A Critical Discussion Of Strategic Management Cases For Amazon.com

Critical discussion of the strategic models from the evidences

Discuss about the essay on Strategic Management Cases for Amazon.com?

It is seen that online market is proving to be new ground of excellence where many businesses are trying to put their hold on. It is necessary for every business be it a big or small retailer to have a knowledge and plan its strategies well to survive in the highly competitive market today. Big online market giants like Amazon also face many challenges in the course of its operations. There are few models that can be applied for analysing the opportunities and the areas where it is needed for a business to improve to stay in the market. A well maintained supply chain with a strong base of suppliers and loyal customers can make any business flourish in any market.

Analysing the porter’s value chain in relation to Amazon:

Porter’s Value Chain:

Porter’s value chain is a process based analysis of the organisations functioning that includes the systems of input from the sources and the processes till the finished goods are reached to the consumers. Value chain takes into consideration the each system or process that is necessary for the organisations to have a competitive advantage in the market. Values are determined based on the activities that may be internal or external that helps the organisation in a better functioning. The activities are analysed on the basis of the value that it adds to the organisational functioning and performance. This model states that the factors are to be analysed in a systematic manner so that the organisation can manufacture articles that consumers will buy. It is required for every organisation to implement the processes in an organised manner to provide for efficient manufacturing.

The company focused here is Amazon.Co.Uk, one of the largest online retailers having various operations that make it the market leader in customer satisfaction. As online retail business is growing in today’s competitive market it is required for the market players to have a systematic approach. There are varied activities identified by the Porter’s Value Chain that leads the organisation towards building a favourable image among the consumers. As per the porter’s value chain there are few activities from the process of procuring the materials to delivering of the product to the consumers.

The activities are classified as primary and secondary activities according to the Porter’s Value Chain. The primary activities include the following:

Analysing the porter’s value chain in relation to Amazon

Primary Activities:

Inbound logistics includes the activities that are important for storing, keeping and distribution of the materials or products internally in the organisation. Amazon being an online retailer has to deal with many vendors. In the annual reports of Amazon in 2014, it was stated that among all the vendors Amazon worked with no single vendor accounted for 10% of the total purchase made on the website. It was also put forward that Amazon did not enter into any long-term contracts or made arrangements with the suppliers so that the availability of the goods can be guaranteed.

Outbound logistics deals with the activities aimed at delivering of the materials to the consumers using the different postal and delivery services available (Luchs et al. ,2010). Amazon promises to be a leader in the delivery services to be able to reach the customers on time. Amazon has warehouses near every important location where the demand can be higher. Amazon uses the warehouses to provide for quick and faster delivery to the customers. Cova and White (2010) stated that as the demand of the people is rising so is the need for faster delivery is rising as people if not provided with the material till he has the urge, he will shift to other product. Amazon has partnered with various courier and delivery services to help deliver the products more conveniently and within a shorter span of time. Amazon has about 109 fulfilment centres all across the globe. Amazon aims at providing for an exact delivery time for the goods purchased on the websites. In UK Amazon has eight fulfilment centres to dispatch packages from there to the whole of Europe and UK.  Amazon has a value driven approach for its Operations where it wants to increase its value by providing with faster deliveries to the customers in the UK and worldwide. Amazon also launched Prime Now services in London and Birmingham in 2015 to improve the faster delivery option of Amazon (Amazon.co.uk, 2016).

Amazon works on the principles of customer satisfaction and it looks to improve its services by providing quality goods at best prices possible. Amazon is specialised in creating a personalised shopping experience for the customers by suggesting them goods based on their purchase history. Amazon has also added the feature of sending personalised gifts to loved ones. Amazon is still the market leader just because it provides for the best services at lower prices than its competitors. Amazon works on the principle of providing customers with better services all the time customers chose it as their shopping destination. Amazon has been a leading organisation in implementing and using the new technologies to provide for a better customer service. Amazon is also a leader in making the latest goods available to the customers as early as they launch in the markets. Amazon looks to provide for new features that can provide for a better shopping experience. In 2014 as per the annual reports it was evident that Amazon tried to improve the shopping experience for the customers by adding 516 new features and services to their websites in 2014. Amazon also provides for an efficient platform for the consumers to sell their products easily and effectively.

