Amazon Corporation is one of the most vivid examples for consideration of strategy development because its structure is a multidimensional division of businesses with clear duties and functions. In this paper, the case of Amazon will guide the discussion of the difference and nature of business-level and corporate-level strategies. Another important factor that should be addressed is the competitive environment in which Amazon operates because the clear picture of the market will drive the more specified values and technologies to satisfy customers’ needs.
Theoretically, the model of business-level strategies has great application to businesses of any size and aim. In general terms, business-level strategy means the actions of some firms aiming to create positive differences in relation to market competitors (Seifzadeh & Rowe, 2019). As for corporations, they need to ensure and check that the local independent actions taken by their affiliates are in full compliance with general corporate interests (Seifzadeh & Rowe, 2019). Amazon’s business-level strategy can be considered as a desire to have extreme cost leadership. In other words, Amazon strives to provide a convenient and low-priced service that will attract customers and make competitors lose their clients (Hitt, 2020).
One of the evident reasons why this measure is considered a business-level strategy is the different costs of service in different states and cities. For example, the Amazon service cost will be different in Mississippi and Washington D.C., so the cost strategy should fit the environment of the place.
This strategy can be applied only in specific circumstances because of the high role of the company’s resources. Sharma (2020) indicates that Amazon has achieved this “thanks to economies of scale, innovation of various business processes and regular business diversification” (p. 36). The economy of scale is a sign of well-working production processes in the company. Amazon had 386 billion U.S. dollars in revenue in 2019, with 1,298,000 employees (Coppola, 2021). This statistic demonstrates the large scale of money turnover and the number of employees, which makes the cost of the products less than in the competitors’ companies.
Finally, another source of Amazon’s competitive advantage is its greatest contribution to talent. Working at Amazon is a very rewarding experience, and employees are expected to do much work, which often means sacrificing a work-life balance. Amazon’s leadership values are made up of 14 principles, including customer attachment, top-notch claims, and thorough research, and play an important role in increasing the workforce (Leadership principles, n.d.). The ambitious workforce makes the management of Amazon more systematic, allowing the company to direct unused resources to the areas where they are needed.
Corporate-level strategy is located on a macro-level of the company’s policies. The main idea is that businesses achieve a more advantageous position by “selecting and managing a group of different businesses competing in different product markets” (Hitt, 2020, p. 174). It helps the company that has a differentiated number of enterprises to combine them in one coherent strategy, where each corporation’s branch contributes to the success of the other. In the case of Amazon, the company began by selling books but eventually decided to purchase the entire retail industry, which included clothing, home goods, jewelry, and electronics.
Discussing Amazon has created the ideal portfolio of diversification of its products. Diversification refers to the scope of the areas and industries in which the business competes (Hitt, 2020). The benefit of it is that company does not need to rely on a few industries because, with diversified production, the company can spread its resources to the most lucrative ones. Diversification contributed to the creation of a wide set of goods that can satisfy the needs of customers worldwide. Therefore, it gives a competitive advantage to e-commerce providers like Amazon (Stiving, 2017).
Amazon’s corporate strategy relies primarily on companies that use their innovation capabilities for business success. Therefore, Amazon elaborated the developed system of innovative capabilities that make customers use the services regularly. For example, customers can buy prime membership and stream different movies and songs for free.
The company’s prime membership is a unique feature of Amazon that goes beyond traditional e-commerce. The prime membership opens access to the huge library of movies, series, songs, and podcasts. It combines the functions of similar platforms like Spotify, Netflix, and Apple TV. This technological shift through diversification brought a new area where Amazon could develop and earn money. In an ideal setting, the prime membership of Amazon can be the indirect advertisement of e-commerce, so different industries can combine together to increase efficiency.
First of all, it is crucial to outline that Amazon operates in the global economy. The main features of the global economy are the absence of artificial constraints, the multiplicity of actors, and the different state policies (Hitt, 2020). This competitive environment plays a paradoxical role: it can constrain and expand the company’s market positioning. For example, Apple experiences a rapid rise because of the various markets of operation, while autocratic countries like China or Russia may oblige it to follow their oppressive law, damaging users’ privacy and the company’s sales. The same situation is applicable to Amazon, so its strategy managers need to address the peculiarities of such an environment.
