MGT703 Strategic Management: A Strategic Innovation Report on Amazon

This report provides a comprehensive analysis of Amazon Inc.'s strategic management of innovation, utilizing frameworks such as PESTEL analysis, BCG matrix, and McKinsey GE framework to evaluate the company's current position and strategic decisions. The report identifies the need for innovation within Amazon, evaluates its current growth and innovation strategies, and examines a specific innovation opportunity the company is pursuing, namely its ventures into physical retail with Amazon Go and the acquisition of Whole Foods. The analysis considers Amazon's strengths, weaknesses, opportunities, and threats, ultimately providing recommendations based on the company's strategic approach to innovation and market positioning. This document is available on Desklib, a platform providing a range of study tools for students.

Running head: STRATEGIC MANAGEMENT
Strategic Innovation Report
Name of the Student
Name of the University
Author’s note

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Executive Summary
The purpose of this assignment is to understand the dynamics of the management of a company
while taking decisions for incorporating innovation in the process of their business. With the
help of PESTEL analysis, BCG matrix and McKinsey GE frameworks the current position and
the strategic decisions are evaluated. The organisation selected is Amazon Inc, as the company is
famous for its innovation not only in its products and service but also in their process.

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Contents
1. Introduction..................................................................................................................................3
1.1 Company Overview...............................................................................................................3
1.2 Role of innovation in the company........................................................................................4
2. Strategic management of innovation of the company.................................................................5
2.1 Industry analysis to identify the need for innovation............................................................5
2.2 Evaluation of the current growth (innovation) strategy.........................................................7
2.3 Evaluation of one innovation opportunity the company is currently pursuing...............10
3. Recommendation and Conclusion.............................................................................................11
Reference List:...............................................................................................................................13

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1. Introduction
Innovation is the process of improving an idea which already exists, there is a difference
in between invention and innovation, where invention is developing a new concept, innovation is
the process by which an idea can be modified in order to make it better. business organisation
have several strategies which help them to grow and expand, so of them incorporate the
expansion strategy, on the other hand some incorporate differentiation and product development.
Depending on the organisation’s culture values and principles, the goals and objectives of the
organisation are set and innovation plays an important role in the process for some of the
companies (Roco and Bainbridge 2013). The company that has been chosen to conduct the study
is Amazon Inc as innovation plays a significant role in its business model.
1.1 Company Overview
Established by Jeff Bezosin the year 1994, Amazon Inc is an American multinational
organisation that is listed in NASDAQ as AMZN. In the last financial year the company has
recorded revenue of US$4.106 billion (Annualreports.com. 2017).Amazon Inchas most of its
business operation based on the internet platform and the services that they provide are based on
e-commerce business model. There is a wide array of services that the company has developed in
the short time of its operation. Now, the company has shown interest in the physical products
business as well by acquiring the Whole Foods chain in 2017 and recently investing in an
ambitious project called Amazon Go.Over the years, Amazon with the help of innovation and
expanded its business exponentially over the last decade.

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1.2 Role of innovation in the company
The company hadbegun its operation from the garage of Bezos in 1994 and now the
company has set benchmarking standards for the companies operating the same industry. Bezos
is known as a visionary transformational leader who encourages innovation in the process of
business. The company has broadened the service line with the help of innovation and with the
objective of providing the customers with services that cater to their needs and requirements. The
management of the company is focused on understanding the growing needs of the customers
based on the dynamics of the industry and designs services that improve the quality of work.
Amazon started the business by selling books and then slowly moved on to consumer goods and
FMGG products as well (Amazon.com 2018). Then the company developed their cloud service
followed by the venture in the entertainment industry as well. But retail has always been the
central focus, from online retail the company has shifted to offline retail and the latest innovation
is in the retail stores called Amazon Go. The company describes it as the future of retail with
fully automated services making buying grocery hassle free and easy. The company also
manufactures its products for example: Amazon Kindle, Amazon Echo and Amazon fire etc
(Amazon.com 2018). Another innovative venture of the company is the Amazon prime
subscription which is aligned with the other services that the company have be it the online
retail, the physical retail stores or the products that the company come up with. This unique
feature of one subscription throughout the line of services help the customers to make full use of
the products and services of the company (Amazon.com 2018).

