Business management is based on the development of a strategy, its adaptation to the specifics of the company, and its implementation. In other words, the strategy implies choosing the path of development of the company, market, competition, and business practices. Amazon is a company that sells goods and services to the mass buyer via e-commerce.
Jeff Bezos, the founder of the company, made use of the Internet instead of the standard ways of selling to expand the operations of Amazon globally. Over time, the company has evolved from a bookseller in a firm that sells various products and services around the world. It is necessary to analyze the environmental forces, the company’s strengths, and weaknesses as well as its potential to understand whether Amazon’s current strategy is effective.
It should be noted that the Company uses various information systems to achieve competitive advantage (Hayden and Webster 23). Amazon carries out continuous monitoring of the environment to respond to changes promptly and effectively. Also, the use of IT helps the Company to obtain customer loyalty and enhance the efficiency of distribution channels (Johnsen, Howard and Miemczyk 364). However, there several factors that can influence and significantly change the activity of the Company in perspective.
The political forces that affect the company include the increase in the tax burden on businesses, increased governmental control in other countries (for instance, in China), and possible changes in industry-related legislation (Fishman et al. 21). Economic factors imply a change in the overall dynamics of the industry, changes in currency exchange rates, inflation rates, and the level of creditworthiness of customers. In some countries, purchasing power has fallen, while in countries such as India or China, on the contrary, it is increasing gradually, which can enhance the performance of the Company in a positive way.
Among the social aspects, several factors can be noted such as a decrease in incomes of international purchasers and, in general, a decline in the purchasing power, the peculiarities of the mentality and cultural characteristics (for example, in some countries people are not inclined to buying goods via the Internet as they do not consider it reliable), and others. Technological factors include the rapid development of the Internet and IT technologies and the improved technological literacy of customers.
Amazon makes extensive use of information technology, and it contributes to the introduction of new buying opportunities from which both the customers and the Company can benefit (Hayden and Webster 23). However, the environmental factor is a controversial aspect because Amazon does not provide sufficient information about their environmental awareness; nevertheless, it cooperates with suppliers that can be considered environmentally aware. Concerning the legal factor, the company has a team of competent lawyers that supports it and, throughout the history of this company, there were few cases related to legal issues.
Resources, Capabilities, and Weaknesses
Amazon is a company that is characterized by high client-orientation in the first place. For instance, it was the first to introduce such an option as customer product reviews. The new approach to customer service has increased Amazon’s sales; respectively the company meets the needs of customers and supports them during the purchase of the goods. Also, diversification is one of the company’s capabilities. At present, Amazon furnishes service provision on more than 30 different categories of goods (Hitt, Ireland, and Hoskisson 29).
Personnel policy is one of the most important sources of the company. It has no difficulty in managing a vertical hierarchy and only small employee groups manage the company processes. The company carefully examines each candidate when selecting the staff. Apart from that, the correct marketing practices take a crucial role in successful sales. The Company managed to build such a system in which customers promote Amazon products themselves. Also, the technique when other sites can sell Amazon products and at the same time advertise Amazon brand while receiving a percentage of sales of each item was a success. The stimulus was simple and obvious to other sites, and they started cooperating in no time.
Meanwhile, the stimulus was doubled for Amazon. Firstly, the distribution and sales through other sites have simplified the company’s operations. Each of the distributor sites received a 3.5% commission without worrying about the issues associated with the products in circulation (Hitt, Ireland, and Hoskisson 30). Thus, the Company was able to extend its influence throughout the global network. Secondly, it excluded large expenses for advertising campaigns.
As a result, Amazon has also implemented the publicity principle and focused on a wider circle of consumers. Further, customers are allowed to negotiate the necessary information concerning the purchase of any product (Hayden and Webster 98). Consumers are informed of delivery conditions, terms, and prices, and their needs are addressed conveniently.
Thus, the company has many strengths; however, there are several weaknesses and issues associated with the Company’s work. For example, the threat of entry of new competitors, increased competition due to numerous new companies implementing e-commerce strategy, and a higher rivalry between firms operating in the market (Schulze 6).
Also, technological change and innovation lead to a drop in demand for old goods. A reduction in market growth due to the economic problems in some countries has been evidenced lately. Apart from that, the dependence on the exchange rate is inevitable; adverse changes in foreign currency exchange rates and foreign trade policies, as well as the introduction of new regulatory requirements that increase costs for the company (for example, in China), hurt the company.
Sustainable Competitive Advantage
At present, Amazon utilizes a combination of price and non-price vantages as a competitive strategy. Its distinctive feature is a focus on high-quality customer service. The company offers a wide selection of items and is transparent regarding the quality of service provision. The internal operations of the company also focus on this strategy and imply the credibility of the external suppliers and distributors (for instance, in Europe) (Fishman et al. 22). With the help of reliable external partners, Amazon ensured its continued growth and success as well as demonstrated profitability.
Amazon has developed a strategy to create customer value that offers the buyer a synergistic combination of the following benefits: ease of selection and purchase of goods simplified purchasing processes, rapid information to aid in decision-making, continuously expanding choice, low prices, reliable order processing and other (Hayden and Webster 16). However, it is worth noting that none of these strategic elements can create a sustainable competitive advantage if isolated. Only the synergistic combination of all information services, logistics, and order processing will create unique customer value and competitive advantage for the Company.
In conclusion, Amazon is one of the leading companies in the industry. This multi-faceted company is strengthening the diversification constantly due to the growing influence of Internet technology and IT distribution. The Company offers a wide range of products to millions of customers and provides a personalized service approach. Despite the potential difficulties and factors influencing the activity of the Company, Amazon’s success generated a new approach to the retail trade and changed the customer’s perception of e-commerce.
Fishman, Charles, Chuck Salter, Danielle Sacks, Harriet Rubin, JJ. McCorvey and Jon Gertner. Breakthrough Leadership, New York: Fast Company, 2014. Print.
Hayden, Tim, and Tom Webster. The Mobile Commerce Revolution, Indianapolis: Que Publishing, 2014. Print.
Hitt, Michael, Duane Ireland, and Robert Hoskisson. Strategic Management Cases, Boston: Cengage Learning, 2012. Print.
Johnsen, Thomas, Mickey Howard, and Joe Miemczyk. Purchasing and Supply Chain Management, Abingdon: Routledge, 2014. Print.
Schulze, Tim. Profitable Strategies in E-Retailing, Munich: GRIN Verlag, 2013. Print.