Business-Level and Corporate-Level Strategies
Business-Level and Corporate-Level Strategies
Amazon’s mission statement shows a customer-focused approach which is a strategy that is crucial to the long-term sustainability and success of the company. The mission statement states that, “Amazon.com strives to be Earth’s most customer-centric company where people can find and discover virtually anything they want to buy online (Craig, 2015). By giving customers more of what they want – low prices, vast selection, and convenience – Amazon.com continues to grow and evolve as a world-class e-commerce platform.” The company has enhanced its efficiency in business delivery which includes stores skillfully located around the country and the use of Artificial Intelligence. The company also prides itself in progressive software that helps in setting its inventory levels and packing labels using predictive algorithms. Amazon works to provide high quality products and services using the latest technological advancements such as Amazon web services, drones, and Prime at reasonable prices.
Amazon is largely customer-oriented as it consistently focuses on the needs of their customers with an aim of delivering products and services in a fast, cheap, and convenient manner. Amazon Prime, reasonable pricing, free-shipping, and a wide variety of products and services ensures that it earns its customers’ loyalty ensuring that they always opt to one store to cater for all their needs. Amazon has discovered practices such as free shipping and willingness to refund unsatisfied customers to be cut in to the company’s profits. However, this may work out in the company’s favor in the long run because it ensures customer loyalty and a significant market share.
Looking in to the company’s 2016 annual report, its accountability for unredeemed gift vouchers stood at $2.4 billion compared to the $2 billion at the close of 2015.The company’s Prime Discounts and subscriptions accounted for over 4% of its revenue with over 60 million subscribers. Amazon has employed an excellent business level strategy that has played a key role in its success. This strategy has removed the company from being a traditional brick and mortar entity thus leading it in the direction of being an internet giant. Developing this strategy has utilized the ease and availability of online shopping thus allowing the company to reach every customer through internet connection, and affording them the ability to retain customer loyalty while at the same time achieving significant market shares.
A research by Delloite and Touche found that customer-centric companies were 6 times more profitable as compared to business that were product or service-centric. This is quite true because focusing on customer needs can help organizations tailor their services and products with the customer in mind thus enhancing the customer experience. Amazon has made great milestones through their business level strategy.
Corporate-level strategy
According to recent annual reports from Amazon, developers, sellers, and consumers are all focused on the vision of growth anticipated by Founder/CEO of Amazon Jeff Bezos. The strategy is to experience growth by majorly focusing on the customer experience as can be seen in the figure below.
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The focus on customers is based around E-Commerce as this is the industry that Bezos visualized to grow in the coming years. To analyze this growth, Amazon utilizes the Ansoff Matrix which explores opportunities for growth for Amazon. The Ansoff Matrix for Amazon can be represented in the table below.
Products
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Existing New
Existing
Markets
New
Amazon has so far managed to adopt all the four strategies mentioned in the figure above. In the past four years, Amazon has majorly concentrated on Product Development in the form of the Kindle E-book reader, along with the Kindle Fire tablet designed and developed originally by Amazon to compete with other tablets in the market such as the iPad.
Although the Kindle app has been the only product introduced in the market within the past four years, Amazon’s main concentration has always been innovation and being a customer-oriented company. It does this by providing easy to use functionalities, fast and reliable fulfillment, and fast-paced customer service (Amazon.com, 2015).
On a corporate level, Amazon has adopted the diversification approach whereby strategic development occurs beyond current markets and products, but within the value network or organization’s capability. In 1995, Amazon started off as an online book library but currently, it retails everything and anything technological through its distinct business technique of offering freedom to sellers and offering programs which enable sellers to trade their products on the company’s website as well as their own branded websites and to deliver order through Amazon (Amazon.com, 2015). Through this diversification strategy, Amazon has managed to establish long-term relationships with multiple strategic partners such as AltaVista, Yahoo!, Netscape, Prodigy, @Home, and GeoCities.
Another major reason for Amazon Diversification strategy success is because of its effective application of economic scopes towards its own resources. The company has a very strong online base which makes it easy to explore new markets through its innovative online software created by Bezos. For instance, the film store has a similar outline on the Amazon website as compared to the book store. This same outline which includes bestsellers and the top 100 can also be found in the games section, clothing lines, toy section, and electronic sections.
Additionally, Amazon provides Market Development through expanding to new geographical locations. Market development entails providing existing services and products to new markets. Amazon effectively does this by extending its website in to countries thriving with E-commerce. For example, in 2010, the company expanded its website globally in to China, Canada, Japan, Germany, France, and the UK. Here it offers customers from these countries the opportunity to pay for products using their own currencies. This has been a major trend among the company’s competitors and where companies such as Wal-Mart seek to use E-commerce sites and cross-territorial shipping to reach a wide audience (Birchall, 2010).
