Assignment 2: Internal Environmental Scan/Organizational Assessment
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crowesl_m3_a2.docxRunning head: PRELIMINARY STRATEGY AUDIT 1
PRELIMINARY STRATEGY AUDIT 11
Preliminary Strategy Audit
Sherry L. Crowe
Argosy University
B6028-T A01 Capstone Experience in Integration & Strategy
Module 3, Assignment 2
Dr. Wan
April 6, 2016
Executive Summary
Amazon has made its name in the cloud computing and electronic commerce industry, and this is down to the fact that the management has been keen on ensuring that they concentrate on growing their competitive advantage. The company has managed to move step by step from the first business which was simply online bookstore and later diversified into different other portfolios such as selling of CDs, Blu-Rays, DVDs and Videos (Antoinne, 2000). This has been down making great strategies that have ensured that the company has remained a success that it is today.
In this paper, we carry out a preliminary strategy audit of Amazon through focusing on the analysis of value proposition, competitive advantage, and its market position. There is also an environmental scan that looks at the five forces of marketing. The paper also looks at the strategic issues that face the organization and lastly the recommendation of tactics that can be used to improve the firm’s strategic alignment. The tactics that have been recommended span from the field of branding, marketing, alliances, integration, development of products, globalization as well as diversification.
Table of contents
Executive summary/abstract 3
Introduction to company 3
Value Proposition 3
Market position 4
Competitive advantage 4
External environmental scan/five forces analysis 5
Current environment 5
Assessment of external factors applying five forces 7
Strategic issues 8
Summary/Key findings and recommendations 9
References………………………………………………………………………………………..11
Introduction to company
Value proposition
Basically, value proposition refers to that statement provided by the business which gives a summary of the reasons as to why the customers should be able to buy the goods and services that are being offered by Amazon. It is a statement that should have the ability to convince any potential consumer to believe that the goods and services being offered will be able to add value or solve the need that they have.
Amazon has a value proposition of convenience and price which does hold true when it comes to all the product categories that it has. This has allowed the firm to open itself for newer forms of markets and therefore deepening its customer relationship. The value is added in the sense that when goods are accessed easily at an even cheaper price, it satisfies the two important Ps for the customer without having to go through tough hustle that most people go through when they shop under the brick and mortar system (Majumdar, 2006).
Market position
Market position is simply defined as the ranking of a company, its brands and products in relation to the sales volumes (Majumdar, 2006). In this case, we look at Amazon’s sales volume in relation to the sales volume that is being posted by the competitors. It is more of the position that the Amazon brand holds in the mind of the consumers.
Amazon is currently considered the second largest e-commerce company after rising from being a simple only e-book vendor. The sales volume of the company has continues to rise, and this is basically due to the fact that the company has managed to increase its spending in promotion and advertising which has made its brand even much stronger (Wheelen & Hunger, 2000). The company has up to 55% of repeat buyers, meaning that it has managed to make its brand stronger by doing some of the things that most businesses may see as hard to do.
According to Forbes, Amazon is rated as the 13th most valuable brand in the world and the fact that it has managed to record up 55% repeat buyers it does inform one about the brand of the company having gotten into the minds of the consumers and occupied a permanent position.
Competitive advantage
When we want to shortlist the competition that Amazon is facing will depend on what business sector we are considering at each and every instance. Apple is one of the competitors that the company has to face when it comes to books, movie, and other online content delivery. The company has to contend with the competition that is being pushed forth by iTunes due to the fact that Apple has iPad, iPhone and MacBook that comes with it.
Amazon has managed to stand the competition and grab a fair share of the market in each and every business sector in which it operates, but the biggest question is; where does the company get its competitive advantage?
It is important to note that Amazon has an amazing product range. Imagine having seen the vanishing spray that has been introduced in football and is being used by referees. The desire to have it comes into your mind and the moment you hit Amazon, you can buy it at a click of the button (Minett, 2002). This is an illustration of the fact that Amazon has realized that the most important thing to do to beat the competition is to have everything that the consumers want, even those that may seem odd.
Bezos in his imagination was able to come up with a business that can give the consumer a combination of values; superior customer service, speed, reliability, and choice. In the online retail market, there are few companies that can provide such a service at a go. It, therefore, means that the Amazon is beating most of its competitor based on the fact that they can give a consumer a combination of values.
External environmental scan/five forces analysis
Current environment
Environmental scanning can be said to be a process of gathering as well as analyzing of information that is strategic and tactical. It gathers both subjective and factual information concerning the business environment a company is operating around.
Internal analysis of Amazon entails the current environment. This will be analyzed by looking at the SWOT analysis of the company (Majumdar, 2006). It could be easy to summarize the Strength, Weaknesses, Opportunities and Threats in Amazon through having a look at how it operates internally.
A. Strengths; the company has managed to create a global brand through having a team that focuses on proper research and development. The company has ensured that its online location is strategic to customers who want speed and accuracy in terms of the products that they access (Stevens & Stevens, 2006). The company has a vision that is customer centric, and this is the reason as to why they have different and diverse products which satisfy the customers. The company has a strong program in logistics which is made possible through its application of the most advanced technology.
