Discuss about the Master Of Business Global Corporate Strategy.
The selected industry is to be e-commerce as it has gained immense popularity in the last few years. It is a continuously expanding industry, which is also closely linked with the digital era. The MNC chosen in this industry is Amazon, which is an American public owned company, founded in 1994 by Jeff bozos. It is launched as an online bookstore and later on their logo got popular (a to z) which symbolize that they have all product available from a to z category.
In few past years, it becomes one of the largest it e-commerce retailing company in the world that sells products all over the country. It is well known for its quality and timely delivery and having great knowledge in making their customers happy.
Amazon vision and mission statements help to evolve the company like a boom. Its mission statement based on the customer convenience-focused on lowest prices and greater choice of selection. The objective of Amazon is always customer centric and the company always amends policies on timely manner compliances to various factors like customer needs and preferences, government laws, societal factors etc.
With the increased globalization of the economy, the economic growth is boosted by a high percentage aligning with innovation and competitiveness. Competitiveness forces the industry and companies to be innovative from both internal and internal end. The close innovation is a traditional concept where the company generates, develops and commercializes their own ideas by highly investing in R&DA department and employing skills and professional employed. The open innovation is a new paradigm, where the company commercializes their own ideas as well as seeks innovation from other firms. It means they focus on getting ideas from both the internal and external environment.
Open innovation is a path of competitiveness innovation and one of the Amazon’s most effective and valuable attributes is that it follow and adopt a business model which is based on open innovation. The most important innovation Amazon’s use is of making effective supply chain management and coordination, which help them to beat other e-commerce options.
Amazon has simplified its shipping landscape by using the concept of eliminating, raising, creating and reducing framework. In this, Amazon eliminates the old retail distribution channel by contracting directly with suppliers aligning with the latest technology in logistics and thus save cost and more avenues to the customers. They try to raise customer expectations and then fulfil it by experience and efficiency. In addition, they try to create new technology which no other industry is offering by establishing cloud computing. Amazon’s also follows a very different standard or policy which states of reducing short-term profit through long-term growth which makes Amazon one of the leading company in the world which come from external innovation and other industries.
The next concept factor endowment is a combination of land, labour, capital, and entrepreneurship that a country can exploit for a purpose of manufacturing. Generally, Amazon selects metro areas, which have more than 1 million individuals. Its Seattle headquarters consist of 33 buildings totalling 8.1 million sq. ft. From 2010 to 2017, Amazon invested up to $3.7 in buildings and infrastructure and $1.4 billion on utilities and maintenance. In getting an effective labour force, Amazon contact with various universities and community colleges. Amazon entrepreneurship cell helps it in ruling the commercial world. Alexa was the part of this cell only whereas a new program called drone delivery is in the beta phase.
Amazon ability to work in the various type of industries dominate and scaring competitors. For example, Amazon is working in merchandising; electronics, web-based service, and Media service provider (Amazon prime video). Buyers are getting expertise over time and that leads to the change in demand from the customer. Amazon is pulling those demand and with various innovations and market techniques, it trying to fulfil those demands before time. This help in building Amazon core capability which is to provide the most convenient place for the people so that they can buy any range of products at the lowest price in the market.
Amazon’s strategy can be described as concentric diversification. With the help of this strategy, Amazon is using its technological capabilities at full potential for the success of the business and follows cost leadership strategy to provide supreme value to the customer at the lowest price.
Amazon organization structure can be classified as hierarchical and this structure emerges due to the huge size of the corporate as according to estimation in the US, the online retail sales in the year 2016 consists of 43% of total sales. In this hierarchy, the senior management team includes two CEOs, three Senior Vice Presidents, and one Worldwide Controller, who control various important programs of the company, which is directly reported to the Amazon CEO Jeff Bezos. In spite of its large size hierarchical structure, there is a high flexibility between its various departments and functions, which makes it a unique e-commerce company. In addition, it also leads externally by disruptive innovation and diversification. The external environment has various rivalries like Wal-Mart, Alibaba, and eBay. Amazon has both offline and online capabilities but some rivalries are acquires only offline capabilities like Wal-Mart. The Chinese company Alibaba, which has spent around $9.3 billion in offline stores since 2015, according to Reuters is not having much impact on Amazon. According to Alibaba international strategy, the focus is on enabling merchants globally to sell into the Chinese market but Amazon has no such reservations and this is the point where these two companies strategy differs.
