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Strategic Analysis Of Amazon Company

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Strategic Analysis Of Amazon Company

Introduction

The purpose of this report is to perform a thorough, in-depth analysis on Amazon.com e-retailing business to identify their competitive advantage, recognize and address their weaknesses; which will help us to design & devise a strategic plan for the company to improve its performance, productivity and finally increase its profits to sustain in the future. Before we move ahead, lets briefly understand strategy & the steps involved in strategic management process.

What is Strategy

Strategy is a method or a plan designed to achieve organizations long-term goals & objectives. Strategic management is a five-step planning process which entails initial Assessment, In-depth analysis, strategy formulation, its implementation and finally evaluation. This entire strategic management process is performed to lead the organization towards fulfilment of its long-term objectives & goals. Steps in Strategic management process:

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  1. Initial Assessment & Goal Setting. This is the starting point of the process wherein long-term goals & objectives are clearly stated.
  2. Situation Analysis. An Analysis which enables the company to know its internal & external factors affecting its business is performed. Popular tool used are PESTEL, SWOT, Porter’s five forces model etc.
  3. Strategy Formulation. Once the situation analysis is complete, company moves to strategy formulation stage wherein various strategic options/alternatives are evaluated based on the outcome of the internal and external situation analysis, the goals are prioritized, resource planning is designed. Popular tools used in this stage is Scenario Planning, Boston Consulting Group Matrix, GE-McKinsey Matrix etc are used
  4. Strategy Implementation. After the Formulation of the strategy, next comes is the implementation stage where resources are allocated according to priorities, employees are made aware of the goals to be achieved, about their roles & responsibilities, funds are made available and finally the implementation begins. Popular tools used are Motivation, policies, performance management 5. Strategy Evaluation In this step, results are monitored to check whether the desired objectives are achieved or not. Corrective actions are taken, in case of any deviation from the desired goals. Tools used are Balanced Scorecard, Benchmarking etc.

About the company

Amazon is the largest online retailer in the world and a successful cloud services provider. It was started in 1994 by Jeff Bezos, as an online book seller. But due to its widespread success, the company diversified into many other product lines such as groceries, electronics and consumer products etc. Its name is taken from the river ‘Amazon’, the largest river in the world. The name served as the reference to the owner’s plan regarding size of the company in the future. Amazon has separate websites, Customers service centres for several countries like China, India, France, Japan and fulfilment centres all around the globe.

Amazon’s Strategic Analysis

To perform Strategic analysis and recommend strategic directions to amazon, all the steps of strategic management process would be performed; as given above, except implementation and evaluation steps:

  1. Initial Assessment. This is the starting point of the process wherein long-term goals & objectives are clearly stated.
  2. Situation Analysis. Here, an Analysis which enables the company to know its internal & external factors that affect its business is performed.
  3. Strategy Formulation. Once the analysis is finished, company moves to strategy formulation stage wherein the goals are prioritized, Resource planning is designed.

Initial Assessment & Goal Setting

This is the starting point of the process wherein we would analyse the long-term goals & objectives of amazon. Following are the vision and mission statement of Amazon. Amazon Vision “Earth’s biggest selection and to be Earth’s most customer centric company.” Amazon’s Mission “Our Mission is to leverage technology and the expertise of invaluable employees and to provide customer with the best shopping experience on the internet.”

SWOT Analysis

SWOT Analysis is a strategic management tool which enables a company to understand its strengths and weakness and to identify the opportunities open in the market & the threats it faces. Strengths Global Brand Low prices bundled with good quality products & quick delivery Wide range of products Quick to adapt to new technologies, strong research & development Strong logistics Amazon.com’s Merchant programWeaknesses Too many business Low profit margin Amazon does not have physical stores Due to low margins, it also has low cash flows Opportunities Changing spending trend in emerging markets like India & China. Growth of online shopping in India & China. Growth in E-commerce sales & Digital media. Increasing movie downloads. Threats Competition faced from brick & mortar shops Heavily dependent on vendors/suppliers. Competition faced from other e-commerce websites.

