For a company to be able to compete favorably in the current business world, it needs to focus on strategic factors. This is because the basic nature of competition among the world’s best industries is ever changing. As such, a corporation such as Amazon is able to thrive because it has been able to achieve above-average earnings in its online retailing business. Such a success can be attributed to correct application of strategic elements that create competitive advantage to Amazon.
However, a business entity should acknowledge that the value that they derive from a competitive advantage cannot be permanent unless it consistently and effectively uses strategic management. This paper will therefore discuss the strategic factors such as globalization, technology, industrial organization and resource-based models, stakeholders, vision and mission that have impacted Amazon for its long-term achievement of above-average returns.
Globalization
Internationalization has had an immense impact on the business operations of Amazon. The corporation has increased its presence in the international market through a strategy known as internationalization of markets (Hitt et al., 2020). Global competition from China’s Alibaba has encouraged Amazon to venture into Asian market. Specifically, the company has acquired domain names of its website in different countries such as China and delocalized the language in the site to suit the needs of its customers in that specific country. As a result, the strategy has brought more benefits than disadvantages to the Amazon.
The main impact that can be derived from such globalization of market by Amazon is that it has broadened its market segment by permitting sellers across the world to market their items alongside Amazon’s commodities. This fact is also evident from the Amazon’s webpage where for instance, different publishers and authors have a platform to sell their books regardless of their world location.
Notably, the global economy has also boosted Amazon’s success because of free movement of the company’s customers’ orders across geographical boundaries of nation states (Hitt et al., 2020). The benefit has been reduced shipping costs for the Amazon’s clients and hence giving them a competitive advantage over other online retailers. Clearly, global economy has bolstered Amazon’s position as the pioneer of online retailing.
Technology
Over a period of years, technology has enabled Amazon to develop from a small firm to one of the largest corporations in the world. Currently, Amazon’s employees work in a technologically conditioned environment where technology is used to enhancing processes and assist them in their daily roles. For instance, introduction of robotics in 2016 to Amazon’s sites has helped in speeding the order processing time (Amazon.Com. Inc., n.d.). The reason for the efficiency is because robots are involved in the sites. Illustratively, robots slide below an obelisk of shelves where products are stowed, then lift a shelf before moving it to the fulfillment center (Amazon.Com. Inc., n.d.).
In addition the diffusion of technology has enabled Amazon to embrace an online books library system which is known as Kindle (Amazon.Com. Inc., 2018). This allows the company to obtain more revenues from accessing books and files in electronic forms. As evident, technological innovations and the diffusion of technology have positively impacted on the Amazon’s employees’ efficiency and growth of turnovers.
Nevertheless, Amazon has experienced the effects of disruptive technologies. The growth of social media has been disruptive to Amazon in terms of its revenue generation. Good examples are Facebook and Twitter which allow sharing of videos and product information, thereby creating a platform in which a potential buyer and seller meet without necessarily going through Amazon website. As a matter of fact, the online social sites are beginning to provide competition to Amazon, though indirectly.
Industrial Organization Model
As one of the best online retailers with high turnovers, Amazon can apply industry-based model to ensure it earns above-average returns. Firstly, the Amazon conducts an industry analysis of its market to ascertain the demand-supply statistics, the existent degree of competition Wal-Mart and others competitors give, as well as the competition structure. Next, the company then proceeds to identify an industry with the highest likelihood for above average returns (Hitt et al., 2020). In this case, Amazon can choose technology because it has existing infrastructural systems such as websites, and physical stores. Following identification of an industry with a highly potential for above-average returns is the strategy formulation (Hitt et al., 2020).
Further, Amazon then, offers its customers prices that are below those of Wal-Mart and Alibaba for standardized products or offering differentiated goods for which the clients are ready to pay a price premium. Fourthly, the Amazon acquires skills and assets such as the machineries and human resource such as the IT experts, and engineers to implement the strategy (Hitt et al., 2020). At last, Amazon then uses its core competencies, skills and assets to implement the strategy. Indeed, application of resource-based model on Amazon could guarantee superior returns.
