Amazon.Com Case Study
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Strategic Management
The main area we will look at is Amazons strategic management capabilities, we will look at the External factors that have influenced Amazons stratgey and the Opportunities and Threats this industru poses. We will also look at the strengths and weakenesses that Amazon have to address these threats and take advantage of the opportunites presented to them
Firstly it is necessary to conduct an external analysis of the environmnet that may have influenced amazons strategic management decision. We will look at the PEST analysis model that may have influenced Amazons strategic planning. The main two external factors that influenced amazons strategies were
Political – These factors address legal issues such as trading laws etc. The low sales tax in seattle was one of the factors that encouraged Amazon to set up their first distribution center
Technological Factors – Introduction of new technology can create new markets. The main reason for Amazon setting up an online store was the growth in the use of the world wide web technologies and their ability to offer a flexible service online.
In order to address these external factors we must look at the Strengths and Weaknesses Amazon have to take advantage of opportunites and avoid threats in the industry using a SWOT analysis
Amazon has proven to be a successful industry to date in terms of growth. Thus it possesses many strengths. It has managed to form alliences with many major Internet Players such as Yahoo, excite etc. In addition it has acquired many well established online companies to assist its expansion into different products. It is a well known service provider to Customers and is renowed for its outstanding customer service. It has the advantage of an experienced and highly skilled management team to assist them to adapt to change and have powerful, innovative and flexivle electronic business designs to enable them to react quickly to competitors needs.
However besides these strengths Amazon has one major weakness, its failure to generate profit, there is evidence that investors may be getting impatient with this trend. This has resulted in some investment managers taking their business elsewhere. In addition their ability to hire, train, retrain and motivate staff may limit their growth.
The eCommerce industry is presenting alot of opportunites which Amazon can take advantage, shopping via the internet is growing at an increasing rate and this is stronger for companies such as Amazon, Dell, Gateway and Floral delivery whose companies do not require help with fit or colour
However due to the rate of demand of the shopping via the internet industry there are also alot of threats associated. The online commerce industry is expected to become increasingly competitive and is expected to intensify
Due to the nature of the eCommerce industry particularly the products that Amazon are offering, Amazon have opted for a growth stragtegy via aquisitions, strategic relations and internal developed. Now let us look at amazons growth strategy in terms of the Ansoff matrix:
Amazon seem to have chosen thwo of the four growth strategies:
Market Development – through the opening of distribution centers and the launching of websites in the UK and germany Amazon offered their existing goods and sevices for sale in new markets.
Product Development – through the acquisition of several online companies such as pets.com and drugstore.com Amazon could offer new products for sale in their existing market
Based on these strategies the following mission statement has been formulated:
Our vision remians being the Earths most customer centric company, the best place for customers to find and discover anything they want to buy online
In addition Amazon wish to achineve the objective to “become the best place to buy, find and discover anut product of service available online”. In line with this and the growth strategies adopted to do this Amazon will continue to enhance and broaden its brand, customer base and eCommerce expertise
Financial Accounting
Amazons accounting situation is fairly dissmal. In terms of market growth rate and customer base Amazon have been very successful, Amazon when compared to their competitors have grown at a phenominal rate of 413% the closest competitor in terms of growth. However, in terms of profitability they have not.
Amazons Gross profit percentage was 21.06% which was not bad in comparising wuth the industry standard of 28.92%.
However when we look at the Net profit % we are deeply disappointed, the net profit percenteage is minus 34.84%, compared with the industry standard of -0.89 this is a massive loss.
Therefore we can only assume that amazon are incurring huge costs or is not operating effeciently. Thus let us look at the efficency rations. On looking at Amazons revenue/Employe od 324, 430 per person it is fairly