Describes the evolution of Amazon.com and its business model since its founding. Specifically, discusses Amazon's transformation from an e-Tailer to a commerce platform and its marketplace initiative, which has driven this. Also describes the economics of various commerce models that Amazon employs and discusses a decision confronting Jeff Bezos regarding how the company should participate in the apparel segment.
Authors :: Stig Leschly, Michael J. Roberts, William A. Sahlman, Todd Thedinga
Swot Analysis of "Amazon.com--2002" written by Stig Leschly, Michael J. Roberts, William A. Sahlman, Todd Thedinga includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Amazon.com Commerce facing as an external strategic factors. Some of the topics covered in Amazon.com--2002 case study are - Strategic Management Strategies, Entrepreneurship and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Amazon.com--2002 casestudy better are - – there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, there is backlash against globalization,
digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Amazon.com--2002 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Amazon.com Commerce, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Amazon.com Commerce 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--2002 can be done for the following purposes –
1. Strategic planning using facts provided in Amazon.com--2002 case study
2. Improving business portfolio management of Amazon.com Commerce
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Amazon.com Commerce
Strengths Amazon.com--2002 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Amazon.com Commerce in Amazon.com--2002 Harvard Business Review case study are -
Analytics focus
– Amazon.com Commerce 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 Stig Leschly, Michael J. Roberts, William A. Sahlman, Todd Thedinga 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.
Operational resilience
– The operational resilience strategy in the Amazon.com--2002 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.
Successful track record of launching new products
– Amazon.com Commerce has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Amazon.com Commerce 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.
Learning organization
- Amazon.com Commerce 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.com Commerce is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Amazon.com--2002 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Amazon.com Commerce is one of the leading recruiters in the industry. Managers in the Amazon.com--2002 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Amazon.com Commerce 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--2002 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Amazon.com Commerce are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Amazon.com Commerce digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Amazon.com Commerce 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.
Superior customer experience
– The customer experience strategy of Amazon.com Commerce in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Amazon.com--2002 firm has clearly differentiated products in the market place. This has enabled Amazon.com Commerce to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Amazon.com Commerce to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Amazon.com Commerce is present in almost all the verticals within the industry. This has provided firm in Amazon.com--2002 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.
Strong track record of project management
– Amazon.com Commerce is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Amazon.com--2002 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amazon.com--2002 are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Amazon.com--2002, is just above the industry average. Amazon.com Commerce 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Amazon.com--2002, in the dynamic environment Amazon.com Commerce has struggled to respond to the nimble upstart competition. Amazon.com Commerce has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Amazon.com Commerce, firm in the HBR case study Amazon.com--2002 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, Stig Leschly, Michael J. Roberts, William A. Sahlman, Todd Thedinga suggests that, Amazon.com Commerce 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.
Aligning sales with marketing
– It come across in the case study Amazon.com--2002 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 Amazon.com--2002 can leverage the sales team experience to cultivate customer relationships as Amazon.com Commerce is planning to shift buying processes online.
High cash cycle compare to competitors
Amazon.com Commerce has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, firm in the HBR case study Amazon.com--2002 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 Commerce 's lucrative customers.
Need for greater diversity
– Amazon.com Commerce 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.
Increasing silos among functional specialists
– The organizational structure of Amazon.com Commerce is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Amazon.com Commerce needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Amazon.com Commerce to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Amazon.com--2002 HBR case study mentions - Amazon.com Commerce 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.
Slow decision making process
– As mentioned earlier in the report, Amazon.com Commerce 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 Commerce 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.
Opportunities Amazon.com--2002 | 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--2002 are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Amazon.com Commerce can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Amazon.com--2002, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Amazon.com Commerce 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Amazon.com Commerce 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 Commerce to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Amazon.com Commerce can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Amazon.com--2002 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.
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 Commerce 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.
Developing new processes and practices
– Amazon.com Commerce can develop new processes and procedures in Innovation & Entrepreneurship 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.
Creating value in data economy
– The success of analytics program of Amazon.com Commerce has opened avenues for new revenue streams for the organization in the industry. This can help Amazon.com Commerce to build a more holistic ecosystem as suggested in the Amazon.com--2002 case study. Amazon.com Commerce 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.com Commerce to increase its market reach. Amazon.com Commerce 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.
Leveraging digital technologies
– Amazon.com Commerce can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Amazon.com Commerce 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.com Commerce 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.
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 Commerce in the consumer business. Now Amazon.com Commerce can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Amazon.com Commerce can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Amazon.com Commerce in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Threats Amazon.com--2002 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--2002 are -
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.
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.com Commerce 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.
Regulatory challenges
– Amazon.com Commerce 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 Innovation & Entrepreneurship industry regulations.
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.com Commerce in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
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 Commerce needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Amazon.com Commerce with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Amazon.com Commerce 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.
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 Commerce business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Amazon.com Commerce has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Amazon.com Commerce needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Amazon.com Commerce in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Amazon.com Commerce 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--2002 .
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--2002, Amazon.com Commerce may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
Weighted SWOT Analysis of Amazon.com--2002 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--2002 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--2002 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--2002 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--2002 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 Commerce needs to make to build a sustainable competitive advantage.