Competitive Sustainability of Amazon - Assignment Example

AMAZON CASE STUDY ON THE BASICS Answer a There are various schools of thought that define strategic management. A prescriptive approach defines strategic management as a tool that guides the development of strategies, while a descriptive approach focuses on the actual practice involved in making strategies. Strategic management is a continuous process that involves intensive planning, close monitoring and frequent analysis and assessment all with the aim of enabling the organization attain its goals and set objectives. Organizations that adhere to strategic management practices have a higher chance of attaining a competitive advantage as compared to those who do not use. Strategic management is an evolution because it plays a critical role in making clear the vision and mission of the organization. It is a destination because it is a trustworthy and most reliable business tool in the ever changing and competitive business environment. Evolution of strategic management is evident through the ever changing business envioment and thus managerial actions, competitive positioning, and entrepreneurial strategies influence decision. Positioning and real-time systems are attributed to the evolution in strategic management. Positioning systems, which comprise of long range and strategic planning play a critical role in guiding the organization’s direction and actions in the environment. Real-time systems, which comprise of strong and weak signal issue management are tasked with responding at each environmental change one at a time. Strategic management is a destination because though the evolution systems, it is easy for the organizztion to understand and make clear the future targets. Management by control, management by extrapolation, management by anticipation, and management through rapid response are key indicators that strategic management is a destination through the stated stages respectively. Answer b Amazon is a strategic management firm as evident in the following activities. Example 1 Amazon has developed a new business platform . for a very long time, the old platform was a ssociated with lock-in, something that brought negative association with the company. However, the new platform has brought success to Amazon since it consists of guidelines and the capacity features that can manage and control commerce engines, the community, the Amazon marketplace, customers and sellers, and copy right issues. This is a proof that the company is a strategic firm because it no longer locks-in customers but promotes entrepreneurship and personal growth. This is a true version of shared value. Example 2 The use of cloud computing makes Amazon a strategic management firm. The company is in a position to expand its infrastructure and successfully shrink it should anything go wrong. This kind of elasticity provides Amazon with the energy to move and expand comfortably. Example 3 Universal connectors in the Amazon ecosystem bring partners together through terms and condition. This means the company incurs little or no contractual arrangement costs. Low friction growth makes it an elastic business venture. Answer c Amazon’s mission statement reads, “Our Vision is to be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.” True to every word in the mission statement, Amazon is a team that has transformed he online trading business because it has tirelessly worked to ensure that buyers and sellers get the best out of their commodities, ensure they reach their final destination safely and in time. Through this kind of customer focus, the company successfully delivers customer satisfaction. The main goal for Amazon is to sell everything to everyone. This is because it has successively managed to re-invent itself and understand how the world controls shopping. As an objective, the company aims at using the profits in 2015 to construct other distribution centers. Ideally, with more distribution centers across the world, Amazon will e in a good position to get close to customers thus ensuring quick and real-time delivery. On corporate governance Corporate governance is a business unit system that is entitled to control and guide organizations in the daily ethical conduct. Answer a The Board of Directors has three traditional roles The board of directors plays a critical role in the continuity of the organization. They are the organization’s brand ambassadors and thus links the firm to external environment. Customers, suppliers, creditors, investors, and other interested parties are in a position to access the organization through the board of directors. The board is tasked with coming up with vision, mission, goals, objectives and strategies that can bring about a competitive advantage to the company The board of director’s controls supervises and monitors the executive managerial position in the organization. They make the top management accountable to all actions and decisions they make. This means they have the power to hire, fire, promote or demote a chief executive officer of the organization. Through hiring the top management, they are in a legal position to delegate authority to the organizational top management. Since the board is above the top management level, its role is to ensure there is continuous flow of information in the whole business unit. The board of directors is tasked to establish and set policies and strategies that can bring a competitive advantage