Introduction
- Focused differentiation: The company is customer-centric; all strategic decisions center on improving customer experience through innovative technology.
- Best cost provider: The organization uses cost-leadership approaches such as discounts, timely delivery, waiving shipping charges, and waiving tax charges to lower product prices.
Complimentary Strategy Options
Offensive Strategic Moves
- The first mover in the implementation of cutting-edge technology, for instance, Alexa.
- Draws sales away from competitors by creating new markets such as Kindle outcompeted Sony Librie shortly after its launch.
- Adopts innovative ideas from rival companies: Jeff Bezos was inspired to create Kindle after hearing how E-Ink works at a conference. E-Ink was an ebook software that specialized in ebooks in the early 2000s.
Website Strategy
The company’s website is used for the following purposes:
- Product information channel: The organization’s product information is available on the website.
- Exclusive channel for reaching customers: Most of the company’s products are sold on the website. The company has a broad product offering. Customers are attracted to the website through the use of innovative technology.
Strategic Alliances and Partnerships
- The company partnered with Microsoft in 2018 to improve the business capabilities of Amazon Alexa (Walker, 2019).
Outsource Selected Value Chain Activities
- The organization mainly outsources inventory management. Supply chain activities are streamlined with strategic goals through automation. Suppliers are also provided with access to the company’s IT resources and assets.
Merger and Acquisition Strategies
- The company acquired the Whole Foods grocery chain in 2017 to expand its share in the grocery market segment.
Functional Strategy Areas
- Sales & marketing: Uses psychographic and demographic segmentation marketing strategies. It maps consumer behavior through AI applications such as Alexa to drive sales and improve user experience.
- Research & Development: Invests in research in technology, market characteristics, and product research.
- Human resources: Uses a combination of in-house employment and third-party employment practices. Innovative leadership is part of the company’s competitive advantage.
Market Timing
- First mover: The organization initiated several high payoff moves in the eCommerce industry, including Alexa, virtual dash button, amazon fire phone, and TV.
CEO Letter
Amazon’s sustainable growth and profitability can be attributed to its cost-leadership and differentiation focus. The company is mainly customer-centric – all its business strategies and decisions aim to improve customer experiences. It provides quality services, and extensive product choices, and focuses its business practices on enhancing user experience. Consumer service is not just a differentiation point for the organization but also its significant competitive advantage. By focusing on clients, the enterprise has succeeded in maintaining better consumer relationships and its image as the ideal portal for their online shopping needs (Juneja, n.d.).
Technology has made it possible for the firm to optimize its marketing strategies, spawn rival organizations with similar business models, and retain its market position as one of the leading global online retailers. Big data and artificial intelligence systems such as Alexa have helped the establishment improve customer experience and drive company sales.
Despite its profound position in the eCommerce market, the organization seems to lag behind its competitors in terms of profit. A study conducted by MGM Research showed that Amazon’s revenue in 2018 was $233 billion, while that of Walmart was $514 billion (“Amazon vs Walmart,” 2019). The survey further revealed that Amazon had a revenue share of 31% while Walmart’s revenue share amounted to 69% in 2018 (“Amazon vs Walmart,” 2019).
Within the U.S market segment, Amazon had an operating profit of $7.3 billion, while Walmart attained an operating profit of $17.4 billion within the same marketplace region (“Amazon vs Walmart,” 2019). From the above analysis, Amazon must employ appropriate strategies to improve its financial or strategic outcomes.
First, the company must align its strategic options with its business strategy. The organization focuses a lot on diversification and expansion without a straightforward approach (“Amazon vs Walmart,” 2019). Amazon has evolved from an online bookstore to a provider of over 90 services on its AWS platform without a well-articulated long-term plan (Juneja, n.d.). Therefore, the firm’s management should identify its core competencies and refocus its organization strategies accordingly. Walmart uses this method and has succeeded in carving out a niche in the grocery segment in the US.
The company makes significant investments in approaches such as the brick and mortar footprint and one-click sales to drive its grocery sales as one of its core competencies (Droesch, 2020). Similarly, Amazon should identify its primary competencies and make appropriate investments rather than expanding its product catalogs. If the firm makes this change, it may succeed in establishing market dominance in this particular segment.
Amazon Web Services (AWS) faces a fair share of competitors in the market – some of them include Microsoft Azure and Google Cloud. Collectively, these businesses pose a threat to the viability of their cloud-based services. Therefore, a second strategic option to improve its corporate strategy is diversifying its cloud-based services. Since big data and cloud computing are set to become significant business trends in the future, Amazon can strategically position itself in these segments.
Diversifying the cloud-based services will satisfy the business’s complementary imperative in the future. If the firm chooses to implement this solution, the diversification will improve its customer base and enhance longer-term profitability (Juneja, n.d.). To buffer against the unpredictability of technological trends, the company can establish complementary dig data services in addition to cloud-based services.
References
Amazon vs Walmart – revenues and profits comparison 1999-2018. (2019). Web.
Droesch, B. (2020). Amazon vs. Walmart: Who’s really winning online grocery?. Web.
Juneja, P. (n.d.). How Amazon can improve its corporate strategy. Web.
Walker, R. (2019). Alexa: A pandora’s box of risks. KEI No. 1443. Web.