ST4S38 Strategic Analysis: Tools & Techniques Assesment Answer

Introduction

According to Mason (2007), businesses are dependent on & serve the external environment in order to live. Companies that successfully adapt to their external environment are successful. Strategies are necessary because organizations must be in harmony with their surroundings; therefore, a strategy is the interaction between an entity & its surroundings. It entails situating or strategically positioning firms in the market & comprehending the business's place in the environment. Yet, internal organizational capabilities that are specific to the particular company are required to facilitate it (Johnson, G., Scholes, K. and Whittington, R., 2006). Keeping all of these factors at the forefront will allow firms to continue to surpass one another. What sets successful organizations apart from the rest is a topic that interests numerous business professionals (Kinuu et al., 2012). How come one identical business in the same field might begin at the same time and have comparable assets, yet years later one completely succeeds the other? The question that has to be addressed is: What constitutes the key to a profitable business? The company must strategically position itself for a competitive edge in the ever-dynamic, tumultuous, & multidimensional environment. The optimal approach is to identify a tactic that prevents rivals from reacting considering their current situation. The Amazon business's initiatives to gain an edge over its rivals are covered in this article to find out which aspects help an entity to succeed in comparison to other companies.

Strategic Position of the company

A crucial component of strategic management is strategic positioning. The act of putting an entity in the future whilst considering its strengths & weaknesses as well as the ever-changing environment is known as strategic positioning.

The Relationship between Resources, Capabilities and Competitive Advantage, Source: (Nyaberi and Justry P. Lumumba, 2021)

Vision- Amazon positioning statement is “Earth's most customer-centric company.” Amazon states that its vision is to continually prioritize its consumer satisfaction through offering consumers low prices, comfort, & an extensive range of goods (Solanki, 2019). 3 operational strategies form the foundation of Amazon's strategic positioning: low cost-leadership, customer differentiation and focus strategies (Amazon, 2023). The goal remains to contemplate the best ways to express the value proposition of the fundamental Amazon marketing approach both offline & online. Gaining repeat business & consumer trust has been always crucial to the success of Amazon. Since many e-commerce companies were successful in raising awareness but failed in fostering trust, countless dot-coms collapsed. Amazon succeeded in both of them. It emphasized in its filings the ways they intended to accomplish it (Stockport, Kunnath and Sedick, 2001).

Capabilities- The strategic position must be in line with the company’s competencies, according to the strategic positioning analysis. First of all, it should be noted that the competencies are changing. As time passes, both the company & the outside world change. As a result, the company acquires new abilities. Amazon has core competencies & capabilities comprising logistics, customer differentiation. These core competencies afford them a competitive edge in upcoming or untapped markets (Odediran, 2020). Amazon has been able to expand into new areas, such as cloud computing, media, and electronic devices, because of its core competencies whereas other e-commerce companies like Boo.com which proved to be the biggest failure of e-commerce strategy in European history. Amazon's cheap prices, selection, shipping, & flexibility provide them an edge over their competitors. The corporation began as an online bookshop but used flexibility as one of its competitive advantages to grow into a large online retailer, Boo.com's product & service performance fell short of customers' expectations, which were heightened by the company's marketing campaigns. So, in spite of Boo.com's core capability of user-friendly interface developed that matched the traditional purchasing experience led to failure of the company “Boo.com” (Stockport, Kunnath and Sedick, 2001).

Culture- The way these goals are reflected in a company's values and belief systems is called its culture. This is due to the fact that the most effective method would depend on the company's culture. Employees at Amazon are encouraged by the company culture to think creatively & outside the box to come up with innovative ideas & solutions (Odediran, 2020). Amazon which is the best-performing e-commerce company in the globe is always looking for new talent.

Stakeholder Analysis

Organizational purpose consists of mission and objectives. The elements of corporate mission are organizational beliefs, organizational values and business definition. The mission statement outlines the goal, intent, & overarching goals of an organization & provides a succinct justification for its continued existence. Mission of Amazon is serving customers via physical & virtual storefronts with an emphasis on convenience, affordability, & choice (Gregory, 2023).

There are several factors which influence the organizational purpose and one of the factors include the stakeholders which include the list of all those whom the company assist.

