Amazon Strategic Management

Topics: Electronic commerce, Amazon.com, Strategic management Pages: 8 (2524 words) Published: April 26, 2013
Part 1- INITIAL STRATEGIC POSITION

1. Introduction

Amazon is the world’s biggest online retailer company, which was founded in 1994 by Jeff Bezos. (Jopson, 2011). It started with an online bookstore, and later expanded its business to other areas with more kinds of products and services such as electronics, computers, clothes, and Merchant Program, etc. Besides, Amazon.com has its subsidiaries around the world, and they are in United Kingdom, Canada, Japan, China, Germany and France.

1a strategic positioning

Strategic positioning is to positively impress customers with the products, image, and the brand of the business, which supposed to be an beneficial option for business development. For company, it is a strategy which can lead them to the right way. Amazon has three strategies to sustain its competitive advantage, which are low cost-leadership, customer differentiation and focus strategies.

Firstly, Amazon is an online retailer with providing dozens of categories of product, and they choose cost-leadership strategy which offers the same quality products as other companies at a considerably cheaper price, so Amazon created great value through providing customer experience; secondly, Amazon use customer differentiation strategy to provide current and potential customers with differentiation through quality, design and convenience, with customer differentiation strategy, Amazon provides current and prospective customers with differentiation through design, quality or convenience by selecting a strategy that is different among the competitors; finally, Amazon concentrate on outstanding customer service as a niche but not the entire market for each niche has its own needs and demands (Porter, 1985).

PESTEL framework

provides a integrated contents of effects on the possible success or failure of particular strategies. It stands for Political, Economic, Social, Technological, Environmental and Legal. (Thomas, 2007) For political environment, there are Relaxed competition policy from European Union on e-retailing as opposed to heavy industries (Kobrin S, 2001). So it is a good time for Amazon to seize this opportunity and quickly expand into new markets via acquisitions. For economic environment, the annual disposable income of 617 million households has increased to more than $5,000 until 2011, there are 185million people considers to be European, besides, the statistics has shown that Europe is the world’s largest market and generates 45.1% of the global sector’s revenue on internet retailing (Source: Data monitor). Therefore, there will be an increasing amount of potential online buyers which is an advantage fo Amazon. For social environment, the European e-commerce market is developing with a dramatic speed, even grow faster than the US e-commerce sales in whole size (Deloitte, 2012). Besides, there is an increasing amount of online social networking. (e-marker online, 2008). Therefore, as this market grows rapidly, Amazon have more chance and opportunities to develop in the European market. Industry level: Porter five forces analysis

Porter’s five forces framework was used as a method to evaluate the attractiveness factors of different industries (Porter, 2008). For supply power, Amazon’s main supplier is publishers, who have been attracted to Amazon for it has 24-hour easily accessible service which provides more widely potential consumers than its retailing competitors. For buyer power, there is a huge amount of online shops in European market to compare best prices, such as Barnes and Noble, and e-bay; for threat of substitutes, there are some websites such as Textbook flix.com and Book Renter.com has provided cheaper price than Amazon for potential buyers (Red Orbit, 2007). For competitive rivalry, Amazon has variety kinds of competitors such as physical-world retailers, online e-commerce, media companies and companies like google and apple (Cassiman & Sieber, 2002) However, the most...
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