Yahoo and Amazon: Building a Competitive Advantage (Research Paper Sample)

Yahoo and Amazon: Building a Competitive Advantage
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Yahoo and Amazon: Building a Competitive Advantage
Introduction
The emergence of the internet laid a basis for different entrepreneurs not only to create businesses, but also employment. This owes to the reality that several online businesses emerged after the creation of the internet. Some of these companies include Yahoo, Amazon, Google, and lately Facebook. Each of these organizations is unique owing to the different types of services they provide. It is critical that even though such businesses provide different services, they tend to have more similarities than differences. This owes to the reality that such organizations use similar strategies in order to maintain a competitive advantage over their peers. Four organizations have been mentioned. However, the upcoming discussion will focus on Amazon and Yahoo. This paper discusses the histories, strategies, compares, and contrasts the strategies before recommending a functional level strategy for each organization.
The History of Yahoo and Amazon
Yahoo originated from a website directory, which was developed by Jerry Yang and David Filo. The founders developed it as a hobby because they wanted an easy and quick tool for revisiting their favorite websites. However, the list of their favorite websites kept on growing and forced them to categorize the websites based on content. This business first appeared on the internet when its founders published it for their friends to use. Nonetheless, it was called “Jerry’s guide to WWW” before it was later renamed Yahoo, which is an acronym for “yet another hierarchical officious oracle” (Hill and Jones, 2013). By 1994, hundreds of thousands of internet users visited the website frequently. Consequently, the founders started charging companies for advertising on their website. The growth forced Jerry and David to expand their business by sourcing capital from Sequoia Capital. The company later raised $338 million from the stock market and hired Tim Koogle who helped to manage the organization.
In comparison, Amazon’s founder was Jeff Bezo who had a computer science background from Princeton University. By 1994, the founder had a dream of creating an online bookstore owing to the rapid growth in the number of internet users. The founder began the online bookstore by operating in his garage in 1995 (Clay, n.d). It is notable that the founder’s initial capital was $ 7 million, which was borrowed. The business was first of its kind hence; it quickly received recognition and started booming in a short time. Consequently, Bezo was forced to move to a 2, 000 square-foot warehouse a few weeks after initiating the business. Six months after starting the business, Bezo acquired $7 million from venture capitalists and moved to a 17,000 square-foot warehouse (Hill and Jones, 2013). Two years after initiating the venture, Bezo was forced to sell shares in the public stock in order to raise more capital for expansion. Today, Amazon also deals with electronics, toys, and food.
Strategic Differences That Influenced the Relative Success of Amazon and Yahoo
The hiring of Koolge by Jerry and David proved to be a resourceful decision because he introduced several business strategies to the organization. To begin with, Koogle (a business executive) recruited marketing experts who developed the classification system for Yahoo. Additionally, he encouraged Filo and Yang to hire more engineers in order to improve the search engine (Hill and Jones, 2013). Another strategy employed the executive was to globalize Yahoo as an advertising venue using additional portals and languages. The use of new media and entertainment services in addition to engaging e-commerce websites boosted the revenue for Yahoo. Yahoo also worked together with media and entertainment companies, which ensured the organization was the megabrand in the market. It was done through acquiring other companies that facilitated online interaction. For instance, Yahoo acquired rocketmail, GeoCities, and Broadcast.com. In short, the main strategy employed by Yahoo was branding.
Amazon implemented different strategies in order to emerge successful. For example, Hill and Jones (2013) assert that Amazon motivated its employees to work efficiently. Simply put, Amazon encouraged its employees to work fast, improve on technology, and wok innovatively. The organization believes in using teams to spur innovation. This is evidenced by an innovation called “gold box” that works as a one-hour order and delivery. It is critical that Amazon also explored other business ventures. For example, the organization used its business experience to sell music CDs after realizing the venture was a good fit with books. Ultimately, Amazon also acquired their major competitor, Border’s, as a business strategy (Clay, n.d). It is evident that there is a difference in the strategies applied by Yahoo and Amazon. This is because Yahoo focused on branding, while Amazon focused on its first movers advantage to control the market. In addition, Yahoo focused on acquiring emerging companies while Amazon acquired a failing business.
A Contrast and Comparison between Yahoo and Amazon’s Strategic Plans
It is crucial to compare and contrast different business strategies used by Yahoo and Amazon because the discussion enhances the subject of competitive advantage. First, it is evident that both organizations acquired other businesses in order to remain competitive. As an evidence of this, Yahoo acquired rocketmail, GeoCities, and Broadcast.com while Amazon acquired Border’s. However, Yahoo was more aggressive because it was acquiring emerging organizations while Amazon acquired a stranded organization (Kumar, n.d). Furthermore, the fact that Yahoo acquired three organizations while Amazon acquired one organization highlights the level of aggression between the two organizations.
It is evident that both organizations came up with innovative ideas, which improved their operations. It is particularly interesting that Yahoo innovated the idea of expanding its operations to include services it was not providing at the onset. This owes to the reality that Yahoo expanded their business to include media, entertainment, and video streaming. In comparison, Amazon was innovative using teamwork and motivation of employees. This enabled the organization to develop the “gold box” technology. Clearly, both organizations used innovative ideas in the competitive industry. However, Yahoo focused on the development of new technology while Amazon focused on teamwork and motivating employees.
The Approach to Strategic Planning Pursued by Yahoo and Amazon In Order To Achieve a Competitive Advantage
Both organizations used different strategic plans in order to achieve a competitive advantage. For instance, Yahoo maintained a competitive advantage by diversifying its business operations. It is undeniable that yahoo began as a search engine before expanding to include other services. As a result, Yahoo moved from an exclusive search engine provider and included other businesses operations such as communication, e-commerce, and other corporate services. It is critical that Yahoo eliminated competition from the market by acquiring emerging companies in the online industry. As a result, the organization attracted more users to its site and made Yahoo a leading site for advertisements (Kumar, n.d).
The organization was also innovative in its use of technology because Koogle encouraged its founders to improve on their technology constantly. According to Hill and Jones (2013), Yahoo had AltaVista as the main competitor at the onset. AltaVista used a mathematical algorithm to enable its search engine crawl through different websites and provide their users with the results. On the contrary, Yahoo used a hierarchical technique that arranged websites hierarchically based on frequency of visits from internet users. Furthermore, Yahoo depended on internet users to rate the most frequently visited websites. This technology enabled the Yahoo to overshadow AltaVista because it had the best results for internet users. In short, Yahoo used technology to maintain a competitive advantage over its peers.
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