Competing with Dragons: Amazon in China SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Competing with Dragons: Amazon in China
Amazon entered China in 2004 by acquiring Joyo, a local e-retailer, and rebranding it as Amazon China, implementing the technology and practices that had worked in the U.S. Unlike its local competitors, Amazon China's organizational culture focused on the use of technology while downplaying the importance of marketing. Amazon's global standardization strategy thus made Amazon China less responsive to Chinese customers' online shopping habits and less flexible in dealing with suppliers and third-party sellers on its marketplace platform. In the first decade following its entry, Amazon China saw its market share of China's expanding e-commerce market shrink dramatically. In 2012, it undertook strategic transformations focused on cross-border e-commerce and introduced Amazon's other core businesses, including Kindle devices and AWS, to China. Adapted to the local market, Amazon's Kindle was a success. Both the e-book publishing and cloud computing (AWS) sectors are highly regulated in China and Amazon's efforts to replicate its U.S. business in China faced big challenges.
Swot Analysis of "Competing with Dragons: Amazon in China" written by Pengfei Li includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Amazon Amazon's facing as an external strategic factors. Some of the topics covered in Competing with Dragons: Amazon in China case study are - Strategic Management Strategies, and Global Business.
Some of the macro environment factors that can be used to understand the Competing with Dragons: Amazon in China casestudy better are - – increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, geopolitical disruptions, there is backlash against globalization, increasing commodity prices,
central banks are concerned over increasing inflation, technology disruption, etc
Introduction to SWOT Analysis of Competing with Dragons: Amazon in China
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Competing with Dragons: Amazon in China case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Amazon Amazon's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Amazon Amazon's 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 Competing with Dragons: Amazon in China can be done for the following purposes –
1. Strategic planning using facts provided in Competing with Dragons: Amazon in China case study
2. Improving business portfolio management of Amazon Amazon's
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Amazon Amazon's
Strengths Competing with Dragons: Amazon in China | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Amazon Amazon's in Competing with Dragons: Amazon in China Harvard Business Review case study are -
Training and development
– Amazon Amazon's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Competing with Dragons: Amazon in China 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.
Superior customer experience
– The customer experience strategy of Amazon Amazon's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Competing with Dragons: Amazon in China 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.
Diverse revenue streams
– Amazon Amazon's is present in almost all the verticals within the industry. This has provided firm in Competing with Dragons: Amazon in China 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.
Sustainable margins compare to other players in Global Business industry
– Competing with Dragons: Amazon in China firm has clearly differentiated products in the market place. This has enabled Amazon Amazon's to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Amazon Amazon's to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Amazon Amazon's 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 Competing with Dragons: Amazon in China HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Amazon Amazon's is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Pengfei Li can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Amazon Amazon's 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.
Strong track record of project management
– Amazon Amazon's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Amazon Amazon's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Amazon Amazon's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Amazon Amazon's 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 Amazon Amazon's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Competing with Dragons: Amazon in China Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Amazon Amazon's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Amazon Amazon's 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.
Weaknesses Competing with Dragons: Amazon in China | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Competing with Dragons: Amazon in China are -
Aligning sales with marketing
– It come across in the case study Competing with Dragons: Amazon in China that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Competing with Dragons: Amazon in China can leverage the sales team experience to cultivate customer relationships as Amazon Amazon's is planning to shift buying processes online.
Products dominated business model
– Even though Amazon Amazon's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Competing with Dragons: Amazon in China should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Competing with Dragons: Amazon in China, is just above the industry average. Amazon Amazon's 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Competing with Dragons: Amazon in China, it seems that the employees of Amazon Amazon's 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Amazon Amazon's 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.
Low market penetration in new markets
– Outside its home market of Amazon Amazon's, firm in the HBR case study Competing with Dragons: Amazon in China needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Competing with Dragons: Amazon in China 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 Amazon Amazon's has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Amazon Amazon's has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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 Amazon's supply chain. Even after few cautionary changes mentioned in the HBR case study - Competing with Dragons: Amazon in China, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Amazon Amazon's vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Competing with Dragons: Amazon in China HBR case study mentions - Amazon Amazon's 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.
Need for greater diversity
– Amazon Amazon's has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Opportunities Competing with Dragons: Amazon in China | 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 Competing with Dragons: Amazon in China are -
Creating value in data economy
– The success of analytics program of Amazon Amazon's has opened avenues for new revenue streams for the organization in the industry. This can help Amazon Amazon's to build a more holistic ecosystem as suggested in the Competing with Dragons: Amazon in China case study. Amazon Amazon's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Amazon Amazon's to increase its market reach. Amazon Amazon's 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.
Developing new processes and practices
– Amazon Amazon's can develop new processes and procedures in Global Business 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Amazon Amazon's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Amazon Amazon's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Low interest rates
– Even though inflation is raising its head in most developed economies, Amazon Amazon's 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.
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 Amazon's can use these opportunities to build new business models that can help the communities that Amazon Amazon's operates in. Secondly it can use opportunities from government spending in Global Business sector.
Using analytics as competitive advantage
– Amazon Amazon's 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 Competing with Dragons: Amazon in China - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Amazon Amazon's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Amazon Amazon's can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
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 Amazon's in the consumer business. Now Amazon Amazon's can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Amazon Amazon's 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.
Building a culture of innovation
– managers at Amazon Amazon's 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 Global Business segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Amazon Amazon's 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 Amazon's to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Amazon Amazon's 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.
Threats Competing with Dragons: Amazon in China External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Competing with Dragons: Amazon in China are -
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 Amazon's needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Amazon Amazon's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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 Amazon's business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Amazon Amazon's 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.
Shortening product life cycle
– it is one of the major threat that Amazon Amazon's is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Amazon Amazon's 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. Amazon Amazon's can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Amazon Amazon's in the Global Business industry. The Global Business 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.
Regulatory challenges
– Amazon Amazon's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Amazon Amazon's 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 Competing with Dragons: Amazon in China .
Technology acceleration in Forth Industrial Revolution
– Amazon Amazon's has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Amazon Amazon's needs to keep up with the evolution of technology in the Global Business 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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Amazon Amazon's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Amazon Amazon's
– 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 Amazon's.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Amazon Amazon's in the Global Business sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Competing with Dragons: Amazon in China 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 Competing with Dragons: Amazon in China 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 Competing with Dragons: Amazon in China 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 Competing with Dragons: Amazon in China 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 Competing with Dragons: Amazon in China 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 Amazon's needs to make to build a sustainable competitive advantage.