Primary Activities

Secondary Activities:

Human resource is an important factor that decides for the marketing and the market position of the organisation. Amazon has the policy of providing for 95% of fees for an employee to choose his career in any course that is in demand. It is also evident that Amazon had low employee retention although providing for such benefits to the consumers. Amazon has a very effective policy regarding the procurement of materials and storing of the inventory. Amazon has decided not to use physical outlets for delivery and procurement of goods.

Teece (2010) was of opinion it has implemented the policy of storing of frequently demanded products and keeping the rest of the goods stored with third parties. These third parties are to supply the goods to Amazon as and when demanded by the seller. This procedure helps the company to cut down its cost of storing and procurement of the merchandises (Slack, 2015). Amazon using this process has considerably reduced the prices of the product as they can cut down the storage and selling cost. Consumers prefer the options that provide for quality products at lower prices and the convenience that companies like Amazon provide to the consumers.

 The technological environment is updating and changing from day to day; to keep itself updated Amazon has used the latest technologies available to provide for the better experience to the shoppers online. As online retail business has no physical contact with the buyers it becomes important for the retailers to provide for options that can make the customers get a glimpse of the satisfaction they are expecting to get from using the product. Amazon provides for services like looking inside a book before a customer buys a book. Casadesus-Masanell and Ricart (2010) opined that these facilities help the organisation to have a better customer relation building by providing for easy and one-click purchase option. To support an organisation, the importance of a good and effective infrastructure is of utmost importance in the aspect of the serviceability of the organisation. Large websites like Amazon has to maintain a huge server for providing the customers with a smooth and streamlined user experience while shopping. To maintain such big servers it requires were a well-planned architecture to hold the server and also a team of the skilled employee to handle the data that are being transported regularly through the servers.

This model provides for a framework to be followed for building plans and strategies for being competitive in the market. It is seen that there are five major forces that affect the competition the organisation has to face in the due course of its operations. The different forces help the organisation to set its focus on the force that has the capability to build a favourable market for the organisation. If the forces are analysed in a proper way it can help the business to take advantage of the forces that seem to be favourable for the business operation McGrath (2010).

Secondary Activities

The power of suppliers can be said as the dependency of the organisation on suppliers for their operations. The power of the suppliers is high when the number of options as suppliers is less for the organisation to choose from. As in the case of Amazon, the suppliers for goods that are readily available have less power over Amazon. Whereas, goods that are unique to particular suppliers as in the case of high-end goods and designer goods, the suppliers have more power on Amazon. It can also be a challenge for Amazon if the supplier is in itself is capable of setting up its own online supply chain for the customers. Ghazinoory et al. (2011) commented that it happens in the course of function that many new companies emerge in the market that poses a threat to the existing business. As in the case of Amazon the power of the new entrants is relatively low as Amazon has a major market share in the online retail sector. Also, Amazon is a leader in term of the services and variety of options provided to the customers. Amazon has a healthy catalogue of products that make the competitors have less power of control on the business. The only threat that can be seen is online marketplace is comparatively less complex to enter and require less capital. This can facilitate entry of new players in the market and pose a competition in later years to Amazon. Amazon-operations.co.uk.(2016).

Consumers are the most important aspect of any business unit that lay the path for success or downfall for an organisation. Consumers today have access to wide range of options available online from where they can choose the best option that is best for them. As the online market is also getting saturated there are many business organisations entering in the market to make their presence felt. As the competition rises so the power of buyers also rises, as they can choose the better option by simply comparing online. Hitt et al. (2012) stated that another disadvantage that online marketplaces have is the lack of physical contact of the product and the buyers. Buyers may prefer to see feel and then decide to buy a product, this is where online giants lose their advantage. And thus, give way to the consumers to have power over them as they have many choices available in the terms of physical outlets.

Amazon in the recent times has seemed to face a bit of competition in the terms of another substitute like the EBay that also operates worldwide. But still Amazon has an edge over its competitors due to the trust and reliability that Amazon provides to its customers. Threats from substitutes will continue to be an issue for any business as the market is getting competitive each day. The competitive rivalry has been very significant in the online business as entering in this type of market is comparatively less complex than the traditional markets. Also, the capital investment for setting up physical stores is higher as compared to the online market. This has made many businessmen jump into this market to explore the opportunities of the market. This has made the rivalry in the market grow to a level where the business has to focus on satisfying the customers in a better way than its competitors. Competitors are looking to take the advantage of price discrimination to make customers focus on other inline retailers than the Amazon.

