Strategic Analysis Of Amazon Company

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Strategic Analysis Of Amazon Company

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Discuss about the various aspects of the successful business of Amazon in the industry.


The report will be based on the analysis of the various aspects of the successful business of Amazon in the industry. The different aspects that are related to the success of Amazon in the online retail industry will be analysed in the report in detail. The evaluation will further help in understanding the business operations of Amazon that has taken place over the years and the improvements that have occurred in these processes.
Overview of Amazon
Amazon.com, Inc. is conducting its business operations in the electronic commerce industry of the United States of America. The company was established in the year 1994 by Jeff Bezos. The technology giant has acquired the position of the topmost retailer in the world in terms of the market capitalization and revenues. Amazon holds second position in the market in terms of the total sales in the entire world. Amazon runs separate websites for different countries where it operates namely, United States, United Kingdom, Ireland, Canada, Germany, Spain, Italy, Netherlands, Brazil, Australia, China, Mexico and India (Amazon.com.au: Shop online for Electronics, Apparel, Toys, Books, DVDs & more. 2018).
Market opportunity of Amazon
The most important and frequent activity that is performed on the web today is the online shopping. The state of the e-commerce industry was however not the same during the start of Amazon in the year 1994. The internet had gained popularity in the year 1994, however the entire process of enhancing the security of various operations and other major activities took more than 4 years to be in place. Jeff Bezos had planned to start its innovative business in the year 1994 when the e-commerce market was not quite developed and the internet based platforms were still not established (Hair et al. 2015).
Business strategy of Amazon
The business strategy that has been implemented by Amazon can be described as the cost leadership which is taken to extreme levels. The online retailer has been able to increase its business opportunities and profit margins with the help of the effective implementation of the generic strategy. The four major principles that guide the business strategy of Amazon are, obsession with the customers rather than focussing on the competitors, passion for the inventions, long-term thinking process and the commitment that has been shown to the operational excellence (Fleisher and Bensoussan 2015). The three major activities of the company that have further supported the business strategy are, making regular entries in the new segments of the markets, strengthening the ecosystem of the company and focussing on the leadership based values.
Timeline of Amazon from 1994 and present
Jeff Bezos had decided to start an ecommerce organization in the year 1994 after understanding the high growth potential of the internet. The CEO of Amazon had understood the issues that can be faced by the company to sell products on the internet based platforms. The business was then started by Bezos with the help that he had received from his parents. The IPO of the company was launched in the year 1997 and approximate worth of the company was around 438 million Dollars. The start-up that had been established by Bezos slowly developed into a multinational corporation within a short period of time (Lhannaoui, Kabbaj and Bakkoury 2014). The main part of the huge growth of Amazon was based on the internet. The business model that has been created by the company has been able to provide the innovative methods of growth. The organization has shown high rates of growth from the online bookstore in the year 1994 to a multinational online retail company in the year 2018. The research that has been conducted by Amazon based on its business operations is mainly based on the compilation of the ideas, the partnerships, the business strategies which have been important for the success of the company in the industry (Metzger et al. 2015).
Revenue model of Amazon 
The payment systems that were used by Amazon in the early years of its operations was mainly based on online payment with the help of credit cards. However, with the evolution of the internet and the online shopping platforms, the methods of payment of the company had also changed a lot. The most popular method of payment that has been introduced by Amazon was the “cash on delivery” method. The company has further introduced many other payment modes which have been helpful for the loyal customers to pay for the services and products in a convenient manner. The different methods of payment that have been introduced by the company recently include, credit cards, debit cards, Amazon store cards, gift cards. The concept Amazon Pay has also been introduced by the company recently which is a wallet service for the customers of the company (Van Der Aalst, La Rosa and Santoro 2016).
Technology issues in Amazon
Amazon has been facing a huge risk in the ecommerce market which is mainly related to the huge number of hackers who have been threatening the security of the database of the company from the last few years. The security and data loss related issues that are faced by Amazon have been highlighted in the annual report of the company in the year 2016. The huge amount information that is held in the database of the company is a major concern for the profitability of Amazon in the online retail industry (Lehmann 2016). The entire services of the company are based on the internet and the security related issue can cause the loss of trust of the loyal customers of Amazon. The third party based technologies that have been used by Amazon are also a concern for the security related issues of the company. Amazon has invested huge amounts in the creation of the security based programs and software. However, this software has not been successful in providing the absolute levels of security to the company (Grant 2016).
Innovation in Amazon
Amazon has invested heavily in various innovative technologies for the improvement of the revenues of the company in the industry. The company has invested considerable amounts on the drones and the robotics. The patents related to these technologies have also been gained by Amazon. The warehouses of the company are filled with more than 45,000 robots. In the year 2012, the company named Kiva Systems was acquired by Amazon. The organization is famous for the designing of robots and their packing process as well. Amazon Drones are also a part of the innovative product base of the company (Rosemann and vom Brocke 2015). In the year 2017 the Drone based delivery program of Amazon was approved by the US Government. The company has further released many Drones for the delivery of packages to the customers. Artificial Intelligence has been used by Amazon to create another innovative product named Alexa. In the year 2017 a new centre for research was developed by Amazon in Germany. The strategy of Amazon named “Alexa Everywhere” was implemented in the year 2017. This strategy had proved to be a huge success in the market in spite of the presence of many other companies in the market which provide similar services (Hair Jr et al. 2015). Amazon Go was another innovative strategy of the company which was a physical store of the company set by the company to get closer to the customers in a physical manner. Amazon has also acquired many companies which in the space of cloud computing which have led to the strengthening of its AWS Cloud based business. The organization has invested largely on the various cloud based services that are provided to the customers. Amazon Prime was a major step of the company towards the formation of a loyal customer base who are provided with more facilities as compared to the normal customers. The Amazon Prime video has also provided tough competition to a huge organization like Netflix (Easterby-Smith, Thorpe and Jackson 2015).
