Due to growing challenges and complexities in the dynamic global business environment, it is essential for Amazon to design and implement potential business strategies to respond to the challenges faced by Amazon in the industry. This report will critically evaluate the business strategy of Amazon and challenges for the firm while operating the global e-commerce operations. The strategic model, such as Pestle analysis will be performed to analyze the attractiveness of the industry and external environmental risks and challenges faced by Amazon in the global e-commerce industry. Several potential business strategies will be suggested for Amazon to overcome the impact of the growing challenges and risks by aligning the current business strategies of Amazon with the strategic objectives (Hill and Jones, 2012).
Amazon is an American e-commerce and cloud computing based technology industry that was founded by Jeff Bezos on 5 July, 1994 in Seattle, Washington, the U.S. It is the world’s largest e-commerce retailor by market capitalization and sales revenues. Amazon is one of the most valuable public limited company having the Worldwide Business Operations. It has its e-commerce operations worldwide with separate retailing e-commerce websites (7 international websites) in each country including the U.S. Brazil, the UK, India, China, Russia, Japan, France, México, Italy, Spain, Germany, Netherland, Canada, Poland, Hungry, and other countries to offer a range of retailing items electronically (SlideShare, 2016). It offers a range of electronics, households and kitchen appliances, foods and beverages furniture, apparel, toys, jeweler, cloths, child entertaining items, health supplements and nutritional products, software, antivirus, CDs/DVDs, books, tablets, fire TV, video games, and other products to the customers across the countries. Its websites are available in different languages French, English, Chinese, Dutch, Polish, Turkish, Chinese, Italian, Portuguese, Spanish, and Hindi.
Vision- The vision of Amazon is ‘To become the most valuable customer-centric company in the world’. The vision of Amazon is leveraging the technology and expertise of our customers with the best shopping experiences through the internet. All marketing campaigns, promotional activities, customer acquisition, and market capitalization strategy of Amazon are aligned with the vision of the company (Smithson, 2017).
Mission statement- the mission statement of Amazon is to build a place where people come to find and discover anything (goods and services) the customers might want to buy online and endeavors to offer its customers at the lowest possible prices.
Amazon is the world’s largest e-retailing industry that is well known for its wide e-commerce operations across the countries for providing its retailing products and services online for the convenience and comfort of the customers. The business strategy of Amazon is customer-centered that revolves around the customers’ needs. It has expanded its product category from one product line to 16 products lines including foods, grocery, cloths, apparels, health, toys, furniture, electronic, kitchen appliances, home furnishing, CDs, and videos. Amazon has globalized business operations to provide the products and services across the country through the combination of the localized portals and global logistics and delivery platforms (McKevitt, 2017). Amazon leverages technology as a source of competitive advantage as well as gaining the benefits of the economies of scale to leverage the synergies between the external drivers and internal sources.
Amazon’s business strategy is customer-centered that includes the core fundamentals, such as building trust, increasing sales, prime customers, faster process, and affiliate the customers are success drivers of the business strategy of Amazon. Its business strategy includes more customers through more sales channels, distribution, larger access, lower prices, greater customer convenience, and larger section (Williamson, Jenkins, Cooke, and Moreton, 2013). Amazon has international corporate brand identity that emphasizes the brand as product (Wide range, lowest prices, quality products, high services, and reliable and timely delivery) organization (global, customer-friendly, innovative, and trustworthy), symbol (modern, reliability, and functional), and person (honest, reliable, timely, energetic, and customer-friendly). Purpose (quality products at affordable costs), emotional (reliability and trust and secure transactions), functional (easy purchase and delivery and lowest prices), and self-expression (next generation outlook and tech savy image) are layers of branding strategies of Amazon.
The current strategy of Amazon is focused around the convenience aspect in which the customers need not go to the physical stores or waiting for purchase to arrive as it has introduced the same day delivery facility in some countries (e.g. the U.S., Japan, the UK, Germany) by using drones for instantaneous delivery. Its business strategy of Amazon is greatly focused on fastest, reliable, and effect ive customer service with fast returns and replacements, easy interface for the customers to register their complaints or querries, and customer feedbacks on product quality, service level, and strategies (Management Study Guide, 2015).
The business strategy of Amazon follows Porter’s three generic strategies including the cost leadership, differentiation, and focus strategy to attain a significant competitive advantage in the industry. Its cost leadership strategy is based on low profit margins by following the law of diminishing return as the firm follows this strategy to sustain growth. The differentiation strategy is based on driving the competitive advantage by focusing on leveraging the technologies, actualization of the benefits of economies of scale, and leveraging the sysnegies between internal sources and external drivers are cornerstones of the business model of Amazon. There is little product differentiation with the intensive focus on the cost reduction at the cost of product differentiation mean there is no exclusive or unique product line because the products are available on other portals as well as (Pearce and Robinson, 2010). The focus strategy is customer-centered that revolves around meeting the needs, interests, and buying preferences of different categories of the customers.
