The managerial strategies employed in Amazon are mainly founded on leveraging high-tech competences for the company achievements and following a cost effective administrative plan. It aims at providing high quality services to the company's clients at low prices besides wrapping the business around clients wherein they find the company to be ideal for their online shopping. The strategy is an excellent achievement for the company in that it has expanded its market which has made it grow to become the most significant international online retailer. However, through applying the law of diminishing returns, it is difficult to sustain developmental plans as well as increase the company’s profits when the prices vary. The difficulty is accrued to applying the law of diminishing returns (Brienen.et.al, 2015).
To pursue the cost leadership strategy, Amazon includes steep discounts for its constant customers, primarily through the Amazon Prime Program. This ensures punctual and fast delivery of products to its clients, waives off the shipping costs, extending the off-tax benefits to the clients, which further reduces the costs. The strategy creates a seamless and smooth experience for the company's clients (Amazon, 2015).
Besides the cost leadership strategy is that Amazon gets motivated by its cradles of competition. In this case, the establishment focuses on technological advancements in their bid to actualize its economies scale profits, leveraging its competencies from the internal resources and external drivers which have been the basis of its growth. Also, the company employs large amounts of data in analyzing the client mannerisms.
By understanding the needs of clients, Amazon offers a variety of products for its clients to choose from based on their preferences and purchasing power. Through this, the company has had a sense of intuition for their clients' needs and therefore perform in accordance to them.
The company also builds its strategy around the aspect of convenience. Here, the clients are not compelled to go to a store or wait for their shopping for long. Instead, Amazon introduced the delivery of products on the same day of a client order. It also focuses on non-retail product lines such as cloud-based services, which enables it to address the issue of differentiation and cost overdependence.
Potential strengths of Amazon.
The company owns a strong brand in the online market, which is essential in enhancing the drastic development of the establishment in its initial times. It is attributed to more than 100M mark as far as prime international participation is concerned. The company has a large global population of clients, different product lines which keeps developing with time (Chanda, 2016).
Also, it has an expansive mixture of products which is essential in offering customers a range of products to choose from the company's website. This aspect has created a strong client foundation for the company by making it attractive and hence easier in focusing on its vision and mission. A sound reason for significant client loyalty is the clients’ experience as far as the company's services are concerned and also the incorporation of high levels of technology (Kantor & Streitfeld, 2015).
Amazon is also among the highest revenue establishments in the market. Even though the company has weak operating margins, it makes large sales which earn it high levels of income. The strength has enabled the company to venture in different businesses or even invest in the development of new products. All of these strengths are important in helping the company maintain its position.
Potential weaknesses of Amazon.
The company’s model is easily imitable. In this case, any other establishment could set up an online shopping portal that sells any products. Having such kind of a business model makes it vulnerable to unhealthy competition. Different companies could easily create more prominent websites as Amazon through benchmarking their business model (Diehl & Bishop, 2017).
Another weakness is that the business is limited as far as penetration in developing markets is concerned. Amazon mainly accrues its revenue from developed nations. While other companies found themselves in developing countries with potential markets, it makes it difficult for Amazon to penetrate and compete with such companies. For this reason, the company has continually had weak operating margins as compared to other online platforms such as Facebook. For instance, Amazon had a small rise in their operating margins in 2016 and 2017, that is, 3% and 3.5% respectively and then 3.8% in 2018. On the other hand, Facebook had a 45% rise. The difference clearly shows the low rate of growth of Amazon operating margins (Burt, 2016).
The company also has a limited brick-and-mortar presence. It is attributed to some product failures. Recently. The company has come up with some products which did not perform as expected since the products could not earn as many sales as the company anticipated. For this reason, the company gets a limited ability to appeal to clients about different types of products that could get easily sold in any other stores. All the weakness calls for the company to maintain both offline and online competitiveness to overcome the shortcomings.
References
Amazon, E. C. (2015). Amazon web services. Available in: http://aws. amazon. com/es/ec2/(November 2012).
Brienen, R. J., Phillips, O. L., Feldpausch, T. R., Gloor, E., Baker, T. R., Lloyd, J., ... & Martinez, R. V. (2015). Long-term decline of the Amazon carbon sink. Nature, 519(7543), 344.
Burt, I. (2016). An understanding of the differences between internal and external auditors in obtaining information about internal control weaknesses. Journal of Management Accounting Research, 28(3), 83-99.
Chanda, K. (2016). Password security: an analysis of password strengths and vulnerabilities. International Journal of Computer Network and Information Security, 8(7), 23.
Diehl, K., & Bishop, B. (2017). Strategic Analysis of Amazon Madison Morgan November 16, 2017 MGMT 275.
Kantor, J., & Streitfeld, D. (2015). Inside Amazon: Wrestling big ideas in a bruising workplace. New York Times, 15, 74-80.
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