Strategic planning is the process under which a company defines its strategy and makes decisions about the resource allocation to practice this strategy. It may include the control techniques for guiding the execution of the company’s strategy. An organization can use strategic planning to establish the competitive priorities, focus on resources, strengthen operations and make sure that its staff and other stakeholders are working to attain its common objectives. The major goal of this report is to discuss the ways in which strategic planning can benefit the selected organization i.e. Amazon. Environmental analysis plays an important role in the growth and success of Amazon. Under this analysis, the organization can understand it strong areas and areas of improvement. Furthermore, the report includes internal and external analysis of Amazon Company. From this discussion, the findings are included under the SWOT analysis. At the end, recommendations are given for the future direction of the firm for long term.
Amazon.com is a multinational organization that was founded in United States of America in the year 1994 (Amazon, 2018). The company was founded by Jeff Bezos in Seattle, Washington, US. It is the biggest online retailer all over the world by both total sales and market capitalization as well. The organization is generating increased revenues every year. Currently, United States of America is the largest market for Amazon with significant revenues. It has started its business operations as online bookstore and now it has diversified the business in other products electronics, CDs, furniture, software, toys etc. It has online websites in different nations like Ireland, United States, China, Spain, Japan, Canada, Australia, United Kingdom and France (Amazon, 2018). The services of this company are online shopping, cloud computing and content sharing. The major competitors of Amazon.com are Wal-Mart stores, Best Buy, Alibaba Group, eBay, International Business Machines and Netflix Inc.
Strategic analysis and strategic planning play an important role in the growth of an organization. In today’s business environment, each and every organization operates its business operations using strategic planning. It includes the set of actions and decisions which result in the creation and execution of plans which are designed to attain the objectives of a company. Implementation of strategic planning and management is beneficial for the Amazon Company. Amazon is operating its business in highly competitive e-commerce industry. Strategic planning assists the Amazon Organization in dealing with the competitors by implementing effective strategies. It allows the organization to forecast the future and develop strategies accordingly. By the implementation of strategic planning, Amazon is able to understand that where it stands right now and in the future (Abraham, 2012).
The founder of Amazon, Jeff Bezos has adopted a strong strategic thinking and used innovative strategies. Under strategic planning process, the company focuses on innovation and growth that assists Amazon to attain a large market share in e-commerce sector and compete with competitors. In addition to this, the organization has implemented strategic alliance strategy. For example, Amazon Kindle entered in strategic alliance with iPad that helped Amazon in getting advantages of economies of scale, accessing to skills and knowledge and eliminate the risks of innovation and research. This alliance between iPad and Amazon Kindle fortified both Apple and Amazon’s position against their competitors in the industry. In this way, strategic planning benefitted the Amazon Organization to stay competitive in e-commerce sector (ACCA, 2018).
Environmental analysis is a major part of strategic planning process. It plays a vital role in business management by offering it potential opportunities and threats outside the organizational environment. At Amazon, the major objective of environmental analysis is to assist to develop a plan by considering the decision makers. There are two types of environmental analysis such as internal environment analysis and external analysis. Internal analysis assists Amazon in finding out its internal strengths and weaknesses. For example, the company came to know that it is the leading organization in the e-commerce industry. Under weaknesses, the company analyzed that it is losing its margins due to free shipping of products (Bennett, and Chorley, 2015). By evaluating this, the company was able to overcome this weakness with the implementation of effective strategies.
In addition to this, analysis of external environment also plays a vital role in the growth of Amazon. It assists the company in analyzing the external factors which may affect its business operations. These factors are competition, political factors, updated technology, changing market trends, fluctuating demographics, economy of any specific country etc. For instance, Amazon has faced the intense competition from domestic and small players who are also engaged in online selling business (Ciambrone, 2018). Thus, environmental analysis assists the organization to enhance the outline of their environment and find more threat and opportunities for future business.
As mentioned above, internal and external environmental analysis is one of the major parts of strategic planning of an organization. The internal and external analysis for Amazon is given below:
The internal environment of Amazon Company can be analyzed by conducting value chain analysis (Wolf, and Floyd, 2017). It includes both primary and secondary activities of the company which assist the organization in its business operations and to stay competitive in global e-commerce industry. Value chain analysis of the company is stated below:
Inbound Logistics
Amazon is providing highly reduced returns to its suppliers because of accurate forecasting technology. The company is able to gather the information about the customer experiences to inform about inventory control and service inputs (Grant, 2016).
Operations
The company is delivering the products to customers on the pre-given delivery time. In addition to this, it is providing the facility of fast and easy payment systems. It has established 24 hours customer support and warehouse operation to fulfill the demands of customers.
Outbound Logistics
Under this activity, the organization has the ability to collect the orders which are bound for specific locations. Amazon has established fulfillment centers in the strategic locations of the country.
Marketing and Sales
Amazon is offering discounts and price reductions with some of its products. It recommends the similar products to the customers when they search for anything. In addition to this, it offers free delivery services on the basis of single transaction spend (Inversini, and Masiero, 2014). It has adopted effect marketing and competitive strategies to attract customers towards its products and services.
Service
Amazon is a leading player in the world’s e-commerce industry and offering its services effectively. The organization has developed a free return policy within 30 days. Moreover, it is using market to enhance the distribution channels and range of products via customers and third parties.
