Strategic management (Coursework Sample)

STRATEGIC MANAGEMENT: CASE FOR AMAZON.COM
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Introduction
The current business environment presents a number of challenges for firms, especially those in the IT industry such as Amazon.com. For this reason, such firms have been obligated to explore and adopt relevant strategies for gaining a competitive advantage over their competitors. One of the key tools of analysis that have been given weight is the application of value chain analysis. Ideally, this paper presents a unique approach to the analysis of Amazon.com’s value chain and thereafter, suggests possible strategies for future improvement.
Porter’s Value Chain Model
In analyzing a firm’s competitive position, experts argue that, it is imperative to focus on a firm’s value chain as opposed to the firm as a whole. In his value chain model, Michael Porter asserts that an organization’s value chain consist of those activities done by an organization, which adds up to the value delivered to its stakeholders (particularly shareholders and customers) (Sekhar 2009). Though unique for each industry, it is only through value chain that a firm can gain cost advantage or differentiation.
For manufacturing firms, their value chain entails both primary and support activities. In this context, primary activities are those in which materials are purchased, processed and delivered to customers as final products. These include activities such as inbound logistics, operations, outbound logistics, sales and marketing, and after-sales services. Support activities, in this case, are those that support the execution of primary activities (Monczka 2009). They entail activities like procurement, technological development, human resource management and the firm’s infrastructure.
The Value Chain Analysis for Amazon.com
For Amazon.com, the application of Porter’s value chain model is not a new concept in the firm. In order to strengthen the organization’s competitive position over its two key industrial rivals (Ebay and Walmart), the Amazon.com has embarked only on primary and supportive activities, which create stakeholder value. From the firm’s initial business strategy, a number of value chain activities can be identified as sales and marketing, customer service, logistics, operations, procurement and human resource management.
In using value chain to improve Amazon.com’s competitiveness, the above value chain activities have been assigned different weights (attentions). Moreover, though executing the same value chain activities as it rivals, Amazon.com gains a competitive advantage by doing same things differently. For example unlike its traditional competitors, which perform their activities in physical stores, Amazon.com uses a virtual store. This enables the firm to offer anything that customers want. In its value chain, Amazon.com has laid more emphasis on two activities, which include customer service, and sales and marketing. By focusing on customer service, the firm has made a significant step towards being the ‘world’s most customer-centric’ firm. For example, in 2000, research indicates that Amazon.com spent over $200 million to seven distribution centers (warehouses) with a 3 million-ft3 capacity from Nevada to Kentucky (OS Financial Trading System 2011). This has helped to increase customer awareness of its products, thus boosting its revenue and profitability. For example, during that year, the sales went up by 169%. A critical analysis of the company’s value chain, further, indicates that the firm applied diversification as a strategic competitive strategy. Here, evidence reveals that Amazon.com offers a wide range of products (books, Telecommunication facilities, furniture, chicken products) to minimize the risks associated with a single product firm, such as product failure or market frustration (Amazon.com 2012). In addition, the firm has found it effective to open up new companies and collaborating with existing companies.
In the past two decades, the company has been paying less weight to value chain activities like inbound logistics, operations and filing. However, with more focus directed to operational efficiency in 2003, the three value chain activities have been incorporated into the company’s new business strategy. Up to date, inbound logistics, operations and filing has helped to lower the firm’s product and shipping prices by reducing its cost of operations through operational efficiency.
In addition to the above primary activities, recently, Amazon.com added a new activity to its value chain, business-to-business (B2B) marketing, by launching AmazonSupply. Through this site, its customers (both industrial and commercial) now benefit by making direct purchase online. Moreover, the customer are enjoying a wide range of products such as pneumatics, hydraulics, drill bits, hand dryers, cash registers and cutting tools that were not initially available (Dow Jones and Company Inc 2012). Also provided through AmazonSupply is free shipping on intelligible orders of $ 50 or more, dedicated customer-services, and corporate lines of credit. These activities increase the competitive edge of the company over its competitors (Dow Jones and Company Inc 2012).
Amazon.com also attains a competitive advantage through its supportive activities like low price procurement and effective human resource management. Through its low price procurement activities, low cost of sales and low product prices has been realized by the firm and its customers respectively. This had made Amazon.com to be a preferred by most customers. Since its incorporation, Amazon.com has highly invested in its human resources with highly delegated decision-making capabi...