Executive Summary
A strategic analysis of Amazon is employed in this document in order to highlight the major problems that must be considered by the management. The company is considered a leader in electronic retailing globally, however facing a stiff competition from its counterparts as bricks and mortar companies as they are emerging in the contemporary corporate setting and establishing their online presence. Amazon is engaged in finding ways to adequately address the contemporary challenges in the global marketplace in order to maintain its competitive position and subsequently attain a greater share of profits from the international market.
Introduction
Amazon is deemed one of the influential organizations which experienced the benefit of online emergence and created an international blueprint which allowed the company to become competitive in terms of commodities and services and technological advancements. Amazon always notices the preferences of customers before offering its final services to them so that customers receive what they are worthy. Amazon’s corporate blueprints are as per its internal and external environmental assessment and they are considered central in order to achieve the above-average growth in the competitive marketplace. Amazon started its business operations in the initial periods of the year 1995 and the company is recently acknowledged the top-ranked retailers . The purpose of this document is to create a strategic report on Amazon. In order to undertake the strategic analysis of the company, various analysis methods are used, including internal environmental & strategic challenges assessment, external environmental & strategic challenges assessment, and strategic options analysis. After completing a range of assessments, this report recommends Amazon about the strategic direction in the years to come.
EXTERNAL ANALYSIS
Macroeconomic Analysis
In the external environmental analysis, various environmental factors impacting the organizations are elaborated and determine how they change the behaviors of an organization in terms of trading. It is established in the research that macroeconomic analysis is referred to the external environmental analysis.
PESTEL Assessment
Marketers of the contemporary corporate period utilize a PESTEL assessment for appraising and observing the macro environmental elements which influence on a company ; .
Political
The role of political environment in an economy is significant for a business because it involves different factors, including legislatures, tariffs, benchmarks, and different policies which impact extensively the company’s revenue making, price establishment, and added creation of the sector particularly when an organization is deemed a leader in the marketplace in the targeted marketplace. The official divisions create rules in terms of e-trading for businesses in general. A research indicates that not very strict competition exists in the heavy industries of European Union and North American regions.
European Union
The European Union has directed electronic – business organizations from mistreating the control in the marketplace, dominating the unions and acquirements that add value in the development of an organization, preventing organizations which employ conspiracies in terms of price fixing, lobbies, and a range of different collective engagements .
World Trade Organization
The World Trade Organization in the year 1998 acknowledged the policies linked with electronic business where different problems were came into notice, including economic inferences of electronic business; association amid digital business and the conventional types of business; growth – centered problems, burden of custom charges in terms of digital communications; rivalry; authority; and on show legislations; and different lawful problems . In order to ensure flexible trading, numerous kinds of zonal corporate accords have been established by the WTO.
Economic
The fiscal or economic environment may reveal a central influence on the achievement of organizations across its impact on a couple of dimensions as demand and supply is indicated in a research . Moreover, it was also established that organizations are required to prefer those fiscal impacts which are found to be pertinent in trading and ultimately observing them. The common behavior of global and local nations may show a deep influence on an organization’s achievements . A couple of significant developments were noticed, including recent Internet-retailing development in Asia-Pacific, digital, and improved electronic buying trends in the most populated economies as India and China are all the factors which will definitely add value in the corporate activities of the Amazon.
Social
Social Networking
The emergence of Facebook and Twitter has altered the traditional ways of conducting corporate activities, and now companies with the help of the stated social networks improve their client database with the help of their marketing strategies; moreover, a significant awareness according to a research has been seen in e-social networking. A significant increase in the utilization of Internet service, Smart phones, computers etc. by a couple of customers has been found as indicated in a research . It is not wrong to assert that the use of internet globally in recent setting has been considerably increased if a comparison is made with the history. The growing tendency in the technological period has redefined the way a business is conducted. People are now inclined towards digital buying instead physically go to the place and execute a transaction. The stated situation is favorable for Amazon as the company will be able to know about the role of demographics and different cultural attributes for a business in an economy.
Technology
As it is a common understanding that the contribution of technology cannot be ignored when it comes to a business. It is establishing a research that more than 85% of families residing in the United Kingdom in the year 2012 showed the property of Internet connection, even though this figure was comparatively greater in contrast to the previous period . However, the United Kingdom has the dominance in Internet dissemination in contrast to five different Western economies, including Spain, Italy, France, and Germany . It may be without any interruption proportional to electronic business, particularly Amazon which already has subsidiaries in a couple of stated economies. The stated situation may influence Amazon to experience appealing customer database within the Western Europe.
