MGMT 415 Strategic Management
Spring 2019-20
Group members:
Mohammed Al Tayer – 201551795
Suliman Hawashin – 201640063
Mohammed Shabrak – 201540028
Usman Speen Jan – 201540261
Khaled Al Dhaheri – 201551407
Abdulla Al Shamsi – 201509508
Ahmad Faisal – 201450057
Course Instructor: Dr. Saba Khalid
Table of contents:
Page 1 of 20
Part-1: Company Description
a. Company description
i. ownership structure
ii. product portfolio
iii. geographical scope
b. Vision and Mission
c. Organizational Chart
Part-2: External Environmental Scanning
a. Levels of competitions
b. PEST Analysis
c. Industry Analysis
i. the Five forces in the Industry
d. Competitors Analysis
i. Strategic Group mapping
ii. Strategic Types
iii. Industry Matrix
iv. Competitive Grid
e. EFAS Table
Part-3 Internal Environmental Analysis
a. VARIO Framework
b. Analysis of Resources, capabilities and Competencies
c. Value Chain Analysis
d. IFAS Table
Part-4: Corporate level Strategy
a. Re- defining the Mission of the company
b. Setting new goals and objectives if needed
c. Analyzing the Directional Strategies of the company
d. Analyzing the Portfolio strategy
e. Analyzing the Parenting fit Matrix for the company
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Part-5: Business level Strategy
a. Analyzing the current business level strategy of the company and
reformulating them if judged necessary
i. Cost Leadership, Differentiation, or Focus strategies
Formulating functional level strategies (optional)
a. Creating Fit between Business level strategies and functional level strategies
Implementing and executing Strategies
a. Culture and organizational structure for Implementation
b. Programs and policies of the company to execute the strategies
c. Analyze and device an appropriate Organizational structure and culture for
the execution.
Part 1: Company Description
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A. Amazon.com Inc
Amazon.com is an e-commerce company located in Seattle, Washington, USA. It is one
of the first large companies to sell goods online. In was launched by Jeff Bezos in 1995.
Amazon started out as an online bookstore and then began to sell other items, including
DVDs, video games, music, electronics, and clothing. Today, Amazon.com is defined by
Britannica as “a vast Internet-based enterprise that sells books, music, movies, housewares,
electronics, toys, and many other goods, either directly or as the middleman between other
retailers and Amazon.com’s millions of customers. Its Web services business includes renting
data storage and computing resources, so-called “cloud computing,” over the Internet. Its
considerable online presence is such that, in 2012, 1 percent of all Internet traffic in North
America travelled in and out of Amazon.com data centres.”
Amazon claims to be guided by four principles: “customer obsession rather than
competitor focus, passion for invention, commitment to operational excellence, and long-
term thinking.” (aboutamazon.com)
i. Ownership Structure:
Institutional investors and mutual fund holders hold a majority ownership of Amazon
through the 88% of the outstanding shares that they control. The following pie chart
illustrates Amazon’s ownership strategy.
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ii. Product Portfolio:
Amazon is the leader in online shopping and it keeps growing by developing new
products and various different services which continuously enlarges its customer base.
Amazon has been continuously trying to cover new markets. As online shopping becomes
increasingly popular, people turn to Amazon for just about everything, from everyday
groceries to seasonal gifts to almost any other thing. In fact, Amazon has a huge product
count. To put a number on it, Amazon.com has a total of 119,928,851 products as of April
2019, according to oberlo.com.
The largest category in Amazon is Books, containing 44.2 million products, followed by
Electronics (10.1 million) in second place, and Home & Kitchen (6.6 million) in third place.
Amazon originally started with books, but has gradually expanded its product portfolio to
include just about everything.
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Amazon aims at selling as many different products as possible, across many different
industries. As a result, it keeps attracting new types of customers and various different
niches. The diversity of products offered by Amazon is one of its main strengths that helps it
to highlight itself prominently among competition. Expanding its categories also means that
it’s becoming accessible to new audiences and constantly expanding its target market, to
reach as many individuals as possible. But it does all this, while at the same time maintaining
quality standards which builds trust. The below infographic from 360pi.com illustrates the
diversity of Amazon’s products. It shows the top 20 categories based on the number of
products listed on Amazon’s U.S. site, including marketplace sellers.
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iii. Geographical Scope:
Amazon has achieved an ever growing presence in multiple markets. It accounted for
13.3% of worldwide retail ecommerce sales in 2018 and 13.7% in 2019. Although Amazon
dominates the US ecommerce landscape, it is a very different story overseas. In an effort to
duplicate its domestic success, Amazon has doubled down on its international efforts, with
Prime membership at the core of its expansion strategy.