Amazon’s expansion and differentiating strategy have forced it to compete with almost every retailer operating through its online platform. Companies using online platforms include eBay, Time Warner, Google, and Netflix. However, one of Amazon’s biggest competitors is eBay, which seeks to establish itself as an e-commerce intermediary to the retailer. The information from Statista shows that eBay placed second after Amazon in the comparison of visits to their online marketplaces in April 2021 (Chevalier 2021). The main difference between them is that Amazon works like a traditional online retailer, while eBay mostly focuses on the auction system.
Contrasting the strategies of these companies, it is evident that they work in quite similar ways. Firstly, they both rely on cost leadership, having huge revenues and resources maximized by the economy of scale. However, one can assume that the corporate strategies are quite different. While Amazon extensively diversifies its products by engaging in cloud computing and digital streaming, eBay prefers to stay only in e-commerce.
It seems that the strategy of diversification applied by Amazon will make it more successful than the more one-sided eBay. For example, Amazon is investing in artificial intelligence, which some analysts assume to be a powerful tool in their portfolio (Taulli, 2021). At the same time, e-Bay sticks with its quite specific business model of the auction house, which makes their perspectives strikingly boost their revenues quite improbable.
The underlying logic of market cycles is that they can be slow and fast. The slow market cycle refers to the markets where the imitation is costly, while the fast market cycle means the market situation with an inexpensive imitation from which companies are not protected (Hitt, 2020). Some stocks or securities outperform others during the market cycle, as the business model is oriented towards growth conditions. Therefore, a slow market has few problems selling to investors, primarily through initial public offerings (IPOs), secondary placements on the stock market, or issuing a new company’s board of directors. In the case of the Fast cycle market, a company’s competitive advantage is not protected from counterfeiting, which can be described as a fast and relatively inexpensive market.
Analyzing the difference in the success of Amazon in different markets, the fast-cycle markets will be less beneficial for Amazon. The reason is that the competitive advantage that they achieve through business-level strategies will be unstable and not sustainable (Hitt, 2020). However, the role of innovations is becoming more important, so Amazon’s investments in technologies may cause them to stay first for a long time (Hitt, 2020). In practice, it seems that Amazon’s business model and strategy are more applicable for the slow cycle market, where it will feel secure and stable. In the circumstances of a slow cycle market, Amazon will benefit from its cost leadership to a higher degree.
Amazon wants to make high-quality products, recognizes core values, is curious, invests and simplifies, advocates first-class standards, thinks big, and adopts and develops its best. Customers want to know if they will continue to receive quality over the long term (Gregorio, 2019).
It is hard to emphasize that quality is almost simpler than quantity. Most businesses are built primarily to make a profit as soon as possible and with the highest possible margin. As business products become known for their crude work over the Internet, the word spreads faster and overall sales are quickly compromised. However, sacrificing the former primarily for the latter can bring short-term benefits to the company. If customers do not come back, the business quickly loses momentum. As a result, prioritizing the quantity of quality can enhance a company’s reputation, increase product loyalty, and ultimately keep its business sustainable.
Amazon has promoted a “single-click” platform where customers can buy anything with the click of a button. Beyond the speed of the company’s development, there is no doubt that its action plan is “clicking” with its customers. Therefore, Amazon’s essential thing is only needed to support its development rate and maintain its strength. The stress factor for this company is that it has not made much money in significant quarters over the last three years. A possible explanation for this is an extreme focus on cost leadership, which only means their primary concern, competition with the base, will be affected.
Ultimately, Amazon needs to take a more comprehensive global approach to the global market. Align its global action plan with its logistics supply chain and local delivery action plans. This will build a global value chain for companies where anyone can buy their products at any time. The company is focusing on its core competencies while expanding its global value chain. This creates a global value chain for businesses where anyone can buy their products at any time. The company is focusing on its core competencies while expanding the global value chain.
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