Posts Tagged ‘IT’
Amazon McKinsey 7S model illustrates the ways in which seven key elements of businesses can be united to increase effectiveness. According to this model strategy, structure and systems represent hard elements, whereas shared values, skills, style and staff are soft elements. McKinsey 7S model stresses the presence of strong links between elements. Specifically, it argues that a change in one element causes changes in others. As it is illustrated in figure below, shared values are positioned at the core of Amazon McKinsey 7S model, since shared values guide employee behaviour with implications in their performance. McKinsey 7S model Hard Elements in Amazon McKinsey 7S Model Strategy Amazon adheres to cost leadership business strategy. Three main pillars of Amazon business strategy are competitive prices, great range and speed of delivery. The largest internet retailer in the world has been able to sustain this strategy thanks to economies of scale, innovation of various business processes and regular business diversification. Moreover, Amazon business strategy places a great emphasis on encouraging communication among various components of its ecosystem. These components of Amazon ecosystem include merchants, writers, reviewers, publishers, apps developers, and the information market of commentators, analysts, journalists and feature writers. Additionally, customer obsession and focus on Amazon leadership values represent important cornerstones of Amazon business strategy. Structure Amazon organizational structure is hierarchical. It is difficult for the company to adapt an alternative structure such as divisional or matrix due to its gigantic size. Specifically, the e-commerce giant employs approximately 1,3 million people who serve hundreds of millions of customers worldwide.[1] The key features of Amazon corporate structure include flexibility of the business; which is unusual for a company of such a big size and stability in the top management, i.e. little turnover in the senior management team. Reliance on hybrid project…
Amazon marketing communication mix deals with individuals elements of the marketing mix such as print and media advertising, sales promotions, events and experiences, public relations and direct marketing. Amazon Print and Media Advertising Amazon uses print and media advertising extensively in order to communicate its marketing message to the members of the target customer segment. The most memorable Amazon TV ads include a video clip featuring former Top Gear host Jeremy Clarkson promoting Amazon Fire TV, a promotion deal reported to cost Amazon GBP 160 million[1]. Moreover, TV commercials promoting Amazon feature cute animals in order to associate the brand image with qualitative values. This strategy indicates to changes in Amazon marketing message in a way that “rather than hawking hardware like Kindle e-readers, furry pets are pitching Amazon’s USD 99,00 Prime membership, which features delivery discounts and media streaming”[2]. The online retail giant had also released “Mom’s Here” TV advertisement on Oprah Winfrey Network, targeting mothers for Amazon Echo. In 2019 Amazon overtook Netflix as the top advertiser for video streaming services and increased TV advertisement spending by 28% for Amazon Prime Video.[3] Print advertising is used by Amazon extensively as well via magazines, journals, newspapers and billboards. In the latest move, Amazon started to print advertisement messages, pictures and cartoon characters from “Minions” movie on its shipping boxes[4], marking the start of a new type of print advertising. One of the most memorable print advertisements by Amazon refers to the ad that appeals to Aatmanirbhar Bharat (self-sufficient India) sentiment featured in The Economic Times in 2020. This specific campaign has been praised as a successful attempt to show solidarity with nationalistic sentiment in India. Viral marketing also plays an important role in Amazon marketing strategy. Amazon is one of the earliest adopters of viral marketing and the…
Value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. Figure below illustrates the essence of Amazon value chain analysis. Amazon Value chain analysis Amazon Primary Activities Amazon Inbound logistics Inbound logistics within Amazon value chain analysis involve receiving and storing raw materials to produce goods and services. Due to massive global scope of its operations the e-commerce giant maintains complex, but sophisticated inbound logistics operations. Generally, Amazon does not have long-term contracts or arrangements with its vendors to guarantee the availability of merchandise, particular payment terms, or the extension of credit limits. Fulfilment by Amazon (FBA) is the cornerstone of Amazon inbound logistics for company-owned