According to emarketer.com, the number of international Amazon Prime subscribers
(59.5 million) surpassed that of US subscribers (58.5 million) for the first time in 2018. Prime
memberships are currently available in 17 countries: Austria, Australia, Belgium, Canada,
China, France, Germany, India, Italy, Japan, Luxembourg, Mexico, the Netherlands,
Singapore, Spain, the UK and the US.
B. Vision and Mission
Amazon.com Inc.’s mission and vision statements largely contribute to the success of
the company and its status as one of the largest online retailers in the world. This success is
indorsed by rigorous measures to guarantee that the vision and mission statements are
achieved. Amazon’s mission statement is:
“We strive to offer our customers the lowest possible prices, the best available selection,
and the utmost convenience.”
This mission statement promises attractive e-commerce services to satisfy target
customers’ needs. In other words, the company emphasizes the variables of price, selection,
and convenience, which, for customers, means lowest prices, best selection and utmost
convenience. As to the Amazon Vision statement, it is
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“To be Earth’s most customer-centric company, where customers can find and discover
anything they might want to buy online.”
This vision statement underlines the business organization’s core goal of becoming the
best e-commerce company in the world, which, for Amazon, means global reach, a
customer-centric approach and the widest selection of products.
C. Organizational Structure
As John Dudovskiy - the admin of research-methodology.net - put it,
“Amazon organizational structure can be classified as hierarchical. Senior management
team include three CEOs and three senior vice presidents responsible for numerous vital
aspects of the business reporting directly to Amazon CEO Jeff Bezos.”
The figure below illustrates Amazon organizational structure: (Source: research-
methodology.net)
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Part 2: External Environmental
Scanning
A. Description of levels of competition
i. Form
In the United Sates alone, Amazon controls 45% of the ecommerce market share. And
is expected to rise to 50% by 2021. In spite of this, Amazon still has its fair share of
competitors. Streaming service Netflix competes with Amazon Prime Video. Amazon’s
virtual assistant Alexa faces competition from Google Home products. In the cloud
computing arena, Microsoft Azure and Google Cloud both compete with Amazon Web
Services. And that’s just on the technology side, there are plenty of business-to-business
and business-to-customer stores going head to head with Amazon and thriving.
ii. Industry
In the E-commerce, Amazon main competitors are Ali Baba, eBay, Walmart, Home
Depot, Etsy, Best Buy and Flipkart. In the media streaming industry, the main competitors
are Netflix, Microsoft Azure, Google Cloud Platform and Facebook. Even in shipping and
delivery services, Amazon has declared that it will compete with FedEx and UPS.
iii. Brand
As mentioned in businessinsider.com, Amazon owns many private-label brands. In
2018, Amazon owned more than 70 private-label brands, many of them were started in
niche categories like batteries or pet carriers, but recently, Amazon has been diverging into
categories that already have well-established leaders, like paper towels, which is led by
Bounty.
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Although competition is hard in these categories, private labels increase customer
loyalty by making them exclusive to Amazon. These labels range from basic care items like
cold medicine to tech accessories, fashion, and many other categories.
B. PEST ANALYSIS
i. Political
Amazon's business could be influenced by protectionist policies. Also, sometimes
politicians can indirectly push towards e-commerce. For example, France has a specific
government plan in which the French government desires to hasten the 4G and optical fibre
network deployment. This kind of political decision facilitates the access to the Internet, so
to all services based on the Internet.
ii. Economical
Since the economic crisis of the beginning of the 1980-90s, the world population
consumes less and is back to an almost systematic search for the best deal. Customers look
for convenience and lower prices. Prices are pulled down
because of the competition, and the drop in the prices of computers and Internet
access increased the need for online platforms like Amazon. This movement is still ongoing
(e.g., the recent democratization of smartphones and 4G packages) and is maintained by the
disappearance of the middle class. So, we can think that Amazon has in front of it a very
favourable economy to continue to grow up.
iii. Social
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Internet brings in more and more users because subscriptions are becoming more
affordable, people have a better network coverage, and the development of the goods and
people movements around the world resulted in the need for global networks to cover their
needs. All the countries are opening up to the world, making large formerly emerging
countries new economic powers whose population is eager for new technologies,
information and new services. Therefore, the demographics and skill level of the population,
class structure, hierarchy and power structure in the society, attitudes to health,
environmental consciousness, and leisure interests are all social aspects that Amazon needs
to examine and consider.
iv. Technological
Technology is in constant and sometimes very fast evolution, which causes industries
to be transforming very fast. Therefore, any company should not only do technological
analysis of the industry but also the speed at which technology disrupts that industry.
Companies should watch technological advances and take the necessary measures to
cope and be profitable. Technology analysis should involve understanding technology's
impact on product offering, impact on cost structure, and impact on value chain structure in
the services sector.
