Strategic Management Analysis: Amazon.ComStudent’s NameInstitutionStrategic Management Analysis: Amazon.ComCurrent StrategiesAmazo.com can attribute its tremendous growth to its strategic partnerships and acquisitions of numerous organizations in different sectors. CBI Insights (2019) indicates that the company has acquired numerous firms such as Whole Foods, Ring, Zappos, PillPack, Kiva Systems, Twitch Interactive, Souq.com, Quidsi, AnnapurnaLabs, and LOVEFilm International. In addition, the company can associate its success to its communication strategy. The United States Securities and Exchange Commission (2019) indicates that most of its marketing communications focus on improving consumer experience. It uses online advertising techniques such as search marketing, e-mail campaigns, interactive advertisements on portals, as well as search engine optimization to send out personalized messages to reach its target market. Most importantly, the organization has attained its competitive advantage via its technological innovations and massive investment in research and development which is unavailable to other companies without appropriate focus on online channels (Ritala, Golnam & Wegmann, 2014). Table 1: Amazon.com’s SWOT MatrixSWOT Matrix Strengths Exemplary customer service Strong management Advanced technology Strong brand image Strong partnership Decreasing cost of operations Strong corporate culture Strong distribution network Weaknesses Declining sales Declining net income Violation of customer privacy rights Limited suppliers High inventory risk Opportunities Favorable economic condition Increasing consumer spending Favorable foreign exchange rate Growing number of Internet users Growth of broadband access technology Growing online sales Internet of things and big data SO Strategies Further e-retail expansion across the world (S2, S3,S4, S7, O2, O4, O5, O6, O7) Expand distribution centers for operation efficiency and customer satisfaction (S3, S4, S5, S8, O2, O4, O7) WO Strategies Expand operations all over the world (W1, W2, W4, O1, O2, O4, O5,O6,O7) Safeguard customer confidential information (W3, O7) Threats Increasing unemployment Intense competition Identity theft Poor economic condition Volatile stock market Unfavorable foreign exchange rate Unfavorable state regulations and taxes ST Strategies Enhance brand reputation in the United States and internationally to increase market share (S1, S2, S3, S4, T2) Liaise with international governments to mitigate unfavorable future taxes (S2, T7) WT Strategies Focus on increasing sales and net revenue by reducing identity theft and intense competition (W1, W2, T2, T3) Possible Alternative StrategiesStrength-opportunity (SO) strategies use a company’s internal strengths to capitalize on external opportunities (David & David, 2017). Amazon should purse a market penetration strategy in order to capitalize on growing number of Internet users, broadband growth, online sales growth, and internet of things as well as big data. Weakness-opportunity strategies seek to improve weaknesses by capitalizing on opportunities (David & David, 2017). The company should pursue a market penetrative and market development strategies in order to counter declining sales and profits. Moreover, it should consider product development strategy in order to safeguard customer privacy. Strength-threat strategies utilize a company’s strengths to reduce the effect of threats. Amazon should pursue market penetration strategy in order to enhance brand image inside and outside of the United States. Weakness-threats strategies are defensive approaches aimed at reducing weaknesses and threats (David & David, 2017). Amazon should enhance its technological strategies in order to enhance customer privacy and sales.Boston Consulting Group (BCG) for AmazonTable 2: Amazon.com’s BCG Matrix Relative market share positionLow 0.0 Medium 0.5 High 1.0 Stars II Amazon Web Services segment International segment Question Marks I Cash Cows III North American segment Dogs IV High +20Industry sales growth rate (Percentage)Medium 0.5Low -20The Boston Consulting Group matrix is a tool that utilizes graphical representations of an organization’s products in an effort to enable organizations to decide what to keep, sell, and/ or invest in. It plots a firm’s products into a four square matrix, in which the x axis represents relative market and y axis representing the industry sales growth rate.Question marksThese products or divisions have low relative market share but compete in high growth industry. Normally, question marks require high cash and have low cash generation. The management must decide whether to strengthen these products by adopting an intensive strategy such as market penetration, product development, market development, or divestiture (Whitehead, 2015). None of Amazon’s three segments of North America, International, and AWS is a question mark. StarsThese represent an entity’s best long term opportunities for growth plus profitability. Segments or products with high relative market share as well as high industry growth rate must receive substantial investment in order to strengthen their positions (Whitehead, 2015). In as much as Amazon Web Services accounts for only 11 percent of net sales mix it experienced the highest growth rate of 47 percent between 2017 and 2018 (see table 3), which makes it a star. The international market segment is also a star because of its moderate portion of net sales mix, which stood at 28 percent (see table 3) Cash CowsCash cows are products or segments that bring in more revenue for a company to regulate its operations of divisions. It is the manager’s task to leverage these segments or products and use their market share to increase revenue (Whitehead, 2015). North America segment contributed 61 percent of Amazon’s sales mix for 2018 making it the company’s cash cow. Management should leverage this segment to increase revenue. DogsThese segments and products have low relative market share and compete in slow market growth industry. Normally, businesses liquidate, divest, or trim down these segments or products (Whitehead, 2015). Since