Am Mazon

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Ammazon

A. Case Abstract
AMAZON ,(Amazon.com) was created by Jeffrey Preston "Jeff" Bezos and incorporated on May
28, 1996 as an e-commerce company. As most people know, the company,Amazon.com, offers
a very large variety of products and services online through their websites. Amazon’s products
not only include merchandise, but they also manufacture and sell electronic devices, such as
the Kindle e-readers, Fire tablets, Fire TVs, and Echo and Fire phones. However, most people
do not realize that Amazon was also the first company to really divulge in cloud computing. The
company serves many different developers and enterprises of various sizes through their
Amazon Web Services (AWS).AWS offers other companies a set of global compute, storage,
database, analytics, applications, and deployment services (Reuters, 2015).This is only the tip
of the iceberg for Amazon though.The company also works with authors and independent
publishers by offering them 70% in royalties for using Amazon Publishing

B. Vision Statement (proposed)

To be Earth’s most customer-centric company, where customers can find and discover anything
they might want to buy online, and endeavors to offer its customers the lowest possible prices.

C. Mission Statement (proposed)


Amazon’s mission statement is to “serve consumers through online and physical stores and
focus on selection, price, and convenience(1).” Amazon’s vision statement is “to be Earth’s most
customer-centric company, where customers can find and discover anything they might want to
buy online(4), and endeavors to offer its customers the lowest possible prices(7).” 

1. Customers
2. Products or services
3. Markets
4. Technology
5. Concern for survival, growth, and profitability
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
D. External Audit

Amazon’s Opportunities – External Strategic Factors


1. Amazon can gain the opportunity to penetrate or expand its operations in developing
markets.

2. By expanding physical stores, Amazon can improve competitiveness against big


box retailers and engage customers with the brand.

3. Amazon has the opportunity to improve technological measures and


organizational policies to reduce counterfeit sales. One case of counterfeit sales
came into light when Amazon sold a fake My Critter Catcher. The product was sold for
$1 less than the original product.   

4. Can do backward Integration by expanding its production of in-house brands such


as Amazon basics to differentiate its offerings and improve profit margins. 

5. More acquisitions of e-commerce companies can increase the company’s market


share and reduce the competition level.

6. Self Driving Technology – Amazon recently acquired California-based self-driving


startup Zoox Inc for whooping $1 Billion. It can now leverage autonomous technology
to exploit the increase in demand for ride-hailing services or use it to improve its
delivery network.

7. Launch of electric rickshaws in India– Amazon pledges to make a positive impact


on the environment. With this vision in mind, Amazon plans to deploy 10,000 electric
rickshaws for delivery in India by 2025. 

8. Personalized Shopper Service Hits Big – Amazon recently launched its incredible
personal shopper service exclusively for Prime members. So, if you have an Amazon
Prime subscription, you can opt for the personal shopper experience giving you access to
the company’s team of professional stylists and fashionistas.

They’re going to help you select the best clothing items, accessories, shoes, bags, wallets,
etc., that suit your taste. Remember, there are millions of product options available, having
a personal team of shoppers is going to be big-time help. 

9. Plans to Enter the Crypto Stratosphere: There are a lot of speculations and rumors
floating around the crypto ecosystem. However, there have been reports by mainstream
media outlets that Amazon does indeed plan to make a move into cryptocurrency, stating
that the company has developed a big appetite for digital currencies and blockchain.

If the retail giant does step into crypto-space and accepts virtual currencies as a payment
option, there will be massive opportunities for small businesses in the future. 

Amazon’s Threats – External Strategic Factors


1. Few controversies have caused a dent in Amazon’s brand image. People critically
reacted and boycotted Amazon sites in 2010 when they found that it’s selling the book “The
Pedophile’s Guide to Love & Pleasure: a Child-lover’s Code of Conduct.”

2. Government regulations can also threaten the business proceedings of Amazon in


some critical countries. Amazon does not ship to Cuba, Iran, North Korea, Sudan, and
Syria.

3. Links to exploitative labor – Amazon is one of three retail giants facing scrutiny
from the US State Department for maintaining supply chains and labor sources
associated with human rights abuses. This exposes the ecommerce giant to
reputational, economic, and legal risks.

4. Increasing cybercrime can affect the network security system of the company.

5. Aggressive competition with big retail firms like Walmart, Target, Home


Depot, eBay can give Amazon a tough time in the future. In addition, now Amazon
competes with the following companies:

 In Video Streaming Service: Apple TV+, Netflix, Disney+


 In Logistics: FexEx, UPS
 In Self Driving Technology: Tesla, Uber, Ford
 6. Imitation is simple as many new entrants are coming up  in the market usually
with the same business model of Amazon.
 7. Fake Products – The increase in counterfeiting and fake products threatens
Amazon’s profits. The company recently filed a lawsuit against New York-based
online retailer for allegedly counterfeiting Valentino shoes, a luxury Italian shoe
brand offered by Amazon. 
 8. Economic Recession – Amazon is not immune to an economic recession. If
economic uncertainty worsens, it can impact Amazon’s sales. 
 9. Fake reviews – Amazon has an overwhelming amount of fake reviews, and the
problem has worsened in recent times due to the pandemic. Product reviews are a
critical indicator of quality and authenticity, and customers rely heavily on reviews to
make purchases.
 According to the Financial Times investigation, Amazon has deleted over 20,000
fake 5-star reviews from its top UK reviewers.
 10. Lawmakers Seek Answers after Tornado Kills 6 Amazon Workers
– Democratic lawmakers are on a quest to seek answers from Amazon after a recent
tornado hit an Amazon warehouse in Illinois, killing 6 workers. In a letter posted, the
company has been heavily criticized regarding poor worker safety policies and
complete disregard for putting emergency countermeasures in place. 

