Bharati Vidyapeeth

(Deemed to be University), Pune, India

Institute of Management and
Entrepreneurship Development, Pune

PROJECT REPORT
ON
BUSINESS POLICY AND STRATEGIC
MANAGEMENT ANALYSIS OF
AMAZON

Submitted By:
Poornima Upadhyay
MBA II year, Div. A
Roll No. 183
 INDEX
CHAPTER 1: INTRODUCTION
1.1 Company Overview
1.2 Products of the Company
1.3 Report Objectives
CHAPTER 2: STRATEGIC INTENT
2.1 Vision and Mission Statement Analysis
2.2 Strategic Business Units
 Primary Strategic Business Units
 Corporate Strategic Business Units
2.3 Balance Scorecard
CHAPTER 3: STRATEGIC FORMULATION
3.1 PESTEL Analysis
3.2 PORTER’S 5-Forces Analysis
3.3 SWOT Analysis
CHAPTER 4: STRATEGIC IMPLEMENTATION
4.1 3 Year Strategic Plan for the company
CHAPTER 5: CONCLUSION AND RECOMMENDATIONS
 INTRODUCTION

1.1 Company Overview

Amazon.com was one of the first major companies to sell goods over the Internet
and has become a worldwide established name. Amazon.com is an American e-
commerce company that is based in Washington. It was founded by Jeff Bezos in
1994 and began as an online bookstore but due to its success, Amazon.com has
developed separate websites for Canada, UK, Germany, France, China and Japan.
Amazon.com's product lines available at its website include several media (books,
DVDs, music CDs, videotapes and software), apparel, baby products, consumer
electronics, beauty products, gourmet food, groceries, health and personal-care
items, industrial & scientific supplies, kitchen items, jewelry, watches, lawn and
garden items, musical instruments, sporting goods, tools, automotive items and toys
& games. In India, Amazon is now gearing up to play a role in the grocery retail
sector aimed at delivering customer needs.

1.1 Products of the Company

Amazon.com has a number of products and services available, including:

• Amazon Marketplace
• AmazonFresh
• Amazon Prime
• Amazon Kindle Fire
• Amazon Fire TV
• Amazon Payments
• Amazon Games
• Amazon Art
• Amazon Video
• Amazon Drive
• AmazonBasics
• Amazon Elements
• Amazon Studios
• Amazon Web Services
• Amazon Local
• AmazonWireless
• AmazonFresh
• Amazon Prime Pantry
• Amazon Dash
• Amazon Prime Air
• Prime Now
• Amazon Go
• Amazon Video Direct
• Amazon Music Unlimited
• Amazon Tickets
• STEM Club
• Amapedia
• Amazon Unbox
• Amazon Vine
• Amazon Connect
• Amazon Webstore
• Amazon Home Services
• Amazon Destinations
• Amazon Book
1.2 Report Objectives

The report objectives that will enable us to recommend a strategic direction to

Amazon.com, these are:
1. To establish background information on Amazon.com’s current strategic
position.
2. To investigate, analyze and evaluate Amazon.com’s external and internal
environment.
3. To generate strategic options that Amazon.com could adopt derived directly from
the internal and external analysis.
4. To decide on the best option we would recommend to Amazon.com anddetail the
implementation implications of this option.
 STRATEGIC INTENT

2.1 Vision and Mission Statement Analysis

Amazon.com Inc.’s vision and mission statements have pushed the company to
become the largest online retailer in the world. This success is attributed to stringent
measures to ensure that the mission and vision statements are fulfilled. The corporate
vision statement provides organizational direction toward a desired future condition
of the business. The corporate mission statement presents business goals and guides
strategic formulation in the company. Amazon’s vision statement shows a future of
global dominance in the online retail industry. On the other hand, Amazon’s mission
statement focuses on effective and high-quality service. The fulfillment of these
official statements facilitates further enhancement of the e-commerce business for
long-term success in the global market. Amazon.com’s mission statement is
responsible for the attractiveness of the company’s online retail offerings. The vision
statement also creates a strong motivational force to push Amazon’s e-commerce
business to be the best in the world. