Introduction
Amazon and Yahoo are one of the biggest brand names in the e-Commerce industry. Since its inception, Amazon and Yahoo have had to compete in their respective market niches, instituting various strategic plans to maintain a competitive advantage. The companies were among the first to penetrate the e-commerce industry, and their respective position in the market has been because of the various strategies used to obtain and maintain a competitive advantage.
History
Amazon is the most well-known internet retailer in the world. Amazon.com was established in 1995 by Jeff Bezos, a computer and electrical science engineer who had resigned from a major Wall Street company (Hill & Jones, 2013). He noticed that out of over 1.5 million printed books, the largest ordinary bookstores can only stock about 50,000 books. He thus utilized his computer science expertise to create an online book retailing business that will reach more people and offer more books. In 1995, Bezos launched his business with a borrowed capital of $7 million.
As the company was among the first e-Commerce business, it gained a lot of free advertisements and soon acquired a very large consumer base. Within a period of 6 months, Bezos had to find ways to increase his capital in order to meet increased sales. As the venture grew, so did capital needs. The company subsequently issued its stock on the NASDAQ stock exchange in 1997 (Hill & Jones, 2013). At the moment, Amazon is one of the biggest suppliers of service-oriented software in the world. The company core business is still online retail, but it has, however, incorporated all types of virtual products in addition to books.
Yahoo! is considered one of the biggest interactive web portals in the world today. The company began as a simple website directory developed as a hobby by two electronic engineers, David Filo and Jerry Yang (Hill & Jones, 2013). The search engine began as a simple directory of the most useful websites that resided in the rapidly growing internet. They published their directory on the internet and encouraged people to visit the site and update it as necessary.
By the end of 1994, the search engine had increased its directory and received numerous visits from internet users all over the world. As more people continued visiting the site, Yang and Filo realized that they could make a lot of money if they encouraged companies to advertise on the site. As the web portal expanded and more business opportunities availed themselves, they borrowed capital from Sequoia Capital in order to improve the IT system of the company. The company became even more popular, and in 1996, it held its first public stock offering that amassed over $330 million.
Strategic Differences
There are several strategic differences that have had a large influence on the success of both companies. The first strategic difference is the online setting employed by these companies. The services offered by these companies are also innovative and offer a strategic advantage. Apart from this, both companies have expanded their initial core services and currently offer a wide range of services. These companies have also developed crucial partnerships with several other companies, thus increasing the services offered.
Finally, these companies have been able to adapt to the fast-changing online environment. Looking at Amazon.com, the company offered bookselling services in a new medium when other book retailers were struggling with traditional mediums. Amazon.com created a stable relationship with book publishers and offered more books to more customers than other booksellers. Yahoo! on the other hand, utilized experts to understand the online market, develop their product, and attract a wider consumer base. They used this consumer base to attract adverts from companies seeking to advance their products all over the world.
Strategic Planning
Both Yahoo and Amazon utilized various strategies to achieve a competitive advantage. Amazon initial strategy was to increase its consumer base so that it reached more customers. In order to attract more customers, the company improved its online portal so that users could easily search for any product. The company has also incorporated book reviews for each product and allowed consumers to ask for recommendations on a particular subject (Homsoud, & Chaveesuk, 2004). As Yahoo! is dependent on the number of users accessing its portal, the company also instituted plans to attract more users as well as maintain its existing users. This was achieved by constantly upgrading the company’s search engine as well as expanding its usefulness.
Amazon.com also instituted plans to offer other products in addition to books, including other physical products, software, downloadable music, and videos, as well as web-hosting services (Hill & Jones, 2013). Executives at Yahoo! also took a similar approach to diversification. The company expanded its core businesses such that it not only functioned as a search engine but also offered media and entertainment services (Yahoo!, 2012). Apart from this, the company increased the number of countries it served. The executives of the company took steps to replicate the Yahoo! business model across the world, in order to increase revenue from global advertisement.
Both companies adopted different strategies for human resources and efficiency. Amazon sought employees who were consumer-centered and could interact with online customers (Ba & Pavlou, 2002). Yahoo! on the other hand, the company recruited various experts to advance departments within the company. It recruited expert advertising managers to improve the company’s core competencies and increase the income received from adverts. One of the main problems with Yahoo! is that it did not deal with its customers directly. They, therefore, did not fully understand changes in consumer needs, and thus, the company had a less loyal consumer base (Torkzadeh & Dhillon, 2002).
Amazon core competencies were in the retail business. The company began as a portal to sell books to more people. The strategies all incorporated into the business are all directed at increasing the sales of its products. In order to attract more customers, the company had to adopt strategies to foster efficiency and cost minimization (Hill & Jones, 2013). The company also had to adopt strategies geared to innovation in order to keep and attract more consumers.
On the other hand, the core competencies of Yahoo! lie in web portals and advertisements. The company thus had to adopt strategies that will reach more people anywhere in the world. It, therefore, had to offer more products, develop a more efficient search engine, and also enter new niches such as social networking (Yahoo!, 2012). Due to the advertisement, the company has had to institute strategies to attract more companies within its fold.
Function Level Strategies
Functional level strategies are those strategies that are meant to improve the effectiveness of all the operations of a company and, therefore, its capacity to achieve greater consumer responsiveness, innovation, quality, and efficiency.
Amazon.com has risen up to become one of the largest online retailers in the world. In order to achieve superior efficiency, the company should expand its reach and install distribution and retail centers all over the world. The company is mainly concentrated in the U.S., and while the company offers fast shipping, it would be better if the company operated from centers in various countries all over the world such that it can offer both local goods and services, but also faster delivery.
Yahoo! has been experiencing fierce competition from companies such as Google and various social networking sites. To improve its competitiveness, Yahoo! has to attract more users as well as improve consumer loyalty. At the moment, the best functional level strategy that Yahoo! can adopt is developing partnerships with other IT companies offering complementary services. Yahoo! can thus negotiate partnerships with established sites as well as local sites all over the world. Yahoo can request to integrate its search engines to these sites such as messages, and other functions connected with these sites can be accessed via the Yahoo! portal.
Conclusion
The internet offered many opportunities for companies around the world. However, the rapid growth of the internet also ensured that companies became obsolete at a very fast rate. Amazon.com and Yahoo! are among the first e-Commerce companies to be established, and have been able to remain functional and competitive throughout. This can be attributed to sound business strategies that have been able to adapt to the ever-changing online environment. Looking at the strategies outlined above, we can see they are responsible for the success of these companies, as well as giving the same companies many opportunities that arise every day on-line.
References
Hill, C. & Jones, G. (2013). Strategic Management Theory: An Integrated Approach (10th ed.). Mason, OH: Cengage learning.
Homsoud, S. & Chaveesuk, S. (2004). Understanding a Proposed Model of ConsumerLoyalty Formation in B2C e-Commerce. International Journal of Future Computer and Communication, 3(3), 191-197.
Ba, S. & Pavlou, P. (2002). “Evidence of the Effect of Trust Building Technology in Electronic Markets: Price Premiums and Buyer Behavior,” MIS Quarterly, 26, 243-268.
Torkzadeh, R., & Dhillon, G. (2002). Measuring factors that influence success of internet commerce. Information Systems Research, 13(2), 187-204.
Yahoo! (2012). “Yahoo!”. LinkedIn. Web.