Yahoo and Amazon: Building a Competitive Advantage - Case Study Example

Yahoo and Amazon: Building a Competitive Advantage Lecturer: Growth of the internet has been exponential and resulted in the development and formation of “new economy” businesses characterized by conducting their businesses over the internet. Among the new companies are Amazon and Yahoo that carry out their distinct job because yahoo acts as an internet portal site while Amazon remains an on-line book store. Yahoo.com offers news and various other services including email service and earns most of its revenue through advertisement. Amazon on the other hand sells books together with a collection of consumer as well as electronic goods (ORegan, 2008). Yahoo.com was created by two students David Filo and Jerry Yang in Stanford and used it for their own interests and tracking their websites on the web. Yahoo as a portal site provides free email accounts, search engine, shopping and entertainment services to users; moreover, apart from the company earning revenue from advertisements it also earns revenue from offering services for businesses like web hosting services. Amazon founded by Jeff Bezos in 1995, is known as one of the initial companies to sell products over the internet, and began business as a web-based bookstore. However, with time Amazon has diversified its product portfolio to include the sale of CDs, DVDs, video games, toys and computer software (ORegan, 2008). Yahoo and Amazon are brand names that are valued because they precisely offer safe avenues for consumers to carry out their businesses. Success of companies in the rapidly changing business environment and the unpredictable nature of the internet often defy the common wisdom of strategy making. Amazon in counteracting and overcoming the overwhelming competition within online retail environment decided to undercut prices, which put pressure on the company’s profit margin. Moreover, to ensure that Amazon became a preferred online retailer, Bezos aggressively moved to look for ways of attracting customers like providing free shipping. In addition, in making Amazon service more convenient, the company began to forge alliances with other companies like Office Depot, Circuit City and Target among others. The alliances helped Bezos transform the company from a leading online retailer to a leader in internet product provision. Moreover, the company’s Online Retail SOA Software Platform helped Amazon offers value chain services to small-and medium sized businesses unable to meet the high costs of delivering products to customers (Hill & Jones, 2013). Moreover, weaker companies became associates of Amazon and directed internet traffic from their sites to Amazon’s website in order to be eligible for sales commission. This helped Amazon realize the significant revenue that could result from associates enabling the company open storefronts for small and medium-sized companies in its website. Amazon being the initial web-based bookselling business was in a position to attract awareness of customers and develop the first mover advantage. In addition, the company took many steps to increase usefulness of the retail site in order to attract more customers and spend more like enticing customers to send books and CDs as presents during celebrations and holidays. This allowed customers of the company to take advantage of gift wrapping service and its free email card to notify the arrival of gift from Amazon. As well, the company expanded into new retail segments selling a variety of products such as books, CDs, Software, watches, jewelry, sporting good and beauty products among others making the company a low-price retailer for many products (Hill & Jones, 2013). On the other hand, Yahoo business model focused on recruiting marketing experts and increasing the advertising function of the company in order to strengthen the company’s competence and increase revenue from advertising in order to fund growth of the company. Moreover, Filo and Yang took responsibility of improving Yahoo’s search engine by hiring many experts. Moreover, Yahoo replicated its business model around the world in order to increase worldwide advertising revenue. As the company grew, it expanded to other fields including new media and entertainment services in an attempt to become a dominant global communication entertainment and retail company (Hill & Jones, 2013). The company portal allowed anyone to connect and anybody over the internet; besides, because of the development of the company, the company generated more revenue from advertising and e-commerce transactions. The company began to work together with media and entertainment content providers in order to help the company develop online content and the ability to work on the digital platform. To ensure that Yahoo remained the web portal of choice, the company adopted a strategy of acquiring leading internet companies in certain areas like online dating to extend the company’s portfolio. Bundling online services in order to attract increased numbers of customers became apparent as the Company’ user base increased. Yahoo business model relied on the notion that the more services, the greater the number of users the company would attract resulting in high advertising charges for companies. Yahoo’s search engine was the key strategy for