Strategic Analysis of Amazon Flex: A Business Strategy Report

This report provides a comprehensive analysis of Amazon Flex, Amazon's delivery service, examining its strategic issues and proposing solutions. The report begins with a mini-case study outlining the context of Amazon Flex, its operational model, and the strategic challenges it faces, particularly in competing with established delivery services like FedEx and UPS. It identifies the need for an innovative strategic framework to address these challenges. The report then delves into two key strategic frameworks: Porter's Generic Strategy and Blue Ocean Strategy. It discusses how Porter's framework, specifically the differentiation strategy, can help Amazon Flex distinguish itself. The Blue Ocean Strategy is also explored as a means to foster innovation and create new market demand. The report concludes with a briefing note summarizing the findings, emphasizing the importance of these strategies for achieving a competitive advantage in the e-commerce delivery market and suggests areas for Amazon Flex to gain strategic advantage. The report incorporates figures to illustrate key concepts and references relevant academic sources.

Running Head: Business Strategy 1
Case of Amazon Flex

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Contents
Part 1: The mini-case.......................................................................................................................3
Strategic issue..............................................................................................................................3
Strategy framework.....................................................................................................................4
Strategy problems........................................................................................................................5
Part 2: The briefing note..................................................................................................................5
Porter Generic strategy................................................................................................................6
Blue Ocean Strategy....................................................................................................................7
References......................................................................................................................................11
List of Figures
Figure 1: Porter Generic Strategy....................................................................................................6
Figure 2: Blue ocean strategy..........................................................................................................8
Figure 3: Six Factors........................................................................................................................9

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Part 1: The mini-case
This case is based on the company Amazon that has recently introduced its own shopping
services named Amazon Flex. Based on the effective demands for the services by the customers,
the world’s biggest e-commerce company Amazon wants to deliver the product on time. So,
Amazon planed last year to provide delivery services with the new service named Amazon Flex.
For the effective services, the company sent emails to the contract drivers who delivered parcels
for the Amazon Flex (Lierow, 2016). This program was launched last year to handle the urgent
deliveries of common household products to the customers by using Prime Now. This is the
mobile app including Amazon’s popular Prime membership by paying $99 per year. This plan
might also create an effective logistics network with United Parcel service, FedEx and many
other local carrier services that are currently delivering the Amazon packages. Amazon Flex
operates like on-demand facility services by the Uber. Drivers use the mobile app to sign up for
the pickup packages from the small warehouses near the metropolitan areas and delivers the
parcels of the products to the customers’ doors. The company is currently operating this service
in the 14 cities such as Las Vegas, Seattle, Dallas and Phoenix. Along with this, it is mandatory
for the drivers to have four-door car i.e. mid-sized sedan or larger car and drivers are paid an
introductory rate of $18 per hour. According to the Amazon, the Flex drivers can earn $18 to $25
per hour. B y this way, Amazon Flex is creating strong competition for the other cargo service
companies like FEDEX, USPS and UPS. But there is an issue with the service of Amazon Flex
which might impact on the business operations of the company (Leonard, 2016).
Strategic issue
In the services of Flex, Amazon is using same services like other companies. This is the
similar cargo services operated by the FEDEX, USPS and UPS in the market. So, this can be the
strategic issue for the Amazon as the retail customers will not want to switch to the delivery
services provided by Amazon. The delivery plans of the Amazon are currently slower as
compared to the FedEx and UPS. If the company focuses on the delivery services deeply then it
will be called as transportation service provider. Further, there is one more issue with Amazon
Flex i.e. Amazon still lacks the service and network infrastructure to compete with the door-to-
door delivery service companies (Mourdoukoutas, 2014). To achieve in the distribution services,

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Amazon needs to adopt some effective strategies in the business operations. There is the need of
an innovative strategic framework to address the above discussed issues in the Amazon Flex
services.
Strategy framework
For the successful business, it is essential for the organizations to have effective strategy
and strategic framework. The strategic framework is very helpful for the useful for the company
to provide an effective structure for the long term planning in the market. In the case of Amazon
Flex, the key issue is to attract the customers so that they use the carrier services provided by the
company Amazon. For this manner, Porter generic strategy will be helpful for Amazon to make
the carrier service successful in the US.
Although a single generic strategy is not always sufficient for the business operations of the
company but in case of Amazon Flex, it is important to analyze the issue first. By the strategic
issue analysis, it is observed that the company providing same services like FedEx and UPS. In
such case, customer will not switch themselves towards the new service. Ultimately, the
customers always want innovations in the products and services. The issue with the Amazon
Flex is that it is not providing anything unique and different in its services so it is going to be
difficult for the company to get the customers like FedEx and UPS. So, for the Amazon Flex, the
differentiation strategy from porter generic strategy is appropriate as there is the need of
differentiation of services provided by the company (Opfer, 2017). The strategy formulation can
be successful by analyzing the competitors’ analysis such as what they are doing and what are
their strategies to attract the customers in the market. The porter generic strategy is the basic
framework for performing the competitors’ analysis which was given by Michael Porter.
Further, there is one more strategic framework i.e. blue ocean strategy. In the Amazon
Flex, there is the need of innovations in its services so; this strategic framework is helpful for the
company to develop effective strategies in the business. This strategy is helpful for the
organizations to explore new ideas and opportunities to create strong profitable growth in the
market. The blue ocean strategic is an effective framework which focuses on the value
innovation in the products and services. The value innovations are helpful in ignoring the
competition and provide competitive advantage to the company. The main aim of any company
is to get competitive advantage by creating demand in the market rather than creating

