Strategic Management BSM999

Q1 AMAZON.COMS STRATEGY DURING 2007

TO EARLY 2010
Growth
To be the largest online retail

Long
term market
store
and improve
customer
experience

leadership

One-stop shop
Customer centric

To have the largest market

share and increased sales

Expanding (Market
leadership)

To acquire companies to own

products and technology or by
alliances

Acquisition /
Alliances

Diversified range and category

of products

Kindle, cloud services, web

services and currency

converter
Product
portfolio

Technology

DRM free MP3 and media

Digital contents

QUESTION 1 CONTD.

Q2 VALUE CHAIN FOR AMAZON

Positive working capital, turnover period for receivables /
payables (approx. 26 Days)
lower
Reinvestment
Continued Investment Improved efficiency,
prices into business for continuous innovation

19.16
billion but net profit margin is 3.4%
Kindle, Kindle 2, Cloud computing (AWS), AWS Premium
Virtual salesman concept
Support , Pubic Data, Amazon EBS, etc.
Simple Storage Services

Office
supply
store
products)Cloud
on
Courier
Service /ofFulfilment centres
Courier
Service
/ Fulfilment
centres
Digital
Contents:
$1 billion
spent
development
(+500,000
Elastic Computer
Online shopping from customers
Espanol
Store (1.6 million
Hispanic
points
Transport
between
the Distribution
points
Transport
between
Distribution
technology,
187 the
million
on internal
use software
Simple
Queue owned
Service
Online registration for developer
customer
business
in
US)

Strategic
Alliances
Strategic
location of fulfilment centres
and DB
Strategic location of fulfilment centres
and
Simple
(flexibility)
Classic(Fabric.com,
Music blowout
store +Payments
Go Indie Music
Acquisitions
Reflexive
Entertainment,
warehousing
warehousing
Flexible
Service
Transaction, Feedback, Complaints
from
Store
independent
music
labels)
AbeBooks)
19.7 million
sq feet
of (30
property
(warehousing)
19.7 million sq feet of property (warehousing)
Web
Services
every sale
in Amazon
(260%
in Diamond,
Richard
Dalzell,
experienced
to ft
meet
600,000
HazletonJewellery
and 500,000
in
600,000
sq ft recruitment
in Hazleton of
and
500,000
in staff sq
/ Watches
Currency
Convertor
between inbound
and in Coloured Gems, 107% is sterling silver)
169%
customer
needs Material handling Goodyear
Goodyear
TextBuyIt
outbound logistics

Motorcycle
Store

products and 500

Frustration Free Packaging
Frustration Free Packaging
300,000
Bill me Later
manufactures
DRM free MP3

QUESTION 2 CONTD.

Analysing competitive positioning using VRIN

approach

Valuable Upgradation of existing technology and

continuous innovation
Rare Brand name and virtual salesman concept
Inimitable Customer base and services
Non-substitutable Personnel and strategic alliances

QUESTION 2 CONTD.
Strategic Capability
Resources
Good turnover and good
management of working capital
Strategically located distribution
centres, technology warehouses
Product development,
databases, internal softwares
and public websites
Brand, customer loyalty and
reputation with suppliers
Specific skills, commitment, key
personnel

Competencies
Financial

Managing cash flow, debtors

and creditors

Physical

Storage and utilisation of

information.
Logistics

Technological

Reputation

Human

Leverage technology to make

products accessible to
customers and manage
operations
Long term strategic
relationship, assistance in
maintaining working capital
Utilisation of the personnel and
pro-active approach
6

Q3 AMAZONS DIVERSIFICATION STRATEGY

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

QUESTION 3 CONTD.
Strengths
Brand name
Online global presence
Large revenues
Large customer base and customer confidence
Weakness
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

Q4 AMAZONS STRATEGY GOING FORWARD

Importance

Amazons relative
strength

R1. Finance

R2. Technology

R3. Location

R4. Distribution

R5. Brand

Resources

QUESTION 4 CONTD.
Importance

Amazons relative
strength

C1. Logistics

C2. Procurement

C3. Operations

C4. Marketing / Sales

C5. Services

C6. HR

C7. Technology
development

C8. Firm infrastructure

Capabilities

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QUESTION 4 CONTD.
Key Strengths

Relative strength

Superfluous Strengths
C5

R2

C6

C7

C7

C1

R5

C2

R4

R2

R1
C8
C3
R3
C4

Zone of Irrelevance

Key Weaknesses

Strategic importance
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QUESTION 4 CONTD.
Strategy going forward
Consolidate the current business line

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 needs to exploit their current strengths and use them to

overcome their weaknesses

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

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