the COVID -19 pandemic
Amazon mission and core values
Amazon was established by Jeff Bezos in the mid-90s as an online retail shop at an era
where globalization was ineffective. However, the development of the mission, vision and core
values for the company, played an integral part in the company’s ultimate success.
Mission statement- “We strive to offer our customers the lowest possible prices, the best
available selection, and the utmost convenience”
Vision- “to be Earth’s most customer-centric company, where customers can find and
discover anything they might want to buy online.”

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Amazon’s SWOT analysis
Strengths
structure cost is low - the huge cost that relates to selling through retail shops is not
incurred the company since it’s online-based, moreover, there is no increase in marginal cost as
the number of sales increases. Moreover, the investment in fulfillment centers all over the world
savers time and cost that would have been passed to the consumer (Fernandes, 2020).
large merchandise selection-Amazon has invested heavily in merchandise selections and
product diversifications offering a wide range product for consumers to settle on depending with
their taste and preferences
The use of third party sellers-Amazon’s site has high traffic which has attracted third-
party sellers who sell their merchandise on the platform. often, products that are not available
through Amazon are offered by the third party sellers
Superior logistics and distribution system. these systems are highly efficient, different
periods have fixed rates, additionally security and timely delivery are key priorities to
maintaining customer satisfaction.
Weakness
Pirate-able business model-online retails business model are easily imitable which has to
lead to the increases in the number of competitors who offers similar products and carry out there
business activities such as Amazon.
Poor market penetration in developing economies-economic variables in developing
countries tends to be ineffective as compared to developed economies. this makes it harder for
Amazon to enjoy the success of such economies which sometimes leads to losses if they do not
adapt to the environment which is also expensive(Lopatta, et al, 2020).

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Controversies-Amazon is sometimes mixed with several controversies such as poor work
conditions in various Amzaon branches. Moreover, there’s the Tax avoidance issue as Accused
by President Trump (Harbolt,2019).
Opportunities
Global lockdown- Due to the spread of COVID-19 many governments all over the world
have resulted in full or partial lockdown in their regions allowing only movement goods or cargo
through designated entities .this presents itself as a critical opportunity for Amazon to increase
its product and consumer base (Chinazzi et al, 2020)
Additional acquisition-Amazon can continue to acquire online retail businesses
especially during this time of the pandemic which will lead to a reduction in competition in the
long run
Backward Integration-Profit margins can be increased through the expansion and
differentiation of its in-house products that are Amazon-branded
Threats
Controversies and scandals-Several scandal and controversies such as tax avoidance as
accused by president trump and the videos that surfaced showing the poor conditions workers in
several Amazon branches experience could tarnish the brand name (Harbolt,2019).
Cybercrimes-Being an online business amazon is vulnerable to cybercrime which could
result in losses for the company and the consumer both directly or indirectly. The brand name
could also be tarnished in the ICT community to be unsafe
Trade war-The trade war between China and USA is not yet over and increases
retaliation from both sides could be harmful to the company

Amazon and the COVID-19 pandemic 7
Value chain: Amazon
Figure 1:Amazon value chain analysis
Inbound logistics-Amazon fulfillment is the building block for inbound logistics for the
company. Owned retail business. agreements or long contracts are not available with its vendors,
however, the economies of scale is essential to the inbound logistics of amazon for value creation
Operations-Amazon’s operations are global, North America entails for 36% while
international entails 23%. However, the rest is dominated by Amazon Web services (AWS). This
web service accommodates the various operations that lead to the consumer buying a product;
has strong computing power (Lincoln and Andrew, 2018).
Outbound logistics-storing, transporting and distributing goods to amazon consumers is
entailed here.there are several fulfillment centers, physical stores and retail shops from third
party merchandisers that are used to deliver goods to consumers. additionally, Amazon usually
arranges areas were they have limited presence through outsourcing and co-outsourcing
Marketing and sales-Amazon utilizes both traditional and modern marketing methods to
reach the consumer. Traditional methods include Tv and radio commercials, billboard and

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branding of retail shops. The modern methods include online marketing especially through social
medial platforms by using influencers. All this in the long will eventually lead to an increase in
consumer sales and an increase in consumer base.
Service-Value creation can be obtained from quality service, through the use of
technology such as cloud computing, consumers can enjoy the various services offered by
Amazon such as solving queries. Additionally, the delivery services of goods to the consumer is
remarkable; they are of high quality and delivered within the specified time, which in the long
run l3eads to value creation (Lincoln and Andrew, 2018).
Financial position: Amazon
There was an increase in revenues for Amazon by a 20% profit margin to 289.52 billion
dollars. Before extraordinary items, the net income in the fiscal year increases to 11.59billion
dollar which is an increase of 17%. Third party merchandisers' sales revenue increases by 26% to
53.76 billion dollars. moreover, online sales generated revenue of 141.35 billion dollars which is
an increase of 15%.AWS sector generated revenue of 37billion dollars which is an increase
to37% and finally, the North America segment generated a revenue of 170.77 billion dollars
which is an increase to 21%. Generally, the 2019 fiscal year was good for Amazon (The Wall
street journal,2020).
Figure 2:Key summary of the income statement for the end of the 2019 fiscal year

