At the end of 1998, Amazon.com founder and CEO Jeff Bezos ponders the next moves for his company. Having secured the leadership position as the leading online book seller in the United States, Amazon.com has now moved into the product categories of CDs and videos by year's end. Having expanded into the United Kingdom and Germany and having 6.2 million members, what new product categories should Amazon.com expand into during 1999? Consumer electronics? Travel? Toys? Software? The possibilities are endless, but Bezos knows the company needs to focus on choosing a few categories and performing well in those picked.
Swot Analysis of "Amazon.com (C)" written by Jeffrey Rayport, Dickson L. Louie includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Amazon.com Categories facing as an external strategic factors. Some of the topics covered in Amazon.com (C) case study are - Strategic Management Strategies, Internet, IT, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Amazon.com (C) casestudy better are - – challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , increasing transportation and logistics costs, geopolitical disruptions,
increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Amazon.com (C) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Amazon.com Categories, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Amazon.com Categories operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Amazon.com (C) can be done for the following purposes –
1. Strategic planning using facts provided in Amazon.com (C) case study
2. Improving business portfolio management of Amazon.com Categories
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Amazon.com Categories
Strengths Amazon.com (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Amazon.com Categories in Amazon.com (C) Harvard Business Review case study are -
Innovation driven organization
– Amazon.com Categories is one of the most innovative firm in sector. Manager in Amazon.com (C) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Amazon.com Categories has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Sustainable margins compare to other players in Technology & Operations industry
– Amazon.com (C) firm has clearly differentiated products in the market place. This has enabled Amazon.com Categories to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Amazon.com Categories to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Amazon.com Categories has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Amazon.com (C) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Amazon.com Categories in the sector have low bargaining power. Amazon.com (C) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Amazon.com Categories to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Amazon.com Categories has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Amazon.com Categories has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Amazon.com Categories digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Amazon.com Categories has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Strong track record of project management
– Amazon.com Categories is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Amazon.com Categories is present in almost all the verticals within the industry. This has provided firm in Amazon.com (C) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Amazon.com Categories is one of the leading recruiters in the industry. Managers in the Amazon.com (C) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Amazon.com Categories has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Amazon.com (C) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Organizational Resilience of Amazon.com Categories
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Amazon.com Categories does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Amazon.com (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amazon.com (C) are -
Slow decision making process
– As mentioned earlier in the report, Amazon.com Categories has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Amazon.com Categories even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Capital Spending Reduction
– Even during the low interest decade, Amazon.com Categories has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Amazon.com Categories supply chain. Even after few cautionary changes mentioned in the HBR case study - Amazon.com (C), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Amazon.com Categories vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Amazon.com Categories is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Amazon.com (C) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Amazon.com (C), is just above the industry average. Amazon.com Categories needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to strategic competitive environment developments
– As Amazon.com (C) HBR case study mentions - Amazon.com Categories takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Amazon.com Categories needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High bargaining power of channel partners
– Because of the regulatory requirements, Jeffrey Rayport, Dickson L. Louie suggests that, Amazon.com Categories is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, Amazon.com Categories has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High operating costs
– Compare to the competitors, firm in the HBR case study Amazon.com (C) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Amazon.com Categories 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Amazon.com Categories, firm in the HBR case study Amazon.com (C) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Amazon.com (C) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Amazon.com (C) are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Amazon.com Categories is facing challenges because of the dominance of functional experts in the organization. Amazon.com (C) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Amazon.com Categories can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Learning at scale
– Online learning technologies has now opened space for Amazon.com Categories to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Loyalty marketing
– Amazon.com Categories has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Amazon.com Categories can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Amazon.com Categories to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Amazon.com Categories to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Amazon.com Categories to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Amazon.com Categories can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Better consumer reach
– The expansion of the 5G network will help Amazon.com Categories to increase its market reach. Amazon.com Categories will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Using analytics as competitive advantage
– Amazon.com Categories has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Amazon.com (C) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Amazon.com Categories to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Amazon.com Categories can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Amazon.com Categories in the consumer business. Now Amazon.com Categories can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Amazon.com Categories can use these opportunities to build new business models that can help the communities that Amazon.com Categories operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Threats Amazon.com (C) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Amazon.com (C) are -
High dependence on third party suppliers
– Amazon.com Categories high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Amazon.com Categories can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Amazon.com (C) .
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Amazon.com Categories can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology acceleration in Forth Industrial Revolution
– Amazon.com Categories has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Amazon.com Categories needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Amazon.com Categories business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Amazon.com Categories in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Amazon.com Categories.
Increasing wage structure of Amazon.com Categories
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Amazon.com Categories.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Amazon.com Categories with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Amazon.com Categories needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Shortening product life cycle
– it is one of the major threat that Amazon.com Categories is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Amazon.com (C) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Amazon.com (C) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Amazon.com (C) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Amazon.com (C) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Amazon.com (C) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Amazon.com Categories needs to make to build a sustainable competitive advantage.