Generic Corporate Strategy of Amazon: Concentric Diversification and Cost Leadership
The term business strategy is about clear and people ideas which consist of various kinds of plans, action goals as well as objectives for their entire process of the business. These business strategies not only help in running the operation for the achievement of the goals and objectives but also helps in the preparation of the outline about how the entire business will intake the ability to compete in a particular marketplace with a range of production or services (Magerakis & Habib, 2021). These business strategies cannot be developed overnight, it requires suitable leadership, management as well as resources for the strategic planning in order to have a profitable business plan.
In the following paper, the business strategy of Amazon will be discussed to have a better understanding about the overall concept as well as understand what are factors that are helping the company in achieving the success. Amazon is known for being the famous online retail space, manufacturer of the electronic books and various other web services providers to satisfy the needs of the customers. Under the leadership of Jeff Bezoz, the company is doing their business and achieving their long-term businesses (Sadq, Sabir, & Saeed, 2018). The following paper will include the generic strategy of the company along with their approaches which helps them achieve their goals and objectives for the long-term approaches.
The generic corporate strategy of the company Amazon can be described by the name Concentric diversification. This entire concept behind the strategy is based upon all kinds of technological capabilities that can help in bringing success in the business (Haas, 2019). Along with this model, the company also applied a cost leadership strategy which mainly aims for the maximum value while offering the products at its lower price (Althafairi et al., 2019). The main intention behind the cost leadership approach is to engage the customers as much as possible to satisfy their own shopping needs and demands.
Amazon’s strategies and competitive advantages are always driven by the company’s own resources. From the technological development to the economic scale every internal and external resource is highly responsible for the competitive advantages and the performances of the company. The main strategy is about focusing cost by the help of cost leadership and on differentiation while working on the differentiation strategies in order to stand out in the market by their offerings and satisfying the need or demand of the customer base (Lemiao et al., 2021). These strategies comprise the latest use of big data where the company extracts the priorities and choices of an individual from the privacy without invading the privacy of the customer base. On the other hand, the company also put their focus on the cost reduction of the expensive items which only helps in making the product differentiation but also helps them in having a very convenient product line that can attract more customers for the shopping purpose (Firoz, Rashidirad, & Firoz Suleman, 2019).
The recent strategy of the company is to build around a convenient place where the customers will not have to wait in queue, rather they can pick anything without any hustle and also start experiencing the same delivery in a limited perimeter of areas with the help of drone supply of the goods.
Competitive Advantages and Marketing Strategies of Amazon
The main business strategy of the company, Amazon mainly put their focus on investing their monetary resources for both the exciting and emerging technologies in order to make a proper use of the same. Apart from that, the company also invests for the enhancement of logistics and its applications, proper improvement of all the web services in order to fulfill the demand of the customers, aligning the right kind of marketing strategies, research and development activities and lastly securing all the inventions by the help of patents (Sikdar, Kadiyali, & Hooker, 2019).
In particular the company holds various patents on technologies such as cloud computing which helps them to invent speech analysis or help the customers in experiencing augmented reality.
As for the marketing approaches, the company uses the most efficient strategy which has been useful for the company to make a huge impact on the customer base (Wu, & Gereffi, 2018). Under the good leadership of Jezz Bezoz, the company uses the cost leadership, a very generic strategy for all kinds of competitive advantages from the business for the competitive advantages. Amazon makes sure of the extensive use of the technology to maximize the efficiency of the operations, while reducing the costs. For the e-commerce services, the company uses automation which takes care of the data collection of the customers without invading privacy or looking after the purchasing process. On the other hand, by following the cost leadership strategy, the company keeps the prices of the products lower (Ives, Cossick, & Adams, 2019). These low prices of the products or services are useful enough to attract the mass number of customers for the services and purchases.
It is important to consider that the entire company is built on the satisfaction of the customers as well as their loyalty helps them in introducing more services to the customers. The main motto or rather can be said the main objective is to serve the customers and become the most customer friendly. Thus, this Cost-effective leadership business strategy has been effective for the company throughout years in order to become the most concovient company for the customers and establish best position in the marketplace.
Amazon is a customer driven company who gives customers the opportunity for purchasing the items directly from the company or from the third-party sellers as well. The most exciting part about the company’s business structure or method is that it offers a huge range of products and services at a low price which is convenient for the customers for the purchasing (Haque, Saber, & Shah, 2018). The other thing that helps the customers to put their trust in the company is the quality of the services to help them in having greater experiences.
Amazon offers a huge range of products for the customers which includes beauty products, health, groceries, industrial or scientific objects. This company occasionally sells more products than a person can even imagine for the daily usages or their necessities. Apart from that the core product is “convenience”. There are two things on which Amazon always puts their focus on which are the convenient product range and the quick delivery of the company in order to offer the customers a great shopping experience about e-commerce (Sudhakar, 2018).
Investment of Resources by Amazon for Enhancement of Logistics, Research, Development and Patents
The main monetary resources of the company are the retails, web services and the subscriptions from the customer end. This company uses different kinds of channels which are helpful in the process of earning revenue from the marketplace. Although the retail sections are the biggest sector for the generation of revenue where the company has shares for the online and physical stores as well. This sale of product is the main revenue earning space for the company. In this process the cost leadership strategy has been effective for the company in attracting the customers for more selling of the products as well as the other services as well.
