STRATEGIC MANAGEMENT

END TERM 2021

Amazon is a multinational e-commerce company. The business strategies of Amazon are
focused on investing in technology, developing its logistics apps, boosting its web services,
merger and acquisitions strategy, logistics research and development activities,
experimenting with financial technology, and securing its ideas through patents are all things
that the company is working on. Amazon’s basic company strategy is Concentric
Diversification. This strategy is built on using technical capabilities for business success and
adhering to a cost leadership strategy that aims to provide the most value for its customers at
the lowest cost.
Answer 1:
RESOURCE BASED VIEW (RBV) of AMAZON
An RBV model of Amazon explains how the company grows and maintains its market
position. It includes assets (tangible and intangible), capabilities, and organizational
processes. A company's resources and capabilities are used to gain a competitive edge. The
organization's distinguishing strengths are the sum of its resources and talents. Competitive
advantage can be divided into two categories:
 A cost advantage exists when an organisation is ready to provide the same services as
its competitors but at a lower cost.
 A differentiation advantage emerges when a company can provide benefits that are
superior to those offered by competitors.
Amazon's decision-makers can use the RBV model to create the ideal strategic plans and
strategic objectives to compete with its competitors.
VRIO Analysis Table:
Amazon's core competencies are based on organisational abilities and resources that match all
VRIO standards (value, rarity, inimitability, and organization). Many of the available
business resources and abilities only fit one or a few of these criteria, yet they all contribute
to the company's survival and effective growth.
Resources Value Rarity Inimitability Organisation Implication
and
Capabilities
Artificial Yes Yes Yes Yes Competitive
Intelligence Advantage
Capabilities
Research and Yes Yes Yes Yes Competitive
Development Advantage
Brand Image Yes Yes Yes Yes Competitive
Advantage
Product Yes Yes Yes Yes Competitive
Range Advantage
Marketing Yes Yes No Yes Temporary
Advantage
 Customer Yes Yes No Yes Temporary
Experience Advantage
Offline Yes No No No Competitive
Presence Advantage
Delivery Yes Yes No No Competitive
Collaborations Advantage

Non-Core Competencies
The company's rising offline presence is one of Amazon's non-core competencies. This
information is valuable and contributes to competitiveness, but it is also imitable and not rare,
given the physical presence of huge firms such as Walmart. Also, Amazon's accelerated
growth in online services during the pandemic time is beneficial in terms of diversifying
revenue streams, but it is neither unique nor inimitable because other digital companies
provide similar services. Another non-core skill is the company's extensive distribution
network, which includes agreements with a variety of third-party service providers such as
courier and delivery companies. According to the VRIO analysis, such a resource improves
Amazon's competitiveness but isn't a fundamental competence because other companies can
form comparable strategic ties to increase the availability of their items to potential buyers.
Core Competencies
In the international market, Amazon has a lot of value. The corporation uses this brand to
attract customers to its new and existing items. Amazon emphasizes its core competency by
arranging its business around it and leveraging the brand for a variety of items. Amazon has
had significant market expansion in recent years, and its focus on customer experience is one
of the key drivers of its expanding brand awareness and appeal globally Amazon's research
and development is a major generator of demand, sales, and recognition. Amazon is the
industry's largest spender on research and development. Continuous investment in research
and development has enabled Amazon to create strong capabilities through improved
algorithms that give product recommendations and make dealing on its online platform more
comfortable for both customers and sellers. The product range also plays a major role as
Amazon has a diverse range of products that provides great competition to its competitors.

Answer 2:
An external factors evaluation matrix is based on an external audit and assesses significant
external variables that affect a company as well as how well it reacts to these issues.
Amazon's EFE outlines the company's opportunities and threats. The two opportunities for
Amazon because of the pandemic were expanding into a new market and a sudden increase in
the need for online purchasing. A competitor replicating their business model and
government rules and regulations were both identified as two of the company's top threats.
The top 8 opportunities and threats are presented in the EFE Matrix below.
EFE (External Factor Evaluation Matrix)
Opportunities Weight Rating Weighted Score
1 Expansion into new market 0.12 3 0.36
segment
2 Sudden need for products due 0.10 4 0.4
to COVID-19
3 Acquisitions of companies 0.08 4 0.32
4 Backward Integration: focus 0.07 3 0.21
on growing private brands
5 New Partnerships 0.07 2 0.14
6 Develop Distribution 0.04 4 0.16
Company
7 Grocery Market 0.02 2 0.04
8 Package Delivery 0.02 2 0.04
Threats
1 Competitors Replicating 0.12 3 0.36
Amazon’s Business Model
2 Government Regulations 0.08 3 0.24
3 Competitive Pricing 0.08 3 0.24
4 Fake Reviews 0.06 2 0.12
5 Quality Control 0.04 3 0.12
6 Seasonal Products Create 0.04 2 0.08
Shifting Revenues
7 Lawsuits from Competitors 0.04 2 0.08
8 Political Constraints 0.02 3 0.06
Total EFE Score 1.00 2.97