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2. Strategic management of innovation of the company
The company is led by the visionary Jeff Bezos and the management decisions are taken
under his responsibility. Based on the value of providing the customers with the best possible
solutions to the problems, Amazon incorporate innovation not only in the products or services
but also in the business process. With the help of determining the dynamics of the industry and
the resources and capabilities of the company, the decision of growth and expansion are
incorporated.
2.1 Industry analysis to identify the need for innovation
The company understands the need for innovation as an important part of their business
model as there is intense competition in the market and the industry in which the company
operates has target market that needs to be constantly catered with upgraded products and
services in order to keep their interest aligned with the supply of the company. Following is a
PESTEL analysis which will help in understanding the need for innovation better.
Political
The company has to keep up with the norms and regulations of the country
they are operating, in order to get full support from the government.
Innovation is essential in this sector as the services have to pass the
restrictions of the government of the country where they want to extend.
Economic
The economy of the country directly reflects the purchasing power and the
income of the people, thus the company decides upon the price of the
products and services based on the economic condition of the places of
operation. Innovation is important as the company focuses on developing
products which can be availed by the target market.
Social Innovation is important as the products or services that are provided by the

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company can be used by the people of any culture and any background.
The company encourages a diverse culture practice among the employees
as well so that innovation and diverse insight can be gathered for product
and service development.
Technology
Technology plays the most important role in the process of innovation for
Amazon. In the business model that is driven by technology any
advancement and any upgrade in IT is welcomed by the company and is
incorporated in simple ways to solve complicated problems.
Environment
One of the principles of the company is to build a sustainable future and in
order to pursue that principle the company incorporates a number of
innovative methods.
Legal
To operate in various countries the company has to abide by the rules and
regulations of the country, the trade laws, the labour laws etc are some of
the important aspects that have to be considered while developing policies
and decisions for operation. Innovation in process is therefore necessary
for the company in order to stay aligned with the

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2.2 Evaluation of the current growth (innovation) strategy
With the help of the BCG matrix the evaluation of the current growth strategy can be
analysed. The BCG matrix will help in analysing the product portfolio and distinguish between
cost-effective and unprofitable business units. The products and services in the unprofitable
segments require attention. Amazon has a large portfolio of products and services which can be
divided in the four segments: Starts, Cash Cows, Question Marks and Dogs. Following diagram
lists the products and services of the company in each category.
Stars
 Amzon.com
 Kindle
 Echo
 Amazon Fire
 Amazon Prime
Question Marks
 Physical retail units
 Web services
 Amazon Art
Cash cows
 IMDB
 Audio books/audible
 Createspace
 Amazon EBook
Dogs
 Destinations
 Daily Deals
 Fulfillment by Amazon
 Amazon Local
 Fire Phone
Source: Author’s Creation
The products that are listed in the star category are the ones which provide the company
with the position that they are in the market they are the source of revenue and the process of
Relative Market Share
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innovation should be incorporate in these products to upgrade the utility and provide the
customers with a better service.
The cash cows are items in the list that has low scope of improvement in the future. The
products in this lies are profitable and provides the company opportunity to focus on the business
units that are not profitable, the company should not focus in these areas to invest in innovation
as it is a matured market and has its own people and satisfied customers(Amazon.com 2018).
The segments in the question mark has potential of improvement and thus the product
and service portfolio in this list should be the focus of innovation for the product as there is
market growth potential in these segments. Amazon can use these items to improve the business.
In the category of Dogs the products and services list is used to recognize those products
that are not generating considerable amount of sales as well as not been able to establish a
notable market share. Amazon Inc can choose to invest in the innovation of these products in
order to improve the market share. But since the services listed are failed it is most likely that the
company will focus on other projects than going back to the ones that are failed (Borison 2015).
The McKinsey GE framework will help in understanding the current growth and
innovation strategy of the company better.

