In business, the ability to compete determines the success of a company. Firms that are unable to compete must pave the way for the more competitive businesses or continually make losses. Companies’ leaders are informed by these realities when developing plans that have the potential to give the company a competitive edge over other players in the same industry. These competition plans can be categorized into business level strategy and corporate level strategy. This paper analyzes Amazon Inc. corporate and business level strategies with the aim of identifying its potential to remain successful in the future. Cost leadership, differentiation, and technological innovation are among the business level strategy discussed. Corporate level strategies include diversification, acquisitions, alliances, and a customer-centric approach to business. The analysis indicates that Amazon has the potential to remain successful in the future, especially in a slow-cycle market. However, competitors would prefer a fast-cycle market associated with the ease of imitation. Investment in research and development offer Amazon the best chance to thrive in a competitive electronic commerce industry.
Corporate level and business level strategies constitute the two distinct levels of organizational strategy. The two strategies play a significant role in the success of any business, particularly in a competitive environment. In fact, business strategy highlights the methods of competing in a particular business, while corporate strategy focuses on the choice of the field of competition. Since the plans are developed with competition in mind, companies rarely compete as an entity, but the competition takes place at the products and services business units. The various business units that form a company contribute to its ability to compete for survival. Although corporate and business level strategies are separate, their efficiency in influencing each other determines the success of the business unit and the corporation. Based on this premise, the paper contains an in-depth analysis of Amazon Inc. business level strategy and corporate level strategy. Amazon Inc. is one of the top global electronic commerce industry players and the companies to beat within the United States. To appreciate Amazon Inc. business environment, the study also focuses on the electronic commerce industry and identifies the business and corporate strategies potent for long-term success.
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Business Level Strategies
Business level strategies constitute any step that a company takes to establish, sustain, and utilize a competitive advantage. Formulation of the business strategy usually comes after an analysis of the competition dynamics, target customer, and the production line (Mckeown, 2015). Data centers, fulfillment centers, and employees comprise the major strategic resources that contribute to the business strategy of a company. Other resources include the intangible strategic resources such as reputation, brand equity, patents, and technologies. Similar to other multinational companies, Amazon Inc. makes use of the available core competencies for a sustainable competitive advantage (Amazon, 2015). To that end, cost leadership through low priced and available products, differentiator process, and the technological capability established and sustained through the intensive investment in research and development are key contributors to Amazon’s competitive advantages. Evidently, Amazon’s brand name, corporate goals, leadership reputation, and technology have developed over the years of intensive investment; hence, the company has become more sustainable (Mckeown, 2015). Nevertheless, the ease of imitating the platforms utilized in e-commerce remains one of Amazon’s major competitive disadvantages. In addition, the dependence of the business on other companies to deliver its products to the customers reduces its margin of competition advantage (Amazon, 2015). Moreover, too many sectors of activities coupled with lawsuits and government regulations add to the list ofcompetitive disadvantages.
Amazon creates a large differentiator advantage by combining cost leadership and the differentiated medium under the generic business strategy. As a result, the firm gains a competitive advantage based on the perceived services efficiency and the uniqueness of the product value affordability. Furthermore, fusion strategy adopted by the company makes it possible to pursue low-cost leadership and differentiation simultaneously (Amazon, 2015). The differentiated and affordable products regularly create customer loyalty that diminishes the ability of eBay and Netflix to compete with Amazon. In addition, customers show less sensitivity to prices because of Amazon’s reliability and uniqueness. Therefore, Amazon remains competitive regardless of the low priced products from eBay and Barnes & Noble because of customer loyalty. Moreover, the reputation of uniqueness and affordability enjoyed by the company creates substantial substitutes barrier to the potential entrance of competitor products. Although in most instances differentiation results in an increase in the cost of goods and services, Amazon has so far managed to pass on the extra expenditures to the customers without experiencing an adverse impact on its market share. In fact, a strong corporate culture and brand stability have enabled Amazon to remain afloat despite the challenges of the global financial crisis, diminishing shareholders sentiments, and disruptive technologies.
An extensive investment in innovation programs explains why technologies continue as the primary long-term competition strategy of the company. This extensive investment is justified because organizational culture qualifies technologies as one of the fundamental elements in consumer business (Amazon, 2015). Moreover, the success of the previous years’ implementation growth remains a chief indicator of the appropriateness of the company’s strategy. For example, the company is only able to meet the customers’ needs because of the advancement in technology. More to say, an improved efficiency as the result of effective, innovative technological ideas enables the company to establish cost leadership via affordability by reducing the operation cost (Thompson & Martin, 2005).
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Furthermore, the investments in the R&D innovation programs provide the company with the capability to revolutionize the customer experience through new technologies. Technology makes the segmentation of the market upon human behavior and demographic conventional approaches irrelevant (Thompson & Martin, 2005). Moreover, artificial intelligence tools embedded in the Amazon websites have the capacity to mine direct customer search and purchase patterns that provide valuable information to the marketing department. Interestingly, artificial intelligence data acts as a virtual sales person because it can recommend products based on the individuals’ search trends. In fact, the returns of investment in R&D has been illustrated trough the increase of the number of book titles from 90,000 to over 200,000 in just one year after the launch of Kindle (Amazon, 2015). Furthermore, the potential of technology cannot be underestimated in the modern economic era, which makes this strategy both potent and viable as a long-term success competitive strategy.