to the organization. The most urgent issue in corporate governance as per the 1997 Letter to Shareholders, the Board of Directors has a hard task in making bold investment decisions in light of long-term leadership considerations rather than short-term profitability considerations. Amazon is in the midst of a series of innovations and has to align itself to fit into the system. The company is working collaboratively with customers and investors because they need each other to propel growth. Answer b Amazon has a philanthropic initiative in place that is aimed at giving back to the society. it has a charitable project called Amazon Smile, which benefits shoppers and gives them an opportunity to make their donations to any charity group of their choice. If a customer shops at smile.amazon.com, 0.5 percent of their total purchases will be deducted towards donation. This is a good project since the company is in a good position to involve customers in giving back to the society regardless of their location. While the organization benefits from the sales, it is in a position to share the profits with the society. 3. on Competition- The Five Forces and The Blue Ocean Answer a Amazon has a competitive advantage through Economies of scale The company, understanding the risk involved in dealing with single products has managed to venture into the online business, which ranges from selling books, home appliances, electronics, clothes, sports, and referrals among others. Brand name The company is brand name and its core competencies are in online business especially in online ordering, online product searching and product delivery. Through such an established brand title, the company enjoys a competitive advantage over its competitors. Timing Just when customers needed e-books and other forms of online materials, Amazon was ready to offer them. Many customers can now download and read their favorite books, watch and listen to music without the hustles of waiting for physical delivery. This kind of timing has made Amazon the most sort after when looking for such consumables. Answer b Amazon’s Porter Model is described as follows Threat of new entrants As expected, new entrants aim at gaining a market share and thus put pressure on prices and other costs. Since Amazon is an established online shopping platform, new entrants have very minimal impact. This is because of the loyal customers, strategically set commodity prices, timely delivery of goods. It is a world class online shop that has affected how people buy and sell commodity items. Competitors will require heavy capital requirements to set up and run such a business thus making most business enthusiasts give up along the way. The power of suppliers A supplier group is said to be powerful if it has a higher concentration than the industry it sells to and if it does not depend heavily on the industry for its revenue. Amazon has got a huge supplier base, which makes most of the commodities affordable due to competition among the suppliers. This gives Amazon an added advantage since it not liable to incurring costs for the seller. In the long run, a customer gets the best out of the product. The power of buyers Since it an international online shopping company, it has a rich customer base. This means that products are on high demand thus forcing suppliers to improve quality, increase supply and reduce prices. Amazon is a established brand name in the world thus has a low customer bargaining power. Threat of substitutes Ideally, a substitute is meant to perform a similar function as the mother industry or product. Amazon introduced an e-book version that has so far threatened the existence and the need of customers buying hard-cover copies. The online versions of books, videos, audio, and pictures are a potential threat to the real shipping business. Rivalry among existing competitors This kind of rivalry is in many forms, which include but not limited to prices, service improvements, new product introductions, and discounting. There are a variety of competitors that Amazon faces, which include eBay, Google books, and Alibaba. However, this rivalry is still low thus making Amazon the giant of Online shopping since it covers every part of the world. According to Wheelen and Hunger, the sixth force is the relative power of stake holders. They do not include customers. In Amazon, the unions have a critical role of ensuring there is a smooth flow in the company’s operations Answer c According to Kim and Mauborgne give suggestions that can help a company attain a blue ocean position. They include comprehensive look across alternative industries, strategic groups, buyer groups, complementary product and service offerings, functional-emotional orientation of an industry, and time. Through these, Amazon will be able to locate potential sources of differentiation. The company gets a quick review of where loyal customers seek for substitutes. These are effective strategies. 