the company’s rise and its distinctive competence (Hill & Jones, 2013). Yahoo to remain competitive continuously develops stronger business model by increasing content and channels in order to ensure continuous profit for the company. Yahoo focuses on creating compelling news, shopping, entertainment and media content by adding extra channels to the company’s portal. With development of internet technologies that allowed customization, both Amazon and Yahoo allow their customers to customize their online experience that help user to be informed choices when carrying out business activities. Among the two online companies Amazon is recognized as one of the portals to pioneer customized shopping experience. Amazon’s software focuses on offering more information to clients since it allows people who purchase books to offer detailed feedback to users regarding certain books (Hill & Jones, 2013). The two online companies began to realize the significance of providing customized online experience in order to keep the customers loyal. Yahoo needed to improve its search engine technology in order to attract and generate more users and marketing revenues because the search engine was the major portal attraction. Yahoo as an online digital media company needed to improve its search engine capabilities to exceed the advanced capabilities of Google, a company that understood the strategic relationship between offering fast and accurate search results and the ability to generate increasing revenue from advertising. Because of the increased competition, Yahoo resolved to decrease its costs and simplify its operations in order to maintain its strong online identity (Hill & Jones, 2013). The emerging strategy in Amazon is the emphasis on its strategic resources that include technology and information that helped the company disrupt the status quo by creating innovative ways of serving online customers. The case of Yahoo and Amazon suggest that differentiation and cost are essential competitive strategies for initial strategic systems; nevertheless, growth and alliances are mature strategies (Kangas, 2003). Amazon’s alliance with suppliers and its competitors does not detract from its business model that is based on the company being a retailer that highly acknowledges customer relations. When Amazon realized its first mover advantage, it embarked on an offensive system; however, with time its technology became commonplace forcing the company to expand to other products and forging alliances that allowed the company to offer back-end operation for competitors and suppliers consumer products. Amazon began with a focus on both internal and external and was able to create a unique infrastructure that undoubtedly contributed to the company’s strategic systems internally and externally. Amazon’s strategic initiatives target various categories within the dimensions of the company’s framework that exploits both technology and information. Amazon’s success in its business is as a result of emphasizing the development of external sales volume while ensuring minimum internal costs. M0oreover, Amazon employs differentiation, innovation and development through alliances that focus on customers, suppliers as well as competitors (Kangas, 2003). Yahoo improvements in revenue generation indicate a successful attempt to diversify from online advertising to non-advertising services such as high speed internet access and online dating as well as Job search websites (Canzer, 2006). Competitive forces that are at play in Yahoo’s external environment include the direct competition between firms that offer substitute products and services. The key success in Yahoo’s achievements in the late 1990’s came as a result of offering new content like stock market quotes, chat rooms, sports and classified advertising among others. Instead of Yahoo focusing its technology on search engine and dominating the search business, the company attempted to become an all-purpose portal for internet users, which turned to be bad for the company’s performance (Chaston, 2012). It would be better for Amazon to adapt high speed as its functional level strategy in satisfying customer needs, which would enable the company to make even more money. It is important for the company to avail products in a market before competition gets there. Besides Yahoo would be better off with finding and retaining the best people as its functional level strategy because for the company to remain successful, it necessitates retention of competent individuals. In an economy propelled by ideas and charge driven by the internet, Yahoo has to invest in brainpower because it remains the real resource in ensuring competitive advantage (Chaston, 2012). References Canzer, B. (2006). E-business: Strategic thinking and practice. Boston: Houghton Mifflin. Chaston, I. (2012). Strategy for sustainable competitive advantage: Surviving declining demand and Chinas global development. New York: Routledge. DuBrin, A. J. (2012). Essentials of management. Mason, Ohio: South-Western/Thomson Learning. Hill, C.,& Jones, G. R.(2013). Strategic management: An integrated approach(10th ed.).Independence, KY: Cengage. Kangas, K. (2003). Business strategies for information technology management. Hershey, Pa: IRM Press. ORegan, G. (2008). A brief history of computing. London: Springer. Read More