retail business. Moreover, the economies of scale is an important source of value creation for Amazon inbound logistics. Sellers can also use FBA by stowing their inventory in Amazon fulfilment centres. In this case, Amazon assumes full responsibility for logistics, customer service, and product returns. If a customer orders an FBA item and an Amazon owned-inventory item, the company ships both items to the customer in one box, as a significant gain of efficiency. The use of FBA is an optional choice for sellers and this choice makes the products of third-party sellers eligible for Amazon Prime free two-day shipping, free shipping and other benefits. Amazon uses logistics beyond the point to serve Amazon Marketplace and starting from recently, the company has been offering logistics services to third parties. For example, Beijing Century Joyo Courier Services, an Amazon subsidiary registered with the U.S. government as an ocean shipping provider.[1] From this point of view, efficient logistics infrastructure also belongs to the list of Amazon competitive advantages. Amazon Operations Operations generally comprise the process of transforming raw materials into goods…
Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. The essence of Amazon Porter’s Five Forces is represented in figure below: Porter’s Five Forces Threat of new entrants in Amazon Porter’s Five Forces Analysis Threat of new entrants into online retail business is significant. The following sets of factors determine the threat of new entrants for Amazon’s industry. 1. Economies of scale. Amazon is the largest internet retailer and internet company by revenue in the world. The e-commerce giant operates more than 175 fulfilment centres worldwide in more than 150 million square feet of space.[2] Although potential new market entrants can copy Amazon business model, they cannot benefit from the economies of scale at the same extent as Amazon. Therefore, economies of scale can be specified as substantial barrier for new entrants. 2. Time of entry. The global market size for online shopping nearly reached USD 4 billion in 2020.[3] It has been estimated that e-commerce sales will surpass USD 740 billion by 2023 in the US alone.[4] Such an increasing popularity of internet shopping naturally attracts new entrants that will attempt to find new niches and competitive advantages. In other words, time of entry is an important factor that increases the threat of new entrants in global e-commerce. 3. Product differentiation. Amazon was able to reach its current position partly because it found an opportunity in online sales in 1994, when other companies didn’t notice or utilise such an opportunities. Likewise, other companies can find new previously unnoticed opportunities in e-retail to threaten the position of established market players such as Amazon, eBay, Alibaba and others. In other words, global e-commerce can be disrupted by start-ups that may find new sustainable sources of competitive advantage.…
SWOT is an acronym for strengths, weaknesses, opportunities and threats related to organizations. Amazon, as the e-commerce and cloud computing company worldwide needs to build upon its strengths at the same time reducing negative impact of its weaknesses on the bottom line. Moreover, it is important for the company to take advantage of opportunities and adopt a proactive approach in dealing with threats in the marketplace. The following table illustrates Amazon SWOT analysis: Strengths 1. Market leadership in the global scale 2. Strong ecosystem of products and services 3. Cost leadership due to efficient cost structure 4. Customer-centricity 5. Brand value Weaknesses 1. Business model that can be imitated 2. Seasonality of the business 3. Weak competitive position of Amazon’s Fire Phone 4. Damage to the brand image due to tax avoidance controversies in USA, UK and Japan 5. Working conditions for warehouse workers Opportunities 1. Diversification of e-commerce business segment 2. Increasing focus on own brand products and services 3. Increasing physical presence of the brand 4. Developing more local sites in international markets 5. Intensifying backward integration Threats 1. Patent infringement and other lawsuits against the company 2. Weakening of industry entry barriers 3. Threats to online security 4. Andy Jassy failing to fill Jeff Bezos shoes effectively 5. Backlash towards the brand Amazon SWOT analysis Strengths in Amazon SWOT Analysis 1. Amazon is an undisputed market leader in online retail and cloud computing segments. The e-commerce giant generated USD 386 billion revenues and earned a net income of USD 21,3 billion in 2020 alone[1]. Dubbed as The Everything Store, Amazon sells hundreds of millions of products of its own and third-party sellers. Current market leadership position grants the tech giant upper hand in the competition in a number of ways such as economies of…
