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Amazon.com, A Strategic Management Case Study.
Transcript of Amazon.com, A Strategic Management Case Study.
The Company's objective is to become the best place to buy, find and discover any product or service available online. Amazon.com will continue to enhance and broaden its brand, customer base and electronic commerce expertise with the goal of creating customers' preferred online shopping destination, in the United States and around the world.
“Relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise.”
(B) Financial Performance
Evaluate current performance results
(A) Amazon.com’s Current Mission, Objectives, Strategies and Policies.
“We seek to be Earth’s most customer-centric company for four primary
customer sets: consumers, sellers, enterprises, and content creators.”
Strategic Group Analysis
(3) External Analysis
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Strategic Decision Making Process for Amazon.com
According to the strategic management and business policy we apply the following eight-step strategic decision-making process as follows
1. Evaluate current performance results.
2. Review corporate governance.
3. Scan and assess the external environment.
4. Scan and assess the internal corporate environment.
5. Analyze strategic factors
6. Generate, evaluate, and select the best alternative strategy.
7. Implement selected strategies.
8. Evaluate implemented strategies.
Abdelnasser, Hosny and Omran
What is Amazon?
Is there any significance in its logo?
Who's the founder and what's his story?
no. 1 Music, Video, Book e-retailer
Named after the Amazon!!!
The Wainwright Story!!!
Why are we here today?
Strategic Decision Making for that giant was not a piece of cake...
Strategies & Policies
Amazon rich and Interactive Website
Real time shipping tracking data available
Results were staggering
Highest Satisfaction score according to SEC (88) overtaking H.J. Heinz and Mercedes.
The $10,000 alarm
Amazon exceeded the $100bn sales mark Q1 of 2016 for the first time ever.
Amazon enjoyed record Christmas trading in Europe last year. And, since 2010 it has invested over $16.3 billion on infrastructure and operations in Europe, with more than $6.6bn invested in the UK.
Porters Five Forces in the E-Retailing Industry
Threat of Substitutes
High- Physical stores and touch, feel, hear factors.
High- Renting products online instead of buying them is increasing in popularity.
High- Internet is a global market. Consumers can substitute by purchasing from overseas.
Low- Catalogue/Mail order; although not popular but still a substitute to online buying
Power of Suppliers
Low- For Standardized products that are easily available, supplier power will be low.
High- Specialized products and brands increase switching costs for buyers so the suppliers have higher power. Harry Potter Books (an Amazon product) are exclusive from publisher.
High- Online shops making it easier for publishers/brands to sell directly to consumers without a third Party (no need to Amazon)
High- If there is a concentration of suppliers for certain products in the industry rather than fragmented
Low- Global Shipping has increased the amount of suppliers available.
Threat of New entrants
Low- For online established retailers a strong brand image generates consumer trust
Low- Economies of scale – Retailers that have refined technology and processes and are able to buy in bulk can offer the lowest prices. This is a major competitive advantage as there is much choice online
Power of Buyer
High- There is a large variety of online shops and comparison websites to compare best prices.
High- As search engines are becoming the first choice for consumers when shipping online and this increases the opportunities for other retailers
High- There is an increasing amount of dotcom companies due to the little capital needed to start up. Smaller niche affiliate online stores when combined create even more competition.
Video on Demand &
e - movies on demand, Kindle, Cloud services
No Dogs (Yet)
potential opportunity for Amazon.com.
IFAS & EFAS SFAS
Value Chain Analysis
It highlights specific activities in the business where competitive strategies can best be applied
5. Analyze strategic factors
6. Generate, evaluate, and select the best alternative strategy
Starting with the TOWS Matrix
The Ansoff Matrix
Strategic Option (1)
1: Market Development-Acquire a growing e-retailing company in India
•The PESTEL: spending is rising in India
•Global internet trends: India ranked as the fifth highest in Internet usage
•Indian government policy: increasing consumers’ likeliness to shop online
•Strategic group’s analysis: Wal-Mart and Tesco aim to enter the Indian market , therefore it is vital for Amazon.com to gain from first mover advantage.
•The SWOT: Strengths of Amazon.com is the experience and knowledge in successful acquisition and integration.
•Amazon.com need to borrow to finance the acquisition, which may be problematic
•By acquiring an Indian e-commerce company they will also be acquiring the local knowledge
•Internet users are forecasted to increase 254% from 2006 to 2015, presenting a growing market and reducing risk
•Shareholders favor long- term investments, such as this strategy therefore
there is a higher chance of acceptability
•By acquiring a company there is the risk of cultural conflict
Strategic Option (2)
2: Service Development - Providing a ‘greener’ delivery option.
Consumers have choice of selecting the ‘greener’ delivery option. Items will be delivered in biodegradable containers .Then there's the green points system and the vouchers. Boxes will be re-used by Amazon.com, which will reduce cost of packaging and ensure less wastage.
•PESTEL: This strategy will address increased environmental awareness.
•It is important for the e-retailing industry as all products need to be sent to customers.
•Resource Based View: This strategy builds on Amazon.com’s past efforts to maintain environmental awareness.
•Biodegradable plastic containers, will require extensive research by Amazon.com. Amazon.com has an active R&D
•Amazon.com has highly experienced workers who can create and manage the new ‘green points’ system
•There is a risk that the consumers will not return the boxes for re-use. The cost
-benefit will not be obtained.
•Consumers will want to make a difference through their packaging choice.
•Governments may supportAmazon.com in some capacity.
