Question

COMPANY AMAZON

WHAT IS THEIR MARKETING, MANAGEMENT, ECONOMICS STRATEGY?

Answer 1

Amazon marketing strategy relies on the following six pillars:

1 Offering the widest range of products
2 Using a customer-friendly interface.
3 Scaling easily from small to large.
4 Exploiting affiliate products and resources.
5 Using existing communication systems.
6 Utilizing universal behaviours and mentalities.

- Amazon 7ps of marketing mainly focuses on product and place elements of the marketing mix. Offering more than 480 million products in the USA alone, Amazon product range is the widest among online and offline retailers. Moreover, the company is able to offer its products for competitive prices due to massive cost savings based on online nature of business operations.
- Amazon segmentation targeting and positioning practices are associated with targeting the widest customer segment. The retail giant does this with the application of multi-segment and adaptive positioning techniques.
- Amazon marketing communication mix integrates print and media advertising, sales promotions, events and experiences, public relations and direct marketing. The company places the particular focus on print and media advertising and sales promotions elements of the marketing communication channels.

Management / corporate 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.

Economic strategy :

As Amazon grew, its share price growth enabled partnership or acquisition with a range of companies in different sectors. Marcus (2004) describes how Amazon partnered with Drugstore.com (pharmacy), Living.com (furniture), Pets.com (pet supplies), Wineshopper.com (wines), HomeGrocer.com (groceries), Sothebys.com (auctions) and Kozmo.com (urban home delivery). In most cases, Amazon purchased an equity stake in these partners, so that it would share in their prosperity. It also charged them fees for placements on the Amazon site to promote and drive traffic to their sites. Similarly, Amazon charged publishers for prime-position to promote books on its site which caused an initial hue-and-cry, but this abated when it was realised that paying for prominent placements was widespread in traditional booksellers and supermarkets. Many of these new online companies failed in 1999 and 2000, but Amazon had covered the potential for growth and was not pulled down by these partners, even though for some such as Pets.com it had an investment of 50%.