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competition. So, in case of Amazon Flex, competitive advantage is crucial among the customers
and this can be done by focusing on value innovation (Dontigney, 2017).
Strategy problems
The above discussed strategic frameworks are more effective in developing appropriate
strategy for the company. In case of Amazon Flex, there is the lack of innovations and new ideas
in the service. Like FedEx and UPS, company is providing same service in the way of Uber.
Basically, it has adopted the strategies of Uber to deliver the products to the customers. Although
the company has adopted fast delivering method but this method is costly due to usage of cars.
For the value innovation and competitive advantage, the above discussed strategic frameworks
are appropriate in the case of Amazon Flex (Palladino, 2016).
To gain competitive advantage in the market, it is important for the Amazon to focus on
the distribution of big products also. The company should focus on the areas where it can get
strategic advantage to capture and grow in the market. Amazon does not ship the heavy products
such as automotive, building supplies, agriculture and heavy machinery by the Amazon Flex. If
the customers buy the big products then they would like to use Flex as product safety is the top
most priority for the customers. By this strategy, company can achieve the growth outside of its
core segments. Further, the company should uses advanced analytics in the business. It should
focus on the behavioral segmentation along with the price sensitivity. By focusing on the
available data, company should retain the current clients (Jthayer, 2016).
Part 2: The briefing note
From the above discussion, it is observed that the famous online retail company Amazon
has launched the new cargo service i.e. Amazon Flex. This work like the Uber as the driver
comes and pick up the delivery parcel and delivers it to the customers. The service of Amazon
Flex is expensive and it is getting more expensive day by day. The customers are getting same
services by FedEx and UPS in the lower rates, so do not want to switch to the costly service.
Amazon and other e-commerce retailers are taking many initiatives to improve the customer base
in the market. In this manner, Amazon has also used many of distribution channels in all over the
country to provide the products to the customers by final-mile delivery. As compared to the
Amazon Flex, FedEx and UPS do not increase their prices at the time of inflation. So, customers

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rely on FedEx and UPS as they know that these companies will not hike their price for delivering
the products (D'onfro, 2015). In the case of Amazon Flex, the appropriate framework is Porter
Generic Strategy and Blue ocean strategy. Both the strategic frameworks are described below:
Porter Generic strategy
Profitability is the key attractiveness of any company along with the strong position in the
industry. To improve the effectiveness of the company, it is important to identify the strengths by
the company in the market. In this manner, Porter generic strategy is very useful to analyze the
core strength of the company. According to this framework, the success of the company depends
upon the two factors i.e. differentiation and cost advantage. So, there are three basic strategies to
get success in the market i.e. cost leadership, differentiation and focus.
Figure 1: Porter Generic Strategy
(Source: Peck et al, 2013)
Cost leadership-
In the war of competition, the company can maintain the profitability by the cost
leadership strategy. The company can provide more effective services with the low prices and

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can achieve high level of profit. This strategy basically targets broad market. The company can
get cost advantages by focusing on the process efficiencies, achieving unique access for the low
cots material and avoiding unnecessary cost in the business operations. Each strategy has some
level of risk including low-cost strategy. So, the company should have some internal strength
such as efficient distribution channels, and high level of expertise to deal with the business
process.
Differentiation strategy-
A differentiation strategy is useful in the effective development of a product or service in
the company. To provide effective services, any company should differentiate its services from
the other companies in the similar industry. Adding value by the uniqueness in the service may
allow the company to attract more customers. Due to the services’ unique attributes customers
cannot find substitute of services easily. There is the risk associated with this strategy i.e.
presence of the competitors and changes in the customer preferences.
Focus strategy-
The focus strategy includes narrow segment to achieve either cost advantage or
differentiation in the product or service. The assumption of this strategy is that the company can
serve effectively by focusing on the needs of the groups. By the focus strategy, the company
enjoys high level of customer loyalty and this discourages the other companies in terms of
competition. The company that gets success in the focus strategy is able to able to develop wide
range of product or service strengths in the market. Like other strategies, focus strategy also has
some risks such as simulation and change in the target market. So, company should identify its
target segment first to offer the product or services (Peck et al, 2013).
Blue Ocean Strategy
The blue ocean strategy basically describes the market environment. In the blue ocen
strategy, the demand created by the markers rather than competition. There are many
opportunities for the growth that is profitable for any company. the Blue Ocean strategy descries
the potential market for the company where there are high level of chances to get success.
According to this strategy, the innovation in the particular service, or product must be done and

