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

Yahoo! and Amazon: Building A Competitive Advantage
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Historical Backgrounds
Amazon
The original name of Amazon.com was different in tone and theme with the founder Jeff Bezos and his wife struggling to come up with the right name. They finally settled on Relentless.com, despite friends criticizing it that it sounded sinister (Brandt, 2012). Bezos registered this URL in September 1994, and even typing this domain name today redirects one to Amazon.com.
Having incorporated the company as Cadabra in July 1994, Bezo's was to settle on the name Amazon because it was "exotic, different and the biggest river", just as he planned his online store to be. He placed a high premium on building his brand, noting that brand names were very important online (Brandt, 2012).
Amazon.com started from Bezo's garage as an online bookstore. This is after selecting twenty products which could be marketed online and narrowing these to five; books, CDs, videos, computer software and computer hardware. Notably all the other four shortlisted items are now on sale at Amazon.com and the product range has since expanded to include DVDs, downloads and streaming as well as video games. The product list also includes electronics, food, toys, jewelry, health and personal care items, home improvement items, automotive parts, musical instruments, sporting goods, baby and beauty products, etc. The company also offers such services as publishing, film production and cloud computing. Amazon.com also makes consumer electronics including e-book readers, TVs, phones and tablets. Indeed, Amazon is the 'Everything Store', just as Bezo's strategized at its startup (Stone, 2013).
Within two months after startup, the company's sales were up to $20,000 per week with its book products sold in all fifty US states and in over forty five countries. The company issued its initial public offering at the NASDAQ Stock Exchange on May 15, 1997 at a price of $18 per share (Stone, 2013). This plummeted later during the dot-com bubble burst, with each share going for $1.50 after three stock splits.
Amazon intended strategy was a slow growth trajectory path where it did not anticipate making any profits for the first five years, investing all the money it made back into the business. But when it survived the dot-com bubble burst, it thrived to become a huge player in the ecommerce business, making its first profit in the fourth quarter of 2001. In the meantime Jeff Bezos was named the Person of The Year in 1999 for his success in popularizing online shopping (Brandt, 2012).
Amazon set out in a merger and acquisition spree from 1998, acquiring various competitors in such markets as UK, Germany and China (BBC News, 1999). It also merged with and acquired businesses dealing with related products such as software, tool and home improvement, clothing, music, industrial components, among many others. So far Amazon has acquired over sixty companies, has over forty subsidiaries and has invested and entered into partnerships with many other companies dealing in related products.
The Washington-based ecommerce giant has risen to be the leading Internet retailer in the world today with a value worth nearly $200 billion and employing about 100,000 people (Stone, 2013).
Yahoo!
Yahoo.com is one of the most important players in the history of the Internet and one of the largest existing portal. In January 1994, Jerry Yang and David Filo were electrical engineering graduate students at Stanford University who were looking for a job. In their office located on the campus, they dedicated their afternoons to surfing the web. In their endeavors, Filo discovered the Mosaic browser which had just appeared on the web, its parent company Mosaic Communications having been started around the same time (Heernet, 2011).
Filo and Yang liked the new browser and, to keep track of all the pages they had visited, they made 'Jerry's fast track to Mosaic' which bookmarked the pages topically. The topics included Arts, Business and Economics, Health, News, Science, among others. This was simply a user service, an exhaustive index for those who had access to Stanford's computer network.
'Jerry's fast track to Mosaic' became a well-known name, with the partners having less success with subsequent replacement names. In April 1994, Yang and Filo eventually decided to substitute all these names with something that could easily strike a chord with people, Yahoo, based on the word's definition of 'rude, unsophisticated, uncouth' as used in the book Gulliver's Travels (Heernet, 2011). The founders noted that Yahoo! was a suitable acronym for 'Yet Another Hierarchical Officious Oracle'.
Before the end of 1994, Yahoo! had surpassed over 100,000 hits per day, creating the most activity on the web despite not engaging in any marketing activities. The domain, yahoo.com, was registered in January 1995.