While discussing the business model, the term which is needed to be considered is the value proposition of the company. This term value proposition refers to the idea of keeping promises from the company side to all the customers. This decides whether the customers visit the website or the physical store twice (Payne, Frow & Eggert, 2017). Value proposition highly relying on the customer loyalty and satisfaction factor. This is an integral part for the marketing as well as the business model for a company. For Amazon, the leader, Jeff Bezoz strictly follows three of the value propositions for the customers which are: a cast range of product items, fast delivery of the products and lastly the cost-effective leadership. The company itself is known for being earth’s biggest product selection for their huge range of products that are low in prices and the fastest delivery of the same. Amazon never fails in creating the value for their huge customer base by the help of a big range of the products through their online and offline stores where they also promise to deliver the product for the fast delivery (Mohd Satar, Dastane & Ma’arif, 2019). With the help of the latest technologies, the company has been able to use drones for fastest delivery in order to help the customers in having great purchasing experiences.
As it has been previously discussed that Amazon put their main focus on the investment for the inventions using the existing or emerging technologies, various research and development processes, having their own logistics and efficient supply chain for the betterment in the business plan strategies. The main corporate strategy of the company is concentric diversification where they put more stress on the differentiation and cost effectiveness to add value to the entire business operation (Rikap, 2020). The main concept of concentric diversification is a kind of growth strategy where the company tries to search for more opportunities in order to add a new product in the existing line of products, this can also be based upon the customer feedback to make the product and its features more efficient for the customers. Similarly, Amazon keeps on adding new kinds of inventions in their existing services products which makes a positive impact on the customer base.
Yes, it can be said that the company has successfully made changes in their product line. At the time of establishing this business, amazon only used to sell books, as the time spassed te company gained the profitability and expanded their range from selling books to household, healthcare, fashion or veen technological products that can help in making a person’s living better (Cattero & D’Onofrio, 2018). In recent years, this e-commerce and technology based online company tools took over the market share of the grocery shopping as well through their own websites. This corporate strategy has been helpful for the company in making an expansion in their product line acquisition of the grocery market. This grocery shopping also provides the delivery process at lightning-fast speed in selected cities only. This predicted line expansion and the usage of technology in the same is very much profitable for the company to earn a huge amount of the revenue.
On the other hand, amazon used their vertical integration strategy for the entire process of business operation. The meaning of vertical integration is about the usage of a streamline where the operation works by taking up ownership at various stages for the production and then relying on the external suppliers of the cost effectiveness and selling of the entire business (Periwal, Jain & Rajkumar, 2018). Under the leadership of Jeff Bezoz, the company has been able to get the fastest growth by the help of vertical integration. Over the time, the company has been able to build up their operational process on the basis of the vertical integration. For example: the company uses automation in their own warehouse in order to stay ahead in the competition in the e-commerce business area. Similarly, Amazon has developed an efficient cloud system to use the technology for the insights of the customers and their behaviors.
As for the organizational structure of the company amazon, the company follows the hierarchical corporate structure with almost 1.3 million people under the leadership of Jeff Bezoz. The structure is segregated as per the necessity of the innovation. It is important to mention that Amazon always practices diversity in their organizational structure. People from different races, background or sexual orientation has been working together to create a inclusive workforce to keep the pace of the business operation while innovating new for the services and to reach to the main goals and objective of the company.
The company is also known for being a great example for the vertical integration where they produce the products with the help of this diverse workforce and their creative approaches to add new things in the product line (Keith, Tay & Harms, 2017). The company involves the third parties to make this development, innovation or the operation more profitable by earning a huge revenue from the customer base.
Lastly, for the corporate strategies, the term globalization plays a huge role for Amazon which is successful in today’s time. Amazon has their own kind of globalization process by which they have been able to enter new marketplaces in different countries to expand their business for more profitability. The entire operation of the company, Amazon, is currently available in various different languages other than English. This globalization also helped them in allowing the customers to have 25 different currencies to pay for. Being a customer friendly company, amazon never fails in satisfying the customers as per their need and their demands based on the necessity. In recent times, the most useful factor that has helped the company in gaining success is millennial marketing. The millennial generation are more drawn towards online purchasing than shopping while visiting them physically. They not only shop from the online retail stores but they also watch programmed or movies over the amazon application. With the help of cloud computing and artificial intelligence, the company has been able to expand their business in different countries.
As for the corporate strategy of the company, they follow the concentric diversification where they put their main focus on the differentiation and cost leadership of the services and the products which ultimately helps the company gaining a huge number of customer base who are satisfied in getting best quality products at a low price. So it can be understood that through the corporate strategy, amazon tries to keep their planning for the benefit of the customers (Lai et al., 2022). On the other hand, the business strategy of the company talks about the investment for the technologies, R&D or even the logistics for the major improvement of the business while at the same time keeping the customers satisfied by the services such as new products in the same products in the same product line or the quick delivery process.
From both corporate and business strategies it can be understood that in both the ways the company put their main focus on the satisfaction of the customers while creating the path to earn more revenue and expand the business seven more effectively.
Conclusion
At the end of this paper, it can be concluded that over the years the company, Amazon, has successfully developed a huge customer support by only spending 15 years in this ecommerce industry. Their efficient business and corporate strategy both are driven towards the customers, thus it helps the organization in developing new things for the customers in order to satisfy them and their needs. The extensive use of automation or having cost effective leadership has been helpful for the organization in competing with the other brands while increasing and enhancing their own productivity as well. In future, the company includes more differentiation in terms of the services or even products which can be helpful for them in being most recognized among the customers and become the best cost leader in the industry.
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