Amazon need to comply with various government laws for entering into the global market like due to Chinese law, Amazon web services have to compulsory sold some physical infrastructure property to Sinnet, AWS has a separate hardware venture in partnership with the Ningxia provincial government in China’s northwest. Amazon also states that the Sinnet managed Amazon public cloud services in the country.
Considering external innovation and competition, Amazon is diversifying its business into various fields like, numerous milestones are achieved by Amazon in recent years including Web services, Alexa, Amazon devices like fire TV stick and Echo devices, Prime Video and Music, Amazon Go etc. The credit is also gone for many who help Amazon by pushing better service to customers.
Global convergence perspective is a process of aligning multiple dimensions such as culture, policy, and economy across nations so that to achieve strategic goal whereas diversity management promotes valuing HR resources of a company as individuals and use their strengths and capabilities for improving the business performance. Both concepts have their own advantages and disadvantages. In global convergence perspective, the focus is on achieving the organizational objectives and this help the company to diversify the business, which leads to superior performance, but here the employees are treated as a thing or tool for achieving a strategic goal. Also, Global convergence is affected by certain factors like technology advancement, customer preferences, countries policy etc. International diversity perspective focuses more on the HR resource where HR strength and capabilities are aligned with the organizational goals and objectives. They use their full employee potential to enhance the performance in every department and functions but in this perspective, there is a high cost of training.
As Amazon is based on digital cloud e-commerce Company, there is less requirement of the labour force and more requirements of Global economy support and resources and this makes Amazon go for the approach of Global convergence where they can comply with different cultures and economies, different market and customers. Digital transformation has both positive and negative connotations for traditional retailers, manufacturers and wholesalers. Many large retailers including Amazon are achieving success by selling online. To satisfy the scaling demand for technology in online retail and wholesale, a company must implement an Omnichannel, multichannel, marketing tools and cloud e-commerce solutions. This will help the company in maximizing their corporate profitability and their reachability.
As this approach applied in all the industries with all its product and services and to all the businesses irrespective of its size and scale, it can be called as an example of “generic strategies”.
Amazon generic strategy for competitive advantage uses the approach that the company uses to develop its business surrounded by strong competition in the online retail market. Amazon established himself as a largest online retailer in the world even against giants like Wal-Mart. This can happen only because of their intensive growth strategies, which lead Amazon to expansion and diversification. According to Amazon annual report 2017, many small and medium-sized businesses worldwide now approach to Amazon for selling their products through Amazon to grab the new customer’s base around the globe. These SMBs comprises various sellers across every state in the U.S., and from different countries around the globe. In the year 2017, with the help of Kindle Direct Publishing technology, various independent authors exceeded $100,000 in royalties. In 2011, these SMBs also invested over $150 billion worldwide in their technology infrastructure, transportation network and fulfilment capabilities. Due to all this, around 1.7 million direct and indirect jobs were created throughout the globe.
The cost leadership is followed by Amazon as its generic strategy for the competitive advantage. The main objective of this generic strategy was in minimizing the operational costs. For example, to improve operation efficiency, the advanced computing and networking technologies are being used which also leads in minimization of various costs. As Amazon is an e-commerce company it benefitted by the practice of automation, which is generally used for processing, scheduling, logistics and various other processes. In addition, there is a huge investment done in the department of R&D so that the performance can be optimized for its IT resources. In addition, Amazon achieves economies of scale as it is supported by massive warehousing facilities which directly or indirectly help in increasing the processing capability and that become a cost advantage for the company. As Amazon differ itself in services- so it can also be assumed that Amazon follows something of a hybrid type of strategy.
For intensive growth strategy, Amazon uses market expansion, which helps it to add new countries over the globe and creates new opportunities. This strategy also works as a competitive advantage related to the market development. Market penetration is a secondary intensive growth strategy where the goal is to make more profits from the markets. Amazon grows with adding more numbers of consumers. For example, if the consumer diverts his/her interest in the online retail, the profits of the organization will increase. Market penetration is behind the initial rapid growth of Amazon in the United States.
For the purpose of business growth, Amazon focuses on product development as a supporting intensive strategy. By introducing Alexa, prime video, drone delivery option (beta) and offering a new product it grows like a boom over time. The company now also deals with Amazon Basics products and Amazon Web Services (AWS). The company has cost leadership generic strategy supports this intensive strategy by aligning the process with lower cost approach to promote new and innovative products.
Amazon highly focuses on customer feedback, and delighted customers spread such feedback on various places such as forums. This type of service also helps the company to make long-term and loyal customers so that they are attracted to buy more from Amazon.
