Strategic Management BSM999

2

Growth Long term market leadership

One-stop shopCustomer centric

Expanding (Market leadership)

Technology Digital contents

Acquisition / Alliances Product portfolio

Q1 – AMAZON.COM’S STRATEGY DURING 2007 TO EARLY 2010

• To be the largest online retail store and improve customer experience

• To have the largest market share and increased sales

• To acquire companies to own products and technology or by alliances

• Kindle, cloud services, web services and currency converter

• Diversified range and category of products

• DRM free MP3 and media

3

QUESTION 1 CONTD.

4

• Online shopping from customers• Online registration for developer

customer (flexibility)• Transaction, Feedback, Complaints from

every sale • Material handling between inbound and

outbound logistics

• 19.16 billion but net profit margin is 3.4%• Virtual salesman concept • Office supply store (+500,000 products) • Espanol Store (1.6 million Hispanic owned

business in US)• Classic Music blowout store + Go Indie

Music Store (30 independent music labels) • Amazon Jewellery / Watches (260% in

Diamond, 169% in Coloured Gems, 107% is sterling silver)

• Motorcycle Store – 300,000 products and 500 manufactures

• Simple Storage Services• Elastic Computer Cloud• Simple Queue Service• Simple DB• Flexible Payments Service• Web Services• Currency Convertor • TextBuyIt• Bill me Later• DRM free MP3

• Strategic Alliances• Acquisitions (Fabric.com, Reflexive Entertainment,

AbeBooks)

• Continued Investment – Improved efficiency, lower prices

• Kindle, Kindle 2, Cloud computing (AWS), AWS Premium Support , Pubic Data, Amazon EBS, etc.

• Digital Contents: $1 billion spent on development of technology, 187 million on internal use software

• Richard Dalzell, recruitment of experienced staff ‘to meet customer needs’

• Positive working capital, turnover period for receivables / payables (approx. 26 Days)

• Reinvestment into business for continuous innovation

• Courier Service / Fulfilment centres• Transport between the Distribution

points• Strategic location of fulfilment centres

and warehousing• 19.7 million sq feet of property

(warehousing) • 600,000 sq ft in Hazleton and 500,000

in Goodyear• Frustration Free Packaging

• Courier Service / Fulfilment centres• Transport between the Distribution

points• Strategic location of fulfilment centres

and warehousing• 19.7 million sq feet of property

(warehousing) • 600,000 sq ft in Hazleton and 500,000

in Goodyear• Frustration Free Packaging

Q2 – VALUE CHAIN FOR AMAZON

5

Analysing competitive positioning using VRIN approach

Valuable – Upgradation of existing technology and continuous innovationRare – Brand name and virtual salesman conceptInimitable – Customer base and servicesNon-substitutable – Personnel and strategic alliances

QUESTION 2 CONTD.

6

Resources Competencies

Good turnover and good management of working capital

FinancialManaging cash flow, debtors and creditors

Strategically located distribution centres, technology warehouses

PhysicalStorage and utilisation of information.Logistics

Product development, databases, internal softwares and public websites

Technological

Leverage technology to make products accessible to customers and manage operations

Brand, customer loyalty and reputation with suppliers Reputation

Long term strategic relationship, assistance in maintaining working capital

Specific skills, commitment, key personnel Human Utilisation of the personnel

and pro-active approach

QUESTION 2 CONTD.

Strategic Capability

7

Amazon has developed a vast technology resource over the years in order to achieve market leadership and did not hesitate to make bold investment decisions

Their study of the consumer buying behaviour enabled them to offer a large variety of products and services. They started out with Books and went on to provide clothing, electronics, accessories and even auto parts and stationery

Amazon had a very good financial position through which they were able to provide these products and services globally

Some of these products and services were sourced through strategic alliances and acquisitions

Q3 – AMAZON’S DIVERSIFICATION STRATEGY

8

Strengths Brand name Online global presence Large revenues Large customer base and customer confidenceWeakness Excessive investment in diversification lead to

reduced net profit margin Unhappy shareholders due to lack of dividends

Focus should be on consolidation of the current product range and sub brands rather than further diversification

QUESTION 3 CONTD.

9

Resources Importance Amazon’s relative strength

R1. Finance 7 6

R2. Technology 9 8

R3. Location 5 4

R4. Distribution 8 8

R5. Brand 9 8

Q4 – AMAZON’S STRATEGY GOING FORWARD

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QUESTION 4 CONTD.

Capabilities Importance Amazon’s relative strength

C1. Logistics 9 8

C2. Procurement 8 8

C3. Operations 9 6

C4. Marketing / Sales 8 5

C5. Services 5 7

C6. HR 6 7

C7. Technology development 6 8

C8. Firm infrastructure 8 7

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Superfluous Strengths Key Strengths

Zone of Irrelevance Key Weaknesses

Rela

tive s

tren

gth

Strategic importance

QUESTION 4 CONTD.

R1

R2

R3

R4

R5C1

C2

C3

C4

C5 C6

C7

C8

R2

C7

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Strategy going forward Consolidate the current business line

• Amazon needs to exploit their current strengths and use them to overcome their weaknesses

Hold back on the heavy investment on new technology• With the current economic downturn going on, investment

needs to be curtailed as the customers are not spending as much as they did earlier

Improve efficiency of the business and thereby increasing the net income• Amazon has a very low net profit margin in comparison to its

competitors and they need to increase it to be attractive to the shareholders

Improve sales & marketing of the brand• The amazon website is does not highlight its sub-brands.

They should create a co-branding and/or cross branding strategy to increase sales in the current economic downturn

QUESTION 4 CONTD.

13