Question

*Industrial economics* Select a firm or industry (AMAZON) and use the theory of market structure to carry out an analysis of the strategic behavior of that firm or industry. As part of the answer, consider the strengths and weaknesses of the theory used. - *WORD COUNT - 650* - *INCLUDE REFERENCES AND CITATIONS*

Answer 1

Evaluation of Current Strategy

Amazon’s generic corporate strategy can be described as concentric diversification. This strategy is based on leveraging technological capabilities for business success and following a cost leadership strategy aimed at offering the maximum value for its customers at the lowest price in addition to wrapping its business around the customers wherein they find Amazon to be the go-to portal for their online shopping needs.

Indeed, this strategy has paid off well as can be seen from the fact that it is the world’s largest online retailer and has consistently been the leader in the market segments in which it operates. Having said that, it must also be noted that cost leadership can follow the law of diminishing returns wherein firms following this strategy find that they are unable to sustain growth or increase profitability once the “low-hanging fruit” are plucked.

The specific measures taken by Amazon in pursuit of this strategy include steep discounts for is regular members through the Prime program, ensuring timely and even express delivery and at times, waiving off the shipping charges, passing on the benefits of avoiding state taxes to the customers thereby lowering the price even further, and an overall strategy based on making the customer experience as seamless and as smooth as possible.

Apart from this, Amazon’s strategy is driven by its sources of competitive advantage wherein it is focus on technology, actualizing the benefits of economies of scale, and leveraging the efficiencies from the synergies between its external drivers and internal resources have been the cornerstones of its business model. Further, Amazon uses Big Data Analytics as a tool to map consumer behavior. Indeed, Big Data has been embraced to such an extent by the company that it is now in a position to market this as another service offering.

Amazon’s Strengths (Internal Strategic Factors)

Amazon.com Inc.’s e-commerce success relies on the effective use of business strengths. In the SWOT Analysis framework, this aspect enumerates the internal strategic factors that the company uses to maintain and improve its operations in the online retail, technology products, and online services markets. The following strengths support the success and continuous growth of Amazon:

• Strong brand
• Moderate and expanding business diversification
• High capability for rapid technological innovation, especially in online services

Amazon.com Inc. has the strongest brand in the online retail market. This strength is partly responsible for the rapid growth of the business, especially in its early years, considering brand recognition and confidence among consumers. Moderate business diversification is also among the strengths in this SWOT analysis of Amazon. For instance, the company now operates as a provider of consumer electronics, online retail services, brick-and-mortar (non-online) retail services, private-label goods, and information technology services, including cloud-computing services, among others. These diversified operations are complementary and make Amazon.com Inc. a formidable competitor. Moreover, the high capability for rapid technological innovation strengthens the business in terms of the ability to respond to trends, at least technologically.

Amazon’s Weaknesses (Internal Strategic Factors)

Amazon’s weaknesses present challenges that limit its business growth and expansion. This aspect of the SWOT Analysis model outlines the internal strategic factors that impose difficulties in growing or improving the business. In this case of Amazon, the following weaknesses are most significant:

• Imitable business model
• Limited penetration in developing markets
• Limited brick-and-mortar presence

Amazon.com Inc. has a business model that is easy to imitate. For example, other companies can establish e-commerce websites that sell just about anything. In the SWOT analysis framework, this internal factor is a weakness that creates opportunities for other firms to impose greater competition against the e-commerce giant. Amazon’s limited penetration in developing markets is also a weakness that prevents the business from benefitting from the high economic growth rates of these markets. On the other hand, the company’s limited brick-and-mortar presence is a barrier to rapidly expanding in the non-online market. Nonetheless, considering its acquisition of Whole Foods Market, Amazon is on track to grow its non-online operations. Overall, the internal factors in this aspect of the SWOT analysis impose challenges on the company, especially in terms of growth in current and new e-commerce markets. Addressing these challenges may involve changes in Amazon’s organizational structure and design, as well as corresponding adjustments in strategic planning and management.

Reference

https://www.managementstudyguide.com/analysis-of-amazon-corporate-strategy.htm

http://panmore.com/amazon-com-inc-swot-analysis-recommendations

Please check the word count.