Resource-Based Model
Considering the availability of Amazon’s unique assets, the resource-based model can be applied to ensure that the company gets superior returns. Firstly, Amazon identifies its distinctive resources such as the financial strength, and infrastructural assets such as its website and physical stores (Hitt et al., 2020). Afterwards, the online retailer determines the capacity of the set of its financial might conjoined with the infrastructure to integratively perform any specific function. Thirdly, Amazon determines the ability of its individual resources in terms of giving competitive advantage (Hitt et al., 2020).
For instance, the firm can regard Kindle as its core competency because it holds patent rights to it and cannot be imitated. Then, Amazon finds a suitable industry with fortunes that can be exploited by its vast financial might, and infrastructure and the capabilities (Hitt et al., 2020). The last step for Amazon is then choosing a strategy that permits the company to use the assets and capabilities comparative to opportunities in Amazon’s external environment. Undoubtedly, resource-based model places great emphasis on a firm’s assets, as a way to achieve super returns.
Vision
Amazon’s vision statement has influenced the company’s overall achievements in a great way. In simple terms, the statement envisions Amazon as the world’s most customer-oriented firm where they can find and locate anything they might want to acquire online (Amazon.Com. Inc., 2018). Inarguably, the vision statement has built a business culture that is completely focused on the customer and as such the firm strives to impress its clients. As an illustration, the company includes spectacular promotions and deals as after-sale services to boost customer loyalty.
The success of Amazon can also be attributed to the vision statement in a manner in which it has designed the website in a way that is easily navigable to most of their customers across the globe. Additionally, the inclusion of the word “Earth” in the vision statement is among the reason as to why the company has increased its global presence. Undoubtedly, the company’s achievement in online trading and its internationalization approaches are deeply rooted in its vision statement.
Mission
The mission statement of Amazon has been fundamental in forming stratagems that support the company’s competitive advantages against other online retailers. The mission of Amazon Company is to endeavor to provide their clients with the least prices for commodities, the best convenient choice of goods, and maximum convenience (Amazon.Com. Inc., 2018).
Ability to offer competitive prices for quality goods as enshrined in the mission statement endears many customers to the company hence increasing their loyalty. This explains why the company has been able to realize great turnovers over the years, as compared to their competitors. Also, Amazon’s popularity is pegged on its ability to offer varied selection of goods and this has propelled it to be known as a store where one can find anything at any time with ease. In essence, all the benefits Amazon offers its customers make it convenient to do a shopping from any part of the world.
Stakeholders
Like any other organization, Amazon has stakeholders that have affected the firm’s vision and mission and the strategic decisions the company has pursued. These stakeholders can be grouped further into three distinctive categories: capital market, product market and organizational stakeholders. Capital market stakeholders in Amazon Company are the main shareholders who hold the positions of top directors in the firm. An example is Jeffrey Bezos who is a major shareholder in the company and the current chairman to the Board of Amazon. Having grown the company since 1994, Bezos has a deep understanding of the risk factors in managing Amazon (Amazon.Com. Inc., 2018).
Amazon’s customers, as product market stakeholders also have influenced the success of the firm. In the financial year of 2018, the net sales derived from the customers alone, totaled to US$232887(Amazon.Com. Inc., 2018, p.17). Moreover, the employees, who are organizational stakeholders, are approximately 647,500 as at the end of 2018 (Amazon.Com. Inc., 2018, p. 4). The staff number is a boost to the company as it enables access to a wider market segment and increasing efficiency. Therefore, all the stakeholders in Amazon have enabled it realize its valued objectives.
Sources
Hitt, Ireland, & Hoskisson. 2020. Strategic management: Concepts and cases: Competitiveness and globalization (13th ed.). Mason, OH: South-Western Cengage Learning.
Amazon.Com. Inc. 2018. Form 10-K. pp.1-75. Web.
Amazon.Com. Inc. n.d. Technology at work. p. 1. Web.