Environment
It refers to the association amid individuals and the physical destination. Environment-centred individuals employ efforts to safeguard the physical place from the expenditures linked with manufacturing and advertising commodities. The most important ecological problems which must be noticed by any organization whose business depends on electronic trading involve global warming, power conservation & conservation of additional deficient reserves, utilization of used packaging & undertaking recyclability, pollution dominance, contamination dominance, the application of ecologically flexible elements, and consideration of corporate social responsibility. However, for Amazon or any other organization dealing with digital business are required to consider all of the stated factors except pollution-control and global warming in order to carry out the business activities in an intended manner as it is revealed in a research that customers employ creative methods to initiate purchasing.
Legal
A range of e-business legislations is applicable in India and China in contrast to the United States and United Kingdom. However, a study shows that international legislations must be acknowledged by the company. It shows that executing corporate activities amid the stated economies are found to be complex. However, as appealing e-business legislations emerged in the emerging countries, it is found flexible to execute the application of laws in terms of digital corporate activities . The stated situation is favorable for Amazon to grow its business activities due to open laws in the emerging economies.
INTERNAL ANALYSIS
It is a method which establishes the relationship between the reserves of an organization and its capabilities. Furthermore, internal analysis reveals the techniques which add value to the clients as indicated in a research . Strategic capability refers to the required reserves and competencies which a company must have in order to ensure its survival and development. Strategic capability is pictorially outlined in the following sketch:
Figure 1: Strategic Capability
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Strategic Capabilities
It has been already established that the strategic capability of an organization involves its competencies and reserves, and they are deemed central for its survival . The comprehension of the strategic capability of a company is mandatory for appraising its strategic status effectively in the marketplace. The above diagram of a strategic ability as claimed in a research prudently outlines the concept.
Threshold & Unique Resources
They are required to address client’s least provisions and thus endure to happen. On the other hand, unique reserves strengthen competitive benefit and reveal hard time for rivals to acquire or reproduce. The threshold and unique resources are divided into two categories as tangible and intangible.
Tangible Resources
The physical reserves of a company involve computers, machineries, properties, and its manufacturing capacity. The following table outlines the physical reserves of the Amazon as indicated in a study of the year 2012 :
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The head office of Amazon is based in Seattle, Washington, United States and it is the property of the company and has already acquired leases with respect to its properties. Moreover, Amazon has its business center, warehouse operations and fulfillment, data hub, client amenities, and different services fundamentally in a couple of regions, including Asia, North America, and Europe. The company possesses distinct retail digital platforms in a series of economies, involving US, UK, France, Italy, Brazil, China, and other emerging economies along with different global shipping to particular different economies for special commodities . Because of the strong foundations of Amazon globally along with a range of leases which stayed for another two decades approximately, the company has the option to execute tasks in an effective manner.
Monetary or Financial Reserves
The following diagrams represent two different situations. Preliminary, a comparison of the operating expenditures debited in the books of accounts by the Amazon during the financial years 2010 and 2012 is made. Secondly, net sales revenue credited in the books of accounts within the North American and a global operation during the financial years 2010 and 2012 is revealed.
Figure 2: Operating Expenditures*
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*The above values are in millions
Figure 3: Net sales revenue across commodity and sales service revenue*
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*The above values are in millions
It is established after the analysis of above diagrams that not very significant, nevertheless a little growth in the subject cases together is reported from 2010-2012. A steady increase in the development appears a good sign that Amazon is on the correct way thus expected to thrive in the years to come.
Personnel Resources
The recruitment of Amazon in terms of permanent and part-time workers up to December 31, 2012 is eighty-eight thousand four-hundred . Nevertheless, a deviation is found in the recruitment extents because of the seasonal causes which influence the corporate activities of the organization, chiefly while the spiritual events, including Easter and Christmas. In the stated spiritual periods, Amazon experiences a greater increase in its profitability and sales revenue.
Intangible Reserves
When it comes to managing the brand name of the Amazon which is the intangible asset, it is found to be a huge liability and it has been effectively address by the management of the company. The head office of Amazon is based in Seattle for a couple of periods, it appears flexible for the management to supervise the functions without commuting from one to a different destination as mostly preferred by numerous organizations in the contemporary period for dividing the job burden. The brand title along with the Patents on Kindle technology offer an effective status amid the company’s rivals and clients comparable, and this leads to the appealing goodwill amount pertaining to the effective extents.
