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 - – increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic ,
central banks are concerned over increasing inflation, there is backlash against globalization, 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 -
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.
High brand equity
– Amazon.com Commerce has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Amazon.com Commerce to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Amazon.com Commerce
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Amazon.com Commerce does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Amazon.com Commerce in the sector have low bargaining power. Amazon.com--2002 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Amazon.com Commerce to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Amazon.com Commerce is one of the most innovative firm in sector. Manager in Amazon.com--2002 Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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.
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 -
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 Commerce supply chain. Even after few cautionary changes mentioned in the HBR case study - Amazon.com--2002, 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 Commerce vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Amazon.com--2002, it seems that the employees of Amazon.com Commerce 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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Amazon.com Commerce is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Amazon.com--2002 can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
No frontier risks strategy
– After analyzing the HBR case study Amazon.com--2002, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Lack of clear differentiation of Amazon.com Commerce products
– To increase the profitability and margins on the products, Amazon.com Commerce needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Amazon.com Commerce 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.
Interest costs
– Compare to the competition, Amazon.com Commerce 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.
Products dominated business model
– Even though Amazon.com Commerce 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 - Amazon.com--2002 should strive to include more intangible value offerings along with its core products and services.
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 -
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.
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. Amazon.com Commerce can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Commerce can use these opportunities to build new business models that can help the communities that Amazon.com Commerce operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
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.
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.
Loyalty marketing
– Amazon.com Commerce 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Amazon.com Commerce is facing challenges because of the dominance of functional experts in the organization. Amazon.com--2002 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 Commerce 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 Innovation & Entrepreneurship segment.
Using analytics as competitive advantage
– Amazon.com Commerce 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--2002 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Amazon.com Commerce to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Amazon.com Commerce can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Amazon.com Commerce 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.
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 -
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.
Increasing wage structure of Amazon.com Commerce
– 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 Commerce.
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.
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.
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.
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.
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.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Amazon.com Commerce can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Amazon.com Commerce 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.
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.
Stagnating economy with rate increase
– Amazon.com Commerce can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
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 .
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 .
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.
