Strengths, Weaknesses, Opportunities, and Threats of Amazon
Discuss about the Business Strategy and Management Of Amazon.
The purpose of the following report is to describe about the business strategy of Amazon. The business strategy is a very important thing for the business companies so they can compete in the modern competitive business environment. In this report the analysis of the business strategy for Amazon will be presented. The success strategies of the company will be presented in this report. The market value and brand reputation of Amazon os huge indeed. The product and service diversification is alos a very important factor in determining the business strategies. In this paper, some of the most important things will be discussed like the product diversification strategy; the competitive factors for this organization should be used as well. They have been targeting to capitalize on their market on the basis of their international market expansion. Also one of their most important target is to achieve the household name status. They want to become the market leaders in their industry. This is why they will need to grow their market status properly. They might face some challenges in the future for optimizing their strategies properly. The potential strategies that they might adopt should be discussed here as well. These strategies will help the organization to thrive more in this environment.
The chosen organization for this business report is Amazon. This is a online retail company that was founded in the year 1994 by Jeff Bezos (Amazon.com 2018). They have been serving the worldwide area for their services. They are active in most of the countries. This company began its trading in the year 1995. The headquarters of the organization is located at Seattle, Washington in the United States of America (Amazon.com 2018). The market capitalization has been one of their most important grounds as they had crossed Walmart in this. They are considered as the third most valuable public company by the revenue. This is why they will look to invest in expanding into other countries. They have many subsidiaries working under them. Currently they are trying to invest on increasing their market capital so they can insist in their growth strategies. They have to improve on their strategies so they can gain more customers by the recommendations of their existing customers. (Amazon.com 2018).
Amazon has been a company that has stressed on the market expansion for a number of reasons (Mithas, Tafti and Mitchell 2013). They operate in a certain industry that is highly competitive for the dependence of the customers on internet and the target market of this company is mainly the young people. The competition has been one of the most important things for the Amazon to confront and the internal environment for the organization should be discussed properly (Armstrong et al. 2015).
Product and Market Diversification as a Key Business Strategy
Strengths
- The brand value of the company is very much strong.
- They focus on three strategies like cost leadership, differentiation and focus strategy (Valipour, Birjandi and Honarbakhsh, 2012).
- They use the information technology for the betterment of their services.
- The e-commerce distribution channels they use is very much strong and finds them new customers every time (Johnson 2016).
Weaknesses
- The diversification strategy of Amazon has been very much thin as it seems from the contemporary aspects.
- They offer free shipping facilities for their customers. This is how they are losing their profit margins in a big way (Gamble, Thompson and Peteraf 2013).
- As they have no physical stores and only focus on online retailing, this might be a problem for them in the international expansion (Kumar, Gaur and Pattnaik 2012).
- Amazon tends to operate in the zero margin business models. The profitability of the company is decreasing in this way.
Opportunities
- They can introduce the online payment system and this could be an effective step for them to resolve the issues to the customers (Sudarno 2012).
- They can sell new products and focus on improving the quality of the products.
- They can increase their brand value by raising their product portfolio in a better way.
- They can offer to open several other websites in the emerging markets.
Threats
- The identity theft and hacking of the personal data of the consumers can cause a serious threat for the customers.
- The pricing strategies of Amazon are very much aggressive. This is why they have faced some lawsuits from many publishers as well (Benito-Osorio et al. 2012).
One of the most important things for identifying the business strategy of Amazon is the product diversification strategy. Amazon has gone on to concentrate on the diversification strategy so they can get more customers at their disposal within a shorter span of time (Benito-Osorio et al. 2012). At the beginning, Amazon began their business by focusing on the various areas like the selling of the mobile phones, spare parts for the motor vehicles, electric goods, cosmetics, clothes and many things. They will be using the market penetration strategies for increasing their market share. They will strengthen the customer loyalty of their existing markets and focus on creating new customer markets (Coelho and (Henseler 2012). They have also adopted one strategy like sending their customers the gifts that would be helpful for them to promote their new products. This is the way they can raise the motivation among the employees properly. Then only the customers will feel the urge for shopping from online retail platform like Amazon (Lazaroiu 2015).
Amazon has been targeting to sell various new products so they can increase their market share by focusing on their target markets. Now, they are planning to sell various products like pharmaceuticals, houses, insurance policies for the customers and many more facilities. It has been seen that the high-fi corporate people do not have the ample time to buy these things by consulting with the experts. So, they simply prefer the internet mediums properly. Amazon will provide the customers with the better and convenient products for their use (Barney 2014).
Amazon will also like to introduce new products for the developing new markets in the future. They do not want to confine themselves within one array of the business products. They want to be global and focus on selling the diversified products to their customers. The online retail site also offers their customers with the free repair service for their several products. They have been using the conglomerate diversification strategy so they can cater to the needs of several customers from all the levels of the society (Barney 2014). Now they want to focus on new products that are just developing and this is why they want to get the grab on these products. They want to grow into these sections as they will not face any market competition here. If they can grab these markets at one go, this will be highly profitable for them. The aspects of customer satisfaction will be on their target as well. This will pose a positive effect on the minds of the customers and they will feel motivated to complete their shopping from Amazon.
