Amazon is an online retailing company based in Seattle, Washington. Amazon.com, Inc. is known as Amazon across the globe. Company is delivering its products and services in more than 188 countries through e-commerce platform along with 12 registered offices in different countries. It was founded by Jeff Bezos in 1994 and initially,
Amazon was selling books from a garage. Jeff Bezos, CEO of Amazon Inc. once dreamt for selling everything on internet which was, later on, came true and today Amazon is one of the largest online retailers across the globe with millions of product and service offerings. The company is present in Asian countries, United Kingdom, United States, and Australia and in various other countries. With its huge product and service offerings, organization has developed its effective place in the e-commerce industry. Amazon is on the leading position in the e-commerce industry in terms of revenues and market capitalisation while, in terms of total sales, Amazon is holding second place after Alibaba Group (Amazon.com, 2018).
Primary objectives of organization are to set up their presence in those parts where organization is not yet present. Amazon’s CEO has adopted the GLOCAL strategy which is efficient in terms of market entry and organizational growth strategy. Motto of this strategy is to expand organizational business in the national as well as in international market. This strategy says “go global, think local”. With relevance to this strategy, organization has attained sustainable growth and development objectives along with the development of an effective brand image in the target market (Hill, Jones & Schilling, 2014).
This report will cover the aspects such as ownership structure of organization, external and internal governance mechanisms and different types of external controlling factors which affects organizational performance. This helps organization to develop unique and advanced strategies in order to deal with these factors so that organizational performance does not get affected. Further, the report will aim over the aspects of basic sources of cost and differentiation advantage in the industry.
Along with this, the report will also cover the aspects under which organizational position will be analysed amongst the competitive business environment. Next section of report will aim over value chain analysis in relation with identification of sources of gaining competitive advantage. Last section of the report will discuss VIRO analysis in relation with determining whether the acquired position is adequate for organization or not so that the corporate governance mechanism could be analysed.
Ownership structure
Amazon is a fourth most valuable public company across the globe. Apple, Alphabet, and Microsoft are ahead of Amazon. Apart from this, Amazon is the largest Internet Company in terms of revenues across the globe and it is the second largest employees in United States after Walmart. Along with this, Amazon has acquired Whole Foods Market in $13.4 billion and this helped the organization to increase its presence in terms of a brick-and-mortar retailer. Further, in 2018, Jeff Bezos, CEO of Amazon released its shareholder letter the number of Amazon Prime subscribers. It is approximately 100 million which is 64% of households in the United States (Hitt & Duane Ireland, 2017).
Internal and external governance mechanism
It is necessary for an organization to set effective corporate governance in order to set as well as to meet with its strategic goals. Structure of corporate governance combines policies, guidelines, and controls which helps the organization to move towards the appropriate direction for the attainment of set goals and objectives (Wheelen, Hunger, Hoffman & Bamford, 2017). These mechanisms also help the organization to satisfy its stakeholder’s needs along with developing an effective brand image in the competitive and dynamic business environment. In corporate governance, numerous mechanisms are involved which are as follows:
Apart from these mechanisms, there are various other forms of control which need to be adopted by an organization with regards to the controlling of organizational operations. In relation to this, it is necessary for the organization to determine the significance of their external bodies which could affect the performance of the organization (DeFranco, Morosan & Hua, 2017). These forms of external control are as follows:
Independent audit: It is a crucial part of corporate governance structure. Independent external audit is executed for the purpose of analysing the organization’s financial statements. Results originated from the execution of independent audit helps the organization to serve its internal as well as external stakeholders. This audit portrays clear picture of the organization amongst the stakeholders and it helps them to take decision on the basis of financial performance portrayed through financial statements. Controlling or amending organizational financial performance is not in hands of organization and on the basis of financial performance, stakeholders create picture for the organization. Independent audit is a primary tool through which organization could easily attract the investors and public to invest in the organization as well as to build an effective image amongst them (Hua, Morosan & DeFranco, 2015).
