This report has been designed to identify Amazon's strategy between 2007-2010 and also to pinpoint the company's strategic capabilities. Internal and External analysis reveals Amazon's position against its competitors as well as sources of value creation and cost reduction in its value chain. Amazon.com is a leading e-retailer and is a globally recognized brand, but is facing increasing competition from bricks and mortar companies setting up an online presence and current e-retailers increasing their geographical and product scope. Amazon.com also faces strong rivalry in its Web Services Business where more specialized web services companies are able to offer more products and have a broader geographical presence. The report finds that Amazon's weakness as an e-retailer arises from the cost of delivery and its reliance on outsourced firms to fulfill its product delivery. To improve the customer experience that Amazon is focused on, this report suggests that Amazon enters into a joint venture with delivery companies to have better control over delivery costs and delivery service levels.
Amazon.com founded by Jeff Bezos in 1995, is the top E-commerce store worldwide in terms of revenue. Amazon.com has a market capitalization of US$29.4 billion, an operating income of $1.406 billion and employs 33,700 employees across the globe. It started out as an online bookstore but has expanded and diversified its services and products to cater to a diverse customer base ranging from retail customers to business customers through two strategic business units, its retail strategic business unit and its software business unit. Amazon.com has established itself as a global company and has websites catering to foreign customers in Canada, United Kingdom, Germany, France, Japan and China. Foreign sales contribute 47 per cent of the company’s consolidated sales. Amazon’s early growth came from its ability to redefine the way bookstores sell its books to retailers. Amazon’s foray into the online bookstore business then could be considered a form of blue ocean strategy, by creating a new market space with no significant rivalry and where demand is created and not fought over. It look Amazon.com less than a year to be recognized as the web’s largest and best online book store with over a million titles. A private investment of $1.2 million along with Silicon Valley funding and a $50 million dollar initial public offering of Amazon’s shares allowed the company to aggressively expand during the period. However, since share listing in 1997, Amazon has yet to pay dividends to shareholders and investors rely upon share price fluctuations for investor returns. By this period of time, what was once a blue ocean market has turned into a red ocean, the online retail market space is now crowded with competition and prospect for profit and growth are reduced. The apparent lack of payoff in Amazon’s earlier investment for investors coupled with Amazon’s plan to spend heavily on its new Web Services Technology during this period resulted in its stock price plummeting close to 50 per cent from 2004 to 2006. In 2007, Amazon was forced to invest in its technology and market expansion at a slower rate in order to subdue shareholder anxiety. Despite being forced to slow down its investment in technology and market expansion, Amazon’s strategy employed allowed it to remain competitive during this period through early 2010. Fig 1.1
A strategy is a plan of action that involves resource allocation and activities for dealing with the environment and ultimately achieving a competitive advantage. The strategy also seeks to exploit core competence, build synergy and deliver value for the company. Amazon’s plan of action revolves around Fig 1.1 known internally as Bezos napkin diagram. It shows that growth has always been central to Amazon’s strategy...