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Strategic Management BSM999

Q1 AMAZON.COMS STRATEGY DURING 2007 TO EARLY 2010


Growth To be the largest online retail Long improve market store and term customer experience

leadership

To have the largest market share and increased sales

One-stop shop Customer centric


To acquire companies to own products and technology or by alliances

Expanding (Market leadership)

Diversified range and category of products DRM free MP3 and media

Acquisition / Alliances

Kindle, cloud services, web services and currency converter Product portfolio

Technology

Digital contents

QUESTION 1 CONTD.

Q2 VALUE CHAIN FOR AMAZON


Positive working capital, turnover period for receivables / payables (approx. 26 Days) Reinvestment Continued Investment Improved efficiency, lower prices into business for continuous innovation 19.16 billion but net profit margin is 3.4% Kindle, Kindle 2, Cloud computing (AWS), AWS Premium Virtual salesman concept Storage Services Support , Pubic Data, Amazon EBS, etc. Simple Office supply store (+500,000 products) Courier Service / Fulfilment centres on development /of Digital Contents: $1 billion spent Courier Service Fulfilment centres Elastic Computer Cloud Online shopping from customers Transport between the Distributionpoints software Espanol Store (1.6 million Hispanic owned technology, 187 million on internalTransport between the Distribution points Queue Service use Simple Online registration for developer customer in US) business location ofAlliances centres and DB Strategic fulfilment Strategic Strategic location of fulfilment centres and Simple (flexibility) Acquisitions Music blowout store + Entertainment, warehousing Classic(Fabric.com, ReflexivePayments Music warehousing Flexible Go Indie Service Transaction, Feedback, Complaints from independent music labels) Store 19.7 million sq feet of property (warehousing) 19.7 million sq feet of property (warehousing) AbeBooks) (30 Web Services every sale in Amazon Jewellery/ Watches (260% in Diamond, Richard Dalzell, recruitment of experienced staff sq ft Hazleton and 500,000 in to meet 600,000 600,000 sq ft in Hazleton and 500,000 in Currency Convertor between inbound and in Coloured Gems, 107% is sterling silver) 169% customer needs Material handling Goodyear Goodyear TextBuyIt outbound logistics Motorcycle Frustration Free PackagingStore 300,000 Later Frustration Free Packaging Bill me products and 500 manufactures DRM free MP3

QUESTION 2 CONTD.

Analysing competitive positioning using VRIN approach

Valuable Upgradation of existing technology and continuous innovation Rare Brand name and virtual salesman concept Inimitable Customer base and services Non-substitutable Personnel and strategic alliances

QUESTION 2 CONTD.
Strategic Capability
Resources
Good turnover and good management of working capital Strategically located distribution centres, technology warehouses Product development, databases, internal softwares and public websites Brand, customer loyalty and reputation with suppliers Specific skills, commitment, key personnel Financial

Competencies
Managing cash flow, debtors and creditors Storage and utilisation of information. Logistics Leverage technology to make products accessible to customers and manage operations Long term strategic relationship, assistance in maintaining working capital Utilisation of the personnel and pro-active approach
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Physical

Technological

Reputation

Human

Q3 AMAZONS DIVERSIFICATION STRATEGY


Amazon has developed a vast technology resource over the years in order to achieve market leadership and did not hesitate to make bold investment decisions Their study of the consumer buying behaviour enabled them to offer a large variety of products and services. They started out with Books and went on to provide clothing, electronics, accessories and even auto parts and stationery Amazon had a very good financial position through which they were able to provide these products and services globally Some of these products and services were sourced through strategic alliances and acquisitions

QUESTION 3 CONTD.
Strengths Brand name Online global presence Large revenues Large customer base and customer confidence Weakness Excessive investment in diversification lead to reduced net profit margin Unhappy shareholders due to lack of dividends Focus should be on consolidation of the current product range and sub brands rather than further diversification

Q4 AMAZONS STRATEGY GOING FORWARD


Resources R1. Finance R2. Technology R3. Location R4. Distribution R5. Brand Importance 7 9 5 8 9 Amazons relative strength 6 8 4 8 8

QUESTION 4 CONTD.
Capabilities C1. Logistics C2. Procurement C3. Operations C4. Marketing / Sales C5. Services C6. HR C7. Technology development C8. Firm infrastructure Importance 9 8 9 8 5 6 6 8 Amazons relative strength 8 8 6 5 7 7 8 7

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QUESTION 4 CONTD.
Key Strengths
R2 C6 C7 C1 C2 R5 R4 R2

Superfluous Strengths

Relative strength

C5 C7

R1
C8 C3 R3 C4

Zone of Irrelevance

Key Weaknesses

Strategic importance
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QUESTION 4 CONTD.
Strategy going forward Consolidate the current business line

Amazon needs to exploit their current strengths and use them to overcome their weaknesses
With the current economic downturn going on, investment needs to be curtailed as the customers are not spending as much as they did earlier

Hold back on the heavy investment on new technology

Improve efficiency of the business and thereby increasing the net income

Amazon has a very low net profit margin in comparison to its competitors and they need to increase it to be attractive to the shareholders The amazon website is does not highlight its sub-brands. They should create a co-branding and/or cross branding strategy to increase sales in the current economic downturn

Improve sales & marketing of the brand

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