C. Industry analysis
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It is a business function done by business owners or other individuals to assess the current
business environment. This analysis helps the analyst to understand and develop strong sense of
what is going on in the industry.
i. Porter’s five forces:
Amazon is up against a number of businesses from smaller online shopping stores and major
corporations like Walmart. The e-commerce business 'global reach often exposes amazon to a
number of external influences, and the organization must ensure that it remains competitive in the
changing conditions of the online retail industry climate. The external factors impacting Amazon
are as follows
1. Competitive Rivalry (strong)
Amazon is up against difficult rivals. The following external factors in the case of Amazon are
responsible for the heavy competitive competition in the online retail business environment:
Strong Corporate Aggressiveness, Large availability of Substitutes and Low switching costs. Retail
corporations are typically hostile, exerting a strong competitive influence on each other. For
instance, Amazon competes directly against giants such as Walmart, which has a large and growing
e- website. Owing to their high availability, Amazon also feels the powerful power of the
substitutes. Walmart physical or brick-and-mortar stores, for example, are replacements to
Amazon's online shopping operation. Many brick and mortar bookstores as well as smaller
retailers compete against Amazon as well. Low switching costs often exert a heavy influence on
the company. Low costs of switching lead to low barriers for customers to switch from one store to
another, or from one manufacturer to a supplier.
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2. Bargaining Power of Buyers (Strong)
The following external factors help the high strength of consumers 'negotiating power in
influencing Amazon: High quality of information, Low switching costs and large availability of
Substitutes. Consumers have access to high-quality knowledge about the online retailers 'facilities
and the items they offer. This external factor affects Amazon as regards consumers 'willingness to
find alternatives to the company's online shopping service. In addition to this, the low cost of
switching makes it easier for customers to move from Amazon to other firms, such as Walmart.
Furthermore, the high availability of replacements often empowers customers to switch from one
store to another. Instead of shopping on Amazon's e-commerce website, for example, a customer
can easily go to one of the Walmart stores, conveniently situated across the US. The external
factors in this dimension of the Five Forces Study indicate that Amazon will recognize buyers
'strong bargaining power as a major factor in resolving business problems in the world of the
online retail market.
3. Bargaining Power of Suppliers (Moderate)
Suppliers monitor the supply of products or services Amazon requires for its e-commerce
operations, such as information-system hardware components. Amazon faces the moderate
strength of suppliers 'negotiating power, based on the following external factors: Small
population of suppliers, Moderate forward integration and Moderate size of suppliers. The
limited population empowers Amazon's e-commerce sector to exert a heavy impact on suppliers.
For example, increases in equipment prices from a small number of major suppliers may have a
direct effect on the company's online retail operating costs. The mild forward integration
however restricts the actual impact of the supplier on Amazon. Strong forward integration is
tantamount to a small degree of control that vendors have when selling their goods to
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companies like Amazon. In addition, most equipment manufacturers 'moderate size restricts
their effect on the business.
4. Threat of Substitution (Strong)
Amazon competes in the online shopping industry with the replacements. The following
external factors, for Amazon, support the high strength of the danger of substitution: Low
switching costs, large availability of Substitutes and Low cost of substitutes. Amazon constantly
tackles the powerful force of substitutes that challenge the success of e-commerce firms. The
low cost of moving demonstrates that consumers can quickly move from the firm to other
retailers. Consumers, for example, can conveniently opt to purchase from Walmart stores or
other retail institutions rather than buy from Amazon. The high availability of replacements and
the low cost of their product offerings further increase the impact of replacements against the
company.
5. Threat of New Entrants (Weak)
Amazon's market share in online shopping is rising in principle by new businesses. Amazon is
experiencing the weak impact of the latest challenge of entry, based on the following external
factors: Low switching costs, High cost of brand development and High economies of scale.
Consumers of Amazon can easily switch to new companies, thus enabling new companies to
place a strong force on the company. This state is due to the low cost of switching or the low
negative effects of shifting from one provider to another. The high cost of brand growth in
online retail however weakens new entrants 'impact on Amazon's results. For example,
developing a strong brand that directly competes with the Amazon brand will take years and
billions of dollars. The company also benefits from high economies of scale which make its e-
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commerce business powerful. As such, new entrants must reach equally high economies of
scale in order to compete with the business.
D. Competitors Analysis
i. Strategic group mapping:
Strategic group mapping is a technique for looking at your position in your sector, field or
market. It is tool for competition analysis Strategic group map help to define the scope of
firm`s competitors.
For the list of competitors we will talk about in the U.S.A only, for example the most two big
competitors for amazon in the U.S.A Walmart and Target. Walmart the largest brick and
mortar retailer in the world. In recent years they are trying to create a stronger online
presence and offer store-side pickup for customers that in terms of speed can offer faster
delivery than Amazon will ever be able to offer, at least until they get their drone system
working. Target a company that differentiates from Walmart by offering slightly higher
quality at slightly higher prices. They have also been successful offering customers a store-
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side pickup service. Second the success factors or the two variables in the strategic group
mapping which are the price and the number of product categories. The price amazon in
known as having good prices, it seems the prices for many items we buy have actually really
suitable and good price. The product number categories Amazon has an amazing large
number of products offered for their customers. Almost anything you can think of buying at
the mall is available at Amazon.