Based on the weight provided, it can be determined that the increasing number of internet
users, an ever-increasing rivalry, and government regulations are likely the most important
elements in the online retail industry, affecting Amazon's company significantly. During the
pandemic, a lot of customers have been shifted to online shopping and new COVID
restrictions by the government have made things complicated for online businesses. A
weighted score of 2.97 (above average) indicates that Amazon has been able to cope up
opportunities and counter threats and is performing effectively, but its business is still not
outstanding. Amazon still has the ability to grab the opportunities and repel threats that it has
failed to achieve in the past.
IFE Matrix (Internal Factor Evaluation Matrix)
This matrix shows the company’s strengths and weaknesses.
Strengths Weight Rating Weighted Score
1 Customer Loyalty 0.12 3 0.36
2 Diverse Business Products and 0.12 3 0.36
Services
3 Cost Leadership 0.10 2 0.2
4 Pandemic (Customer shifts 0.08 4 0.32
from traditional offline
shopping to online)
5 Diversification 0.08 4 0.32
6 Superior Logistics 0.06 3 0.18

Weakness
1 Margins Shrinking 0.12 3 0.36
2 Quality Focus 0.12 4 0.48
3 Seller Relations 0.10 3 0.3
4 Increase Competition 0.08 3 0.24
5 Brick and Mortar Presence 0.02 2 0.04
Total IFE Score 1.00 3.16
Internal factors evaluation matrix (IFE) is a method that uses an internal audit statement to
analyse a company's internal strengths and shortcomings. An IFE matrix is a useful tool for
gathering data and formulating solutions. The weighted score of 3.16 indicates that the
internal position is solid, but there are still concerns to be resolved. As in the case of Amazon,
expenditures have been high as a result of high product variety and pushing into new product
categories, and while net sales have increased since 2018, net income has decreased
significantly due to lower margins available. Furthermore, due to the vast number of third-
party sellers and various products, the company is unable to keep track of product quality.

Answer 3:
Amazon is an e-commerce company serving each and every person in this world. A Blue
Ocean Strategy is a business strategy that combines product differentiation with a competitive
price advantage to create whole new markets.
 Amazon has applied the Blue Ocean Strategy by launching Kindle in 2013. The value
offered by Kindle here was unbeatable and at an attractive price making the
competition irrelevant at that time.
 For the time being, AWS (Amazon Web Services) supports Amazon's Blue Ocean
Strategy, in which competition is catching up but Amazon remains the leading Cloud
 Services provider. In the market after Amazon, every platform is trying to provide the
best value at the best price. For example, Microsoft has given a start to cloud gaming.
 Amazon Go, the cashless grocery shop, poses a challenge to all retailers because it
combines cutting-edge technology with a distinct brand identity that will be difficult
to match.
 The introduction of Alexa to the markets has changed the consumer perspective of
buying speakers. Amazon is offering an AI-based speaker with very good sound and
at an unmatchable price. Through the integrated AI chip one can operate LED lights,
Air Conditioners, Washing Machines, Plugs, etc through Alexa. This has created a
monopoly in the industry.
 Amazon is now delivering products with help of drones. This has established a new
delivery standard for its competitors.
Amazon has made the best use of the blue ocean strategy by using the framework to sequence
its plan in order to maximise its benefit and profit. Amazon uses the ideal sequencing for
value innovation under the blue ocean approach, which includes consumer utility, price, cost,
and adoption, to deliver Kindle, Cloud services, online grocery sales, Alexa, and other
products. Amazon can tap into the blue oceans of unexplored marketplaces and ensure that its
development comes through market spaces and is organic in terms of demand creation by
following this pattern. Amazon ensured that maximum value is generated and enjoyed not
only by consumers but also by the company itself in unexplored and new market spaces by
following this sequence. Amazon is best at developing its pricing strategy that attracts a large
number of customers.