Infrastructure
All the business units of Amazon have huge central data warehouses (Warner, 2010). It is an e-commerce organization so it has used updated technology to process the order fulfillment process. It has established a single technology platform. It is reducing the costs by leveraging the investments.
Human Resources
Amazon has hired the well-qualified and expert employees for its business operations. It offers various employee benefits to its people like medical, stock grants, paid time off and relocation allowances.
Technology Development
Amazon has made higher investment in technology and related resources. It has implemented an effective IT strategy and IT infrastructure on Linux (Mishra, & Kotkar, 2015). It has reduced the cost of technology development. It enables the organization in offering the online selling services effectively.
Procurement
This organization has created specifically distribution centers, fulfillment centers, warehouses to enhance the speed of order processing and avoiding the transaction costs. It has kept the inventory according to the demand and reduced the deliver time.
There are various external factors which can affect the business of Amazon in today’s competitive environment. These factors are stated below:
The policies of government are promoting competition via e-commerce promotion and telecom liberalization. It assists Amazon Organization in accessing more affordable internet services and increasing the users of internet (Bhattacharya, and Mishra, 2015). The government has made investment in ICT infrastructures that has provide better, faster and reliable access for internet users.
If the interest rate is higher in the country then it reduces the consumer spending on shopping. Considering the fact Amazon should enter in the countries where consumer spending is comparatively higher such as China and India. There is a tremendous growth in the internet retailing that has increased the customer base for Amazon (McLean, 2018).
There is an increase in the online social networking and people needs to take the benefits of this new shopping channel. Apart from this, there are some risks such as financial risk and product category risk that can decrease the online shopping. Amazon needs to consider eliminating these risks for internet shoppers.
Technological factors play a most important role in the business operations of Amazon.com. There is an increase in the information and telecommunications technologies for internet access. It has increased the frequency of using mobile phones, TV for internet access by online shoppers. In addition to this, there is fast development of the high speed internet that has enhanced the utilization of smart phone applications. It has positive impact on Amazon’s business operations (Keith, 2017).
There are different laws and regulations for e-commerce in different countries so Amazon needs to be aware about both the domestic and international country’s laws. It should be aware about the data protection and trade commission regulations. It has to comply with all the laws and regulations related to e-commerce business.
Today, most of the population is becoming aware about the online shopping and they are purchasing their needed products from online sites like Amazon. It has reduced the pollution in the country due to less car journeys for shopping. The organization needs to become more environmental-friendly to attract customers.
In this way, there are various external factors which are favorable for the business of Amazon.com. The company can use these factors to grow its business in global business environment (López-Gamero, and Molina-Azorín, 2016).
From the above environment analysis, it is found that there are some strengths and opportunities which make Amazon’s business stronger. Apart from this, there are some weaknesses and threats which may affect the business of company. These components of SWOT analysis are stated below:
From the above analysis, it can be stated that Amazon is operating its business as a leader in global e-commerce industry. The strengths of this organization are driven from its strategies i.e. differentiation, cost leadership and focus. It is gaining more competitive advantage by leveraging the information technology and utilization of e-commerce. Effective supply chain and logistics has enabled the organization in better customer fulfillment (Helms & Nixon, 2016). It has established a better brand image than its competitors like Snapdeal, Flipkart etc.
As mentioned above, the organization is delivering the products without charging any shipping costs that affects the profit margins of company adversely. Due to this, the organization is unable to optimize the costs. Moreover, one of the biggest weaknesses of the company is that Amazon runs a near zero margin business model that declined its profitability (Mitra, 2015).
One of the biggest opportunities for Amazon is that it can expand its operations in the developed and developing markets. The company should expand the business in the countries with high consumer spending. In addition to this, it can enhance its product portfolio wherein it stocks more goods than others. It places the company in a position of strength.
One of the major threats to Amazon’s operations is the increased issue of online shopping due to hacking and identity theft that leaves its customer data exposed. The company is facing intense competition from emerging players in the e-commerce industry. Additionally, due to its aggressive pricing policies, it had faced various lawsuits from editors and competitors in e-retail industry (Parilla, 2017).
After doing the above analyses, it can be recommended that Amazon should focus more on its business operations and strategies. The organization needs to emphasize on the profitability and not on volumes only. If the organization wants to become more competitive in the future then it should focus on profitability. Market leadership and volumes are not only factors which can add the value to its stock (Rao, 2011). It is hereby recommended that Amazon should use market penetration strategy in developing countries. It will be most feasible, suitable and acceptable option on the basis of capabilities and opportunities for Amazon in e-commerce industry. It will assist the organization in its future success and business operations in long term. In the changing business environment, it will be very challenging to implement changes and new strategies so organization should integrate its strengths and capabilities across its function areas. The company should use its strengths and opportunities to overcome the weaknesses and threats. It will assist Amazon in operating its business successfully in long run and staying competitive in modern business environment.
Conclusion
From the above analysis, it can be concluded that Amazon is operating its business operation as a market leader in online selling industry. The above report analyzed the internal and external environment of Amazon Organization. Both the analyses have resulted in the position of company in the market and about its strategies. The first section of the report includes the importance and benefits of strategic planning in the organizational life of Amazon.com. Furthermore, it includes the role of environmental analysis in the growth of organization. Value chain analysis and PESTLE analysis is conducted to analyze the environment of company. In the future, the organization should focus on generating profitability and revenues.
References
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