Introduction to Strategic Management
Strategic management is the most crucial and essential function for business organizations in terms of attaining desired goals and objectives. The role of strategic management is increasing day-by-day as companies have started giving importance to the very first step of the management function i.e. to planning in relevance with arranging the tasks in an effective sequence through which productivity could be maximised along with maximising the returns over investments made. Strategic management includes framing of strategies for the business for the purpose of attainment of future goals as well as evaluating the effectiveness of current strategies to align the future outcomes with the expected outcomes (Szolnoki, Thach & Kolb, 2016).
In consideration to the significance of strategic management, this report will focus on the future strategies for Amazon Inc. in terms of enhancing organizational performance by making their strategies flexible and effective enough to deal with different types of market situations. Amazon is a giant e-commerce company with its headquarters in Seattle, Washington. The company was founded in 1994 by Jeff Bezos and since then, organization has acquired the leading position as the largest internet retailer in the world measured in terms of market capitalisation and revenue. The company started its functionalities by selling books and with the passing time, Jeff Bezos has evolved his strategies with the objective of cope up with the changes as well as to gain competitive advantage (Amazon Inc., 2018).
This report will determine the evaluation of strategies in Amazon in the last 5 years along with analysing the type of industry including utilisation of appropriate strategic frameworks. Further, report will include the discussion of company’s competitive position in comparison to the primary competitors of the organization. The next phase of the report will include analysis of organizational strategies with their mission and vision in relevance with the demand and wants of the target market.
Organizational strategic capabilities will be discussed along with discussing the future strategies which could be adopted by the organization to gain future goals. Further, possible strategies will be discussed through which the organization could be able to defend its core business in the global market and the last part of the report will focus over recommendations for the objective of enhancing the performance of the organization through which company would be able to address all the challenges and opportunities for the objective of attaining desired goals.
Initially, Amazon.com was just an online bookstore which later on becomes the number one online retailer across the globe. With the passing time, organization diversified their product offering through which the organization could have been able to target other customer segments. Today, organization sells millions of products and the company’s logo also indicates the huge product and service offering of the organization. In relation to the organizational success, growth and development, credit goes to Jeff Bezos, CEO and founder of Amazon Inc.
because with his unique thinking style and innovative behaviour, organization would have been able to expand its business approximately in more than 80% of the world with 12 registered offices in the worldwide locations (Grant, 2016). Jeff Bezos always believed that innovation is the only aspect to sustain for longer run along with retaining the interest of the target and potential customer segments.
Background of Amazon Inc.
Thus, the major objective of the organization has always been inclined towards the innovation and this is not just limited to the top level management, organization has provided all the resources to its employees which are required for thinking out of the box. Although, organization have also faces several challenges and issues due to their wrong decisions but with the effective strategies and effective decision making process, organization has been always been managed to get over those challenges and issues very quickly (GreyB Services, 2018).
In the Fortune 500 list in 2017, Amazon ranked on the 12th position and in the same year, organization also managed to acquire the position in the top ten companies by securing the 8th place and it is considered as the biggest achievement for the organization as it is the best rank for Amazon since they have managed to set up their presence in the magazine first time in 2002. The last five years for the organization have been tremendous as the organization have been able to enhance their sales by 140% including whopping of $178 billion in 2017 from $74 billion in 2013. Along with this, organizational revenue also increased by 31% in 2017 in comparison to the revenue in the previous year.
Apart from this, Amazon has also expanded its operations in last five years which have become one of the most effective decisions for the organizational sustainable growth and overall development. Amazon has invested in different technology for improving their services in order to enhance customer satisfaction. Amazon has made investments in following sectors:
- Robotics
- Drones
- Alexa (virtual assistant)
- “Alexa Everywhere” Strategy
- Amazon Go
- Cloud Technology
- Prime Video and Prime Music (online entertainment)
Amongst these technologies and products, one of the best strategies for organizational success and growth was launched in 2017 as “Amazon Everywhere” which surprisingly became the huge success for the organization despite the presence of other top personal assistants in the market. Amazon launched Alexa in 2014 in smart speakers as Echo and this made the organization to stand with its primary competitors in the artificial assistant market. Google Home and Apple are the two biggest rivals of this industry and Apple has also announced to soon introduce their virtual assistant Siri-enabled speakers as Homepod.
In order to gain competitive edge over these two competitors, organization announced to launch Alexa (AI) in every echo devices along with numerous other new products in 2017. Along with these products, organization announced to introduce two major Alexa integrations for non-Echo devices and the organization also announced that Alexa will be launched in the BMW cars from the beginning of the next year. These are some of the effective strategic decisions taken by Amazon in last 5 years which have not just boosted organizational revenues and profitability but it has also led the organization to expand their functionalities in various other trending industries like web services, cloud storage, artificial assistant, online entertainment, etc. which has also helped the organization to build a massive brand image in the global market (Seeking Alpha, 2017).
