Amazon.com founded by the legendary Jeff Bezos was one of the pioneers of e-commerce phenomenon when it launched the world’s biggest online book store. Thereafter it went on to upscale its business to offer music, software, office products, electronics, health products and much more. Although Jeff Bezos did not have enough experience about the dynamics of the retailing business, the exponential growth of the Internet made him envision a huge growth opportunity waiting to be tapped. He opted to start the company from Seattle as it was a repository of a huge talent pool and also nearer to one of the largest book wholesalers operating from Rosenberg, Oregon. From very humble beginning within the confines of a garage, to becoming the largest virtual bookstore, Amazon.com has seen it all. (Kotelnikov, 2011)
(1) (i) Identification and evaluation of Amazon’s Strategic position in the context of its internal and external environment:
Strategy is associated with aligning organizational resources and capabilities to the opportunities which arise in the external environment. Overall it has been observed that greater the rate of change in an organization’s external environment, the greater likelihood of the organization’s internal resources and capabilities to provide a secure base for long-term strategy. In case of Amazon.com, as it is a fast-moving, technology-based company, new companies are launched around specific technological capabilities. When a company is encountered with the imminent obsolescence of its core product, whether its strategic focus on continuing to cater to the basic customer requirement or on deploying its resources and capabilities in other markets, Amazon has diversified from its core business of books to include other merchandise like music, health products etc. (Grant, 2007)
(1) (ii) Assessment of Amazon’s internal and external environment to describe its current strategic position and strategies.
The external environment was never favourable for Amazon as it was a contemporary company during the dotcom era. With a lot of companies going bust during that era, Amazon was among the few winners to have emerged colourful from being a $4 billion company in 2002 to about $20 billion in 2008. The company was able to survive the dotcom bust since it was equipped with a feasible and innovative business model which it built around a market-changing customer value proposition. Besides, it has expanded its business beyond books to cover all types of consumer articles as well. Concurrently, it has also worked out a new value proposition of offering buyer and sellers of used books based on an agreed commission-based brokerage service. It has also strategically developed a model to cater to a completely different category of customer i.e. third party sellers. (Johnson, 2010)
In yet another strategic move, the company by selling merchandise of other retailers which were direct competitors, has graduated its business from a direct sales model to a model based on sales plus service thereby aggregating a cluster of sellers under a single virtual entity. This model has been good revenue grosser as it has helped it earn commission from the sales of products of other companies. Amazon went a step further in 2007 and launched its killer product the ‘Kindle’ an e-book reader which was completely outside the realm of its core business. In order to launch product based offering as opposed to service-based business, the company had to become an OEM — original equipment manufacturer. It dovetailed this technology in a completely integrated digital media platform akin to Apple’s iTunes combining transaction as well as subscription-based content delivery. Amazon collaborated with content producers in newer ways to facilitate independent publishers to generate novel content for Kindle. The product did very well in the first year itself selling roughly 500,000 kindles. Amazon has immensely broadened the market for e-books and positioned itself for success not just in this market, but in the daily newspaper as well as journals. (Johnson, 2010)
(1) (iii) Industry Analysis (Porter Five Forces, Value Chain, Technology Life Cycle & Product Life cycle) Threat of new entrants:
Amazon operates in the Electronic Commerce space which has low entry barriers and hence no specific skills or permits are needed to enter the online retail business except for modest capital requirements. Although the industry is highly fragmented, of late there has been a marked trend towards consolidation wherein personalised service offered by Amazon has become the key differentiator. Its “one-click” shopping makes purchase duration short…