•Value creation and reduced costs lead to increased returns for
Strategic Option (3)
3: Product Development-The addition of prescriptive contact lenses to Amazon.com’s product range.
• Competitor analysis:Wal-Mart.com and Tesco.com offer this service.
• The US Market for eye glasses and contact lenses has grown to reach a value of us$29.2 billion in 2014.
• An estimated 60% of the US population requires vision correction.
• Amazon.com’s value activities include successful co-operation and joint ventures with other companies. In the case of contact lenses a partnership with healthcare professionals is important.
• Sales of optometric products will increase customer choice in healthcare goods.
• The initial investment for this option will be high, however, long term
p profitability reduces the overall financial risk associated.
Strategic Option (4)
4: Market Penetration in China: Amazon.com entered the Chinese e-commerce
market in 2004 by taking over Joyo.com
GE matrix indicates, Amazon.comhas lost its position as market leader
Option 1 Extensive marketing,raising Awareness an brand Building
Option 2 Increase product range and suitability Increasing Market Share and sales
•PESTLE:high economic growth in China and high consumer spending
•Global internet trends: China has the second highest internet usage in the world
•GE matrix: China is the most attractive market for Amazon.com
•Amazon.com has the capabilities to undertake global operations successfully as demonstrated in the UK, German and Japanese markets
•Market penetration into China will be less capital intensive than entering a new market
•Amazon.com has successfully implemented the Merchant Program in the U.S.
•Amazon.com’s investments in China must be fully harnessed to exploit the market potentials thus reduces financial risks
•The Merchant Program will create value for the Chinese consumers.
•Penetrating the Chinese market will have long term benefits which increases
Strategic Option (5)
5: Market Development– Platform via the Facebook, to develop a presence on Facebook to boost digital media sales.
• PESTEL: This strategy will take advantage of the continued growth in social networking websites .
•Gain access to large customer base thatAmazon.com can target
•This strategy will also help to increase awareness and boost sales of digital media.
•Amazon.com has the technology to sell digital media online.
•Facebook may not allow Amazon.com to have a presence on the website.
•This strategy should boost sales of digital media which will increase profits, therefore pleasing the shareholders.
•Users of Facebook will be able to purchase digital media whilst
they are on the social networking website. This provides a quick
and easy service for the consumer
Strategic Option (6)
6: Market Development into Scandinavia- with a population of 25 million
•Will address the lack of geographical scope in comparison to competitors
•Exploit infrastructures and skills in Scandinavia
•Global internet trends: Europe has the largest internet retail spend and a presence in Scandinavia
•The four markets can be served by a single distribution center .
•Logistic expertise can be easily integrated with the value chain of Amazon
•Modern IT infrastructures to support services
•The Scandinavian nations are known to be very price sensitive when shopping online. Amazon.com will have to compete strongly in price
•Deal with 4 different countries with different currencies will mean they have to carefully manage exchange rates.
•Online audiences are more experienced; therefore differentiation and value-creation services options will be necessary and this increases the
China’s National Festivals.
“To adapt to the international diversity encountered” or
“To overcome the constraints imposed by distinct national systems, structures or behaviors”?
8. Evaluation and Control
The Balanced Scorecard
This presentation analyzed the internal and external environment in which Amazon.com operates, which has resulted in the generation of several possible strategies. In conclusion, we recommend that market penetration in China is the most suitable, feasible and acceptable option based on Amazon.com’s core competences and opportunities in the industry. Managing change and implementing strategies can be very challenging in a constantly changing, global environment. Therefore, Amazon.com will need to integrate its resources and competence across different functional areas.
“Capability in separate resource
areas is not enough”
Identifying how future trends in the
(political, economic, social, technological, environmental and legal)
might influence an organization
Responsibility of the Board
• Responsibility: Control and direction of the Company.
• Accountable: only to shareowners.
• Primary purpose: build long-term shareowner value.
• The majority should be of independent directors.
• The Chief Executive Officer serve as a director.
• An independent director is a person that meets the definition of independent under applicable
requirements and does not have any other relationship with Amazon.com which,
Selection of Candidates for Board Membership
According to “Nominating and Corporate Governance Committee” NCGC:
• Nominates candidates for election to the Board.
• NCGC annually reviews the tenure, performance, and contributions
Amazon: The qualifications and skills of a candidate:
The long-term interests of the shareowners;
Customer experience skills;
The willingness to take appropriate risks;
Personal and professional ethics,
Integrity and values;
Practical wisdom and sound judgment;
Business and professional experience in fields such as operations, technology, finance/accounting or marketing.
• Elected for a two-year term.
• Serve more than two consecutive terms.
The lead director:
Presides at the executive sessions of independent directors,
Presides Chairs Board meetings in the Chair's absence.
Provides direction regarding the agendas,
Schedules and materials for Board meetings that will be most helpful to the independent directors.
Executive Performance and Succession
Review its own performance
Review the performance of the CEO
Set goals at least annually
Review the experience, skills and competencies of potential successors,
Nominating and Corporate Governance Committee
knowledge on the local market resides in the employees in China
employees should be empowered.
Chinese employees have the right channels to interact
encouraged to take leadership roles within the organization structure.
Cultural processes should be encouraged:
Self-control & personal motivation should be suggested.
Training and development and intercultural awareness.
Performance targets & internal markets
will depend heavily on the early success of the strategy.
Keep the Board informed of their actions
Provide assistance to the Board
Board of Directors