The marketing strategy of Amazon is based on the reliable, timely, and cost-effective service delivery to the customers across the countries through its e-retailing stores. It marketing strategy is based on seven pillars including the use of customer-friendly interface, free offering of products and services, creating the high brand awareness, affiliate the market programs, using effective communication system, and scales from small to large. The marketing strategy of Amazon is based on achieving the marketing objectives, such as enhancing brand awareness, high brand equity and market growth, cheaper than the competitors, communicate the brand promises of Amazon, and increase the research internationally (Bhasin, 2017). For achieving the marketing objectives, it uses the promotional campaigns, such as online ads, pay per click advertising, affiliate marketing, e-mail marketing, social media advertsing, promotion, media, events, and other programs.
Amazon uses STP model to meet the needs of different category of the customers. It uses demographic, geographic, psychographic, and situatinal segmentation to segment the markets for accessing the large geographical access. For example, the geographical segmentation is based on segmenting the market into sub-groups of the geographical distance customers for accessing the customers across the countries over the world through its seven international websites. The demographic segmentation is bassed on meeting the needs of differentt categories of the customers ranging from different age groups, family backgrounds, liviing standards, and genders. The psychographicc segmentation is focused on the customer loyalty and personalization (Slideshare, 2016). It uses undifferentiated targeting strategy for focusing the needs of different market segments over the world. It uses the branding strategy and promotional campaigns to maintain its dominant position in the global industry.
SWOT analysis is an important strategic model that represents the strengths, weaknesses, opporunities, and threats for Amazon Company. This is a strategy planning tools that will provide a platform for Amazon to exploit the business opportunities by reducing the threats or risks for the company.
Amazon has strengths, such as world’s largest e-retailing company, strong market presence, extensive utilization of the first mover advantage, low cost products, leverage the use of e-commerce and information technology (IT), global logistics and distribution system, global portals, customer-centric strategy, acquisitions, efficient delivery networks, and actualization better customer fulfilment (Cunningham and Harney, 2012).
Amazon also has weaknesses, such as high debts, shrinking margins or limited profits, products flops, tax avoidance issues, seasonality of businesses, lack of focus of control on product and service categories, lesser marketsin China and India because of late entry, no offline presence, free shipping to the customers, and zero margins model.
Amazon has opportunities to expand its businesses, such as opening of physical stores, expanding global footprints and opening of more sites in new or emerging markets, introduction of new products through increasing focusing on own branded products, improvement in IT services, and strategic collaborations with other local e-commerce companies (Frynas and Mellahi, 2015).
There are some threats to Amazon, such as entry of new entrants, local competition, lawsuits from publishers and arrivals, patent infridgements, threat to Kindle-free e-books,cyber crime, competition from new entrants and other e-retailing businesses, growing government legislations.
Amazon is the leading e-commerce retailing company in th world that has been facing the complex problems and challenges threatening the sustainable business operations of Amazon.
Pestle analysis is an important important strategic analytical tool that provides the detailed analysis of the macro environmental factors or external risks and challenges on the business operations of Amazon. This strategic model includes six forces, political, economic, legal, socio-cultural, technological, and environmental factors that significantly influence the global e-commerce operations of Amazon in different countries. It faces the challnges from the external environmntal forces, such as political instability, terrorist attacks, government spending pattern and support for e-commerce operations, law and order situation, cyber-crime challenges, economic uncertainties, global financial recession, socio-cultural risks and demographic differences, country legislations, export duties, taxes, shipping costs, environmental laws and community pressures, rapid technological advancements and innovation, and cultural differences and language barriers are such growing challenges that Amazon faces in the diverse environments across the countries (Graham, 2015).
The political instability is a major challenge that is characterized by the terrorism attacks, growing cyber-crime activities, law and order situation, government spending pattern and intervening the e-commerce operations are such growing challeges that Amazon faces while operating its e-commerce business operations across the countries. The economic uncertainty is another challnge that is identified from the changes in the taxation policies, export duties, and shipping costs as well as fluctuations in the interest rates, exchange rates, currency values, inflation rates, and GDP that significantly influence the market demand and purchasing power of the customers. The adverse economic conditions, such as high taxes, export duties, high interest rates, high inflation rates, and low GDP and currency value of the countries affect the disposable income of the customers that in turn will reduce or lower the purchasing powers of the customers (Chaffey, 2014). The socio-cultural trends, such as wealth disparity, distinct buying behaviors, and cultural differences, language barriers, and communication problems are such growing challnges influencing the e-commerce oprations of Amazon while operating in different countries.