Marketing Mix of Amazon
The business model that the organization currently uses is the Clicks model. According to this model they have adopted the Just in Time approach for the customers. This approach means the strategy by which they will provide the special products and services just in time when it is needed. They go on to buy the products from their suppliers and send it back to their customers. In order to do this, they must focus a strong supply chain and logistics support for the customers (Christopher 2016). This proves to be very much beneficial for both the sellers and buyers.
A very significant thing for adopting the perfect marketing strategy is indulging in building a proper marketing mix. However, it has to be said that Amazon has been able to expand the size of the market as they have improved their marketing position than their potential substitute online retailers (Gordon 2012).
Product
Amazon has been expanding their business by selling various types of products like the books, DVDs, latest and exclusive mobile phones, jewelry, clothes and many other things. This huge range of products has benefitted them a lot by increasing their customer base. They are aiming to enter many new products into their inventory for catering to the needs of diverse customers (Gordon 2012)
Place
The brand value of Amazon is so high that it has saved the company from being drowned in this competitive environment. They are present in most countries. The R&D technology they use has become a very important part of their supply chain and logistics process. The employees of Amazon are generally very friendly and they mitigate all the problems with smiling faces all the time. The customer service for Amazon is present in most of the countries.
Promotion
As Amazon is a e-commerce site, the most useful way for promoting their business is digital marketing or social media marketing (Tuten and Solomon 2017). Amazon has also taken up the strategies like spreading the uniqueness of their products by the television commercials. The advertising strategy for Amazon is very much web based indeed. They also use the advertising networks online. This is why the customers see the same products on some other websites as well (Gordon 2012) They are also keen on getting their name on the high up on the search engines like Google. This will help them to get the most useful reactions from the users. This is why the name of the company begins with ‘a’. The word of mouth promotion activity has been used by Amazon for getting more users as well.
International Expansion: Challenges and Opportunities
Price
They use the competitive strategies in terms of setting the prices properly. They have many employees all over the world (Gordon 2012) This is why they use the premium pricing method so they can pay their employees on time. The competitive pricing of the company should benefit the company from many angles. The company uses the online payment system so this system is very convenient for them.
Amazon has targeted the international expansion for several reasons. They want to build up a distribution network so they can get a wide range of customers all over the world. The millions of customers would help them to gain the best profits. The intensity of global expansion of Amazon is huge indeed (Penrose 2017). This is why they will need to focus on strengthening their customer base in a better way. They want to expand their market overseas in the markets of Asia and Europe. They want to capture the Asian countries like China and India. The huge population of these countries will help Amazon to succeed as well. Most of the European countries like England, Germany, France and Italy have been much updated with technology. This is why the Europeans will get the advantages of using the Amazon prime benefits.
Amazon has been facing many challenges in their business operations. These challenges will act as the backdrops for getting the profits within their business operations.
- Amazon has set up the performance targets for the sellers in most of the countries. It will be a great cause of worry if the sellers are not able to meet the performance targets. This will lower down the profits for Amazon (Pantano 2014)
- The e-commerce market is very convenient as well as costly. Amazon wants some of the important data like the name of the customers, their address, their identity cards, the details of their bank accounts and many more. If these data are somehow leaked, this will cause havoc and the customers will lose the faith on the security settings of the company (Pantano 2014).
- Amazon wants to sell diverse products focusing on different target markets. It might happen that all of their target markets do not respond to these products. Besides that the qualitu of their products is also an important question. It has been reported from some regions that the product quality for Amazon has not been that much up to the mark.
- The lack of proper training for the employees about handling the e-commerce system will hamper their business operations (Ford 2014).
- As Amazon operates in several countries, they might face the issues related to cross-culture. The employees belong to different backgrounds and this could cause huge issues.
Some recommendations could be given in order to solve these issues. These recommendations can really be helpful for designing the working environment and reshaping the business operations in a better manner.
- Amazon should bring some regular offers for their customers. These offers should be new in concept and should be able to draw the attraction of the customers (Ford 2014).
- Amazon should arrange for the training of the employees to make them adept at handling the e-commerce systems. This should enable the employees to work better.
- The working environment and organizational culture should be very much friendly.
- Amazon should draw up more competitive strategies so they can be able to cope up with the challenges posed by their rivals or competitors (Ford 2014).
Conclusion
This paper can be concluded by saying that Amazon has been the best online retailer in the world right now. The business strategies of the organization have been discussed here. The different business strategies and business models they have adopted have been described here properly. Some of the important things that have been discussed here are the marketing mix of the company, different issues like the product diversification strategy, internal environment and other things. The product diversification strategy has been very much important for them to be the market leaders in the online retail industry.
References
Amazon.com (2018). Amazon.com: Online Shopping for Electronics, Apparel, Computers, Books, DVDs & more. [online] Amazon.com. Available at: https://www.amazon.com/ [Accessed 20 May 2018].
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