To maximize their effectiveness, color cases should be printed in color.Considers the development of Amazon Web Services (AWS), a division of Amazon.com, Inc., specializing in the provision of web-based storage and computing services to web developers. The case focuses on the issues facing Andy Jassy, the head of AWS, in 2008 as AWS faces increased competition from established technology giants, such as Google, Microsoft, and IBM. Students are asked to consider whether entry into web services by Amazon, which had established its brand in retail, represented a prudent move by the company. The case provides an opportunity to highlight the benefits of AWS' variable pricing for developers and to determine where overlaps exist between Amazon's core retailing business and AWS. Students are also provided with an opportunity to discuss operational diversification and its limits within the AWS context.
Authors :: Robert S. Huckman, Gary P. Pisano, Liz Kind
Swot Analysis of "Amazon Web Services" written by Robert S. Huckman, Gary P. Pisano, Liz Kind includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aws Web facing as an external strategic factors. Some of the topics covered in Amazon Web Services case study are - Strategic Management Strategies, Internet, Operations management, Risk management and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Amazon Web Services casestudy better are - – increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies,
increasing energy prices, increasing commodity prices, etc
Introduction to SWOT Analysis of Amazon Web Services
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Amazon Web Services case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aws Web, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aws Web 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 Web Services can be done for the following purposes –
1. Strategic planning using facts provided in Amazon Web Services case study
2. Improving business portfolio management of Aws Web
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aws Web
Strengths Amazon Web Services | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aws Web in Amazon Web Services Harvard Business Review case study are -
High switching costs
– The high switching costs that Aws Web 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.
Diverse revenue streams
– Aws Web is present in almost all the verticals within the industry. This has provided firm in Amazon Web Services 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.
Cross disciplinary teams
– Horizontal connected teams at the Aws Web 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.
Effective Research and Development (R&D)
– Aws Web has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Amazon Web Services - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Aws Web has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aws Web 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.
Strong track record of project management
– Aws Web is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Leadership & Managing People industry
– Amazon Web Services firm has clearly differentiated products in the market place. This has enabled Aws Web to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Aws Web to invest into research and development (R&D) and innovation.
Ability to lead change in Leadership & Managing People field
– Aws Web 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 Aws Web in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Aws Web has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aws Web to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Aws Web is one of the most innovative firm in sector. Manager in Amazon Web Services Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Aws Web is one of the leading recruiters in the industry. Managers in the Amazon Web Services 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
– Aws Web 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 Web Services HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Amazon Web Services | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amazon Web Services are -
Interest costs
– Compare to the competition, Aws Web has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Amazon Web Services 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 Aws Web has relatively successful track record of launching new products.
High cash cycle compare to competitors
Aws Web 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.
Need for greater diversity
– Aws Web 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.
Aligning sales with marketing
– It come across in the case study Amazon Web Services 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 Web Services can leverage the sales team experience to cultivate customer relationships as Aws Web is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Aws Web is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Aws Web needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aws Web to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Amazon Web Services, is just above the industry average. Aws Web 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.
Products dominated business model
– Even though Aws Web 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 Web Services should strive to include more intangible value offerings along with its core products and services.
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 Aws Web supply chain. Even after few cautionary changes mentioned in the HBR case study - Amazon Web Services, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aws Web vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Amazon Web Services, it seems that the employees of Aws Web 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.
Low market penetration in new markets
– Outside its home market of Aws Web, firm in the HBR case study Amazon Web Services needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Amazon Web Services | 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 Web Services are -
Better consumer reach
– The expansion of the 5G network will help Aws Web to increase its market reach. Aws Web 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
– Aws Web 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aws Web can use these opportunities to build new business models that can help the communities that Aws Web operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Building a culture of innovation
– managers at Aws Web 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 Leadership & Managing People segment.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aws Web can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aws Web is facing challenges because of the dominance of functional experts in the organization. Amazon Web Services 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aws Web 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 Aws Web in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Aws Web has opened avenues for new revenue streams for the organization in the industry. This can help Aws Web to build a more holistic ecosystem as suggested in the Amazon Web Services case study. Aws Web can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aws Web 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 Web Services, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Aws Web can develop new processes and procedures in Leadership & Managing People 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.
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 Aws Web 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.
Learning at scale
– Online learning technologies has now opened space for Aws Web 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 Amazon Web Services External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Amazon Web Services are -
High dependence on third party suppliers
– Aws Web 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aws Web in the Leadership & Managing People industry. The Leadership & Managing People 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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Aws Web 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 Aws Web 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.
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. Aws Web 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.
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. Aws Web needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
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 Aws Web business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Aws Web 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 Leadership & Managing People industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aws Web with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Aws Web 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. Aws Web can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Stagnating economy with rate increase
– Aws Web 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.
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.
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 Aws Web.
Weighted SWOT Analysis of Amazon Web Services 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 Web Services 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 Web Services 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 Web Services 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 Web Services 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 Aws Web needs to make to build a sustainable competitive advantage.
