Founded in 1994, Amazon Inc. is an online book retailer with its headquarters in Seattle, Washington. It operates in two business segments, which are North American and international ones. It serves consumers through retail websites such as amazon.ca and amazon.com, which involves merchandise and content purchase from vendors and third-party sellers. In addition, Amazon Inc. e-commerce programs allow sellers to market goods on both the company’s, and their own websites. Additionally, it allows artists, authors, and App developers among others to publish and sell digital content such as "Kindle Direct Publishing." Secondly, the company serves developers and enterprise through Amazon.com to provide access to technology infrastructure for virtual businesses. To meet customer needs, the business has a global Fulfillment Centers to provide services such as shipping of goods, and, as a result, the business has to develop both corporate and business strategies that offer a competitive advantage to the concentrated e-commerce industry.
Business Level Strategy
Business level strategy deals with the organization, and relationships to customers and other entities. The company makes decisions to create value through product development and cost-effectiveness. As a result, they allow a business to position competitively on the market. There are three generic strategies, which are cost leadership, differentiation, and focus on a market segment. Amazon adopts a Hybrid approach. However, the strategies depend on the business segment. For example, between 2009 and 2012, the company developed a new market segment of e-book reader. For the business to counter competition, it employed the cost leadership and focus strategies.
Cost leadership strategy allows a business to produce products and services for mass-markets. On the other hand, it consists of price sensitive consumers, and, as a result, a business succeeds by developing a wide market share to achieve economies of scale. Amazon developed an e-book reader called Kindle. It is a new product within an existing market segment. Later, it developed new features and advertised to its customer base, giving it a competitive advantage and attractiveness required to achieve economies of scale. Another hybrid approach is a combination of cost leadership with differentiation. Such strategies apply to products such as the “one-click-ordering-system," Voucher and Amazon Prime. The products enable the company to offer services in different segments, hence, enhancing customer satisfaction.
Regardless of the cost leadership and differentiation strategies, Amazon deals with products within a niche market, sold at low prices to sellers with access to economies of scale. Besides, Amazon reduces costs through innovative strategies. For example, Beat headphones have a huge demand on the markets, and as a result, should sell at a high price. However, Amazon has developed price reduction strategies to achieve the lowest price in the business. An example of such strategies is reducing operational expenses. The business established warehouses in rural areas where land is cheaper than in industrial areas.
Business level strategies adapted by Amazon enhance business process. For example, the business is a market leader because it provides quality products through competitive services. Additionally, it has built capability through technology to reduce the cost of service and delivery. For example, by using cloud computing, the company offers digital content to consumers without transportation. It allows efficiency in selling goods since the business does not store goods for sellers. Additionally, the strategy enables a business to reduce storage costs and reach every customer with internet connection.
Corporate Level Strategy
Corporate level strategies are the decision made by a company, which affects the entire business. It involves decisions on diversification and vertical integration of business. Additionally, it examines what the business does and makes decisions including whether the business should diversify into different areas product line or partner with others. For example, diversification occurs when a business ventures into a new business or in case of vertical integration where firms adapt other businesses or activities in the supply chain. However, diversification can be in either related or unrelated business processes. Nonetheless, the activities must add value to the objective of the business. Therefore, corporate level strategies allow companies to share resources, competence, and assets that might be available for a single company. As a result, the decisions must consider the shareholders. They have a strong influence since they provide capital for expansion and consent to diversify.
Amazon expanded through concentric diversification, which enabled the firm to develop new product lines. For example, in 1997, the company diversifies from an online bookstore and retailer to selling music, video, electronics, apparels, food, among other household and office equipment. Additionally, it has different websites that serve different market segments. Examples of such services include referral-based selling, web and related services to business. For example, it provides international shipping services to consumers. It is part of Amazon’s strategy to provide a “one-stop-shop” to customers and operational efficiency. Secondly, a significant strategy in integration is acquisitions. Examples of acquisitions include IMBD, Exchange.com, Musicfile.com, Planetall.com, and Junglee.com.
The strategies are good for business. For example, through concentric diversification it creates value for customers. For example, by using technology expertise in different business segments, Amazon reaches an array of customers with different needs, and, as a result, a high potential for long-term success and competitiveness and as a result, allows Amazon to compete with organizations such as Google, and eBay. Additionally, through such acquisitions the company absorbs technology, talented employees into business process.
Secondly, through the above strategies, the business leverages on economies of scale. An example is on storage and distributions where the firm takes advantage of existing assets and service by other firms. Additionally, it allows the firm to strengthen its brand. For example, by using other business to develop the “one-stop-shop” strategy, Amazon enhances brand awareness, which also increase market share. As a result of Amazon’s strong marketing platform, it gains new revenue streams from the existing and new customers.
