A strategy is crucial when it comes to growing a successful company. Both business and corporate strategies need to be developed to improve performance and profitability. For large-scale businesses like Amazon, careful planning and thoughtful approach are essential contributors to the organization’s success. Hence, Amazon’s plans and policies need to be explored since they allow it to gain a competitive advantage. As the company’s strategic analyst, I have been tasked with providing a business analysis of Amazon’s strategy. If it is designed wisely, it allows for achieving objectives and allocating resources efficiently. The purpose of this paper is to analyze the business and corporate strategies of Amazon and discuss the company’s business model, corporate structure, and management systems.
Generic Business Strategy for Amazon
First, the generic business strategy for Amazon needs to be examined. According to Smithson (2017), there are four generic strategies, such as cost leadership, differentiation, cost focus, and differentiation focus. Each of them emphasizes different approaches to maintain a competitive advantage for the firm. Amazon operates in the e-commerce market, which is known for tough competition and the challenge of keeping customer loyalty. Under such conditions, the company succeeds and shows intensive business growth and expansion. In particular, Amazon provides its services outside the U.S., which confirms the international reach objectives (Smithson, 2017).
Besides, the organization is considered a tech gained, highly competitive against other large retail corporations, such as Walmart (Smithson, 2017). Hence, it can be concluded that Amazon uses a cost leadership strategy in setting its objectives, aiming to minimize its operational expenses. In particular, the company utilizes advanced technologies to increase its processing efficiency. As for the e-commerce market, such an approach automatizes many of the routine tasks involved in purchasing goods. Hence, Amazon applies a cost leadership generic strategy to build a competitive advantage through improving its information technologies utilization.
Amazon’s Business Strategy in Its Marketplace Approach
Another aspect to consider is the firm’s business strategy used in its marketplace approach. In general, Amazon’s market strategy is based on the concept of the virtuous cycle, designed by the company’s CEO Jeff Bezos (Secrets of Amazon’s winning marketplace strategy,” 2016). It has been driving the corporation’s store traffic and profits since it was established. The virtuous cycle model views excellent customer experience as a starting point, which attracts more consumers. In turn, more third-party sellers are drawn to the company’s marketplace, which offers a broader product selection.
Ultimately, the price of goods per unit is lowered due to the wide range of products available, along with technology implementation. Finally, attractive prices lead to positive customer experience and ensure the smooth work of the virtuous cycle model. Automation, multi-channel fulfillment, and logistics infrastructure play an essential role in lowering the cost (Secrets of Amazon’s winning marketplace strategy,” 2016). Overall, an extensive product catalog, affordable prices, and excellent buying experience constitute the blueprint for Amazon’s business strategy in its marketplace approach.
Amazon’s business model
The corporation’s business model needs to be considered as it defines the core strategy for business profitability. In this regard, core products, sources of revenue, the customer value proposition, and the profit proposition are essential in designing a plan for achieving the company’s goals. As Uenlue (2018) reports, Amazon’s business model is based on a number of fundamental principles, such as leveraging the economies of scales, applying a platform business model, bundling, and using a data network. The corporation has partly achieved a scale economy as its distribution network processes customer orders directly.
Fulfillment by Amazon (FBA) and Shipping with Amazon (SWA) constitute the fulfillment and delivery infrastructure for third parties, respectively (Uenlue, 2018). The platform business model involves Kindle, Prime Video, Alexa, Amazon Marketplace, and Amazon Services Marketplace as some examples operated by Amazon (“Amazon,” n. d.). Subscription offerings, Amazon recommendations, and product grouping can be considered as a bundling principle and data network utilization. It is worth noting that for its business model, the company focuses on enhancing technologies and logistics applications, along with improving its online services.
In regard to business strategy, the internet should be viewed as an integral part of Amazon’s development. However, modernization and marketing strategy contribute to Amazon’s title of the current most innovative corporation. According to Singh (2020), its Merger & Acquisition (M&A) strategy, Amazon Web Services segment (AWS), and Research and Development (R&D) activities can be listed as examples of the company’s business model implementation. Overall, technologies contribute to the corporation’s implementation of its business strategy.
Amazon is known for its wide variety of goods presented on its platforms. The core products can be divided into several subcategories: retail goods, consumer electronics, and digital content. Retail goods include electronics, baby products, arts and crafts products, beauty and personal care items, gourmet food, groceries, clothes, healthcare and household goods, pet supplies, toys, sports equipment, and many more (“Amazon,” n. d.). Consumer electronics were presented as the Kindle e-reader, Amazon Fire T.V., and Echo smart speaker (“Amazon,” n. d.). As for digital content, it is presented through such platforms as Amazon Music, the Kindle Store, Amazon Studios, and Amazon Games Studios (“Amazon,” n. d.). In general, the company’s products available in the market are extensive.
How Amazon Makes Money
Sources of revenue are another essential aspect to consider concerning the company’s business model. For Amazon, the retail segment, subscriptions, and web services can be regarded as the main channels of generating revenue (Uenlue, 2018). It is worth noting that the corporation ranks among the top global companies in regard to their market value, and its business can be divided into several sectors: North America, International, and AWS (Singh, 2020). Overall, selling physical goods, commercials, and software should be viewed as the primary source of the company’s revenue.