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An increase by 25% of the operating cash flow was seen by the end of the same fiscal
year, this amounted to 38.5billion dollars, nevertheless, free cash flow for the past twelve months
increased to 28.5 billion dollars. There was also an increase in frees cash flow that is fewer
financial obligations and leases payments to 16.2 billion dollars (The Wall street journal,2020).
The strategic situation
From the above statements and in-depth illustration in the report of Amazon, t6he
multinational organization it seems to be capable of tackling the COVID-19 pandemic although
it will incur some losses, it will eventually be worth it in the long run. (Lopatta, et al, 2020)
Therefore, Amazons should examine the following key sectors or element s to succeed:
Consumer trend-Due to the pandemic the most sought-after items are healthcare
products, foodstuff, and other products essential during the lockdown. Therefore, the firms
should prioritize in stocking up on such products that are on high demand and also maintain a
constant supply in the long run (Swartz, 2020)
Government policies-Government policies will tend to fluctuate during the pandemic
period. this is highly dependent on the geographical spread of the virus. Amazon should be keen
on government policies as they vary from region to region and adapt
Ensure safety -employees of amazon are the backbone of the company, their safety
should be a priority as they will ensure the running of the firms during the pandemic. This could
be achieved through the development of a conducive working environment from a healthcare
perspective (Valinsky,2020).

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Expected impacts of the Pandemic on Amazon
Reduction in profit margins-Amazon is expected to incur some losses which will lead
to the reductions in profit margins in the 1st quarter as compared to the end of the 2019 fiscal
year.
Increase in operation cost-Operation cost is expected to increases as amazon will need
to adapt to the new business environment that seems to be more volatile than the last financial
crisis
Supply chain disruption-The normal supply chain that Amazon was used to will be
disrupted, however, the disruption will not take a toll due to the effectiveness of the AWS.
consumers’ goods will be delayed by a further 5-10 days depending on the location (The
marketer,2020).
Potential mitigation strategies
Product prioritization-The burden on profit reduction can be shifted by focusing on the
products that are selling during the pandemic or that are in high demand. Additionally, the
branding of these products act as a marketing and consumer retention strategy
Cost cutting-cost cutting measures such as reducing allowances of travel executives
shrinking the number of employees to their relevancy of the business activities being carried out
by the firm during the pandemic
Opportunities available for Amazon
An increase in online shopping-the the pandemic has resulted in government initiatives
to reduces that movement of people in public places. This has resulted in individuals staying at
home and resulting in the online market when they need products. This presents an opportunity

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for Amazon to dominate the market by increasing its consumer bases in the long run (Swartz,
2020)
Acquisitions and partnerships-Amazon can partner with Uber or Lyft to meet on-time
deliveries for homebound shopping which is on the rise. These partnerships may lead to the
development and diversification of companies involved (Kerr,2020).
Conclusion
The COVID-19 pandemic has disrupted the business environment that has been
interconnected more than ever due to effective globalization and technology advancement. This
has resulted in organizations to shut down and the investor community to lose money. The global
supply chains have also been affected which has resulted in organizations adapting to the new
business environment. The focus of this report is Amazon; the largest online retailer in the world.
The theme of the paper is to analyze the backbone of Amazon’s business activities relative to the
pandemic. This has been done by illustrating the mission and vision statement, SWOT and value
chain analysis, moreover the impact and potential mitigation strategies have also been depicted
as well as the available opportunities for Amazon during the pandemic.

Amazon and the COVID-19 pandemic 12
References
Lincoln, I. V., & Andrew, C. E. (2018). Porter Analysis: A Business Strategy of Amazon. Com
Through a Value Chain and Comparative Advantage Analysis of Amazon’s Trademarks
and Intangibles. Com Through a Value Chain and Comparative Advantage Analysis of
Amazon’s Trademarks and Intangibles (November 27, 2018). Practical Guide to US
Transfer Pricing,.
Harbolt, B. (2019). Tax Avoidance through E-Commerce and Cross-Border Shopping.
Reeves, M., Lang, N., & Carlsson-Szlezak, P. (2020). Lead Your Business Through the
Coronavirus Crisis. Harvard Business Review.
Lopatta, K., Alexander, E. K., Gastone, L. M., & Tammen, T. (2020). To Report or not to Report
about Coronavirus? The Role of Periodic Reporting in Explaining Capital Market
Reactions during the Global COVID-19 Pandemic. The Role of Periodic Reporting in
Explaining Capital Market Reactions during the Global COVID-19 Pandemic.(April 3,
2020).
Chinazzi, M., Davis, J. T., Ajelli, M., Gioannini, C., Litvinova, M., Merler, S., ... & Viboud, C.
(2020). The effect of travel restrictions on the spread of the 2019 novel coronavirus
(COVID-19) outbreak.
Fernandes, N. (2020). Economic effects of coronavirus outbreak (COVID-19) on the world
economy. Available at SSRN 3557504.
Wall street journal. (2020, January 30). AMZN | Amazon.com Inc. Financial Statements - WSJ.
Retrieved from https://www.wsj.com/market-data/quotes/AMZN/financials

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The marketer. (2020, March 14.). The Biggest Business Impacts of the Coronavirus Pandemic
Retrieved from https://www.emarketer.com/content/the-biggest-business-impacts-of-the-
coronavirus-pandemic-according-to-business-insider-intelligence
Kerr, D. (2020, March 27). Lyft partners with Amazon on package and grocery deliveries.
Retrieved from https://www.cnet.com/news/lyft-said-to-partner-with-amazon-on-
package-and-grocery-deliveries/
Valinsky, J. (2020, April 16). Amazon is developing its own coronavirus test for workers.
Retrieved from https://edition.cnn.com/2020/04/16/business/jeff-bezos-amazon-
shareholders-letter-2019/index.html
Swartz, J. (2020, April 18). Amazon has the right businesses to weather coronavirus, but
spending could grow even faster. Retrieved from
https://www.marketwatch.com/story/amazon-has-the-right-businesses-to-weather-
coronavirus-but-spending-could-grow-even-faster-2020-04-13