Porter’s five forces model will be used to analyze the attractiveness of the industry for Amazon. This model includes fove forces, threat of substitutes, the threat of new entrants,bargaining power of buyers, supplier power, and rivalry in the industry. Amazon has been facing competition from the retailing companies, such as Walmart retailing stores (in the U.S.), Tesco Supermarkets , Aldi Supermarkets, Morrisons, Marks& Spencer (in the UK), e-commerce companies, such as Flipkart, Snapdeal (India), Alibaba and eBay (in China)and many other competitors in other countries where it has its business operations. Amazon also faces the challenges due to stiff competition created by most of the top retailing companies with their e-commerce operations in different countries. Due to growing demand or increasing trend for the e-commerce oprartions, most of the retailers in the world have been more focusing on the e-commerce businesses by facilitating the-shopping facility, e-payment, and home-based delivery facility for the convenince and comfort of the customers (Tran, 2015). Along with this, the entry of new e-retailing firms also threatens to the businesses of Amazon by creating some extent of competition to the e-businesses of Amazon. Additionally, the supermarkets, hypermarkets, superstores, convenience stores, and retailing outlets creat comptition to the established operations of Amazon.
Incrasing cyber-crime activities is a major challenge that threatens to the e-commerce businesses of Amazon because the cyber-crime activities by the hackers or cyber criminals cause for the customers avoiding from e-shopping and e-payment. The cyber-crime activitis create and convey wrong message to the people by creating a negative publicity of e-commerce business in the mindsets of the people that tend to avoid them from e-shopping. The company has also been facing the cultural complexities while selling the retailing products and services to the overseas customers. The cultural complexities and differences cause for the company facing the language barriers and communication difficulties due to the different cultural environments, different languages, values, and norms of different categories of the people in different countries (D’Onfro, 2015).
Amazon is the world’s largest e-commerce company that has been facing challenges in the globalization of its e-commerce operations. To overcome the challenge of cultural complexities and socio-cultural risks, it will be effective for Amazon to know about the customers, their shopping patterns and behaviors, likes, preferences, values, disposable income, and cultural conditions in order to serve the customers by focusing on their buying needs, preferences, and shopping trends. The company is needed to focus more on what the customers in different countries demand and what their priorities are regarding the purchasing of the online items (Hill, Jones, and Schilling, 2014). For ex- the Chinese customers are crazier and more interested to buy the apparel and footwear online. For another example, in the UK, China, Finland, Norway, Denmark, and South Coria, the customers prefer to purchase through online retail store. The company can enhance its business operations into these countries.
To overcome the challenge of the language barriers and different communication styles, Amazon should make changes its communication strategy to interact with the customers of different cultural environments having different languages and diverse communication styles. Amazon should promote all communication medium, such as social media communication, e-mails, direct mail, catalogs, and text message to interact with the customers effectively. According to Pitney Bowes survey, more than 80% customers like to communicate through social media and e-mail, 25% still prefer to direct mail and catalogs, while the Asian customers prefer social media and text message (Hiriyappa, 2013). Amazon should provide the information to the customers in the local languages and the website should be tailored to each country’s local language to create the high level of communication with the customers.
To overcome the challenge of the country legislations, taxation, duties and export laws, it will be effective for Amazon to prepare and display an international shipping policy upfront that will assist to be clear about the international legislations, governmental laws of different countries, taxes, duties, export laws, shipping costs. Amazon should follow each country’s laws and return processing that will involve the calculation and documentation of cross-border taxes, shipping costs, and export duties. It should affiliate and work with the international shipping service providers who will assist the businesses of Amazon by providing an end-to-end support with great consultation on shipping costs, taxes, export duties, and international laws in different countries (Alkhafazi and Nelson, 2013).
To overcome the challenge of the competitive trends, socio-cultural risks, and economic risks, it could be effective for Amazon to employ the skilled, talented, and highly competent marketing personnel in different countries to conduct the market surveys of the customers’ actual needs, wants, and preferences, their buying behaviors, consumption pattern, sales forecasts, income level of the people, market size, and competitor’s products and strategy so that it could make changes in its business strategy as per customers’ needs and buying preferences and market demand in different countries (Dawson, 2015). Along with this, Amazon should employ the virtual teams for understanding the local conditions, cultures, and customers’ needs, and competitive demand in order to represent effective customer service.
To overcome the challenges in the global expansion issues, the land-grab mentality will be an effective strategy for Amazon to spread its investments in the broader markets across the countries rather than focusing on few market segments in order to maintain its leading positioning in the online retailing industry. Along with this, Amazon should focus on the handful of the countries from where it makes the large revenues, such as the U.S. the UK, Canada, Mexico, Germany, and Japan for building scale and density in these countries (Schneider, 2017). For example, it has lesser extent of businesses in India and China because of established competitors, such as Flipkart and Snapdeal, as well as Alibaba and eBay in China and other e-commerce businesses. It can refocus on extensive investment into China and India that are high-growth potential markets.