Competitive Profile Matrix

EFE Matrix

Amazon’s Strengths – Internal Strategic Factors


1. Strong brand name – As a global e-commerce giant, Amazon has a strong position
and successful brand image in the market.
2. Brand valuation – According to Interbrand’s Global Brand Ranking 2021, Amazon is
ranked at #2 position (Apple at #1 and Google at #3), with a brand value of $249
Billion.

3. Customer oriented – Amazon caters to a large number of customers for everyday


needs at inexpensive prices. This has made it a customer-oriented brand.

4. Differentiation and Innovation – Amazon frequently brings creative ideas


and innovative additions to its product line and service offerings like ambitious drone
delivery service and Withings Aura Smart Sleep System.  This creates a differentiation
from other companies.

5. Cost Leadership – Amazon doesn’t incur costs in maintaining physical retail stores
by selling everything online. With economies of scale, Amazon efficiently controls its
costs and lowers its inventory replenishment time. The company has formed
numerous strategic alliances with many companies like Evi Technologies, Thalmic
Labs, Shoefitr, The Orange Chef etc. It has a strong value chain system which also
helps in maintaining a low-cost structure.

6. Largest Merchandise Selection – Amazon owns extensive product mix which


attracts online customers to make their majority of purchases from it rather than other
online retailers. As of 2021, Amazon has sold 75 million products in its Amazon.com
Marketplace. 

7. Large number of third-party sellers – Due to the high traffic volume on Amazon’s
sites, a large number of third-party sellers have joined the platform of Amazon to sell
their own merchandises. The data from Fulfillment by Amazon (FBA) reveals that there
are more than 2 billion items available from third-party sellers.

8. Go Global and Act Local strategy – This strategy has benefitted Amazon the most.
Amazon develops partnerships with local supply chain companies that help it in
competing against domestic e-commerce rivals. It understands the local needs and
launches its services as per the country’s culture.

In India, for example, it has launched a market campaign “Aur Dikhao” to encourage
users to search more of its products.

9. Large number of acquisitions – The successful acquisitions of Whole


Foods, Zappos.com, woot.com, Junglee.com, IMBD.com, and many others have
produced significant revenues and profits for Amazon.

10. Involved into 3 key business – Amazon Marketplace, Amazon Web Services


(AWS), and Amazon Prime are 3 key businesses of Amazon which work and support
each other. As a whole, they generate massive profits and advantages for the company.
11. Market Leader – With over $1.6 Trillion market capitalization and above $386
billion annual revenues, Amazon is truly a market leader in online retail industry.

12. Superior logistics and distribution systems – Amazon uses highly efficient
logistics and distribution systems. It even has fixed rates for different delivery time
periods. Thus, it executes reliable, secure, and fast delivery of goods and products to
the customers.

13. Minimum pay raise to $15 per hour – Amazon is among the first companies in
retail to raise its minimum hourly pay to $15. In comparison, Target pays $12 per
hour, Walmart pays $11 per hour, and Costco pays $14 per hour. 

Image source: Statista

Amazon’s Weaknesses – Internal Strategic Factors


1. Easily imitable business model – Online retail businesses have become quite
common in this digital world. So imitating Amazon’s business model for rival firms is not
so difficult. A few businesses are even giving Amazon a tough time. These include
Barnes & Noble, eBay, Netflix, Hulu, and Oyster etc.

2. Losing Margins in Few Areas – In few areas such as India, Amazon has faced
losses. It’s free shipping to customers can be one of the reasons that expose the risks
of losing margins in some markets.

3. Product Flops and Failures – Its Fire Phone’s launch in the US was a big failure
while its Kindle fire device didn’t even grow well.

4. Tax Avoidance Controversy – Tax avoidance in Japan, UK and US has sparked


negative publicity for Amazon. President Trump criticized Amazon over taxes on social
media.

5. Limited brick-and-mortar presence – Amazon owns very limited physical stores.


This sometimes hinders to attract customers buy things which are not sellable on online
stores.

6. Vox published negative reports related to employees’ treatment and workplace


conditions against Amazon in July 2018. Poor air conditioning, timed bathroom breaks,
and constant video surveillance are few of the negative remarks made by the
employees. Such things affect the market reputation of Amazon.

7. Declining consumer safety – As its offerings increase, it is becoming a challenge


for Amazon to vet each product and guarantee the highest level of safety. The U.S.
Environmental Protection Agency (EPA) recently had to order Amazon to remove a
wide range of pesticides and unsafe products on its platform.  

8. Unfair use of third party data – Engaging in unfair trade practices undermines trust
and increases legal risks. Amazon is facing antitrust charges in the European Union
for collecting and using data from third-party to compete against them. If found in
violation, Amazon can be fined up to 10% ($28 Billion) of its 2019 annual revenue
($280 Billion). 

10. Overdependence on distributors – Relying on distributors exposes Amazon to a


wide range of issues. One of its main distributors (German Logistic Group – Deutsche
Post DHL) can leverage its position to renegotiate terms.

11. Employees Strike – Strikes can grind Amazon’s operations to a halt. In Germany,


Amazon employees went on strike due to unsafe working conditions and paralyzed
operations in six distribution centers.

12. Amazon Drivers Allege Inhumane Work Conditions – Amazon delivery drivers allege
that they’re forced to urinate in bottles because of the strict delivery time schedules and
constraints. While the company has denied that they don’t force their drivers to pee in
bottles, some drivers have come forth with complaints.
While the online retail giant denies the allegations, it’s also true that the company does
impose very strict company policies – which can come with bad consequences for Amazon
workers.

Amazon’s Opportunities – External Strategic Factors


1. Amazon can gain the opportunity to penetrate or expand its operations in developing
markets.

2. By expanding physical stores

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