4. on Value Chain A value chain is an integrated series of activities in an organization, which incorporates all activities that deliver value. Answer a A business model gives an overview of how an organization generates revenue and earns profits. With the ability to generate over $80 billion in sales, the Amazon business model captures and expands its territory by disrupting retail stores. The business model has its foundation laid on three pillars: low margins, making sure it is easy for customers to find best deals, and developing a variety of customer-oriented services. Business model canvas is has got nine building blocks which are customer segment, revenue streams, cost structure, key resources, customer relationship, key partnerships, channels, key activities, and value proposition. All these components define how the company generates revenue and makes profits in the long run. Answer b Amazon’s value chain has undergone reviews and improvements to make sure that customers get the best out of it. The company has diverted its attention and value chain energy on procurement processes. This is a body that determines the success of a business since it is tasked with acquisition of goods and services for effective business operations. To ensure effectiveness, the company works closely with huge companies like Apple in providing services like iTunes to customers. This does not only reduce time but ensures efficiency and effectiveness. Through market research, Amazon has understood what customers are looking for. This has made it easy for them to make available all products and services that customers are looking for in order to discourage them from looking out for substitutes. An aspect that is evident in the Amazon’s value chain is its marketing strategy. The company works closely with all suppliers and sellers who use its platform so that it comes up with effective marketing tactics and strategies. Since it aims at giving customers products that are of high quality, the company can boost sales by requiring all suppliers and seller to uphold quality. Currently, there is need for the company to improve on its service strategy. Feedback is very important on business growth and thus after-sales service is something that cannot be neglected. By providing such services, the company can be in a good position to know what customers love, take in necessary corrections and propel themselves to greater heights thus gaining a competitive advantage. 5. on general strategy A strategy is a laid down plan of activities that aim at helping the company realize its business goals. Answer a Business strategies Amazon aims at improving and upgrading its website to be data driven automation. The key areas are customer channel preferences in that relevant content is made visible to all users including promotions and advertisements. Through automated searches and adverts, Amazon will gain a lot especially from the sponsored links. The automation is meant to generate key words and measure conversions and related charges per successful following of the link. Such new systems will for sure improve customer experience, control and effectively distribute information to all users, and ensure real time updates. Having realized the ever growing competition, Amazon is on the move to abandon auctions and rely heavily on marketplaces. This is because its strategy to use auctions was primarily to compete with online giants like eBay. Since there are many third party sellers on Amazon, the company is using the marketplace as a strategy to lower the prices. In return, the company will have a greater margin on the sales since all sellers are charged a commission and all costs of storing the inventory are transferred to the seller. Corporate strategies Partnerships The share price for Amazon keeps growing at the end of each financial period. For this reason, the company is in a position to enter into partnerships and acquire companies in all sorts of industries. For instance, Amazon is in the process to partner with Drugstore.com, a pharmaceutical dealer; Homegrocr.com, a groceries store; Wineshopper.com, which deals with wines. The company has already bought equity stakes in some of these companies in order to share the growth with them. Marketing communication strategy This is a key corporate strategy that Amazon is currently working on. It aims at using this strategy to increase customer traffic to its website, create products and service awareness among customers, promote repeat purchases, and strengthen its brand name. Answer b Strengths of business and corporate strategies are in the strong positioning around the world as well as teamwork. Effective communication at all levels of management guarantee good integration of business and corporate strategies and goals. However, the weaknesses of the strategies are evident in the manner in which the company handles environmental issues. Since this is a global concern, it may hinder the organization from effectively achieving its corporate and business strategies. Answer c The most urgent issue that Amazon has to handle to secure competitive sustainability is venturing into new markets. Amazon services are widely acceptable in the United States but become a real problem in the Middle East and African nations. This will not only help in generating more profits but will also help in countering the high level of competition in most developed nations that aim at relying on their own systems. To venture into new regions, the company will be required to build new outlets and establish the transportation infrastructure to ensure effective service delivery to customers. New ventures will enable the company attain a competitive advantage amidst the already growing competition. Competitors will have a rough time settling in those areas since it will have established a brand name. Work cited Porter Michael E. The Five Competitive Forces That Shape Strategy. Harvard Business Review. Jan 2008. Read More