According to Helms and Nixon (2010), SWOT analysis is one of the most prevalent methods of analysis the opportunities of the business in the present market and look for the threats to take corrective measures. This model is used to identify the threats that the company can face in the due course of its operation. As the online market is easily accessible to anyone, many new players are entering in the market with aggressive marketing policies. Being the threats that Amazon is facing from the competitors it is still accepted as one of the leading online marketplace due to its customer oriented outlook.

Amazon being faced with adverse competition from the competitors is proving its ground on the basis of strengths it poses. Amazon features one of the largest operational networks being able to reach customers all across the globe. Amazon has a large network of fulfilment stores from where it operates and sells its goods to a wide range of customers of various provinces. Not only it has a large network for transfer of goods but it also has a wider range of products. The ranges of products that Amazon has provided the customers with a one-stop place for shopping all their required items with convenience. Wheelen and Hunger (2011) opined that having the large network of its own storing and delivery units it can provide the customers with wide range of products at quite lesser price than its competitors. Amazon not only provides for a range of products at lower prices but it also creates for a personalised shopping experience for the customers. It has used various technologies to create for a personalised experience for the shoppers based on their preferences and buying history. The company also provide for career development help and opportunity for the employees. Amazon owing to its widespread distribution centres and the customer oriented outlook has helped it gain an advantage in relation to the threats from the competitors.

Every business learns about few weaknesses in the due course of operation of the firm in the competitive market. The financial aspect is an area where Amazon is found to be lacking in the present times as the internet cost and another cost to incur the goods increased. This lead to a decrease in the operating profit of the organisation drastically. These weaknesses can be left behind if the company looks to cash in the opportunities it has in the market at the present time. Amazon has been able to build a favourable image of its operation in the online market and thus it must look to use its reputation to set up new units in other places. Amazon may look to increase its business in the UK as the spending power of the citizens of UK has grown. It can also use the support that government is providing in easing the regulation to facilitate the growth of online retail market in the UK (Xu et al., 2011)

Findings from the value chain analysis:

From the value analysis, it was evident that logistics plays an important role in the business operation of Amazon. Amazon has a healthy number of storing facilities but still does not have its own delivery house. This has caused Amazon to lose on the advantage of cutting down the delivery cost. It has to depend on third party courier services for delivery of its goods. The prime delivery option available in the UK has put pressure on the cost Amazon has to bear to get the delivery done in such short span of time. The delivery houses generally charge for higher fees for speedy delivery that has made Amazon incur a higher cost for delivery of its goods. Amazon is required to develop and build its own delivery channel for faster and quick delivery all across the UK and another place worldwide.

From this model, it was seen that the suppliers are posing a threat to the operation of Amazon. It is needed to set up a strong base of suppliers that can be loyal to the business and help the business achieve competitive advantage in the market. The suppliers are given an option to keep track of their products that are sold even after they are sold to the customers. Amazon has introduced policies to provide for feedback system for the suppliers to let them know their goodwill among the buyers. Another threat that Amazon has to face is related to the physical local retailers who have a better reach of the local customers. But Amazon can deal with this by providing the unique membership policies that provide the customers with extra benefits (Sethuraman et al., 2011)

After analysing this model, it was seen that employees in the organisation were facing some kind of issue that were to be taken care of by the company. The challenge was regarding the additional cost that was incurred by the organisation to support for the low employee retention. Amazon needs to build its own delivery house and a strong base of loyal customers that can help the company to save the additional costs.

In the course of the study, it was seen that Amazon was proving its ground even after facing competition from many another firm that has entered in the market. As it is seen that even though the threats Amazon has a reputation in the market, it can be beneficial for Amazon to expand its operations. Amazon can use its build reputation to reach in the markets in other countries where there are more prospects. Also, delivery becomes a  problem in areas Amazon does not have physical reach, this makes the customers opt for the local retailer and other local e-retailers whose delivery are faster as compared to Amazon.