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create value for the market. If the services are less valued, then there is the need of some
innovative ideas to deal with this kind of strategic issue in the company.
So, blue ocean strategy is the business strategy that focuses on promoting the systematic
approach to make the competition irrelevant in the market. This is basically a core idea to create
value for the company in product and profit proposition. Before implementing the blue ocean
strategy in the Amazon Flex, it is important to understand the functions of the strategy.
Figure 2: Blue ocean strategy
(Source: Peck et al, 2013)
It basically recognizes the market boundaries and market for the managers. The demand
of the customers can be managed by the creating innovative value to unlock new demand. These
expectations of the customers can be met by focusing on differentiation and low cost blue ocean
strategy. The reason is that the level of growth and success can be achieved by the continuous
effort of the company. The blue ocean strategy is six path frameworks. There are six basic
approaches in the strategic framework which is known as six path framework. These frameworks
are helpful in creating the blue ocean strategy for the company. These have general applicability
in all over the industry. These six paths framework involved six ways to formulate the blue

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ocean strategy i.e. looking alternative strategies, looking for strategic group, looking for buyer
group, looking for complementary products and services, looking for functional and emotional
orientation and looking across time.
Figure 3: Six Factors
(Source: Peck et al, 2013)
Now, in case of the Amazon Flex, then blue ocean strategy would be helpful in creating
value innovations for the carrier services. Amazon should create a market for the effective carrier
services and should focus on delivering heavy products. The company should create and capture
the customers’ market demand in terms of effective cargo services. The company can also
provide value addition by keeping the cost of delivery charges consistent and low. By
continuously innovation in the cargo services, the company will be able to maintain the market
share (Kim, 2016).
Next is the Porter Generic strategy which is very effective in the case of Amazon Flex.
Differentiation is needed. The strategy of Amazon should be in such manner that provides
something unique in the services. There is the need of a business model to operate this Amazon
Flex program. There is the need in Amazon to sustain the growth and profitability for Amazon

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Flex. For this manner, Amazon needs to adopt cost leadership strategy to keep the cost low for
the carrier services as the customers are price sensitive these days. They prefer low cost products
and services. It should adopt global business model with the local delivery and supply chain.
This would increase the global business value of the company among the customers (Youderian,
2016). With the Amazon Flex, the company’s strategy is to deliver the products to the customers
effectively. But, there is the need of building convenient aspect so that the customers consider
the Amazon Flex as the useful service. In the differentiation strategy, the company can provide
discounts, coupons with the low delivery charges. By the Amazon prime programs, company can
provide offers to the customers if they use the service of Amazon Flex for their product delivery.
By the delivery of heavy products such as automotive, building supplies, agriculture and heavy
machinery, company would be able to target the customers those areas where the other
companies are unable to reach. It is well known that FedEx and UPS are very traditional
companies and deliver small parcels. By providing heavy materials, Amazon Flex will be
considered as the effective carrier service as compared to other companies (Duryee, 2015).

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References
D'onfro, J., (2015), One Of Amazon's Biggest Challenges For The New Year, accessed on 17th
August 2017 from http://www.businessinsider.in/One-Of-Amazons-Biggest-Challenges-For-
The-New-Year/articleshow/45983785.cms
Dontigney, E., (2017), Key Elements of a Strategic Framework, accessed on 17th August 2017
from http://smallbusiness.chron.com/key-elements-strategic-framework-18145.html
Duryee, T., (2015), FedEx to Amazon, Uber: Don’t be fooled, we make delivering packages look
easy, accessed on 17th August 2017 from https://www.geekwire.com/2015/fedex-to-amazon-
uber-dont-be-fooled-we-make-delivering-packages-look-easy/
Jthayer, (2016), Amazon: Automating the Supply Chain Using Mobile Technology, accessed on
17th August 2017 from https://smbp.uwaterloo.ca/tag/amazon-flex/
Kim, E., (2016), Here's why Amazon won't be a threat to FedEx or UPS anytime soon, accessed
on 17th August 2017 from http://www.businessinsider.in/Heres-why-Amazon-wont-be-a-threat-
to-FedEx-or-UPS-anytime-soon/articleshow/51986983.cms
Leonard, D., (2016), Will Amazon Kill FedEx, accessed on 17th August 2017 from
https://www.bloomberg.com/features/2016-amazon-delivery/
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logistics-to-lead-a-retail-revolution/3/#2ecd5cdc2a19
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2017 from https://www.forbes.com/sites/panosmourdoukoutas/2014/02/18/is-amazon-making-a-
big-strategic-mistake/#759f3f521581

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Opfer, C., (2017), Amazon Flex Draws Uber-Like Driver Complaints, accessed on 17th August
2017 from https://www.bna.com/amazon-flex-draws-n73014450075/
Palladino, V., (2016), Amazon looking to abandon UPS, FedEx in favor of its own delivery
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https://arstechnica.com/information-technology/2016/09/amazon-wants-to-challenge-ups-and-
fedex-with-its-own-delivery-system/
Peck, H., Christopher, M., Clark, M., & Payne, A., (2013), Relationship Marketing, Burlington:
Linacre house, Jordon hill
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