Competencies
They refer to the capabilities and strength of a company which develops effective measures to deploy the reserves across its engagements and procedures. Threshold competencies are known as procedures and engagements which are required to address the least provisions and thus endure to on show. On the other hand, core competencies strengthen competitive benefit and it becomes complex for rivals to acquire or reproduce the core competencies of an organization.
Amazon is considered an influential organization and has experienced core competency across its exclusive reserves and as well through offering amenities and establishing associations with its traders. All of the stated considerations have enabled the company to stand before the rivals a strong barrier which is quite hard to remove . Amazon as well established links with associates, including Christian publishers along with Simon & Schuster Incorporated in order to create a good amount of titles for Kindle and moreover nurturing tendency in this emerging commodity .
Ultimately, Amazon while inducting individuals utilizes a strategic method which reveals the sharp behavior of its landlord. A broader existence of applicants having expertise in the information technology is found in Seattle. The availability of professionals in IT influenced the management of the company to underpin itself. Amazon took strategic induction initiative as it recruited the previous Vice President of the Wal-Mart, Richard Dalzett in the capacity of Chief Information Officer. As the newly appointed Chief Information Officer was competent in a range of corporate activities, including supply chain management, marketing, money-making decision-making advocacy, and data mining frameworks etc. The stated competencies of Richard enabled Amazon to go one step further and enjoy the better business in contrast to the traditional dimensions to carry out corporate activities previously .
Strategic Options
The blueprints preferred above are required to be appraised for Amazon in order to investigate if they are effective in seamless continuation of the company. The strategic options are found to be significant because they highlight the efficacy of the entire blueprints in attaining the intended outcomes. The administrators may as well evaluate the relevance of the recent blueprint in the contemporary biosphere with modernizations happened in PESTEL assessment. It is indicated in a research that strategic evaluation is called the ultimate stage of strategic management .
Suitability, Acceptability, & Feasibility
Amazon’s involvement in the electronic – retailing market in China is attributable to the acquaintance of joyo.com by the company in the year 2004 . However, the official findings as reported in the Wall Street Journal that the company was not successful in achieving the required performance standards locally and globally because of the decreased share of market as compared to its competitors. The market penetration strategy as explained in the Ansoff Model given below is found to be relevant in terms of suitability, acceptability, and feasibility.
Figure 4: The Ansoff Model
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The Chinese economy appears to be a relevant place for marketing of Amazon; therefore market penetration strategy is the best for the company to adequately address the Chinese marketplace. On the other hand while considering acceptability, it is necessary for Amazon to utilize the strength of the Chinese marketplace optimally for circumventing any sort of financial distress. Furthermore, it is mandatory for Amazon to pay attention on its merchant programs because local and specialized trading of products across local corporate individuals reveals importance to the local clients. When feasibility is considered, Amazon remarkably performed in a couple of economies as Germany, Japan, and United Kingdom etc. and this performance demands the company to employ market penetration strategy in order to avail above-average profits rather establishing measures for initiating the trading activities into a new market.
Conclusion
In this report, an evaluation of diverse organizational aspects where Amazon is engaged is undertaken. The assessment of the stated organizational settings revealed the emergence of a couple of likely strategies. According to different studies assessed in this report regarding Amazon, it would not be wrong to state that the company has enough strength to capitalize its resources due to multiple reasons, including global identity, topographical presence, improved tendency towards research and development, customer-centered approach, diverse series of commodities, utilization of advanced applications, highly competent employees, and huge economies of scale. The determination of strategic choices by Amazon is done through PESTEL assessment, for example if suitability is considered, the PESTEL analysis allowed the organization to gauge the tendencies about incurring expenses by the customers. The company’s vulnerability includes nonexistence of physical outlets, not very significant monetary streams, and decreased percentage in the profitability because of the stiff competition globally. According to the standpoint of the author of this report that Amazon is not effectively organizing threats because the company significantly bases on vendors. Furthermore, the company failed to appropriately welcome the executable patents legislations. It appears that the company is not in a position to address the stiff competition emerging in the global arena. It is inferred that there is an existence of inconsistency amid the vision of the company and its strategic preferences. The reason behind that the company expressed concentrated corporate vision. However, the contemporary corporate provisions demand the vision of the company to be redefined. Overall, the company’s strategic choices which involved suitability, feasibility, and acceptability reveal any issues as they are engaged in gauging the strength of the organization through diverse angles. It is recommended that the company needs to adjust its business vision with its strategic preferences so that it could behave influentially in the corporate world.
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