Amazon must look forward in extending its market reach and market share by providing for faster delivery options to the customers in the UK. Amazon’s prime service is such an example that should be spread to other regions too so that people can have the advantage of the faster delivery from anywhere. Also, it can help the company to remain competitive in the market when there are a lot of new online retailers approaching online business.

objectives	Skills needed	Time Frame
Communication within group	It was felt that there was a need for an effective communication among the group. I felt I lacked the formal communication skills in the group during the presentation.	1 week
Setting of goals	It was needed to set a goal that was to be achieved through the planning process that was to be implemented. I felt the goal setting was well planned that made the project successful.	2 weeks
Finding the issues	The issues that were affecting the functioning of the company was analysed using the various models such as SWOT analysis, Porter’s five force model and Porter’s Value Chain model.	2 weeks
Providing the recommendation	Recommendations were provided after the findings were analysed using the above-mentioned models. I found the models were accurate in terms of analysing the different market factors.	3 weeks

Action Plan (Kozinets et al, 2010)

Conclusion:

In this study, the various models like the Porter’s Force model and the SWOT analysis are used to analyse the threats the company is facing or may face in the long run. Also, the opportunities available for the company are analysed to recommend the steps that can be taken by the company to gain a competitive advantage over its competitors. Amazon being a leader in the online business has a strong customer oriented outlook that has helped the firm to stay on top even when it has to face competitors from many other online retailers. Even though the advantage is with Amazon, it still has few weaknesses that are to be improved by the company to have a better control over the market.

Reference list:

Books:

Hitt, M., Ireland, R.D. and Hoskisson, R., (2012). Strategic management cases: competitiveness and globalisation. Boston: Cengage Learning.

Slack, N., (2015). Operations strategy. New Jersey: John Wiley & Sons, Ltd.

Wheelen, T.L. and Hunger, J.D., (2011). Concepts in strategic management and business policy. New Jersey: Pearson Education.

Journals:

Casadesus-Masanell, R. and Ricart, J.E., (2010). “From strategy to business models and onto tactics”, Long range planning, 43(2), pp.195-215.

Cova, B. and White, T., (2010). “Counter-brand and alter-brand communities: the impact of Web 2.0 on tribal marketing approaches”, Journal of Marketing Management, 26(3), pp.256-270.

Ghazinoory, S., Abdi, M. and Azadegan-Mehr, M., (2011). “SWOT methodology: a state-of-the-art review for the past, a framework for the future”, Journal of Business Economics and Management, 12(1), pp.24-48.

Helms, M.M. and Nixon, J., (2010). “Exploring SWOT analysis-where are we now? A review of academic research from the last decade”, Journal of strategy and management, 3(3), pp.215-251.

Kozinets, R.V., De Valck, K., Wojnicki, A.C. and Wilner, S.J., (2010). “Networked narratives: Understanding word-of-mouth marketing in online communities”, Journal of marketing, 74(2), pp.71-89.

Luchs, M.G., Naylor, R.W., Irwin, J.R. and Raghunathan, R., (2010). “The sustainability liability: Potential negative effects of ethicality on product preference”, Journal of Marketing, 74(5), pp.18-31.

McGrath, R.G., (2010). “Business models: a discovery driven approach”, Long range planning, 43(2), pp.247-261.

Sethuraman, R., Tellis, G.J. and Briesch, R.A., (2011). “How well does advertising work? Generalizations from meta-analysis of brand advertising elasticities:, Journal of Marketing Research, 48(3), pp.457-471.

Teece, D.J., (2010). “Business models, business strategy and innovation”, Long range planning, 43(2), pp.172-194.

Xu, H., Luo, X.R., Carroll, J.M. and Rosson, M.B., (2011). “The personalization privacy paradox: An exploratory study of decision making process for location-aware marketing”, Decision Support Systems, 51(1), pp.42-52.

Websites:

Amazon.co.uk, (2016). Amazon.co.uk: Low Prices in Electronics, Books, Sports Equipment & more. [online] Available at: https://www.amazon.co.uk/ [Accessed 16 Feb. 2016].

Amazon-operations.co.uk.(2016). Amazon Operations Careers. [online] Amazon-operations.co.uk. Available at: https://amazon-operations.co.uk/ [Accessed 16 Feb. 2016].