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Amazon Prime Physical retail units
Echo, Amazon Fire tv,
Amzon.com
Web services, Amazon Art Daily Deals, Fulfilment by
Amazon
Kindle Amazon Local Fire phone, Destinations
Source: Author’s Creation
It can be concluded from the analysis of both the framework is that the company has got
considerable success in some of the product portfolio on the other hand there are some that have
been a total failure for the company. The organisation is now focused on improving the status of
the market in the retail business. As we have analysed that the physical retail market is in the
position of question Mark which suggests that there is opportunity for the company to invest in
this segment. Apart from that form the BCG matrix the Amazon Art platform is also seen to
share space in the question market segment suggesting as the concept is relatively unique the
company has the capability to cater to a niche market. With innovation in the process of
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Competitive strength of business Unit
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promotion and marketing the service the company can gain the competitive advantage and
upgrade the service to the Stars segment. The list that is in the high and medium segment of the
GE framework suggest that these are the ones that have potential to innovate and also have the
potential to generate revenue for the company as they have competitive advantage as well as
have opportunities in the market to perform better (Mckinsey.com, 2018). The target market of
Amazon changes with their product or service, but the objectives of the company remain the
same.
2.3 Evaluation of one innovation opportunity the company is currently pursuing
From the evaluation of the recent investment updates of the company it can be concluded
that first the company has acquired the chain of whole foods. Secondly, the launch of the
revolutionary Amazon Go has helped the company to innovate in the physical retail sector as
they understand that some people want to physically pick grocery items rather than depending on
that is sent over to them by the delivery person in case of an online purchase (Bessant and Tidd
2007). So the company has chosen to find the difficulties that the customers face while buying
grocery items. The company has removed all the barriers in the process of purchase by making
the process based on technology. The idea is to pick the items that you want and to walk out of
the store without any payment or waiting in the queue (Mckinsey.com, 2018). The company has
aligned the Amazon Prime subscription service with the Amazon Go service in order to make the
process completely mechanical and hassle free (Youtube.com 2016).
The launch of the store in early 2018 had made headlines explaining the store format to
be revolutionary and a breakthrough in the retail industry. The process of innovation in this
criterion can be called as disruptive as the traditional perspective of retail is being challenged
with this format (Christensen et al. 2015). Amazon is known for its breakthrough innovations in

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terms of its services and products. Furthermore it can be argued that the retail industry is
established in for a long time but the idea of upgrade with the help of technology has led to an
innovation that has been developed in this process is the fact that it is completely digital and fuss
free, the customers do not have to stand in queues to bill their items rather they do not even have
to pay for the items they have picked up all the process will be handled digital form the moment
the customer walks through the door of the store (Neate 2016). The company is always focused
on the needs and requirements of the customers in order to design a project or to develop a
product line (Souto 2015). The company has invested in retails as this is the industry that has
opportunities from the perspective of incorporating technology in the process of the business
function. Amazon has always welcomed new ideas, and has invested and taken risk in order to
grow in their business. The CEO has stated that the objective of the company is to incorporate
ideas which will make the life of the customers easy. The idea of e-commerce was also new at
the time the company was established, and the company has set up benchmark for the
competition in the e-commerce sector. Similarly, with the physical retail unit the company wants
to invest in technologies and ideas that are designed to make the process of buying grocery easy
(Amazon.com 2018).
3. Recommendation and Conclusion
Therefore, from the above analysis on the innovations in Amazon Inc, it can be
concluded that the company is one of the most innovative in the specified genre, which is
followed by many of its competitors to achieve the kind of success it has achieved. The brand is
known for their unconventional planning and strategies with ethics that benefits both the