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Week 8 Business and Corporate Level Strategies Assignment
BUS499 Business Administration Capstone
Jeremy Taylor
28 August 2022
Week 8 Business and Corporate Level Strategies Assignment
The business and corporate-level tactics that Amazon employs contribute significantly to the company's competitive edge. Amazon has been able to establish itself as a pioneer in its product industry by relying on its fundamental skills. At the corporate level, Amazon has taken strategic activities that have boosted the value of the firm and improved its strategic posture as a result of competition in numerous industries that are connected to one another. Even though it operates in a market that experiences rapid change on a regular basis, Amazon has a significantly higher chance of achieving long-term success than its rivals, such as eBay.
Business Level Strategies
Amazon's effective business model is cost leadership. Cost leadership is a business approach in which firms create at low costs in order to offer satisfactory goods at the lowest price (Hitt, 2020). Amazon's cost leadership has enabled it to offer low costs to customers, enabling it to dominate its market. The utilization of computing and networking technologies is one of the benefits. These innovations have improved the effectiveness of product procurement, arranging, processing, and delivery. This overall operational effectiveness translates to low expenses. Due to the nature of e- commerce, Amazon and related businesses' online retail expenses have been reduced by the automation of procedures such as processing, planning, and operational activities.
Amazon also places a strong emphasis on research and development. The total manufacturing costs in companies like Amazon are significantly influenced by the inbound and outbound logistics (Sadq et al., 2018). The company's information technology systems function better when research and development are prioritized. These tools are crucial for automating procedures and cutting operating expenses. These factors result in a decreased price for the customer.
Amazon is able to deliver goods and services to various client segments due to its cost leadership. The company is able to offer customers a high degree of pleasure by providing a product that is simple to use, giving it an advantage over its rivals. The fact that the company is able to provide services is directly correlated to how user-friendly its products are. Ease is achieved through the utilization of a review function. The review section gives users of the site the ability to form their own opinions regarding the various products. In addition, the review function serves as a data collection tool for the company, which is then used to prioritize certain products above others when making recommendations (Sadq et al., 2018). This proposal is a significant low-cost feature that expands the reach to larger consumer groups that can be served by the appropriate products. Furthermore, the ability for customers to conveniently place subsequent orders is provided by the re-ordering option for fast-moving consumption goods. These characteristics are crucial in boosting Amazon's efficiency, which in turn contributes to additional cost reductions for the company's services.
Scale economies are essential to Amazon's cost leadership achievement. The corporation has extended its warehouse and logistics systems, resulting in decreased unit costs. The capacity to achieve huge volumes disperses the majority of costs across a huge product base. This volume has enabled Amazon to beat newcomers in the market and maintain its dominant position over its rivals. In addition, scale economies in e-commerce permit discounts of more than 50 percent (Gallo et al., 2017). Amazon is also capable of leveraging its economies of scale to offer consistently cheap pricing that attract customers and allow it to maintain its competitive edge.
Corporate Level Strategies
Amazon's growth can be attributed, in large part, to the company's policy of diversification. Companies are able to gain a significant competitive edge through the application of corporate strategies, which involve the selection and management of a diverse range of enterprises operating in a variety of marketplaces (Hitt, 2020). The value of a company can be increased by acquiring new strategic positions through the implementation of corporate-level strategy. In addition to its core retail operation, online retailer Amazon operates a diverse range of subsidiary companies. As a result of the diversification, close to 70 percent of the organization's revenue now comes from the various businesses. Nonetheless, there are certain linkages between the businesses, as well as some sectors in which they share common ground. The Kindle service is a good illustration of this point. Users of the service are granted access to both the online shop and the cloud service, providing them with unified access to media and items originating from a variety of geographical locations.
Amazon has multiple interests, including e-commerce, marketing, as well as cloud solutions. According to Chevalier (2021), Amazon dominated the e-commerce business in the United States in 2017 with a market dominance of 37percent (while Walmart came in second with a market dominance of around 5%). This dominant position in the market served as the foundation for the company's growth into related industries. Since it has such a large customer base, the company is able to detect more unfulfilled user demands and work to satisfy them. As such Amazon Web Services (AWS) is able to offer a distinct service inside the Internet domain. AWS is the industry-leading provider of public cloud services. AWS enjoyed the same first-mover benefit as Amazon's online retail operations. Due to this benefit, Amazon Web Services has a market dominance of 32percent, while Microsoft only has a share of 21percent (Vailshery, 2022). As a direct result of its online shopping business, Amazon now has a division that focuses on digital advertising. The business sells digital space through its Amazon Publisher Services and Marketing division, which falls under the umbrella of digital advertising. As can be seen from the aforementioned three instances of diversification, Amazon employs a concentric growth plan, which means that the company does not rely heavily on any one particular line of business.
Amazon's several business divisions have various benefits for sustainability. The organization performs well, increasing its worth. The value increase is crucial in an effort to prepare the company for further expansion and new offerings. Additionally, by using the links, the company can benefit from economies of scale (Sadq et al., 2018). Using tactics like rival mergers and acquisitions, and also investments in complementary industries like cloud computing, Amazon is able to lower the unit costs of a variety of business-level initiatives. As a result, the company may provide safer products through research and development from AWS to be utilized in its digital marketing and online retail businesses.
Additionally, the organization diversifies to develop into untapped markets. Amazon has a propensity to achieve first-mover edge in a variety of sectors. Amazon seeks to diversify into new sectors in this manner. This describes autonomous cars. The business is investing in designing autonomous vehicles in the contest to build and bring to market the next new wave of transportation. In the event of success, this may offer the organization a substantial growth rate. This is crucial for large businesses, as exponential development is frequently constrained.