Amazon Inc. is a mammoth player of e-commerce industry and it stands on the leading position as the largest online retailer in the world. Company was founded in 1994 by Jeff Bezos and its headquarters is situated in Seattle, Washington. From being an online bookstore in the initial period to becoming the largest online retailer in the world, journey of Amazon has been very interesting. There were various obstacles which degraded organizational performance in this journey but with the effective strategies, organization continuously moved towards their primary vision of becoming “the online store of everything” (Columbus, 2018).
Evaluation of Amazon’s Strategies in the Last 5 Years
Frameworks for strategic analysis
Growth of e-commerce industry started with the introduction of internet and the penetration of smartphone. Since, penetration of smartphones has been increased, demand for mobile internet has been increased and this has ultimately generated opportunities for the companies to expand their businesses over internet in order to expand their reachability. Internet has been proven as the biggest factor for the companies who operate on e-commerce platform. Amazon is one of the largest internet retailers in the world and through e-commerce platform; organization has been able to establish its brand image in the global market.
Amazon operates in more than 188 countries which is approximately 80% of the world with 12 offices in different countries. In some countries where organization is not yet present, they offer international shopping for some of their products to set up their brand image in those locations also. Amazon has separate retail websites for countries like United States, United Kingdom, France, Canada, China, Japan, India, Singapore, Turkey, etc. (Cohan, 2018). Primary vision of organization is “to be the earth’s most customer centric company” and with regards to this, organization uses number of frameworks to design their strategies as well as evaluate the organizational performance in the market with the objective of determining the scope of improvement. Following are some of the frameworks used by Amazon for strategic analysis:
- PESTEL Analysis: for evaluating the impact of external factors over business
- Value Chain: for analysing internal strengths of the organization in order to fulfil target audiences’ demands and wants (CB Insights, 2018).
Both these methods are useful for the organization to evaluate organizational performance along with determining the impact of internal as well as external factors through which relevant strategies could be designed for the objective of enhancing organizational performance as well as to match up with the latest trends, customers’ requirements and competitive conditions in the market. Apart from this, these analyses are also useful in evaluating the scope of entering into other countries with the objective of expansion (Jenkins & Williamson, 2015). Ultimately, these analyses help the organization to develop the new and innovative ways to move towards attainment of organizational vision as well as to establish an effective brand image in the target market along with brand loyalty amongst the target audience (CNBC, 2018).
Competitive Advantage
Amazon is one of the giant players of the e-commerce industry and as the market conditions of e-commerce industry is oligopoly because there are only few names which are operating at international level. With the passing time, Amazon has expanded its functionalities and with regards to this, currently, organization is present in different sectors and in all sectors, organization has multiple competitors. Majorly, organization performs in three general segments i.e. media, other merchandise and electronics (Bouncken, et. al., 2015).
In the media segment, organization competes with Netflix, eBay that is also known as auction site, Time Warner Cable, iTunes, Apple, and Play store by Google. In this industry, organization functions as Amazon Prime Video and Prime Music and as of 2017, organization has become the second largest online entertainment platform in the world (Segal, 2018).
In the electronics and other merchandise segment, organization has several competitors and amongst them, most of the companies are brick and mortar retailers which performs on the both platforms i.e. offline as well as online. Best Buy, Staples, Target, family Dollar, Walmart, SysteMacs, and Big Lots are some of the competitors which are major players of brick and mortar retailers.
Analysis of the E-commerce Industry
The main competitors of Amazon in e-commerce industry are Alibaba Group, Overstock.com, Vipshop Holdings, etc. In the other segment, organization competes with some of the biggest companies of the world like CDW, PC Connection, Oracle, Insight Enterprises, Accenture, Salesforce.com, etc. (Shaoolian, 2016). In relation to this, Amazon has acquired the leading position in the online retailing industry in terms of market capitalisation and revenues while it still stood on the second position in terms of overall sales. For fiscal 2017, Amazon reported $161.15 billion in revenues; it had a market capitalization of $885.22 billion as of July 16, 2018.
Amazon’s vision is “to be the earth’s most customer centric company” and with regards to this, management monitor organizational performance at all locations to analyse whether organization is moving in right direction or not. Jeff Bezos, CEO and founder of Amazon Inc. has believed in innovation and being customer centric in order to sustain in the competitive and dynamic business environment for longer period of time. Thus, he and his team always seeks for all those strategies through which desired goals and objectives could be attained along with the organization could be able to reach to its vision (Amazon Inc., 2018).
In relation to this, Jeff Bezos and his team always try to upgrade its products and services in relevance with the fulfilment of their target and potential customers’ demands and wants. Along with this, organization always seeks for innovation and creativity for the objective of enhancing their customer base, attracting new customer segments along with aligning the demands of the marketplace (Ang, Benischke & Doh, 2015).
As per the organizational vision and mission, organization considers their target audiences’ demands and wants with the objective of reaching towards their vision along with boosting up organizational performance in the target market. Organizational innovative strategies are the major contributors for enhancing organizational performance along with matching up with the dynamic business requirements (Peppers & Rogers, 2016).
