Describe and discuss the bases of Amazon’s competitive strategy (generic strategy that it pursues in order to gain and sustain competitive advantage) offering plenty of examples to support your discussion.
Gaining competitive advantage
The Amazon Company has, over the ages, been using the Porter’s model in achieving their goal of reinforcing and retaining the competitive edge in the market. The model designed by Porter is simple in its design but very powerful when implanted in the business. Its manner of understanding is that it helps realise the strengths and weaknesses of the company, while at the same time, detailing the position of the company in the competitive world. It also does help to factor in threats and opportunities, which may help in the strategy management of the company or the business as a whole.
Based on the supplier power, the Amazon Company has created a niche for itself in the business world as it is well renowned by its providers in that it does not charge on products until they are sold. Its payment process and procedure of paying to the supplier a month after the payment has been implemented, and it plays very well for its suppliers as they are willing to continue to supply Amazon with the required products and services.
Its technological switch to a better operating system has ensured that it saves the company lots of money to an estimated figure of 15 million dollars. There is also a reduction in terms of cost for the small companies that are partners with the Amazon Company. Amazon helps to keep items of a limited amount in their stock, and hence, enable the smaller companies to work and stay in business. In this case and also as an effect of this, loyalty from the smaller companies towards the Amazon Company is very evident and noticeable.
The buyer power is among the other evidence of the Porter’s model use. Renowned people, such as Bill Gates, used to buy products from the Amazon Company simply because of the efficiency and time reduction that it offers to the customers. Another factor that plays along very well for Amazon.com is the fairness in its pricing. Customers, who transact with the company, are drawn to future transactions due to the reduced price, a figure which is hard to attain from the competition. The low pricing of their commodities is an ideal card player that it holds the closest, as it offers lower rates in terms of clients’ management, offering the services of the company.
Competitive rivalry from the Porter’s grid is another factor that Amazon.com has used in generation of a huge database of clients and customers. This is because it is essentially based and embedded in the e-commerce field. Years of having played in this field has ensured that it has made the required renovations over time, in terms of customers’ satisfaction. This means that it has a better position and it is assured that it will have this position for a long time in the years ahead.
Due to the years of playing in the e-commerce field, the renovations made by the Amazon Company to keep itself ahead of its competitors means that it has become trusted by its customers. It is also a point of reference to them as the first stop and not a substitution for other companies, offering the same kind of services and products. There is a definite threat to the Amazon Company due to the prevalence of the Internet. The company can be influenced by a number of the new companies that have been formed in a short period of time, and strive to occupy a niche for themselves within the market. Such companies are also trying to develop themselves from the Amazon.com perspective, in terms of selling most of their products over the Internet.
This type of rivalry, however, is inevitable considering the fact that the world has become smaller in terms of what can be bought and sold over a short time span while at the same time covering great distances between the continents. Thus, there is a threat of new companies entering the market, and Amazon should find better means of ensuring that they remain the leaders, and still attract greater number of customers to use their online services. The greatest threats to them at the moment include the companies, such as Facebook.com, Ebay.com, and Google.com, among other.
Sustaining Competitive Advantage
There are different ways, in which Amazon sustains its competitive advantage. The company has been able to achieve success because of the significant reduction in prices. As earlier stated, the lowering of price is a strategy that has been employed to ensure that other companies cannot offer the same price, without experiencing losses. Amazon has implemented a strategy that ensures that every customer can have quality for their money, even if the price is very cheap.
Another strategy that has ensured competitive advantage of the Amazon Company is the raising of barriers to the new entrants. Amazon has been using unique online one-click purchasing software for years, and it helps out in cutting down the costs while enabling its customers to save time in the processing and checking of their shipping. Back in 1999, the company had to get a patent to use this simple software. However, the patent expires in 2017.
There are, however, companies that feel that they can use the software for free, as it happened to Barnes & Noble. Since they had no right to use the software, Amazon.com issued them and won the case. In such instances, other companies have to pay the company, who owns the patent, in order to implement the desired software in their business.
There are also other exclusive methods that the company could use to ensure that they have a better understanding in the buying manners of a customer. This could help them give a projection of what customers are inclined to buy first of all. It, therefore, goes to say that the use and security of patents and copy right materials ensure that there is a given barrier that protects the company from entrants and competitors.