Stakeholder analysis is a procedure used in strategic planning to determine the parties that the activities of the organization would impact. It entails determining their impact & areas of interest inside the organization. According to the stakeholder theory, any business has several internal & external stakeholders, some of whom are listed under (Gregory, 2023).

Internal Stakeholders of Amazon

1. Directors and officers - The CEO, President, chairman of the Board, SVP, various directors & International Clients constitute the company's top executives. Since directors supervise the whole management of the organization & play a major role in the procedure of making decisions, Amazon's directors hold the greatest amount of power.
2. Shareholders- While it is possible to argue that shareholders possess little control over Amazon, shareholders possess influence, positions of power, & necessity. Shareholders having significant influence upon the business's choices as they can vote on regulations, participants, as well as other matters. For instance, the shareholders of Amazon dismissed fifteen suggestions from employees, leading to divergent opinions of the company (K, 2018). Additionally, Amazon shareholders have the freedom to voice their concerns & engage in the discussion at any moment. An event which took place in 2019 when staff members requested that Amazon consider environmental issues is a perfect example of the 2 elements listed above. A suggestion made by the staff was rejected by the shareholders. It suggests that the stockholders possess the ability to assess & decide whether or not to join (The Guardian, 2018).
3. Employees- As of September 30, 2023, 1,500,000 people worked for Amazon.com. As the numbers were released on December 31, 2022, there are currently 41,000 fewer staff members, or -2.66% shorter (Analysis, 2023).

External Stakeholders of Amazon

1. Government- Since it sets business rules & other legal regulatory standards that every global organization must strictly adhere to for operating its business activity in certain areas, the governing body is a significant external stakeholder. Undoubtedly, the government plays a pivotal role in overseeing multinational corporations, maintaining wage, vacation, impeding the decline of worldwide pricing, & implementing transnational taxes to sustain the business. It is certainly imperative that a company such as Amazon follows the laws that are set forth by the governing body (U.S. Department of Labor, 2023).

Marketplace Stakeholders

1. Competitors- International companies of many kinds compete with Amazon. In the virtual marketplace, eBay presents a formidable rival. Comparable to Microsoft Azure, & other web service providers. It demonstrates that in every industry which it serves, Amazon has lots of fierce competitors.
2. Customers- Workers and customers who are stakeholders because they possess 2 of those aspects—urgency & legality. Their arguments can be recognized even if they don't have the power to sway people in positions of power. They're able to compile data & draw Amazon's focus on the problem (The Guardian, 2018).
3. Supplier- Amazon to meet consumer demand, suppliers must provide the goods. In contrast, suppliers depend on Amazon's website—which processes several orders every minute—to turn into revenues. Authority is the sole thing that service providers possess. Supplies are free to choose if they want to work with the e-commerce company "Amazon". As instance, some well-known companies might use an outside supplier to sell on Amazon. But 3rd-party merchants are fully aware that Amazon frequently puts pressure on them to become distributors and lower their prices (Masters, 2020). As a result, sellers have some influence over the relationship with Amazon.

External Analysis

Whether the profitability of a business exceeds or falls short of the standard for the sector depends on where the company stands in its industry. Long-term profitability that is above average is essentially based on a durable competitive edge. A company might have one of two primary forms of competitive benefit: low cost or differentiation. 3 general methods for generating beyond average outcomes in an industry are cost leadership, differentiation, & focus. These approaches are derived from the 2 categories of competitive edge & the range of operations for which an organization aims to accomplish them. There are 2 kinds of the focus strategy: Differentiation emphasis & Cost focus (Islami, Mustafa and Latkovikj, 2020).

Competitive Advantage

Lower Cost Differentiation

The technology & e-commerce company Amazon.com uses a cost leadership approach to give customers competitive rates. One way to characterize business strategy is cost leadership. The business saves money because of its automated storage facilities, effective distribution system, & Prime membership program.