Cost and differentiation advantage
Amazon has acquired leading position as an online retailer in the global e-commerce industry. Primary reason for organizational success, growth, and development is their strategies and approaches (Liu & Hong, 2016). Basic sources through which an organization could enhance its effectiveness in the market are cost management and unique measure adopted for differentiating its products and services from the competitors. Amazon is operating in various parts of the globe and every country has different conditions, thus, it is necessary for the organization to adopt advanced level strategies which could generate positive outcomes irrelevance to the type of market conditions or strategies needs to be designed as per the market conditions. Amazon designs their strategies on the basis of organizational requirements and market conditions so that set goals could be accomplished (Boyd & Solarino, 2016).
Amazon mainly focuses over cost management, reduction in cost and in terms of waste management so that the profit margin could be maintained along with the objective of attainment of competitive advantage (Formentini & Taticchi, 2016). Following strategies have been adopted by Amazon with regards to the attainment of organizational goals and objectives along with differentiating its products and services from its competitors:
Amazon is a largest online retailer across the globe in terms of revenues and their operations area is also wide. It operates mainly in three segments i.e. media, electronics and other merchandise. In every segment, competitors exist for Amazon and in order to maintain their acquired position as well as to differentiate its products and services from its competitors, it is necessary to adopt unique strategies. In media segment, eBay is a primary competitor in terms of an auction site, and Netflix is a major competitor in terms of media game changer,
Time Warner Cable, iTunes, etc. (Weber & Jones, 2016). Apart from the media segment, Amazon has several competitors in electronics market and Alibaba Group is one of the primary competitors and it stands on the leading position in terms of total sales. In the third operating segment, Amazon competes with several of the world’s largest companies including CDW, PC Connection, Insight Enterprises, Oracle, salesforce.com, Accenture and Citrix Systems, among others (Heide, Kumar & Kumar, 2014). Company reported $161.15 billion revenues in fiscal year 2017 and at the beginning of 2018, the company had market capitalisation of $607.20 billion.
Strategic group is a concept which is mainly used in strategic management and primary purpose of this concept is to combine companies of same industry, who have similar business functions, business models and combination of strategies. Strategic group for Amazon could be defined in different categories such as media, electronics and other merchandise. Above figure shows the strategic map of Amazon in terms of online retail industry. This group segregates companies with the same business models on the basis of product’s quality, product offering, price and presentation of products (Gereffi & Fernandez-Stark, 2016).
Value chain Analysis
It is an analytical framework which helps the business entities to identify the effective activities in relation with the organizational operations which could create value for the organization and ultimately, it could help the organization to attain competitive advantage.
Inbound Logistics
Amazon has inbound inventory system in terms of providing products to its target audience with regards to the increasing customer satisfaction. This also helps the organization to enhance the reliability of customer for organization through huge product offering. Inbound logistics of organization is FBA (Fulfilment centres by Amazon). In this case, Amazon assumes full responsibility for logistics, customer service, and product returns. Apart from this, Amazon ships both FBA as well as Amazon owned-inventory items in same box so that brand image could be sustained amongst the target audience (Jaligot, Wilson, Cheeseman, Shaker & Stretz, 2016).
Operations
Amazon’s operations are segregated into three segments:
Amazon outbound Logistics
Amazon currently operates more than 100 fulfillment centers across the globe and these fulfillment centers are huge in terms of size. For managing, stock, picking, receipt, and shipment of product, Amazon uses robotic technology. Specifically, Amazon Robotics, which started with the acquisition of Kiva in 2012, now uses more than 15,000 robots to support the stowing and retrieval of products at a higher density and low costs. Along with this, the organization has also announced the Prime Air services under which drones will be used for the purpose of delivering products to the customers within minutes after placing orders (El-Sayed, Dickson & El-Naggar, 2015).