Amazon should maximize its strong brand presence by extending the warehouses, distribution centers, and physical retailing stores to enhance its sales revenues and market share as well as competing with the world’s largest retailing stores, such as Wal-Mart, Tesco, Aldi, and Mark& Spenser (Williamson, Jenkins, Cooke, and Moreton, 2013). For example, Amazon should expand Brick and Mortar bookstore operations in the U.S. to complement its e-commerce operations to compete with Wal-Mart retailing operations.
Conclusion
From the above studies and discussions, it can be concluded that the strategic management is quite essential for Amazon to improve and maintain the financial and strategic performance of Amazon in the global e-retailing industry by overcoming the environmental risks and challenges. Pestle analysis was performed to analyze the impact of the external environmental risks and challenges including the political, legal, technological, socio-cultural, economic, and environmental factors on the global e-commerce operations of Amazon. Along with this, Amazon uses Porter’s three generic strategies including the cost leadership, differentiation, and focus strategies for attaining the sustainable competitive advantage in the industry. The SWOT analysis was performed to analyze the strengths, weaknesses, opportunities, and threats for Amazon. Along with this, several alternative potential strategies were recommended to maintain the leading position of Amazon in the global e-commerce industry by reducing the impact of the risks and challenges faced by Amazon.
References
Alkhafazi, A. and Nelson, A. R. (2013). Strategic Management: Formulation, Implementation and Control in a Dynamic Environment. UK: Rout ledge Publication.
Bhasin, H. (2017). Marketing Strategy of Amazon. [Online]. Available at: https://www.marketing91.com/marketing-strategy-of-amazon/. (Accessed: 20 May 2017).
Chaffey (2014). Amazon.Com Case Study. [Online]. Available at: https://www.smartinsights.com/digital-marketing-strategy/online-business-revenue-models/amazon-case-study/. (Accessed: 20 May 2017).
Cunningham J. and Harney, B. (2012). Strategy and Strategists. UK: Oxford University Press.
D’Onfro, J. (2015). One of Amazon’s Biggest Challenges for the New Year. [Online]. Available at: https://www.businessinsider.in/One-Of-Amazons-Biggest-Challenges-For-The-New-Year/articleshow/45983785.cms. (Accessed: 20 May 2017).
Dawson, J. (2015). Amazon’s International Growth Challenge. [Online]. Available at: https://www.recode.net/2015/5/11/11562518/amazons-international-growth-challenge. (Accessed: 20 May 2017).
Frynas, G. J. and Mellahi, K. (2015). Global Strategic Management. London: Oxford University Press.
Graham, J. (2015). Amazon’s Biggest Challenge. [Online]. Available at: https://www.huffingtonpost.com/john-graham/amazons-biggest-challenge_b_8062784.html. (Accessed: 20 May 2017).
Hill, C. and Jones, G. (2012). Strategic Management: An Integrated Approach. USA: Cengage Learning.
Hill, C., Jones, G., and Schilling, M. (2014). Strategic Management: Theory: An Integrated Approach. USA: Cengage Learning.
Hiriyappa, B. (2013). Strategic Management and Business Policy. USA: Book tango Publisher.
Management Study Guide (2015). Analysis of Amazon’s Corporate Strategy. [Online]. https://www.managementstudyguide.com/analysis-of-amazon-corporate-strategy.htm. (Accessed: 20 May 2017).
McKevitt, F. (2017). Five challenges Amazon faces plotting its own-brand products. [Online]. Available at: https://www.cityam.com/241239/five-challenges-amazon-faces-plotting-its-own-brand-products. (Accessed: 20 May 2017).
Pearce, J. and Robinson, R. (2010). Strategic Management. Washington: McGraw Hill Education.
Schneider, L. (2017). Overview of Amazon.com’s History and Workplace Culture. [Online]. Available at: https://www.thebalance.com/g00/amazon-com-company-research-2071316?i10c.referrer. (Accessed: 20 May 2017).
SlideShare (2016). Business Strategy- A success story of Amazon. [Online]. Available at: https://pt.slideshare.net/vinica_mordani/amazon-business-strategy-a-success-story. (Accessed: 20 May 2017).
Smithson, N. (2017). Amazon.com Inc.’s Generic Strategy, Intensive Growth Strategies [Online]. Available at: https://panmore.com/amazon-com-inc-generic-strategy-intensive-growth-strategies. (Accessed: 20 May 2017).
Tran, P. M. (2015). Global Retailing by Amazon: The Biggest Challenge to Overcome When Selling Internationally [Online]. Available at: https://www.cpcstrategy.com/blog/2015/04/global-retail-biggest-challenges-overcome-selling-internationally/. (Accessed: 20 may 2017).
Williamson, D., Jenkins, W., Cooke, P., and Moreton, M. K. (2013). Strategic Management and Business Analysis. UK: Routledge Publisher.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download