Amazon Company Analysis
Amazon is a global retail company that has maintained a top position in the retail industry by leveraging its strengths and creating a favorable internal and external environment. This paper provides a detailed analysis of the company’s internal and external environment by focusing on various elements of the two environments. One of the elements is the company’s segments. The paper will analyze the two most successful segments that have contributed to Amazon’s success. The second element is the five forces of competition. The paper will review two forces and how well the company has dealt with them to enhance competitiveness. The third element is future improvements that the company should consider to improve its ability to deal with the two forces. The fourth element is the company’s greatest external threat, and the fifth element is the company’s greatest opportunity. The next element is the company’s strengths and weaknesses. Lastly, the final element is the company’s resources, capabilities, and core competencies.
Amazon’s general environment is divided into different segments. Each segment focuses on meeting specific customer needs and preferences. The main characteristic of Amazon’s segmentation is the use of psychographic and demographic attributes. The company relies on purchase behavior to determine customer preferences, thus maintaining customer loyalty. The sections below review two of the most important segments in Amazon’s market.
One of the segments that Amazon focuses on to improve competitiveness is North America. According to Majed et al. (2018), North America dominates the company’s sales because it has the largest customer base. The main sources of revenue in the North American segment include the sale of merchandise across various physical stores and the company’s online store and Amazon subscriptions such as Amazon Prime, which focuses on unlimited free movies and TV shows streaming and unlimited free shipping. The company also conducts market research in this segment to match its products and services with customer needs and preferences.
Amazon has maintained a sizeable global presence by selling its products and services worldwide (Majed et al., 2018). The international segment includes the company’s retail business for subscriptions and products sold through the company’s online platform. Although the company faces intense competition in global markets, it has secured a reasonable customer share by specializing in products in high demand in a specific country. The company also uses strategic alliances and partnerships to expand operations to global markets and secure a large market share, thus creating a competitive advantage over other brands within the global markets.
Five Forces of Competition
Amazon operates in a highly competitive environment. However, it has maintained a competitive advantage by maintaining a good relationship with customers, vendors, and suppliers. This section reviews the main forces affecting Amazon’s operations and how the company has dealt with the forces to sustain its operations.
The Threat of New Entrants
One of the main forces that affect Amazon’s operations is the threat of new entrants in the online retail market. The threat is high due to the rise in demand for e-commerce services, especially after the Covid-19 outbreak. This force is significant to Amazon because it has been a major player in the e-commerce market for a long time and has made major investments to maintain its position as a top e-commerce company worldwide. However, the rapid increase in online stores offering similar services may prompt Amazon to increase investment in research and development to make their e-commerce services and retain existing customers. The company may leverage its economies of scale due to its reputation as the largest online retailer in the global e-commerce market. The company may also continue using the strategies it has used in the past to address the force, such as selling its products at discounted prices to maintain customer loyalty and attract more customers.
Bargaining Power of Suppliers
Suppliers play a significant role in Amazon’s operations by providing the products sold to customers. Suppliers have high bargaining power because they know that retailers cannot operate without supplies. However, Amazon has managed to reduce the bargaining power of its suppliers by setting strict rules and regulations that its suppliers should adhere to. For instance, the company emphasizes ethical practices among suppliers through the supplier’s code of conduct. Suppliers who violate the code of conduct risk losing their contract with the company.
The threat of new entrants will continue to be a strong force affecting Amazon’s operations, hence the need to devise strategies that can help the company effectively deal with the force to create sustainability. I would recommend introducing a variety of payment options, including cryptocurrency. Currently, online retailers emphasize using Visa, MasterCard, and e-wallets to pay for products and services sold on online platforms. Therefore, allowing payments using cryptocurrency will give Amazon a competitive advantage over competitors because cryptocurrency is gaining recognition as one of the most reliable currencies to pay for goods and services on online platforms worldwide. I would also recommend signing contracts with multiple suppliers supplying similar products to avoid disruptions in the supply chain if any supplier violates the company’s supplier code of conduct.
Greatest External Threat
Amazon’s greatest threat is stiff competition from local online retailers with more agile operations and responsive strategies. Therefore, the company may lose its customers to local online retailers, especially in global markets where the local retailers have already established broad brand awareness and substantial brand equity. Competitors, especially in the global market, also use innovation and strategic partnerships to increase their customer base, thus limiting Amazon’s competitiveness. For instance, the partnership between Shopify and Walmart poses a major threat to Amazon’s competitive advantage because the two companies have a large market share, and combining resources would enable them to acquire more customers, thus reducing Amazon’s customer base. Therefore, Amazon needs to consider strategic alliances and partnerships with local online retailers to maintain a solid customer base. Strategic alliances will help Amazon increase its customer base by acquiring the customers within the acquired company’s market share, thus increasing its competitive advantage.