The Customer Value Proposition
As a global company, Amazon holds numerous value propositions based on the nature of the product. For instance, the customer value proposition combines on- and off-page elements targeting clients in different markets (Uenlue, 2018). Amazon’s mission focuses on providing excellent customer experience and goods at the lowest possible prices. Hence, the platform collects user data to build pricing strategies and content, targeting the specific client group. In general, Amazon’s customer value proposition includes three key factors: low prices, fast delivery, and a vast selection of goods (Uenlue, 2018). The combination of these characteristics allows the company to target different audiences and appeal to various needs.
The Profit Proposition
The profit proposition refers to the revenue a company generates without the cost required to produce and deliver goods. As for Amazon, it has a diversified business model, with online stores constituting about half of the corporation’s revenues (Singh, 2020). Other segments that make profits are Amazon Advertising Services (AAS), Amazon Prime, and AWS (“Amazon,” n. d.). The company’s cash machine business strategy can be viewed as an essential element of the entire system. Besides, advertising services offered on Amazon’s platforms contribute to the total revenues. Therefore, it can be concluded that the company has multiple sources of profit.
Amazon’s Corporate Strategy
The company’s corporate strategy builds upon its business strategy and allows for determining ways to create the most value. Amazon’s corporate strategy can be referred to as concentric diversification that bases on leveraging applying technologies and enhancing the cost leadership model (Singh, 2020). The corporation aims to offer all kinds of products at the same place for its customers. Hence, building upon the strategic objectives, Amazon lowers prices utilizing its famous virtuous cycle model.
Amazon’s Expansion from its Original Product
Amazon is known for its significant expansion form the original product offered as the company emerged. As Singh (2020) states, it started as an online book retailer in 1995. However, the store expanded to other areas, such as technology, cloud computing, logistics, and media, which marked the beginning of the company’s transformation into a global corporation. Currently, Amazon’s marketplace has reached beyond the original product offers.
Vertically Related Activities
Amazon bases its work on vertical integration, which benefits the company and explains its rapid economic growth. In general, the corporation starts utilizing a particular service, proceeds to build operational efficiencies, and, finally, offers them to other users. For instance, warehouses, AWS, delivery, and banking services are examples of businesses launched by the corporation (Singh, 2020). Such a model has proven to be successful and has contributed to Amazon’s transformation into a retail giant.
The Overall Corporate Structure and Key Management Systems
Amazon’s corporate culture should be determined as hierarchical since it is based on a vertical line system of authority. In particular, senior management is represented by three CEOs and three vice presidents, who are subordinate to Amazon’s CEO Jeff Bezos (Singh, 2020). The directives of senior management are implemented in all relevant divisions of the company on the international level. Hence, it is critical for Amazon to ensure efficient management control of the entire company and apply a functional organizational structure. This approach allows for guaranteeing a successful interaction among all the components of the corporation. Besides, function-based groups are developed to facilitate e-commerce management, considering the current globalization of the business. According to Uenlue (2018), such groups as the CEO Office, business development, AWS, and Finance constitute the core of the organization’s management system. Amazon’s strategic objectives are compatible with corporate structures and management systems.
Amazon is involved in worldwide-reaching retail, which requires global alliances and cooperation. In particular, global alliance managers contribute to expanding the company’s partner community. Amazon Partner Network (APN) is an international program that targets technology and consulting businesses utilizing AWS for their services (Uenlue, 2018). It aims to help entrepreneurs expand their business and improve cloud computing experience. According to “Amazon” (n. d.), the APN tool is applied by most of the Fortune 500 companies. The system helps its users find and choose the right partners and get go-to-market support. Hence, the company reaches out in its corporate structure, building connections, and providing emerging businesses with opportunity.
The Strategic Fit between the Business and Corporate Strategies of Amazon
Overall, it is crucial to evaluate the strategic fit between Amazon’s business and corporate strategies to ensure the achievement of the company’s strategic goals. Even though both terms refer to different aspects of the firm’s policies and principles, they fulfill each other, and an efficient combination can increase the corporation’s competitive advantage and boost profitability. As can be seen, Amazon applies the cost leadership model in terms of business strategy and concentric diversification in terms of corporate strategy. Such a method allows the company to deal with numerous products, lower costs, and offer a global reach.
In general, Amazon corresponds to the following principles: entering merging markets and segments, strengthening its ecosystem as the core of corporate strategy, focusing on customer service, and promoting leadership values (Uenlue, 2018). Price and convenience constitute the blueprint of the corporation’s vision, while the profit margin can be considered relatively thin. In this regard, a constant business diversification, the economy of scales, and continuous innovation allow Amazon to maintain its competitiveness. It can be concluded that the strategic fit between Amazon’s business and corporate strategies is efficient as it enhances the company’s operating capabilities and profitability.
To summarize, this paper analyzes Amazon’s business and corporate strategies, focusing on its business model, organizational structure, and management systems. The company is considered the largest online retailer, and its success results from an efficient implementation of strategical objectives. Amazon maintains numerous business models and targets various customer groups. To operate such a large variety of platforms and products, a virtuous cycle principle is applied, ensuring lower costs and higher profits for the company.
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Uenlue, M. (2018). Amazon business model: The ultimate overview. Innovation Tactics. Web.