Cost-leadership- Amazon exemplifies the potential of cost leadership by offering a large selection of goods at low costs, while at the same time advancing & growing. The three main pillars of Amazon's competitive edge are ease of use, affordability, & range. The worldwide online retailer's continued growth, inventive use of various business processes, and economies of scale allow it to prosper despite maintaining an incredibly small margin of profit. The company's founder & initial CEO, Jeff Bezos, believes that focusing on problems that don't change is a wise business strategy. After he originally launched the company, he thought that customers were perpetually seeking a wide selection, prompt delivery, and affordable prices (Dudovskiy, 2022). Amazon's business strategy is centered on meeting & exceeding the demands of consumers in these domains. The massive online retailer uses technology and innovation as instruments to achieve its main objective. Amazon's general strategy for obtaining a competitive edge is cost leadership. This general competitive strategy aims to reduce operating costs as much as possible. By putting back the money it earned in new ventures & eliminating the cost of operating physical storefronts, Amazon was able to achieve a cost advantage (Smithson, 2017).

Differentiation- Differentiation has proven to be a successful brand approach on Amazon. It sets itself apart with innovative tech, people, user-friendly web pages, & services in the cloud. Amazon offers software as well as algorithm assistance for efficient listings of products, storage, fast delivery, & other functions. The services division of Amazon is a leader in cloud storage solutions by itself (Dudovskiy, 2022).

Focus- The term "focus strategy" refers to concentrating on a small & distinct market niche. Amazon operates multiple business paths, such as an e-commerce store, a cloud computing company, & an electronics device manufacturing line. Amazon could gain from concentration by creating merchandise for certain markets, such as regions, the elderly, kids, etc. (Dudovskiy, 2022)

Industry Analysis

It is the level where a single business competes. For a corporation, the strategic business unit (SBU) level is the best place to analyze competition, while an industry study may still be impacted by a corporate company. Understanding an industry's limits is essential, as is identifying & evaluating the various components that influence how an industry functions.

One of the most influential contributions to industry-level analysis is Porter's 5 Forces Model. The goal is to comprehend the organizational structure of an industry. The focus is on analyzing the underlying structural elements at play & not being unduly influenced by transient indicators (Goyal, 2021).

Since Amazon is a market leader in the eCommerce entity, let's examine its Porter's Five Forces to find out how being a successful company, it is performing.

• Threat of new entrants (Weak force)
• Bargaining power of customers(Strong force)
• Competition in the industry (Strong force)
• Threat of substitute products (Weak Force)
• Bargaining power of suppliers(Moderate force)

Threat of New Entrants (Weak force)

Amazon is the titan of the industry, with a strong reputation as a brand. Large warehousing and delivery capacities, economies of scale, and other advantages are also advantageous. Due of its size, the business has made significant investments in marketing, customer support, shipping, & solutions for online shopping. Therefore, it is pretty difficult for any business to overcome this reputation & establish itself as an industry leader. Nevertheless, due to inexpensive switching expenses, small businesses could only attract a certain group of clients (Opia, 2021). Therefore, Porter's Five Forces analysis of Amazon indicates that the possibility of new competitors is a weak force that will not result in a major setback for Amazon.

Bargaining Power of Customers (Strong force)

Customers on Amazon have an average amount of negotiation power, based on Porter's five forces framework. High-quality products & satisfied customers are the main reasons behind the success of Amazon. Even while cost of switching for consumers was comparatively low, substitutes have multiplied. Because consumers can obtain extensive information about the goods and services that different vendors supply, they can quickly locate alternatives (Dudovskiy, 2022).

Competition in the Industry (Strong force)

Amazon operates in a fiercely competitive industry, and a review of its competitors shows that the online retail industry is becoming even more cutthroat. Notwithstanding the industry's increasing size, small & medium-sized enterprises are becoming more popular in it since switching costs are low. Amazon is in a strong rivalry with eBay, Microsoft Azure, Walmart, & other businesses. However, Amazon has access to a large array of potential investments and economies of scale.

Threat of substitute products (Weak Force)

Porter's Five Forces approach highlights several factors, including the possibility of substitute goods and services. In this instance, there are 3 factors at work: cheap cost of replacements, high substitute availability, and low cost of switching. Since there aren't many switching costs, customers can choose a customer easily & for free. People therefore pay no extra money when they shop on Amazon (Rutakirwa, 2018). After that, many low-key options offer reasonably priced options. To maintain its standing as an innovator, Amazon fights off these imitations constantly. But Amazon's standing provides a robust barrier against these threats.

