Jeff Bezos, the founder and CEO of Amazon.com, an Internet-based bookseller, has created one of the most successful ventures for electronic commerce on the Web. With revenue growing at a pace of 30% per month, Bezos attributes the success of Amazon.com to its value proposition--selectivity, availability, price, and service. Even so, Bezos is faced with new challenges in early 1997--competition from the mainstream bookstores Borders, Inc. and Barnes & Noble.
Swot Analysis of "Amazon.com (A)" written by Jeffrey Rayport, Dickson L. Louie includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bezos Amazon.com facing as an external strategic factors. Some of the topics covered in Amazon.com (A) case study are - Strategic Management Strategies, IT, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Amazon.com (A) casestudy better are - – increasing energy prices, challanges to central banks by blockchain based private currencies, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy,
there is increasing trade war between United States & China, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Amazon.com (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bezos Amazon.com, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bezos Amazon.com 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 (A) can be done for the following purposes –
1. Strategic planning using facts provided in Amazon.com (A) case study
2. Improving business portfolio management of Bezos Amazon.com
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 Bezos Amazon.com
Strengths Amazon.com (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bezos Amazon.com in Amazon.com (A) Harvard Business Review case study are -
Innovation driven organization
– Bezos Amazon.com is one of the most innovative firm in sector. Manager in Amazon.com (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Bezos Amazon.com
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Bezos Amazon.com does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Bezos Amazon.com has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Bezos Amazon.com to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Bezos Amazon.com 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.
Learning organization
- Bezos Amazon.com is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Bezos Amazon.com is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Amazon.com (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Bezos Amazon.com digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Bezos Amazon.com 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
– Bezos Amazon.com is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Bezos Amazon.com has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Bezos Amazon.com 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.
Operational resilience
– The operational resilience strategy in the Amazon.com (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Technology & Operations industry
– Amazon.com (A) firm has clearly differentiated products in the market place. This has enabled Bezos Amazon.com to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Bezos Amazon.com to invest into research and development (R&D) and innovation.
Ability to lead change in Technology & Operations field
– Bezos Amazon.com is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Bezos Amazon.com in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Bezos Amazon.com has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Amazon.com (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Amazon.com (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amazon.com (A) are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Amazon.com (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Bezos Amazon.com has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Amazon.com (A), it seems that the employees of Bezos Amazon.com don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Amazon.com (A), in the dynamic environment Bezos Amazon.com has struggled to respond to the nimble upstart competition. Bezos Amazon.com has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Bezos Amazon.com is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Amazon.com (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Amazon.com (A) HBR case study mentions - Bezos Amazon.com 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Amazon.com (A) 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 Bezos Amazon.com 's lucrative customers.
Interest costs
– Compare to the competition, Bezos Amazon.com 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.
Slow decision making process
– As mentioned earlier in the report, Bezos Amazon.com 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. Bezos Amazon.com 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.
No frontier risks strategy
– After analyzing the HBR case study Amazon.com (A), it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Low market penetration in new markets
– Outside its home market of Bezos Amazon.com, firm in the HBR case study Amazon.com (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Bezos Amazon.com supply chain. Even after few cautionary changes mentioned in the HBR case study - Amazon.com (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Bezos Amazon.com vulnerable to further global disruptions in South East Asia.
Opportunities Amazon.com (A) | 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 (A) are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Bezos Amazon.com can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Bezos Amazon.com 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.
Loyalty marketing
– Bezos Amazon.com 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.
Buying journey improvements
– Bezos Amazon.com can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Amazon.com (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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. Bezos Amazon.com can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Bezos Amazon.com can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Bezos Amazon.com in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
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 Bezos Amazon.com in the consumer business. Now Bezos Amazon.com can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Bezos Amazon.com can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Bezos Amazon.com 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Bezos Amazon.com is facing challenges because of the dominance of functional experts in the organization. Amazon.com (A) 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.
Creating value in data economy
– The success of analytics program of Bezos Amazon.com has opened avenues for new revenue streams for the organization in the industry. This can help Bezos Amazon.com to build a more holistic ecosystem as suggested in the Amazon.com (A) case study. Bezos Amazon.com can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Bezos Amazon.com 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.
Threats Amazon.com (A) 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 (A) are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Bezos Amazon.com 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 (A) .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Bezos Amazon.com 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. Bezos Amazon.com needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Bezos Amazon.com 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.
High dependence on third party suppliers
– Bezos Amazon.com 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 wage structure of Bezos Amazon.com
– 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 Bezos Amazon.com.
Consumer confidence and its impact on Bezos Amazon.com demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Amazon.com (A), Bezos Amazon.com may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Shortening product life cycle
– it is one of the major threat that Bezos Amazon.com is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Bezos Amazon.com can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Bezos Amazon.com needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Bezos Amazon.com can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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 Bezos Amazon.com.
Weighted SWOT Analysis of Amazon.com (A) 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 (A) 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 (A) 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 (A) 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 (A) 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 Bezos Amazon.com needs to make to build a sustainable competitive advantage.