Amazon marketing and sales
Annual global marketing expenses are increasing rapidly as Amazon has adopted numerous methods of marketing and promotion. Amazon is continuously enhancing its operational area and in relation to this, it is constantly expanding its business in the international market especially where company is not yet present. In terms of promoting its products and services, the organization is using components such as marketing mix and in this mix, print and media marketing, sales promotion, direct marketing, public relations in order to communicate the message to the target customer segment (Kogut, 1985).
Amazon service
Amazon claims that it is the Earth’s most customer-centric company and in relation with this, company offers exceptional customer services. Amazon’s Marketplace and Prime are two significant service platforms which provide an effective platform to both sellers as well as to the buyers to fulfill their needs. For sellers, Amazon offers seller coaching program where sellers could sell their products and services to their target audience and this lead the organization to enhance its product offerings. With the help of this product offering, organization attracts its target audience and provides them a huge choice amongst the products and services to avail and consume (Lin, Tsai, Wu & Kiang, 2012).
With the help of this, organization has attained leading position in terms of revenues, market capitalisation across the global online retailing industry. With regards to the above-discussed elements of Amazon’s operations, it could be said that organization has managed its operations in an effective manner. These have helped the organization in relation with the attainment of set goals and objectives along with the originating opportunities for acquiring an effective position in the international market where Amazon is not yet present (Daellenbach, 2015).
VRIO Analysis
This analysis is an analytical tool to evaluate company’s resources in relation with the attainment of competitive advantage. The dimensions used for evaluating organizational position in the target market as per this analysis is done on the basis of value, rareness, imitability and organization. The major focus of this analysis is to evaluate the micro-environmental resources of organization such as financial resources, human resources, material resources, and non-material resources. This analysis’ primary motive is to evaluate company’s resources in order to determine company’s competitive advantage or weakness (Sheng & Kodono, 2014).
Company is known for delivering high quality products and services to the target customer segments and with the help of this, organization has attained an effective position amongst the global online industry. Company’s primary segments are inbound logistics, outbound logistics, marketing and sales, operations and services. With regards to this, organization provides numerous choices to its customers in order to meet with their demands and wants.
Apart from this, organization has also announced to launch Amazon Prime services as a speedy delivery system. This delivery system will be an effective strategy for enhancing customer satisfaction which will help the organization to improve its brand image in the target market. Strategies adopted by organization are effective enough to generate appropriate opportunities to control the governance mechanisms which affect organizational performance. Apart from this, it will also be beneficial for the objective of attainment of competitive advantage in the competitive business environment. With this regard, organization could easily accomplish its goals (Ryan, 2016).
Recommendations
It has been recommended to the organization to set certain benchmarks to maintain the quality of their products and services for maintaining their acquired image as the giant player of e-commerce industry. Its closest competitors are Wal-Mart, eBay and Alibaba Group. With regards to the attainment of competitive advantage, it is necessary for the organization to adopt appropriate strategies to differentiate its products from its competitors as well as to enhance its market image in the target customer segment.
Other crucial measures through which organization could attain competitive advantage as well as to defend the current competitive image in the target market, organization requires to adopt appropriate marketing and promotional strategies for staying in touch with the target customers. Apart from this, it is required for the organization to survey market conditions along with determining target customer’s needs so that new products and services could be introduced for the objective of fulfilment of their needs and wants. This is another significant aspect through which competitive advantage could easily be attained.
Conclusion
From the aforesaid information, it can be concluded that Amazon is one of the giant player of e-commerce industry and in terms of attainment of its set goals and objectives, organization regularly update its strategies on the basis of its target customer’s needs as well as on the basis of market conditions. In this report, strategic management of Amazon has been discussed under which organizational ownership structure has been discussed. Apart from this, internal and external governance mechanisms have also been covered in this report with regards to the organizational operations. Further, several strategies have also been discussed to attain competitive advantage. VIRO and value chain frameworks have also been discussed for determining organizational operations along with identifying resources through which organization have attained competitive advantage.
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