Strategy Formulation
Considering the emphasis on customer value, it is necessary for any company to formulate business strategies, internal operating strategies and business strategies. Strategy formulation enables creation and successful delivery of customer value which is a fundamental source of competitive strength. In this case, strategy formulation is necessary for amazon to achieve customer loyalty by offering not only convenience and low prices but also a wide selection of products.
Using the information about Amazon and the environment it operates in, strategic formulation is necessary to create long term goals that will enable the company to achieve its vision. The first step thus includes an analysis of the company which is part of the strategic plan. This includes the SWOT analysis, understanding the customer base and understanding of the company’s vision and mission statement (Sarbah, 2014). Amazon’s mission statement is “strive to offer our customers the lowest possible prices, the best available selection and the outmost convenience.”
The next step in strategy formulation includes setting long term goals. Amazon’s competitive advantages should be used when setting the long-term goals so as to give Amazon an upper hand in comparison to its competitors. These competitive advantages include the low-cost strategy, differentiation and effective innovativeness. Most consumers consider Amazon as a low-cost shop when shopping online. One of the company’s strategic goal will be to use its low-cost advantage to put financial pressure on its competitors and market this advantage to the consumers. In the case of innovativeness, Amazon should work to introduce new technologies that are bound to improve customer experience and meet the dynamic expectations of the consumers.
Examples of markets that Amazon should pursue include the grocery market since e-commerce represents only 1.4 percent of that market. Programs like Prime Pantry have also begun to address this market. Another market that will increase the audience of Amazon is the advertising space. This market has mostly been dominated by online platforms such as google and Facebook among others. Considering the size of this space, pursuing this market will cause growth in Amazon. Another market worth pursuing by Amazon is the entertainment industry. A prime subscription with an Amazon account already comes with access to TV shows and movies.
Convenience is a major value that amazon will add to the grocery industry specifically. The same day delivery or a delivery within two hours is without doubt a major attraction since one does not have to physically visit a grocery store. For customers who insist on touching and smelling the food, Whole Foods is bound to increase the customer base of Amazon in the grocery market. It is also clear that Amazon allows the customer a wide selection of services and thus customers are able to select a service that suits them best. Its low costs will also be a major contribution to the selected industries in comparison to their competitors like Netflix, Google when it comes to entertainment and advertising respectively.
The resources and capabilities needed in the grocery industry for example include stores and warehouses around the country. This will be to accommodate the physical buyers of the grocery. Supply chain software and strategic plan to ensure that losses are minimized since this industry involves perishable products. Before restocking their refrigerators and pantries, Amazon should first come up with strategies to ensure customers consider purchasing from the store every time they need to do grocery shopping. The company needs to focus on customer experience in order to capture value and sustain competitive advantage over time. Cost advantages is when the costs are lower as compared to that of the competitors while in differentiation advantages involves other factors other than price (Rothaermel, 2013). Amazon has cost advantages since it is regarded as a low cost online retailer. The warehousing facilities also gives the company physical economies of scale that gives it cost advantages as a result. In the differentiation advantages, Amazon places much value on customer experience and feedback which not only bring loyalty from the customers but also encourages other shoppers to use amazon.
When it comes to corporate strategy, Amazon mainly focuses on using technology to succeed and maximizing in the cost advantages. This improves their customer value since customers are able to enjoy low prices which makes Amazon their go to platform whenever one intends to shop online. The strategy is also driven by the company’s sources of competitive advantage and ensure that it actualizes the benefits of the economies of scale, it is also worth noting, but convenience is an important aspect when it comes strategy. Their main objective is that customers are able to receive their products as fast as possible in comparison to its competitors.
Since their inception, Amazon has always been in progress when it comes to vertical integration. This include creation of its own warehouses that are run using technology to increase its efficiency. It is a major cost advantage. Another example is the web services. This includes cloud computing systems and relying on technology to understand consumer behavior. When it comes to delivery services, Amazon will also incorporate technology and plans are underway to use a drone in its delivery services. Instead of relying on banks, Amazon has launched debit cards to enable transactions to be carried out electronically. Amazon is thus a master of vertical integration in comparison to other online companies.
Examples of strategic alliances of Amazon include Netflix and Salesforce Platform. With this integration, salesforce allows Amazon Web services to increase customer value through use of effective ways of managing customer data. The alliance with Netflix has also been growing stronger as Netflix depends on Amazon to serve its services. Amazon has been dominated the commerce infrastructure industry.
As stated earlier, Amazon’s competitive advantages include the low-cost strategy, differentiation and innovativeness (David, 2013). Amazon is considered a low-cost service provider hence preferred more buy most online shoppers. When it comes to differentiation, the company also places a huge focus on other factors other than price for example customer service. Amazon is known for the value it places on improving customer experiences. As a master of innovation, Amazon has also been able to use technology to improve its services, for example, the planned use of drones in delivery.
When it comes to the organizational structure, Amazon’s structure can be said to be hierarchical. Its senior executive team comprise of two CEO’s, three senior vice presidents and a worldwide controller. This team is concerned with important aspects of the business and reports directly to the Amazon CEO, Jeff Bezos. The other segments in the chart include information technology, human resources and legal operations.
It is clear, that the formulation of strategies is vital in any companies that aims at penetrating through the market. Through the strategic planning and setting of long term goals, the company is able to increase its service delivery by understanding and prioritizing the customer’s needs.
References
David, F. R., & David, F. R. (2013). Strategic management: Concepts and cases: A competitive advantage approach. Pearson.
Rothaermel, F. T. (2013). Strategic management: concepts. New York, NY: McGraw-Hill Irwin.
Sarbah, A., & Otu-Nyarko, D. (2014). An Overview of the Design School of Strategic Management (Strategy Formulation as a Process of Conception). Open Journal of Business and Management, 2(03), 231.