Amazon marketing mix (Amazon 7Ps of marketing) comprises elements of the marketing mix that consists of product, place, price, promotion, process, people and physical evidence. Product Element in Amazon Marketing Mix (AMAZON 7Ps of Marketing) Amazon products can be divided into the following four categories: 1. Amazon websites that enable hundreds of millions of products to be sold by Amazon and by third parties across dozens of product categories. Due to the abundance of ranges of products it sells, Amazon has gained the moniker The Everything Store. In 2020 third party sellers made a profit of minimum USD 25 billion.[1] There are more than 200 million Paid Prime members.[2] 2. Electronic devices such as Kindle e-readers, Fire tablets, Fire TVs, and Echo. In 2020, customers bought tens of millions of Echo devices, and Echo Dot and Fire TV Stick with Alexa.[3] There are more than 100 million smart home devices connected to Alexa.[4] 3. Media content. An extensive range of products and services, including cloud-based services that can be used to produce content. The e-commerce giant is planning to increase the range and variety of its media content products. According to new CEO Andy Jassy it is still early days for Amazon in the media.[5] The company has reached a deal to acquire US historic movie studio MGM for USD 8,5 billion[6], as a sign of increasing focus on the media business. 4. Amazon Web Services (AWS). This segment offers a wide range of global compute, storage, database, and other service offerings. AWS serves developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions. The e-commerce giant also completed the acquisition of Whole Foods Market in 2017. Place Element in Amazon Marketing Mix (AMAZON 7Ps of Marketing) Traditionally, Amazon didn’t have physical stores and the…
Amazon segmentation, targeting and positioning involves a set of activities aimed at determining specific groups of people as customers and developing products and services attractive to this group. Segmentation involves dividing population into groups according to certain characteristics, whereas targeting implies choosing specific groups identified as a result of segmentation to sell products to. Positioning refers to the selection of the marketing mix the most suitable for the target customer segment. Amazon mainly uses the following two types of positioning: Multi-segment positioning. Amazon offers a wide range of products and services, successfully exploiting more than one segment at the same time. Specifically, the online retail giant sells more than 75 million products, appealing to the needs and wants of a wide range of customer segments.[1] Adaptive positioning. The online retail giant closely monitors changes in external marketplace and addresses increasing customer expectations by periodically repositioning of products and services according to changes in the segment. Anticipatory positioning. This refers to positioning to a market segment that has low turnover with the anticipation that the turnover will increase in the future. Amazon Web Services (AWS) is a stark example for anticipatory positioning. Company’s founder and former CEO Jeff Bezos notes that “no one asked for AWS. No one. Turns out the world was in fact ready and hungry for an offering like AWS but didn’t know it”[2] Additional examples of anticipatory positioning applications by the e-commerce giant include Amazon Sage Maker, Amazon Comprehend and Amazon Rekognition. Stop-gap positioning This strategy involves investing in currently unprofitable brand due to profitability expectations on long-term perspective. The e-commerce giant applied stop-gap positioning strategy in relation to a number its brands such as Core 10, Happy Belly and Vedaka. The following table illustrates Amazon segmentation, targeting and positioning: Type of segmentation Segmentation criteria Amazon target…
Amazon marketing strategy relies on the following four pillars: 1. Offering the widest range of products. The largest internet retailer in the world by revenue offers hundreds of millions of products. The wide range of product it offers has earned the online retailer the moniker The Everything Store. 2. Using customer-friendly interface. The tech giant has an advanced interface that integrates personalized recommendations and recent browsing history, among others. Ever-improving user interface is the result of the company’s focus to become Earth’s most customer-centric company. 3. Scaling easily from small to large. The e-commerce and cloud computing company has experience and competence in scaling from small to large. This factor plays in instrumental role exploring new business segments. Scaling from small to large has allowed the online retail behemoth do disrupt increasing ranges of industries such as retail, transportation, entertainment and now industrial distribution. 