Yahoo! grew over the next few years to become one of the most successful technology company, and despite other internet directories such as Infoseek, Lycos and WebCrawler appearing on the scene, none of them managed to reach the number of Yahoo! followers. In the spring of the following year, Sequoia Capital, a venture capital company, invested two million in Yahoo! for a twenty five percent stake, the best deal in the history of Silicon Valley at the time. Sequoia subsequently invested another million dollars in the company. (Heernet, 2011)
It was clear to Yang and Filo that their startup had huge potential, yet neither of them had the knowhow to run a company. Hence they hired professional managers to steer the growth of the company, with Tim Koggle as CEO and Jeffrey Mallet as COO (Carlson, 2015).
Yahoo! went public in 1996, making a very successful initial public offering (IPO) by raising nearly $34 million at $13 per share. This was to prove an inspired move as the stock market soon experienced a bull run based on the dot-com bubble, with the company's stock price skyrocketing to reach an all-time high of S118.75 in 2000, though after the dot-com bubble burst, it dropped to an all-time low of $8.11 just a year later (Heernet, 2011).
Towards the end of the 1990s, Yahoo! adopted an emergent strategy of aggressively promoting its brand based on a realization that not many US citizens knew about the company. The marketing campaigns included various catchy slogans being prominently and strategically displayed, including at various football stadiums.
Today, Yahoo! Inc is a public company traded on the New York Stock Exchange with a share trading at about $16, making the company worth around $20 billion (Carlson, 2015). It is one of the most popular internet media in the world offering many valuable and paid services that include Yahoo! mail, Yahoo! messenger and Yahoo! weather.
Comparing Amazon and Yahoo! strategies
From their histories, it is clear that Amazon has mostly been guided by intended strategies whereas Yahoo! has mostly adopted emergent strategies. Mintzberg (2000) defined strategy as "a pattern in a stream of decisions". Strategy evolves as intentions collide with a fluid reality, hence intended strategies and emergent strategies.
Whereas Amazon's strategic plan was to build a strong brand right from the start, the Yahoo! founders set out to make their web browsing easier and their business model was mostly an emergent strategy to deal with the popularity of their product. Hence, apart from careful consideration of the name for his store, the Amazon founder set out to identify what was easily marketable online, finally settling on starting with books (Brandt, 2012). On the other hand, the Yahoo! founders pondered some possible names for their emergent product before finally settling on the name Yahoo! with an exclamation mark because Yahoo! had already being taken by another organization (Heernet, 2011).
Though Amazon's strategic planning was to cater for online book buyers, it adopted an emergent strategy of offering whatever the online community wanted to buy (Stone, 2013). This made it add new products to its portfolio as the requirements arose, a trend that it continues to this day. Adoption of this strategy can be traced back to 1998 when the company started to aggressively venture into mergers and acquisitions of various competing firms in UK, US and Germany as well as firms offering complementing and supplementing products to its initial product (BBC News, 1999).
This is not unlike Yahoo! which also started acquiring other companies offering products related to its core competency of being a web directory from as early as 1997 with the plan of building its product portfolio. Among the products it introduced was a mail service, online gaming and web hosting (Heernet, 2011).
However, one key difference in their strategic planning was that Yahoo! acquired companies that had established users yet went on to tweak the products including changing the terms of service for the users; a move that proved unpopular with many of the users of such companies like the web hosting site GeoCities and the social media site eGroups (Carlson, 2015). It even lost out in its bid to merge and or acquire some prominent companies such as YouTube and eBay. In contrast, Amazon already had a system of engagement with online buyers, only adding backend support and the product range (Stone, 2013).
Whereas both Amazon and Yahoo! have strong online presence, a major strategy difference is that Amazon has a brick-and-mortar presence in many locations throughout the world to cater for their software development, customer service and warehousing and distribution (Stone, 2013). This ensures that it is always in touch with the specific needs of a market, it is able to quickly satisfy the needs of that market and to create goodwill as a responsible corporate citizen that pays its local taxes and offers employment...