Corporate Level Strategies
Business is said to have diversified when it keeps identifying new opportunities outside its current areas of operation and taking them. Initially, Amazon operated as an online bookstore but with time has expanded and offered video services and Kindle (Amazon, 2015). With diversification came the need to develop the corporate strategy that will ensure the success of the various business units operating under the umbrella company. Through diversification, Amazon had become the most valuable online retailer for years until recently, when Alibaba took over the leading position. Diversification is a central corporate strategy as evidenced by the continued improvement of the customer experience through websites and other technologies (Amazon, 2015). New products have been tailor-made for the modern-day customers, while the changes made to the corporate logo aimed at capturing and illustrating the growing dynamics of the business.
Acquisitions and alliances play a significant role in increasing the customer bases. In that line, Amazon acquires strategic entities with the potential to extend its services and products range. In addition, acquisition helps in eliminating the cutthroat competition in the online retail business and increase the capital base (Thompson & Martin, 2005). In fact, Amazon’s ability to compete with Google, Apple, and eBay grew as the result of the acquisition of Junglee.com, Planetall.com, Bibliofind.com, Musicfile.com, INOVA Software, Fabric.com, IMBD, Audible, and exchange.com. Additionally, this corporate strategy brought the firm into the strategic alliance with the National Basketball Association (NBA) and Diane Von Furstenberg (Thompson & Martin, 2005). It is through such growth strategies that the company has gained an edge over the fierce competitors.
One of Amazon’s core goals is to provide the customers with all online purchases needed through the customer-centric e-commerce. To achieve dominance in the global e-commerce industry, Amazon has identified competitive prices, a vast selection, and convenience as fundamental elements of its business (Amazon, 2015). Affordability and the quality of goods and services influence how well the company is accepted on the global market. Several strategies have been put in place in implementing this corporate strategy, including the company app distribution to over 200 countries, cloud computing, the availability of currency converter, and other software development programs (Amazon, 2015). The company assesses the effectiveness of these projects through the evaluation of customer satisfaction based on their feedbacks and online reviews. Having considered the reviews, Amazon improves its products and services to meet the specific clients’ needs (Amazon, 2015). R&D and concentric diversification act as the foundation of the corporate level strategies.
Customer satisfaction remains primary to Amazon, as evidenced in the changes made in the vision statement. Prime membership builds loyalty and increases the business base (Mckeown, 2015). Furthermore, technology has made it easier to achieve customer satisfaction by gathering reliable data with the specific clients’ needs. Regional tailor-made products enhance the customer experiences, especially with the consideration of the various consumer groups such as direct consumers, enterprises, developer, and resellers.
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Diversification has made it impossible to identify any company as the single major competitor. Amazon operates in a broad market segment; hence, it must deal with the competition from numerous major competitors. For instance, Amazon competes with Netflix, eBay, and Time Warner Cable among others in the media front. Electronic and merchandise segments attract RadioShark, Wal-Mart, Best Buy, and Family Dollar as the major competitors. Similarly, Barnes & Noble has been Amazon’s main competitor in online reading software and books over the years. At the e-commerce level, Alibaba is the company to beat, especially after replacing Amazon as the most valued e-commerce retailer globally (Mckeown, 2015). However, based on the geological market coverage, business scope, and products breath, Barnes & Noble, Wal-Mart, and eBay are the primary competitors for Amazon.
For instance, Wal-Mart has the world biggest retail chain, which enables the company to implement low-cost management in the value chain coupled with cost leadership, hence offer low priced products through e-commerce and physical stores. Similarly, eBay exercises dominance as the online auction house by concentrating on service provision. By conducting e-commerce as an intermediary in the absence of inventories and physical infrastructure, eBay actualizes cost leadership strategy. Moreover, a vast product variety, high-quality security, and electronic commerce services enhance eBay’s competitive differentiation strategy. On the other hand, Barnes & Noble offer intense competition in books and learning material distribution (Mckeown, 2015). Similar to Amazon, Barnes & Noble utilizes a combination of differentiation/cost leadership strategy to win over the price sensitive market share by availing rare books at low prices.
Evidentially, Amazon’s primary competitors seek a strategic position both physically and on the e-commerce platform. These companies must increase their market share and overall profitability to compete effectively through competitive pricing, cost leadership, and differentiation in the assumption that online shopping will continue to experience exponential growth. If the competitors form strategic alliances, they have the chance to remove Amazon from the position of the market share leader. Nevertheless, Amazon is expected to increase its competitiveness continually through research and development in technology based solutions. Extensive investments in R&D create an opportunity for long-term success, especially if innovations resolve the current challenges leading to the maximization of the core competencies.
Evidentially, Amazon would do best in a slow-cycle market because its innovative products like Kindle and the one-click purchase technology would be shielded from imitation for a longer period. Hefty fines that characterize a slow-cycle environment scare imitators, creating more sustainable competitive advantages (Mckeown, 2015). On the other hand, the fast-cycle market provides zero imitation shields, making it easily for the competitors to erode the core competencies through the imitation of the innovative approach to business. In such an environment, it would be hard to retain market leadership primarily because the companies with greater market value would take over control of the market share.
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In sum, Amazon has the potential to remain competitive in the future based on the available information on business and corporate-level strategies. Moreover, the current competitive environment characterized by innovation, concentrated growth in market, and product development increase the chances of the companies that invest extensively in research to set the pace in the industry. Leadership in the technology arena also makes it easier for Amazon to implement other corporate and business level strategies like cost leadership, differentiation, and diversification. As expected, the slow-cycle market creates an advantage for the market leaders, while a fast-cycle environment is most likely to improve the competitive capability of the smaller companies. Nevertheless, the extensive long-term investment in research and development innovation creates flexibility and provides Amazon with the opportunity to sustain current competitive advantages.