For have to be a big giant, an organization may not have to depend on one strategy, plan or perspective but they have to comply with different strategies which help them to penetrate the market. Amazon, which is an international e-commerce retailer majorly, focuses on cost-leadership but also make plans while considering other factors (like service) which makes it hybrid.
Corporate social responsibility (CSR) is a corporate responsibility to the environment, society and stakeholders. Corporate governance is the boundary and framework where a company has to work under various processes, practices as it consists of the interest of various stakeholders, shareholders, management, customers, government and societal and community. Corporate profitability is a tool, which gives a global overview of how a company works, its relation between various department and functions, so that effective strategic planning can be done which help the managers at every level. It also helps the management in knowing how a business earns a profit and what are the various strategic decision affect the daily operations of the organization.
CSR, which stands for Corporate Social Responsibility, is a broad concept that helps the society in sustainable development, the delivery economic benefit to the organization (shareholders), providing social and environmental benefits and thus it has wider practices and definitions.
These all concepts are inter-related which help the organization in achieving its goals and build a strong brand identity. For growing corporate profitability, Amazon pushes various new products with effective plan and strategies. From a CSR perspective, it is beyond corporate profit and has become the mainstream part of the company for the community benefit and as the corporate business become more aligned with a non-profit organization.
Every business uses various resources like water, land, roads, and power, etc. and it is the responsibility of every business organization to uses a part of the profit for the welfare for the organization. Also, it is an obligation of the business towards the government, which persuades the organization to take a lead in reducing the pollution created by their factories.
Amazon which is leading in e-commerce industry has also focused on the development of their CSR activity by supporting local communities, empowering workers, reducing energy consumptions, providing education and by doing various charity and donations to NGO. Few initiatives, which are taken by the organization, are –
According to RepTrak ranking, in 2015, a reputation of good citizenship is also earned by Amazon due to its number of initiatives:
These CSR activities help the organization in the strengthening of their corporate profitability and brand equity. According to the Reputation Institute, those companies, which have excellent CSR RepTrak scores, are recommended by the consumers and only 6% customer would recommend those companies have poor scores.
Various organizations doing a great job by accepting the importance of CSR and aligning the goodwill with corporate social responsibility and it is also important they these organizations have to communicate their performance to the public as this will help and encourage the customers to see your corporate reputation on a positive side. This concept can be achieved if an organization –
As the multinational company works in several countries, it is important to understand the demand and environment (PESTEL) of the respective countries, which help the organization to design their corporate plan and strategy.
Most countries use external innovation as a part of the strategy for framing their policies and plans. This is a new paradigm, which seeks and acquires knowledge and ideas from the external environment including competitors, customers and stakeholders.
There are both pro and cons of open or external innovation, which influence the business decisions from different dimensions. External innovation provides self-competition, which helps the organization to create innovation in itself. It will help in building trust and an open relationship. The major disadvantage of open innovation is that not sufficient resources or money for the Research development and time is a constraint. In addition, global convergence helps the organization to mix-up their resources, values and cultures for expanding and diversification of the business but it is also affected by the rapid change in technology and consumer tastes and preferences. Also, the organization has to face certain challenges at certain stages of implementation.
Various organizations also adopt internal diversity organization and treated their employees as an individual and value them by using their unique strengths and capabilities to increases the management performance. The major advantage of this perspective is that the employees are more loyal to such organizations and prefer organizational goal to the individual goal and thus productivity and creativity are increases. The major cons of this perspective are that the organization has to bear the high cost of training and sometimes competition in the workplace increases when employees do not accept other cultures and try to compete with each other rather than working in a collaborative team.
For sustaining the corporate profitability, the senior management helps in showing the clear vision to the employees and leads to create a change with the leadership quality called leadership for change. This will help the management to create a customer-centric strategy based on innovation.
Conclusion
In conclusion, Amazon as a leading chain of e-commerce industry had passed all the tests required in a winning strategy. The alignment of their strategies with the open innovation tool helps them to understand their market more precisely and support them in widening their market base. Using their technological innovation and strategic alliances, they made cost-effective, convenient and simple for their customers to purchase any products or service online.
While choosing the correct approach i.e. global convergence, their goal for expansion and diversification also comes. The support of digital transformation also helps the company to get a competitive position in the marker.
The corporate profitability of the company gets strengthen with their CSR activities and as an MNC, Amazon successfully makes a positive stand for the various numbers of CSR accomplishments during their lifecycle.
At last, the adoption of all the approaches in a timely and effective manner make Amazon the “darling of Wall Street”.
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