Answer 4:

Firm Infrastructure

Support Human Resources

Activities
Technology Development

Procurement
Margin

Inbound Outbound Marketing

Operations Service
Logistics Logistics and Sales

Primary Activities

Primary Activities
Inbound Logistics:
  The term "inbound logistics" refers to the process of procuring raw materials.
However, because Amazon does not often manufacture its own products.
 Amazon's inbound logistics for company-owned retail businesses is based on
Fulfilment by Amazon (FBA). Furthermore, for Amazon inbound logistics,
economies of scale are a significant source of value generation. Sellers that keep their
stock in Amazon fulfilment centres can also use FBA. In this case, Amazon is solely
responsible for logistics, customer support, and product returns and exchanges.
Operations:
 Operations are actions that convert raw materials into finished items in a value chain
analysis. Amazon has a variety of channels that it covers with its activities. These
segments are divided by geography and the international segment being the most
prominent.
 The Amazon Web Services division is the third segment.  Amazon gains a
competitive edge from these businesses in terms of operations and services. In order
to enhance its business processes, the IT giant first built cloud storage and cloud
computing resources for its own business purposes. After the benefits of cloud
services were clear, the company began to commercialise them.
Outbound Logistics:
 The storage, supply, and delivery of finished goods are covered in outbound logistics.
 To make Amazon’s outbound logistics effective, it has 175 fulfilment centres
globally.
 Amazon uses advanced technology to assist its inventory fulfilment. Fulfilment by
Amazon is in charge of managing, storing, and shipping all orders. For effective
and efficient outbound logistics, it involves shipping providers and Amazon's logistic
infrastructure, which includes aeroplanes, ships, trucks, and drones. Aside from that,
outbound logistics also includes digital product distribution. It includes kindle
content, entertainment, and other items. 

Marketing and Sales:

 This vast marketing and promotional campaign are evidently dispersed throughout
numerous channels and media, with a global reach and influence. It includes print and
broadcast commercials, sales promotions, events, public relations, and targeted
customer marketing.
 Amazon always spent more money on marketing than its competitors. As a result,
marketing and sales may be considered one of the primary sources of value in the
Amazon chain of operations, despite the fact that this value is generated as a result of
excessive marketing investments.
 The Amazon marketing slogan offers a diverse selection of items and services,
reasonable prices, quick product delivery, and overall great customer service. Several
parts of the marketing communication mix are utilised in parallel to communicate the
marketing message to the target customer group, including advertisements, sales
promotion, event sponsorship, public relations, and direct marketing.
Service:
 For e-commerce and cloud computing corporations, excellent customer service is a
crucial source of value development. Amazon customers can reach out to the
company by phone, email, chat, or social media.
 Customers on Amazon Marketplace and Prime are divided into two categories: sellers
and buyers. Furthermore, Amazon's return policy process is fully conducted online
through a user's account. If a customer needs to speak with a customer service
representative over the phone, the representative will have accessibility to the
customer's account and order details, allowing any issues to be resolved quickly and
efficiently.
Support Activities:
1. Firm Infrastructure: Amazon has put money, effort, and time into developing a
flexible and stable business strategy to support its massive scale and market position.
Offline structures such as shipping, hiring, and delivery are included. At the same
time, online assistance and digital solutions are second to none.
2. Human Resources: Without Amazon's HR management department, the value chain
model cannot be completed. Amazon has a permanent workforce, as well as in-house
employees, overseas employees, contractors, and a flexible workforce. Amazon
features a technologically enabled firm architecture that ensures optimum
collaboration between the company and its employees. It has the most loyal staff and
the lowest turnover because of its incentive programme and appreciation of good
performance.
3. Technology Development: Amazon has not only demonstrated its real-world
success, but it has also kept a close eye on the digital environment. Cloud computing
and cloud storage, which started as internal business methods to handle operations,
have since evolved into new industry standards.
4. Procurement: The company's procurement is handled by the sales and operations
(S&OP) process. This system is efficiently managed using forecasting and just-in-
time inventory principles.
Benchmarking Primary Activities and Support Activities of Amazon with Walmart.
 Walmart is a technological leader, and it communicates with all of its stores via
satellite links. Suppliers establish satellite offices near the most convenient
procurement centre. Walmart's largest supplier has more than 300 full-time
employees.
 It places a high value on the "customer experience," which includes having
someone dedicated to each customer, assisting them in finding what they're
looking for, taking returns, and delivering things to the customer's vehicle.
Walmart's value chain is incredibly basic because it is a retailer rather than a
manufacturer. It sells to clients and works with many vendors. The key to
understanding what makes Walmart so successful is to look at its internal value
chain. This is somewhere Amazon lacks as it is not selling the goods physically in
India. Its offline presence is zero.
 Suppliers are integrated via IT and treated nicely in terms of pricing. Data mining
at its most advanced: Customer purchase behaviour data is actively collected,
used, and protected. Customer-focused employees are motivated by significant
monetary contributions and trust in Walmart's culture. EDLP: "Everyday Low
Prices" must be maintained by the company. On the contrary, Amazon is much
focused on cloud computing and storage. This EDLP strategy has helped Walmart
to build a reputation as the best price retailer in the industry.
 Walmart uses a variety of advertising techniques, including conventional and
digital, to promote its brand and amazing deals. Walmart uses everything from
promotional ads to social media platforms to promote its brands globally.

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