In terms of price and product categories, Walmart and Amazon almost occupy the same
space. They are low on prices offering customers the lowest priced option in almost every
product category. Also, they offer a very wide selection. Target does not typically offer the
lowest prices on goods. They are attempting to differentiate by offering higher quality goods
at a higher price. Also, their selection is less than Walmart and far less than Amazon.
ii. Strategic type
Amazon is a prospector: “This involves new product development, expansion into new
market opportunities and increase of market share through offensive and aggressive
marketing warfare strategies.” (MBASKOOL.com) Amazon definitely fits this category.
Amazon tries to new products, new services, and new markets all the time in its pursuit of
global domination of the retail world. They want to be the retailer people go to for
everything. Also, with the unbelievably fast growth of the Amazon Web Services, Amazon is
proving it can be successful and profitable in areas far away from traditional retail. Amazon
has also maintained first mover advantage in most of its ventures. Jeff Bezo’s doesn’t wait
and copy other people’s ideas. He likes to be the first to strike when he believes something
is a good idea. (Example: Amazon Prime. Nobody else was doing a subscription service in e-
retail. Another example: Two day delivery. No other e-retailer was offering that. And now,
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Amazon is trying to roll out same day delivery in some markets. That will be an even greater
challenge for competitors.) Another prospector advantage is the development of loyal
customers. Amazon has built a very loyal customer base, with over 100 million in the US
alone (in a country with a total of 330 million people) that’s incredible loyalty.
iii. Industry matrix
Helps you to identify the competitive position of the competitors in an industry.
• List your competitors: Walmart, Target.
• Assign weights for each success factors, all sums = 1.0
• Assign ratings for each success factors (1 to 5, 1 is the worst).
• You can calculate the weighed rating by multiplying the rating with the weight.
• Find the sum of the weighted rating and then I will rank Amazon’s competition in the end.
Walmart Walmart Target Target Amazon Amazon
Critical success weight Rating Score Rating Score Rating Score
factors
Advertising 0.2 2 0.4 1 0.2 5 1
Product quality 0.1 1 0.1 5 0.5 4 0.4
Price competition 0.1 3 0.3 1 0.1 4 0.4
Management 0.1 2 0.2 1 0.1 4 0.4
Financial position 0.15 3 0.45 2 0.3 5 0.75
Customer loyalty 0.1 1 0.1 3 0.3 4 0.4
Global expansion 0.2 2 0.4 1 0.2 5 1
Market share 0.05 5 0.25 3 0.15 4 0.2
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Total 1 2.2 1.85 4.55
Amazon beats its competitors in the industry matrix. On virtually every critical success
factor, Amazon is the best of the 3 companies evaluated.
iv. Competitive Grid
Amazon uses cost leadership as its strategy for competitive advantage. Minimization of
operational costs is the objective in this generic competitive strategy. For example, Amazon
uses advanced computing and networking technologies for maximum operational efficiency,
which translates to minimized costs. For the differentiation focus, Amazon can give ten
ways you can differentiate your product from the competition, here some examples.
1 Before you Source, Find Market Gaps to Fill.
2 Differentiate your Product by Origin.
3 Differentiate your Product by Size.
4 Differentiate your Product by Branding.
5 Differentiate your Product by Packaging.
6 Differentiate your Product by Price.
7 Differentiate your Product by Adding Feature.
8 Differentiate your Product by Offering a Bonus.
9 Differentiate a Product by Highlighting its Feature.
10 Sell your Strength to the Right Audience.
E. EFAS Table for Amazon
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External Factors Weight Rating Weighted
Score
Opportunities
1. Increasing number of online buyers 0.2 5 1
2. Amazon (movies-music-entertainment) 0.1 4 0.4
3. Fast delivery – one day or less 0.05 3 0.15
4. Increasing product categories 0.1 2 0.2
5. E-commerce expansion in MENA 0.05 1 0.05
Subtotal 0.5
Threats
6. Increase in competition (Target Online) 0.05 5 0.25
7. Fast delivery services provided by local retailers 0.1 4 0.4
8. Increasing government regulations 0.1 3 0.3
9. Identity theft/ hacking 0.1 2 0.2
10. Unsecure online payments 0.15 1 0.15
Totals 1 3.1
Sources:
Page 19 of 20
1) www.aboutamazon.com
2) www.britannica.com
3) www.oberlo.com
4) www.360pi.com
5) www.emarketer.com
6) www.research-methodology.net
7) www.businessinsider.com
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