Launching of new products and services is another way of sustaining competitive advantage. Concerning the point, the company recognises a need within the market and strives to fill in that gap. Using this strategy, the Amazon Company ensures that it is the first to deliver what the customers are lacking and looking for, while, at the same time, ensuring customers’ loyalty towards the company. This is a field that the Amazon Company has played its card right in the realization of the existing gap in terms of low priced commodities even if they are the second hand commodities. Filling in this gap brought a massive number of customers who prefer using the company’s services, due to the low prices and a wide range of the products offered.
Using the Ansoff matrix, identify some of Amazon’s past and/or current directions (at least one for each part of the matrix). Display on the Ansoff matrix several Amazon’s directions. Make sure that you cover all directions. Choose any two Amazon’s directions from the Ansoff matrix and discuss these in greater detail (describe the direction, discuss challenges and comment on success).
The Ansoff matrix has been the best strategy option that any company has ever implemented. It is a matrix of interrelation of the existing and new products and existing and new markets. In the category of protect/ build, Amazon.com believes in selling of the existing products within the existing and available markets. The main and focal points, which the company has paid extra attention to, include areas, such as advertising, launching the loyalty programs, reasonable pricing, and expansion of their sales resources. Currently, the company aims at the expansion of their products among their clientele.
In terms of market development, the company is focused on selling the products to the new markets. This move is to some point risky as there are things that might go wrong for the company. Areas, which involve the market development, include areas of new packaging and pricing.
Product development is another area within the Ansoff matrix that the company concentrates on. Concerning the point, it involves the introduction and development of products to the markets that are already in existence.
The most risky part in the Ansoff matrix for the Amazon Company is in terms of diversification. Diversification has its advantages to any given company, but it also faces a set of challenges in that it is the most risky. This usually entails the selling of new products to the new market.
Describe/discuss how does the Amazon add value to their businesses (use 3 or 4 roles of corporate parent and provide examples to support your argument)?
As a corporate parent, Amazon.com has been able to add value to its businesses through the use of technological infrastructure that supports the diverse culture in the company, in terms of experimentation and management. To ensure that the company stays at the top of its game, Amazon.com has ensured that it has fully invested in the development of its technology internally. This has helped the customers develop a better understanding of the technology in terms of its functionality and features. Furthermore, it has prioritised to develop software that is unique in the market, and which caters to the needs and wishes of the customer.
Marketing should be aimed at selling existing and new products to the customers and also use it to create new markets where the products can be sold. Marketing is another form, in which the company has managed to add value to its business. In this case, their marketing strategy is mainly based on their online marketing, which can be attained through emails, associate programs, marketing channels that can be found online, and portal advertising, among many other means.
Another marketing strategy that has ensured that the company retains the customer loyalty is the use of the free shipping option. It has proved to be an effective mechanism in terms of its marketing. The use of affiliate programs also helps to ensure that it has good working environment with other companies in that they are able to make money through the Amazon.com. This is mainly attained if the acting affiliate programs work as referrals in the products sales by the customers. It thus becomes a win-win situation for all parties involved.
Competition, if well played, can add immense value to any given business. Currently the main competition to the Amazon.com entails the e-commerce sites that are created every day, and some of which are making a name for themselves among the customers and the market as a whole. The physical retailers also pose a challenge in terms of competition to the Amazon.com. They include the publishers, the manufacturers, the distributors, and the vendors who in the physical world have significant awareness in terms of the brand, customers, and even sales.
In conclusion, Amazon.com has faith in its marketing in terms of its competition due to existing factors, such as easiness, availability, low pricing, wide selection, good customer care, adaptability to changes, easy accessibility among others. These values, if put together, will let the Amazon Company occupy a greater market niche, as these are characteristics that ensure customer loyalty and increased business value.
Marketing communication is a strategy that has been used by Amazon.com in the creation and enhancement of better competitive value in the business. The main goal of its communication in marketing is to ensure that it increases the customers’ traffic to their website, strengthen their name as a brand to be reckoned with, and create the awareness of their services and products among other objectives. Most of its success can be attributed to the fact that, over the years, Amazon.com has made its agenda to focus on its customers and also in their experiences with the supplying companies. In this manner, better customer care ensures that there are repeated visits from their customers, which can also ensure that the company picks on the trends of the customers for future benefits.