The Amazon Company’s Strategic Analysis
Amazon is a multinational corporation that focuses on e-commerce, artificial intelligence, digital streaming, and cloud computing. The company commenced as an online bookstore in 1994, and now it is a huge multi-service platform (Flamand et al. 4). This strategic analysis of Amazon will help identify the company’s strengths and weaknesses and opportunities for future development.
Based on Porter’s three generic strategies, one can see that Amazon uses a cost leadership strategy in a broad target market. This strategy is effective because it allows the company to offer various products and services within a broad socio-economic background, thus attracting diverse customers. At the same time, Amazon uses differentiation, which implies fast delivery and a variety of unique products and services. Amazon differs from other online platforms since it allows customers to find almost every product available on the global market and receive it quickly in practically any part of the world (Flamand et al. 15).
The company does not focus on profits; instead, it tries to get market share that will help it achieve financial success. Moreover, the “Amazon Prime” business model reaches and unites three groups of customers: online shop consumers, prime content creators, and prime customers (Aversa et al. 7). In such a way, Amazon provides a unique value in the most cost-efficient way, and its competitors cannot imitate its business strategy.
Amazon uses an unrelated diversification corporate strategy to promote its business. This strategy allows the company to bring different companies within its boundaries. The main advantages of this strategy are expanding opportunities and protection against such pitfalls of business downturns as seasonal or multi-year dips. Amazon sells everything: from kitchen utensils, books, and clothes to electronics, cloud services, and food. The company’s strategy allows customers to avoid state taxes and save time and money on cheap and quick delivery. However, this corporate strategy has some disadvantages, for example, lack of synergy. Amazon must ensure that brand images of each business are not diluted, so the company’s own brand philosophy may be subdued.
In addition, Amazon bases its corporate strategy on M&A (mergers and acquisitions). For example, in 2017, the company purchased Whole Foods Market that helped it enter the traditional brick-and-mortar retail market of the United States (“Amazon’s Major Acquisitions”). From the perspective of vertical integration, Amazon bought Kiva Systems to create and maintain its personal robotic systems (“Amazon’s Major Acquisitions”). This diversification mode helps the company expand its business and attract more customers worldwide.
Amazon uses a global strategy, lowering costs and adjusting to the world’s quality standards. Clients from any place of the globe can buy several million products directly from the United States. Amazon allows customers to pay for products and services in different currencies and use the platform on their browsers and apps in various languages. Amazon’s Global Selling Program attracts international sellers, allowing them to reach new customers through the platform. Moreover, it helps Amazon survive during low sales periods in the United States, taking advantage of peak selling seasons in other countries.
To conclude, Amazon’s business, corporate, and international strategies are successful since they helped the company cross the threshold of the global market and expand its business globally. At the same time, an unrelated diversification strategy makes the company worry about its future because of its disadvantages. Thus, Amazon has to be a first-mover in everything, which means it should focus on new product categories instead of profits. Consequently, if the company does not change its approach, it may suffer from a lack of future profits.
“Amazon’s Major Acquisitions over the Years.” Reuters, 2021. Web.
Aversa, Paolo, Stefan Haefliger, Francesca Hueller, and Danielle G. Reza. “Customer Complementarity in the Digital Space: Exploring Amazon’s Business Model Diversification.” Long Rage Planning, no. 101985, 2020, pp. 1-21. Web.
Flamand, Olivia, Shannon Riley, and Aaron Wisher. “Strategic Plan: Amazon.” Undergraduate Theses, Professional Papers, and Capstone Artifacts, no. 309, 2020. Web.