PESTEL Analysis

PESTEL is an analytical tool which enables the company to review its external environment from different angles and contemplate the analysis into designing of its strategic plan.

Political

Government policies promote competition through liberalization of telecom policies. Government supporting e-commerce promotion and huge investment in ICT infrastructure.

Implication

Liberalization of telecom policies will lead to cheaper internet price; thereby increasing the numbers of internet users. Government spending on ICT infrastructure will lead to faster & better network of internet connection. In all, more people will use internet & high scope for amazon to grow its e-retailing business.

Economic

Internet retailing has seen incredible growth & the same trend is going to continue in future, with sales growth rate rising over 100%.

Social

Increase in online Social media networks like Facebook, twitter.Implications: – Amazon should devise a strategy to include placing advertisements on social media network.

Technological

Increase in broadcasting, I.T & telecommunications technologies across the world. Rapid development in ‘high-speed network’ has made media-rich contents available to internet users.

Implications

Access to Internet available on smart phone devices like mobile phones & tablets. It will enable amazon to develop faster applications which in turn will increase its sales.

Environmental

Less People will travel for shopping & more people will shop online. In turn, more potential customers for Amazon.

Strategy Formulation

Once the situation analysis is complete, company moves to strategy formulation stage wherein various strategic options/alternatives are evaluated based on the outcome of the internal and external situation analysis, the goals are prioritized, resource planning is designed.We now come to stage of strategy formulation/Plan for amazon. This would be final stage of this report. Strategic Options/ Plan for Amazon.

Indian & Chinese markets

The Pestel analysis reveals that the consumer spending is going to rise in emerging economies like India & china. Liberalization of telecom policies will lead to cheaper internet price; thereby increasing the numbers of internet users. Government spending on ICT infrastructure will lead to faster & better network of internet connection. In all, more people will use internet & high scope for amazon to grow its e-retailing business in India & China.

Social Media Marketing

There is going to be an increase in online Social media networks like Facebook, twitter according to PEST analyis. Social Media Sites like facebook have phenomenal growth with 1,50,000 users adding everyday. Amazon can take advantage of this large customer base to increase awareness and boost its sales. Increase Merchants/ suppliers:- Porters five forces model reveal that there is risk of increased competition from brick and mortar stores as well as from the other online retailers. In order to combat this risk, Amazon should increase its suppliers or merchants supplying to its website, which will increase its product range, making it difficult for small online business to compete.

Incorporate new technologies

According to PEST analysis, it was clear that there would be increase in broadcasting, I.T & telecommunications technologies across the world. Incorporating new technologies in the business would enable Amazon to develop faster applications which in turn will increase its sales. Sponsor large Events:- Sponsoring worldwide national and international events will bring awareness among large mass of people, thereby increasing its sales.

Sales Promotion activities

Providing genuine discounts will help the company win the trust of people. Building trust would enable the company to make loyal customers.

Conclusion

This report has thoroughly studied & analyzed the internal & external factors which affect Amazon’s business, which has resulted into crafting and designing some implementable strategies for Amazon. This will help the organization to improve its performance, productivity and finally increase its profits to sustain in the future.

References:

  1. Investopedia. 2018. Ratio Analysis | Investopedia. [ONLINE] Available at: https://www.investopedia.com/terms/r/ratioanalysis.asp. [Accessed 12 Sep. 2018].
  2. Ovidijus Jurevicius. 2018. Strategic Management Process? – Strategic Management Insight. [ONLINE] Available at:https://www.strategicmanagementinsight.com/topics/strategic-planning-process.html. [Accessed 27 September 2018].
  3. Business Study Notes. 2018. Strategic Management Process and Its Different Stages. [ONLINE] Available at: http://www.businessstudynotes.com/finance/strategic-managment/different-stages-of-strategic-management-process/. [Accessed 27 September 2018].
  4. Strategy-Keys.com. 2018. Example of a Strategic Plan Model Amazon Internal Analysis — Strategy-Keys.com. [ONLINE] Available at: https://strategy-keys.com/articles-on-strategic-planning/example-of-a-strategic-plan-model-amazon-internal-analysis/. [Accessed 27 September 2018].

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