The most important corporate level strategy that seems to be more important to Amazon is diversification. This is because diversification ensures that the company continues to expand it knowledge base and coming up with new innovative ideas to develop products to an ever expanding market. The global market is increasingly becoming more and more internet dependent and more and more people are looking to purchase products and services from different regions with ease. Through diversification, Amazon can come up with new products to meet the demands of emerging consumers. Diversification will also ensure that the company explores more international markets. There are multiple opportunities in emerging market in developing countries. Amazon should consider s diversification strategy that will enable it to roll out its website in to these markets. The increasing customer trends and behaviors are increasingly sweeping through developing countries and therefore this is a niche that the company can explore through its diversification strategy.
Competitive Environment
Amazon’s direct competitor across the internet world is Google, and the rivalry between these two internet giants has only escalated in the past few years. A lot of individuals consider Google a Search Engine first, then an email provider second, and lastly an ad seller through its AdWords program (Gregorio n.d., 2017). On the other hand, many people consider Amazon an online platform for shopping. However, these two companies are internet giants whose main focus is on selling products and services. In the online market space, the products and services being sold by these two companies have often resulted in head-to-head competition between them.
As compared to Yahoo, Amazon is Google’s main Search Engine rival. Most times when people are shopping online, they often go to straight to Google Search then go right over to Amazon. According to a report by an E-marketer survey by Adeptmind, about 48% of online shoppers go directly to Amazon at first as compared to 35% who start straight on Google (Gregorio n.d., 2017). Amazon has tirelessly worked to increase this statistics by offering, aside from just buy and sell information and trends, answers to customer questions, and product and service reviews, thus outperforming Google Search in regards to providing information needed by most consumers.
Every time someone fails to search on Google, the organization misses the opportunity to showcase ads to the viewer and this is detrimental because ads are Google’s business’ bread and butter. Google has developed Google express, a delivery service aimed at partially stealing away some of Amazon’s purchase traffic and competing with Amazon’s Prime Service. However, Amazon has not been left behind lagging. The company is currently experimenting with drones to offer delivery services.
Another section of the Amazon Prime is its video and music service which has been expanded by the creation of the Kindle Fire tablet. On the other hand, Google has Google play and Play Store incorporated within its Android Operating System. To compete with this, Amazon has also rolled out its own app store. In terms of video services, both Amazon and Google have implemented direct television viewing software. Google has developed the Google Chromecast while Amazon has developed the Amazon’s Fire TV.
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From this analysis, it is clear that Amazon is gaining an upper hand over Google. This can be seen through how fast Amazon is catching up with Google. Although Google has developed products and services that appeal to a large customer base such as Google Earth for space explores, Google maps for voyagers, Google scholar for academicians, and the Play store for the young and curious audiences, it may soon be outpaced by Amazon in the long run. Many people go to the Google search engine to check out Amazon products. Most of the time, they do not really focus on ads but when they check out the Amazon website, they are sure of what they want and are more likely to purchase via the portal.
Slow and Fast Cycle Markets
Both Amazon and Google have competitive advantages they would want to sustain in the long run. However, the level of the sustainability depends on how quickly other competitors can imitate their competitive advantages and the cost of doing this. In a slow-cycle market Amazon my choice of Amazon being more successful long term will change. This is because the company’s major strategic move such as diversification carries with it a lot of risks in this market. Since Amazon is always engaging in a lot of acquisition and diversification, this poses a great liability and the risk of going beyond the budget and failed investments which can lower their profits.
In a fast-cycle market where the capabilities of the firm competitive advantages are not protected from imitation I believe that my choice would not change. Amazon’s continuous acquisitions and launching of new products and innovations will make the company have an edge over Google. In such a market, innovation, speed, and technology are crucial for success since it is difficult to gain competitive advantage. The use of AI and drones will further optimize its efficiency and ensure that its products can be cannibalized before being imitated by competitors.
References
Birchall, J. (2015, November 28). Amazon seeks to expand globally. Retrieved February 7, 2019, from: http://www.ft.com/cms/s/0/730ce8d4-fb27-11df-b576-00144feab49a.html#axzz2bi9MbthO
Craig, William (April 24, 2015). Business Diversification: The Risk and the Reward. Retrieved on May 12, 2017, from: https://www.forbes.com/sites/williamcraig/2015/04/24/businessdiversification-the-risk-and-the-reward/#192d17c87d09
Deloitte B.R & Touche D.M. (2017). Customer centricity: Embedding it into your Organization’s DNA. Retrieved Feb 7, 2019, from, https://www2.deloitte.com/ie/en/pages/strategy/articles/customercentricity.html
Funding Universe. Amazon.com, Inc. History. Retrieved February 7, 2019 from,
http://www.fundinguniverse.com/company-histories/amazon-com-inc-history/
Gregorio, Lou (n.d). Case Study: Amazon.com, Inc. Retrieved Feb 7, 2019, from,
https://stonybrook.digication.com/lou_gregorio/Corporate_Level_Strategy
Hitt, M. A., Ireland, R., &Hoskisson, R. E. (2013). Strategic Management: Concepts and Cases:
Competitiveness and Globalization (10th Ed.). Mason, Ohio: Cengage Learning.
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