The competitive environment refers to the market structure of a business. The business structure limits the flexibility of a business. Such factors affect economic conditions such as increased price of raw materials and, therefore, operating cost. Secondly, a firm has both direct and indirect competitors. Direct competitors provide similar products and services. On the other hand, indirect competitors provide dissimilar or substitute products. To address such issues, the firm uses different strategies both at the corporate and business level. Examples of such strategies may include product differentiation, innovations, costs leadership, mergers and acquisitions.
Barnes & Noble, Inc. is an indirect competitor to Amazon. It is a content, commerce, and technology company that provides access to magazines, books, newspapers, and other written content around the world and through multi-channel’s distribution platforms. It is an indirect competitor because it does not major in books as Amazon, but additionally offers substitute goods, and services. For example, the company sales trade-books, mass market paperbacks, children books, magazines, gifts, educational toys, and other entertainment content. Secondly, it commands a significant market share. For example, in 2013, it operated more than 1300 bookstores in 50 systems, 660 stores on college campuses, web e-commerce sites, and digital products to serve the demand. Additionally, it operates in three segments, which are B&N Retail, College and NOOK.
Barnes & Noble’s significant business level strategy is low-cost operations. For example, it focus is on inventory management and IT infrastructures such as BookMaster to reduce the cost. It optimizes retail stores to leverage its brand and promotes products. Corporate level strategies include alliances and partnerships as well as diversification in both products and distribution channels. For example, it spends significant amounts of capital on developing digital channels. Such channels include online NOOK devices and accessories as well as updating eBookstore and digital newsstand. Strategic partnerships, alliances and acquisitions include college and university acquisitions, strong relationship with publishers such as Flat World Knowledge, Alibris among others.
Ebay is a direct competitor to Amazon. It is a global online retailer allowing members to purchase and sell goods through its site. It offers a wide category such as antiques and arts, vehicles, clothing and accessories, coins, crafts, business and industrial products and services. However, eBay’s focus is on a service delivery. Business level strategies include Corporate level strategies include acquisitions such as Half.com and PayPal. Half.com is a retailer that offers process at fixed costs while PayPal is an online leading provider of P2P payment services.
In regards to the above information, Amazon will succeed in the long run. Amazon maximizes on innovative strategies to reduce costs of operation, and service delivery. The firm has a well-developed cost reduction strategy not common in competing firms. Additionally, through strategic acquisitions and partnerships, Amazon links to third-party sites that offer various products and services. As a result, the company builds its brand by using existing firms. The second place would be Barnes & Nobel. In addition to online retails stores, the company has thousands of brick-and-mortar stores the U.S. As a result, it offers consumers the option to shop at both places hence, enhancing convenience. Additionally, having an array of products and services, and not concentrating on one-business segments, it attracts more customers than Amazon.
Slow-Cycle Market versus Fast-Cycle Market
Cycles are trends within an industry created by innovation, product line, or general environment. The stages are the same, but every business experiences differently since some may start last long during some pass quickly than others. Even within the same industry, firms may be at different stages. The stages are significant since they affect a firm’s strategic plan. For example, some firms find a new use for declining products. To identify the business cycle, the firm uses sales over time. The stages of the business lifecycle are introduction, growth, maturity, and decline. Sales begin slowly at the first stage and then increase during the second phase and decline in the maturity stage. In contrast, profits increase through the life cycle, as firms take advantage of expertise and economies of scale to reduce costs over time.
In regards to the above analysis of the three businesses, the answer would be same in a fast business cycle. The reasons are that Amazon does not hold products it advertises, and, as a result, it would not suffer costs on obsolescence on a fast business life cycle. For example, the firm takes advantage of existing assets and service by other firms in storage and distribution of goods. Additionally, the firm does not have break-and-motor stores for hardcover books and magazines. However, it uses innovations such as eBook readers to avail such content in digital form. In contrast, in a slow-market life cycle, Barns and Nobel would be successful. The firm maintains brick-and-mortar stores as a strategy capitalize on goods with a slow-market life cycle. As a result, it is a capability that can be of competitive advantage in the long run.
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Amazon Inc. is an online book retailer operating in two business segments, which are North American and international segments. It serves consumers through retail websites such as amazon.ca and amazon.com, which involves merchandise, and content purchase from vendors and third party sellers. It has e-commerce programs, which allow sellers to market goods on both the company’s and their own websites. Additionally, it allows artists, authors, and App developers among others to publish and sell content. Secondly, the company serves developers and enterprise through Amazon.com to provide access to technology infrastructure for virtual business.
To meet customer needs and counter competition, the business maximizes on both corporate level and business level strategies. For example, corporate level strategies involve expansions through acquisitions and concentric diversification. On the other hand, it uses Hybrid strategies in the business level to counter growing competitions. The strategies are combinations of cost leadership, business focus, and differentiation. For example, in addition to the cost leadership and differentiation strategies, Amazon deals with products within a niche market, sold at low prices to sellers with access to economies of scale. Even though the competitors use similar markets strategies, the company adapts strategic distribution channels that allow it to be competitive in a fast business life cycle.
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