Competitive Environment
The presence of appropriate levels of competition is essential to the existence of productive corporate environments. According to Hitt (2020), competitors are involved with the same markets and provide items or services that are comparable to one another. The objective of a competitor is to advance to a more favourable position in the market. Amazon, which specializes in the online retail market, faces competition from a number of other companies, most notably eBay. eBay is a well-known retail brand that acts as a connecting hub for purchasers and vendors by way of an online auction platform. Ebay functions as an online marketplace in this sense. Amazon and eBay each have profitable market shares, but they approach the competition with distinctive business models.
At the business level, eBay prioritizes differentiation over cost leadership as its primary objective. Due to the fact that eBay uses an auction model for bringing together customers and sellers, there is minimal control over who has the lowest prices. Nonetheless, the company places a strong emphasis on a variety of characteristics that set it apart from the companies that it competes with. To start, eBay has placed more of an emphasis on sellers than buyers. In this manner, eBay has centred its efforts on establishing an atmosphere in which third-party merchants furnish the items. This is distinct from Amazon's buyer-focused approach, in which the business both offers things and permits third-party sellers to provide items. Amazon also allows buyers to provide feedback on the products they purchase (Sadq et al., 2018). In a similar vein, eBay places a significant amount of importance on sellers posting goods. In comparison to Amazon, this means that the corporation is extremely reliant on the cooperation of outside parties. Due to the unique dependence on sellers, the corporation has lower overhead expenses when it comes to selling goods, but this creates a large risk on the organization's capacity to continue operating in the future.
The capacity to successfully attract buyers, navigate catalogues, and complete purchases is one of the primary differentiating factors that contribute to eBay's success. This three-pronged technique is a crucial differentiating tactic that has helped eBay preserve its illustrious reputation in the internet marketplace. In addition, the company focuses on charging sellers. The merchants list their products within a predetermined time range and accept bids from interested purchasers. At the conclusion of the allotted period, the highest bidder wins. In this manner, merchants might generate greater profits than with Amazon's fixed price model. In exchange, eBay can earn more from the vendors' commission fees.
eBay employs a diversification approach at the corporate level as part of its overall strategy. An important step in the direction of diversification has been taken with the acquisition of PayPal, which is an online provider of financial services. Due to the completion of this procedure, eBay now has improved capabilities to deliver services to customers who shop at its online retail marketplace. In addition, PayPal was the pioneer in the provision of online financial services, which enabled it to maintain an exceptionally high revenue margin. Nonetheless, the efforts to diversify have not been nearly as successful as Amazon's diversification approach. Amazon prioritizes the use of a feedback system incorporating a recommendation-based strategy. Amazon's recommendation system is a crucial component of its sales strategy, as it helps the company to match interested customers with products. This boosts the likelihood of sales compared to eBay's model, which requires buyers to browse merchandise. In addition, Amazon's high rate of diversification has allowed it to grab larger markets, thereby enhancing its sustainability. Due to these factors, Amazon stands a greater possibility of achieving long-term success.
Market Cycles
Slow-cycle markets give a sustainable competitive advantage over the long term because of increased levels of counterfeit protection (Hitt, 2020). Fast-cycle markets do not protect businesses from imitations, making it very simple to mimic and implement methods (Hitt, 2020). This makes competitive advantage unsustainable in a fast-cycle context. Amazon functions in a fast-paced market, particularly in the online retail sector. In this industry, time is of the essence in order to capitalize on the lucrative first-mover benefit. The ease with which innovation can be replicated paves the way for new competitors to fill previously unfilled market niches. When it comes to the marketplace, hesitation is a very expensive issue.
Amazon is more likely than eBay to succeed over the long run in the fast-cycle market situation. This benefit results from Amazon's propensity to capitalize on first-mover advantages and continuously innovate. In addition, contrasted to eBay's seller-focused approach, Amazon's buyer-focused strategy fosters a long-standing capacity to comprehend customers and act quickly (Sadq et al., 2018). Amazon would continue to have a long-term advantages in the slow-cycle market. Because of the company's remarkable capacity for innovation, a significant portion of the newly developed services will be shielded from potential imitators. In this manner, the institution would have a greater potential to enjoy the revenue that is generated from the provision of its services over the course of time. In addition, a greater level of diversification would make it possible for the company to have multiple safeguards in a variety of industries, which would result in more lucrative revenue and ensure the company's long-term viability.
References
Amazon. (2021, September 29). Leadership principles. US About Amazon. Retrieved August 25, 2022, from https://www.aboutamazon.com/about-us/leadership-principles
Chevalier, S. (2021, July 27). U.S. amazon e-commerce retail market share 2021. Statista. Retrieved August 25, 2022, from https://www.statista.com/statistics/788109/amazon-retail-market-share-usa/
Gallo, P., Randazzo, F., & Gallo, I. (2017, November 7). E-fair: Aggregation in e-commerce for exploiting economies of scale. arXiv.org. Retrieved August 25, 2022, from https://arxiv.org/abs/1711.02661
Hitt, A. Michael 2020. Strategic Management: Concepts and Cases: Competitiveness and Globalization 13th ed. Cengage Learning.
Sadq, Z. M., Sabir, H. N., & Saeed, V. S. H. (2018). Analyzing the Amazon success strategies. Journal of process management and new technologies, 6(4).
Vailshery, L. S. (2022, August 25). Global Cloud Infrastructure Market Share 2022. Statista. Retrieved August 25, 2022, from https://www.statista.com/statistics/967365/worldwide-cloud-infrastructure-services-market-share-vendor/#:~:text=In%20the%20third%20quarter%20of,with%20eight%20percent%20market%20share.