Strategic Capabilities
Amazon’s strategic capabilities stands on the three pillars i.e. price, selection and convince and these elements are used by Amazon for the motive of fulfilling their customers’ demands and wants. Along with this, these pillars also act as the primary components for enhancing customer experience with the organization. Apart from this, organization has included innovation in their strategies for the objective of retaining their targeted customers’ interest in the organization as well as in approaching to the new customer segments.
In relation with gaining competitive edge over its competitors as well as to retain their acquired position in the market, organization uses Porter’s Generic strategies (West, Ford & Ibrahim, 2015). Cost leadership and product differentiation are the two major strategies used by the Amazon to offer the unique products from its competitors and that too at minimum prices for attracting customers. Therefore, strategy clock concept states that Amazon’s generic strategy could be deemed as Hybrid Strategy which seeks to attain differentiation and low price simultaneously related to its customers. Hybrid strategies enable organizations to acquire big portion of the target market along with boosting up the sales volumes.
Amazon’s Competitive Position in the E-commerce Industry
Expansion and market entry strategy
In the global market, Amazon’s strategies are considered as the most effective and result oriented. Various big multinational companies have also followed Amazon’s strategic concept with the objective to expand their business in the international market along with enhancing the market share for gaining competitive advantage. Primary strategy used by Amazon for expanding their business in the international market is “GLOCAL” which describes “go global think local”. For the objective of entering into new markets, organization mainly consider joint venture or acquisition of small businesses of the same industry in order to understand the type of market, conditions in the market, target customers’ preference, demands, and for determining the competitive conditions in the market with the objective of designing appropriate strategies. As a result, organization is currently operating in more than 188 countries in the globe with separate retain websites for countries like United States, India, United Kingdom, China, Japan, Turkey, etc. (Hill, 2017).
Strategies for defending core business
Amazon’s core business activities include providing a decent platform for buyers and sellers to transact upon and in return to this service, organization charges certain rate of commission as the fees for providing a mammoth platform. On the other hand, organization does not charges extra from customers except the delivery charges and that too till a minimum order value and after that, organization does not charges delivery charges also (Karakaya & Yannopoulos, 2010).
With regards to this, their primary motive is to expand their functionalities in the global market as well as to establish an effective brand image so that organization could be able to sustain in the dynamic and competitive business environment for a longer period of time. In relation to this, organization could adopt the following three strategies in order to defend its core business:
Excellent customer service
Although, Amazon’s vision is to be the earth’s most customer centric company, thus, providing excellent customer service for the organization is not much difficult as their strategies are linked with enhancing their customers’ experience with the organization. This could be done by delivering qualitative products and services along with implementing quality checks for the objective of maintaining quality. This will ultimately help the organization to build a reliable image amongst the customers which will ultimately boost up the organizational performance in both financial as well as reputational terms (Wamba, et. al., 2008).
Easy to use and responsive website
Website design and its responsiveness matters a lot because it act as the first impression for the customers towards the organization. The more an organizational website will be responsive and easy to use, the more and large part of the target audience will be attracted. Amazon’s website takes less than 3 seconds to load in the average speed of internet (Hickman & Silva, 2018). With regards to this, organization could easily be able to retain its existing and potential customer segments along with targeting new customer segments. Apart from this, it is necessary for the organization to maintain appropriate categories in their website on the basis of products and services so that customers could easily be able to find relevant products and services as per their requirements (Mulpuru, Harteveldt & Roberge, 2011).
Organizational Strategies and Mission
Understanding customers
Knowing the customers and their demands is necessary and on top of that, targeting them in an appropriate manner also stands crucial in relation to the defending core business practices. There should be difference in targeting new and existing customers so, same marketing tactics should not be used for the existing customers. In order to retain their interest along with targeting new customer segments, organization needs to introduce new products and services as per the latest business trends, marketing environment and customers’ demands and preferences (Reddy, 2017).
Resource Implications
With regards to the organizational functionalities, it can be considered that for sustainable growth and overall development, Amazon requires maintaining the level of resources that they have along with seeking for the new opportunities in order to accomplish its desired goals and objectives. Primary resources for Amazon are talented and skilled employees, innovative and creative workplace environment, and all other resources which are required for the purpose of enhancing customer engagement within the organization in order to enhance customer experience and their satisfaction level (Gowri, et. al., 2015).
Amazon is required to address competition, employees’ demands and wants, aligning their efforts with the organizational vision and understanding customers’ demands and wants. With the help of these variables, organization would easily be able to utilise available resources to the optimum level along with gaining desired goals and objectives for the purpose of sustaining in the competitive business environment for longer period of time (Pearlson, Saunders & Galletta, 2016).
Conclusion
From the aforesaid information, it can be concluded that strategic management is the most crucial and essential function for business organizations in terms of attaining desired goals and objectives. Strategic management of Amazon is considered as the most effective in the global business environment and various multinationals follow their strategies in order to attain success and growth. In this report, organizational strategic directions of the past five years have been discussed along with discussing the detailed strategic analysis of the organization.
Further, report has concluded organizational vision and mission statements along with determining strategic capabilities of the organization in consideration to their desired goals and objectives. Strategies have also been discussed for defending organisational core business activities and the last part of the report have concluded resource implications for the recommended strategies.
References
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