B. Weaknesses; the company, unlike the brick and motor retailers does not have a physical presence. Some customers may not be convinced of its effectiveness and efficiency. The company has low-profit margin due to the fact that cost of goods sold is usually high and hence the cash flows in most cases are low. In the biggest external market which is China, the company has not managed to perform well
C. Opportunities; there is new opportunities that come up in the internet market every single day, currently there is growth in social networking, growth in digital media which has led to higher presence of online customers. There is growth in online movie downloading as well increased market presence in the market outside the United States for instance China.
D. Threats; it is highly dependent on the external vendor for quick delivery of the goods, the company does not own any store of inventory. There is also strong competition from Apple especially when it comes to the sale of online music. There are also cases of patent infringement which the company has to handle frequently.
Assessment of external factors applying five forces
The Porter’s five forces refer to that analytical framework which shows the five forces which are used to shape the extent of competition in the industry.
A. Bargaining power of the buyers is great in the online retail industry. For Amazon, it is unique since the bargaining power of each buyer does vary from different customer categories depending on the product's nature and the services that are being extended. Most customers who purchase in Amazon marketplace possesses the greatest bargaining power since they have the ability to make a switch to a competitor or a product that can act as a substitute. The buyers that operate in the Amazon Web Services are known to have lower power in bargaining in comparison to those in Amazon marketplace; this is due to the fact that there is the possibility of incurring some switching costs.
B. Threats of new entrants; this is a concern that is significant in the online retail industry. There are certain industry entry barriers that include retaliation from the current market players and economies of scale. The potential entrants in most cases base their advantage on the new and innovative features as well as the capability of the services that they offer into the innovative business world as a whole. This means that creativity and innovation are the two most important elements that play a key role in terms cutting the impact of the entry barriers into the market. The fact that there are no costs associate with switching by customers means that the entrants are more easily accessible
C. Rivalry among the existing firms; in this industry the rivalry is intense (Stevens & Stevens, 2006). There are rapid rates of growth in the industry as well as barriers for exit make up the factors that raise the intensity when it comes to competition in online retail and electronic commerce. The company faces several competitors, and the most notable ones include Netflix, Inc., Time Warner, and eBay Inc.
D. Bargaining power of suppliers; the power of the suppliers in this industry ranges from medium up to high (Minett, 2002). The inventory by Amazon can be obtained from several different suppliers and therefore the company has a higher power in terms of bargaining. The company has the ability to dictate what goes into the online market due to its size, and therefore less power goes to suppliers.
E. Threat of substitute in the company is high. There are several alternatives to Amazon products save for the patented technology. There are also cases of firms that have the online presence as well as a physical presence which challenges Amazon.
Amazon is continuing to make a positive growth yet there are challenges that the company has to deal with.
1. Competition
The competitors are all over the place devising means through which they will be able to cut the force with which Amazon is gaining the market share. There are certain strategies that have been put in place by Amazon which will fail but others will prosper. There are hundreds of retailers that are fighting for the online presence, and others are coming up a factor that will heighten competition for Amazon. Brick and mortar retailers such as Amazon are getting into the industry and are trying to match what Amazon has created. This is another avenue of greater competition.
2. Looming Price Wars
Once the competitors will be able to match Amazon in terms of delivery speed and interface, the next place where the competition will move to will be in the price area. Amazon has a reputation of accumulating market share and not generating profits. In any case, there is price war, it will dent the business.
3. Risk in the Stock market
Most investors are of the opinion that there is a certain risk that can be associated with investing in Apple Stocks. The company has not done well in terms of flexibility, opening up to new markets and dealing with competition. There is evidence that the above challenges will impact the manner with which Amazon operates in future. The company should be considering having a brick and mortar back up plan to counter entrants such as Wal-Mart.
Summary/Key findings and recommendations
The fact that the company is faced with the risk in terms of its performance in the stock market, Amazon should look out for the areas of concern. The first important thing that should be done is to ensure that the Chinese market presence is enhanced to increase the amount of revenue. The company also has to ensure that it deals with the upcoming competition. How what strategy can the business use to deal with competition?
It is important for the business to show that the competitors are not in a position to create more value proposition to the customers in the areas that the company has gained its competitive advantage such as price, fast and free shipping, selection as well as overall experience while shopping on Amazon. This will ensure that the company continues its growth trajectory.
If the business can build on the above competitive advantages, there will be no worries even if the rival companies decide to launch price wars since the consumers are already aware of the place where they can find value.
References
Antoinne, D. K. (2000). Strategic thinking: An executive perspective. Upper Saddle River, NJ: Prentice Hall.
Majumdar, R. (2006). Marketing strategies. New Delhi: Allied.
Minett, S. (2002). B2B marketing: A radically different approach for business-to-business marketers. London: Financial Times/Prentice Hall.
Stevens, R. E., & Stevens, R. E. (2006). Market opportunity analysis: Text and cases. New York: Best Business Books.
Wheelen, T. L., & Hunger, J. D. (2000). Strategic management and business policy: Entering 21st century global society. Upper Saddle River, NJ: Prentice Hall.