none of Amazon.com’s segments has low relative market share or operate in slow market growth industry, the company does not have a dog.Table 3: Amazon’s sales for 2018 Segments Net sales Year over year % growth Net sales mixNorth America $141,366 33% 61%International $65,866 21% 28%Amazon Web Services $25,655 47% 11%(Source: SEC, 2019)SPACE Matrix for Amazon.comThe Strategic Position and Action Evaluation matrix comprises of four quadrants indicating whether a firm should pursue an aggressive, conservative, defensive, and/or competitive strategies (Sherafat et al., 2013). Conservative quadrant comprises of four strategies: market penetration, market development, product development, and related diversification. Aggressive quadrant consists of four strategies- backward, forward, or horizontal integration, market penetration, market development, product development, and related or unrelated diversification. Defensive quadrant consists of retrenchment, divestiture, and liquidation. Competitive quadrant comprises of backward, forward or horizontal integration, market penetration, market development, and product development. The matrix represents two external dimensions and two internal dimensions (David & David, 2017). Internal dimensions include financial position and competitive position. External dimensions represent stability position and industry position. Factors that determine financial position include: return on investment, leverage, liquidity, working capital, cash flow, and earnings per share. Factors determining competitive position include: market share, product quality, product lifecycle, customer loyalty, technological know-how, and control over distributors. Factors affecting stability position include: technological changes, inflation rate, demand variability, price of competing products, entry barriers, competitive pressure, and ease of exit. Factors determining industry position include: growth potential, profit potential, financial stability, resource utilization, and productivity (David & David, 2017). Figure 1: SPACE Matrix for Amazon Financial position +5 +4 Conservative +3 Aggressive +2 (+2, +4) +1-5 -4 -3 -2 -10
+1 +2 +3 +4 +5 -1 Defensive -2
Competitive -3 -4 -5Possible Alternative StrategyThe SPACE vector for Amazon is located in the aggressive quadrant based on the company’s 1.65 long term debt to equity ratio, intense competition in the e-retail industry, and the Amazon’s dominant market share. Amazon should consider expanding in other parts of the world to benefit financially and move the SPACE point vertically. Internal-External MatrixThis matrix positions a company’s divisions in nine cells. It is similar to the Boston Consulting Group matrix in the sense that these two tools plot a company’s segments in a diagram. The internal-external matrix is anchored on two dimensions: the internal factor evaluation total weighted scores and the external factor evaluation’s total weighted scores. An internal factor evaluation total weighted score of between 1.0 and 1.99 signify a weak internal position while a score of between 2.0 and 2.99 signify an average internal position. A score of between 3.0 and 4.0 represents a strong internal position. In the same, an external factor evaluation of between 1.0 and 1.99 represents a weak external position while a score of between 2.0 and 2.99 represents a medium external position. An external factor evaluation score of between 3.0 and 4.0 represents a strong external position (David & David, 2017). IFE Total Weighted Score Strong 3.0-4.0 Average 2.0-2.99 Weak 1.0-1.99 EFE Total Weighted Score 4.0 3.0 2.0 1.0 I II III IV (Amazon.com) V VI VII VIII IX High (3.0-4.0) Medium (2.0-2.99) Low (1.0-1.99)
Possible Alternative StrategyAmazon.com’s internal factor evaluation total weighted score is 3.10 while its external factor evaluation total weighted score is 2.72. Thus, the plot on IE matrix is (3.10, 2.72). In this regard, Amazon has strong internal position and an average external position. After plotting, Amazon falls into cell IV, which is managed through grow and build. The company can pursue four strategies in order grow and build: backward, forward or horizontal integration, market penetration, market development, and/ or product development. Evaluation of Organization StructureAmazon.com has a hierarchical organization structure. Senior management consists of three chief executive officers and three senior vice presidents, who are responsible for different business aspects reporting to Jeff Bezos, the chief executive officer. The hierarchical structure helps with its large size of business. Unlike other firms with hierarchical organizational structures, the company is highly flexible to embrace frequent changes in market place. The company’s organizational structure incorporates numerous small teams that focus with different business aspects (SEC, 2019). RecommendationsAmazon should enhance employee relations for enhanced staff motivation and productivity. This is due to the fact that the company has been accused of treating employee like robots as evidenced by more than 600 ambulance calls to the company’s warehouse in the United Kingdom between 2016 and 2018. Workers have accused the organization of constant pressure to attain performance targets, which makes life difficult for them as they cannot visit a toilet or take a drink (Butler, 2018).ReferencesButler, S. (2018, May 31). Amazon accused of treating UK warehouse staff like robots.
Guardian. Retrieved from https://www.theguardian.com/business/2018/may/31/amazon- accused-of-treating-uk-warehouse-staff-like-robots CBI Insights. (2019, June 19). Infographic: Amazon’s biggest acquisitions. Retrieved from https://www.cbinsights.com/research/amazon-biggest-acquisitions-infographic/David, F. R., & David, F. R. (2017). Strategic management concepts and cases: A competitive
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Research,9(4), 2666-2673.United States Securities and Exchange Commission. (2019). Form 10k: Amazon.com. Washington, D.C.: U.S. Government Printing OfficeWhitehead, J. (2015). Wiley encyclopedia of management. Hoboken, NJ: John Wiley & Sons