Bargaining power of suppliers (Moderate force)

Suppliers oversee the goods' accessibility for Amazon's online business. Furthermore, Amazon is dependent on the computer networks' hardware and infrastructure for its services in the cloud. According to Amazon's Porter's Five Forces analysis, the negotiating power of suppliers is rated as an acceptable element (Rutakirwa, 2018). Nonetheless, Amazon has control over the supply chain because of its size & ease of changing vendors.

Internal Analysis

The value chain is a representation of each step or procedure that a business takes to produce a certain good or render a specific service. A value chain that is correctly depicted encompasses all phases of the product's life cycle, from design & motivation to manufacturing & distribution. Primary & secondary activities are the 2 distinct groups into which the value chain could be separated. Operations, marketing & sales, logistics for outbound deliveries, inbound supply chain management, & support are among the main tasks. Procurement, HRM, and company infrastructure are examples of secondary or support tasks. Yet, it's crucial to remember that "primary" operations aren't always the key factors influencing a company's performance (Dudovskiy, 2022).

We'll concentrate on the main business operations of Amazon for the purpose of a value chain assessment.

Primary Activities

Inbound logistics- The majority of Amazon's inbound logistics are handled by fulfillment by Amazon; the business doesn't manufacture its goods. What keeps Amazon so powerful in the market is its capacity to manage logistics at the highest level of effectiveness & lowest possible cost.

Operations- 3 sectors make up Amazon's activities: worldwide, North American, & Amazon Web Services. In this instance, it's important to point out Amazon Web Services, that it provides to other businesses along with other expert services like cloud storage & computing. The majority of these features were created internally by Amazon for its own use, however the business later realized it could make money by offering similar services to other businesses & clients (Dudovskiy, 2022). Such invention is a superb use of value chain assessment.

Marketing and sales

Marketing and sales depict how the company markets its products or services. Amazon uses a variety of marketing communication strategies, such as publicity, events, printing and media, and direct advertising. These advertisements usually showcase the business's vast array of goods & services, quick delivery options (Dudovskiy, 2022).

Outbound logistics

Outbound logistics’ procedure entails both the storage and delivery of commodities to the final consumer. Almost 200 fulfillment centers, online delivery, contracted shipment, & storefronts are all part of Amazon's outbound supply chain. A significant portion of Amazon's total value comes from its fulfillment facilities' unmatched productivity (Jenkins, 2020).

Secondary activities

HRM

Operations, marketing, & sales incorporate human resource management (HRM). The HR management division of Amazon is essential to the completion of its value chain assessment. Amazon employs vendors, temporary workers, foreign workers, & internal personnel (Jenkins, 2020).

Procurement

This procedure, known as sales & operations, handles the business's procurement. This approach uses just-in-time inventory & forecasting techniques for handling the stock.

Technology

Technology can aid in the procedure of optimization of outbound logistics. Amazon has demonstrated its ability to succeed not just in the real goods market as well as in the world of online shopping. The company's operational procedures with solutions, such as the use of cloud computing & storage on the cloud, were so successful that they quickly became industry norms.

Conclusion

A company should evaluate its internal strengths & limitations about the external environment before launching into an appropriate positioning strategy endeavor. In addition, businesses should foresee rivalry, have a goal and mission, & position themselves or their goods in the marketplace extremely strategically. The competitive edge comes from strategic positioning. Positioning is vital to all aspects of strategic leadership. All of them highlight the fact that positioning is philosophical (and hence closely linked to the development of strategies). It is based on strengths, future-focused, & contingent upon the mentalities of individual organizations. It is thus believed that there is a relationship between the ideas of strategic positioning & strategic advantage in competition; more research suggests that the foundation of effective strategic positioning is the development of connections with an item that depend on its inherent qualities (Dudovskiy, 2022).

The question facing firms today is whether they should take an external-in or inside-out approach to positioning themselves. From the inside out refers to putting the perspective of resources front & center & evaluating internal competencies first. The outside-in positions the company by evaluating external opportunities & risks. With the help of successful organization, it is found that in order to succeed strategic positioning requires equilibrium between the 2 possibilities & that positioning which affects all organizational levels, encompassing resource positioning, positioning of products, & overall firm positioning.

It can be said a well-defined goal & a carefully considered plan of action are the foundation of any successful organization. Thus, some companies succeed while others fail it is due to the fact they can adjust to shifting market conditions while maintaining a growth strategy in place. On the other hand, companies with no clear plan are more inclined to fail.

References

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