Products offered by Amazon
Amazon had started its business operations in the year 1994 by offering books and DVDs. However, the company had shown high rates of growth in the following years. The product line of the organization was extended which now includes products like, baby products, fashion apparels, beauty related products, gourmet food, groceries, personal care and health based products (Müller and Pfleger 2014). The huge product line of the company also includes various other items like, scientific supplies, musical instruments, personal care related items. The services that are provided by the company to the large number of customers mainly include Amazon Prime, Amazon Pay and many more. The wide range services and products offered by the company have been the main reason behind the success of Amazon in the market (Woerner and Wixom 2015).
Target markets of Amazon
The target market of Amazon has been segmented with the help of geographic and the demographic process. The criteria which has been selected for the geographic segmentation is mainly based on the different regions and the density of the customers present in the regions. The company offers its products to the customers in greater than 100 countries. The age of the target customers of the company is above 18 years. The behavioural segmentation process is also used by Amazon to provide the best products to the customers. The three types of customer segments that are formulated by Amazon are mainly, the hard core loyal, the soft core loyal and the switchers (Leonidou et al. 2017). The company has targeted the customers with the help of the attributes which include, the wide range of the products, the competitive prices and the convenience based on online purchasing.
Financials of Amazon
Amazon has been operating on a break-even point in the years before 2014. The company has however shown huge amounts of profit in the year 2016. The revenues that were posted by Amazon in the year 2016 was higher than 40 billion dollars. The costs of the company based on shipping and other marketing related activities have increased in the recent years. This has caused pressure on the profits of the company (Brewster 2017). The company had suffered huge losses in the year 2015. The increase in sales of Amazon in the year 2016 had thereby led to huge profits for the company in the industry. The company is however spending huge amounts on increasing the speed of their delivery in various areas of its operations. The third party sales of Amazon have also increased in the recent years further leading to the increase in the sales of the company as a whole (Akter et al. 2016).
Figure 1 – Source – (Amazon.com.au: Shop online for Electronics, Apparel, Toys, Books, DVDs & more. 2018)
Figure 2 – Source – (Amazon.com.au: Shop online for Electronics, Apparel, Toys, Books, DVDs & more. 2018)
Figure 3 – Source – (Financials.morningstar.com
Figure 4 – Source – (Financials.morningstar.com 2018)
Competitors of Amazon
The biggest competitors of Amazon in the online retail industry are the other major online retail based companies and the brick-and-mortar based organizations. The major competitor of Amazon in the media based segment is Ebay. The other main competitors of the company in this sector are, Netflix, Apple, Google. The competitors of the company in the retail sector of Amazon are, Target, Walmart. The operating based segment of Amazon also has to face huge competition from the companies like, Insight Enterprises, Oracle, salesforce.com (Buckley, Burton and Mirza 2016).
Business partners of Amazon
Amazon has made some valuable partnerships and alliances with various organizations in the years of its operations in the online retail industry. The retail websites of companies like, Sears Canada, Mothercare, Lacoste and Marks and Spencer has been operated by Amazon. The company announced a partnership with DC Comics in the year 2011. The digital rights based on the popular comics that are created by DC has been taken by Amazon (Grover 2016).
Value chain of Amazon
Infrastructure – The infrastructure of the company has been strong enough to provide the best services to the customers of Amazon. The company also manufactures and further sells kindle. The organization also offers various programs that can enable the sellers for the purpose of selling their products.
Human Resource management – The structure of the company is organic in nature and the products that are offered to the customers are offered with the help of the ecommerce platform of Amazon (Spender 2014).
Technology development – The availability of high range of technologies was the major reason behind the establishment of Amazon in Seattle. The innovative programs and the software were created by Bezos. The company has also established itself as the leader among the e-tailers.
Procurement – The e-procurement based activities have been implemented by Amazon to create a profitable experience for the huge range of customers of the company.
Primary activities
Inbound logistics – The development of technologies and selective process of procurement has also been able to filter choice of the services and products that are made by the company. The security in the transactions has also been a part of this factor of Amazon.
Operations – The operations of Amazon have been organized in two parts which are in North America and the overseas. The highly efficient technologies of Amazon have been used by Amazon in the different processes (Cubas?Díaz and Martínez Sedano 2018).
Outbound logistics – The distribution based activities of Amazon have been developed in-house and the network of distribution that has been for this purpose also has been quite useful for the company.
Services – The online services provided to the customers of the company have been able to provide them with a different type of shopping experience. The recommendations related to products are also provided by Amazon (Buckley, Burton and Mirza 2016).
Strategy of Amazon in Australia
The fulfilment by Amazon based services have been rolled by Amazon in the operations in Australia. The products of the company are delivered to the customers in Australia with the help of the logistics that are provided by Amazon. The company has been able to attract the local business owners with the help of this strategy. The local business organizations are thereby able to provide the products to the warehouse of the company. The products then reach the targeted customers with the help of the efficient logistics based services designed by Amazon. The returns and other related issues are thereby handled by Amazon. This has helped Amazon in capturing a large area of the retail market of Australia within a short period of time (Cubas?Díaz and Martínez Sedano 2018).
The report can be concluded by stating that Amazon has been successful in creating its profitable position in the market with the help of the efficient strategies that have been designed by the management of the company. The innovative products and the uniqueness of the company has been able to help the company in creating a profitable position in the online retail market. Amazon has however faced major issues based on the security related concerns of the data of the customers and the partners of the company. This is a major issue that has been highlighted by the company in the annual reports for many years. The value chain of the company has been efficiently serving the interests of the customers of Amazon for many years.
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