4. Exploiting affiliate products and resources. Up to date, the tech giant has taken a full advantage of affiliate programs, products and resources to contribute to the bottom line of the business. Amazon marketing strategy integrates a number of targeted online marketing channels, such as Associates program, sponsored search, social and online advertising, television advertising, and other initiatives. Generally, Amazon marketing strategy is based on the following principles: Amazon 7ps of marketing mainly focuses on product and place elements of the marketing mix. Offering hundreds of millions of 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, adaptive, anticipatory and stop-gap…
Generally, Amazon organizational culture integrates the following five key elements: 1. Immense performance pressure. Amazon organizational culture has been described as “breakneck-paced, and notoriously cost-conscious, as befits a company that has run only a small profit, or a loss, under generally accepted accounting principles for most of its life as a public company.[1] Amazon organizational culture was fiercely criticized in 2015 in The New York Times article titled “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace”. Specific flaws mentioned in the article include unrealistic performance standards, the work culture based on fear and the lack of recognition of employee contribution. The article caused debates in the media and even prompted a response from Amazon CEO at the time Jeff Bezos. Furthermore, work culture at Amazon has been described as “purposeful Darwinism” approach for employee management.[2] Generally, pushy, combative and ‘bruising’ organizational culture is perceived as outdated. Nowadays, the popular belief is that workplaces need to be nurturing and encouraging, and managers need to be nice and friendly and treat their employees like family in order for a company to succeed. The largest internet retailer in the world by revenue proves this belief wrong. Amazon has a very intense corporate culture with an extensive emotional and even physical pressure to some employees. Nevertheless, Amazon along with Alphabet has been recognized by LinkedIn as the best place to work in US in 2021.[3] This can be explained in a way that Amazon has a unique organizational culture that is not for everyone. Only employees who can thrive under immense pressure and fast-paced environment can survive in this company. 2. Constant reinvention and optimization of organizational culture. Amazon founder and CEO Jeff Bezos “emphasizes the importance of constantly assessing and adjusting Amazon’s culture so it never loses the agility, nimbleness, and hunger for…
Amazon leadership style has been classified as pragmatist. Pragmatist leaders “set high standards and unapologetically expect those standards to be met by themselves and by their employees”[1] The company’s founder and first CEO, Jeff Bezos is an exceptional and proven business leader. Bezos efficiently exercises visionary and servant leadership styles and places exceptional customer service at the core of Amazon’s business practice. Moreover, Jeff Bezos leadership style is unique in several ways. For example, it has been noted that “while you might find other internet firms focusing on a fun, relaxed atmosphere for their employees, no-frills Bezos is proving the potency of another model: coddling his 164 million customers, not his 56,000 employees.”[2] Jeff Bezos’ leadership style can be analysed through the prism of contingency leadership theory. According to contingency leadership theory, “leader’s effectiveness is contingent upon with how his or her leadership style matches to the situation.”[3] Jeff Bezos leadership style has been characterized as harsh, cutthroat and demanding.[4] It can be argued that such a leadership style fitted the situation on the onset of the business, when the company had to strengthen its position on rapidly expanding industry. In July 2021 Jeff Bezos stepped down as CEO and assumed the role of company’s executive chairman. Andy Jassy CEO of Amazon Web Services became the new CEO of the online retail behemoth. At has been noted that although Andy Jassy values Bezos leadership style the new CEO is “more mild-mannered, soft-spoken and less prone to angry outbursts compared to Bezos”[5] Nevertheless, Mr. Bezos will continue to yield an immense influence on the business and Amazon leadership style for the foreseeable future. This is because his new role executive chairman grants his involvement in strategic decision making and Mr. Bezos remains as the largest shareholder of the e-commerce giant. Amazon…