Amazon’s greatest opportunity is the expansion to emerging markets. Amazon can expand its operations to emerging markets that other online retailers have not yet dominated. It can use third-party sellers to expand its brand awareness in the global markets and leverage the sellers’ brand image and awareness to increase its customer share in the markets. Amazon could also use independent partners to expand operations to global markets. Although Amazon’s competitors have also expanded their operations to global markets, Amazon may gain a competitive advantage due to its reputation for offering high-quality products and timely delivery of products to customers once they place their orders.
Strengths and Weaknesses
The main strength that Amazon can leverage to increase success is its strong brand name. The company has established global recognition as one of the best global online retailers worldwide due to providing high-quality products and services. The company can leverage its strong brand image to extend operations to global markets, including emerging economies. Another strength is highly effective distribution and logistics strategies (Yoo-Nah Hahn et al., 2018). The company has maintained a reputation of delivering products to customers within the shortest time despite their locations, thus creating convenience, which is among the things online customers look for. The main weakness that could affect Amazon’s success is the seasonal nature of the company’s scope of operations and revenue. According to (bb), Amazon’s revenues and sales peak in the fourth quarter annually, thus making it hard to maintain the cash flows required to maintain operations.
Strategy or Tactic
One of the strategies that Amazon could use to enhance its brand image, especially in global markets, is partnering with local online retailers with widespread brand awareness. The company can leverage the retailer’s brand awareness to attract more customers and maintain its loyal customers, thus enhancing its competitive advantage. Another strategy is diversifying the category of products and services offered to reduce the seasonality of the company’s cope of operations and revenues. The company may focus on products and services always in season to maintain consistency in its products and services demand.
Resources, Capabilities, and Core Competencies
Amazon’s main resources are human resources. The company has experienced staff who have the knowledge and expertise needed in the online retail business. The company also keeps its staff motivated by offering incentives and bonuses to reward them for meeting and exceeding expectations. The company’s capabilities include global presence, brand equity, and a wide range of products targeting different customer segments. The company’s brand equity has played a significant role in maintaining customer loyalty and attracting customers in the global market share (Betz, 2018). Amazon’s global presence increases its customer share, thus increasing revenue streams. The wide range of products contributes to increasing the company’s customer base by reaching a wide range of customers demanding different products and services. Amazon’s main competencies include high equity in the global market and affiliate networks. High brand equity enables the company to attract many customers, hence gaining a competitive advantage. The affiliate network enables the company to reach more potential customers through referrals, hence reducing marketing costs.
Betz, F. (2018). Chapter 2 strategic sales – The case of Amazon. Strategic Business Models: Idealism and Realism in Strategy, 13-23. https://doi.org/10.1108/978-1-78756-709-220181002
Majed, S., Nuraddin, S., & Hama, S. (2018). Analyzing the Amazon’s success strategies. Journal of Process Management. New Technologies, 6(4), 65-69. https://doi.org/10.5937/jouproman6-19264
Yoo-Nah Hahn, Myoung-Kil Youn, & Dong-Ho Kim. (2018). A brief analysis of Amazon and distribution strategy. Journal of Distribution Science, 16(4), 17-20. https://doi.org/10.15722/jds.16.4.201804.17
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In this assignment, you are to use the same corporation you selected and focused on for the Strategic Management and Strategic Competitiveness assignment.
Using the corporation you chose from the Week 3 assignment, Strategic Management, and Strategic Competitiveness, examine the industry in which the entity operates. Use any or all of the following resources to conduct research on the company:
Public filings from the Securities and Exchange Commission’s Filings & Forms page.
Strayer University’s online databases.
The Lexis Advance database.
Other miscellaneous sources. Note: the company’s annual report will often provide insights that other resources may not include.
Use the External and Internal Environments Template [DOCX] to ensure that your assignment meets the requirements.
Write a 4-6 page paper in which you do the following:
Choose the two segments of the general environment that would rank highest in their influence on the corporation you chose.
Assess how these segments affect the corporation you chose and the industry in which it operates.
Considering the five forces of competition, choose the two that you estimate are the most significant for the corporation you chose.
Evaluate how well the company has addressed these two forces in the recent past.
With the same two forces in mind, predict what the company might do to improve its ability to address these forces in the near future.
Assess the external threats affecting this corporation and the opportunities available to the corporation.
Give your opinions on how the corporation should deal with the most serious threat and the greatest opportunity. Justify your answer.
Give your opinion on the corporation’s greatest strengths and most significant weaknesses.
Choose the strategy or tactic the corporation should select to take maximum advantage of its strengths and the strategy or tactic the corporation should select to fix its most significant weakness. Justify your choices.
Determine the company’s resources, capabilities, and core competencies.
Go to the Strayer University Online Library to locate three quality references. Note: Wikipedia and similar websites do not qualify as academic resources.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.
The specific course learning outcome associated with this assignment is as follows:
Analyze the effects of the general environment, competition, threats, opportunities, strengths, and weaknesses relative to a corporation.
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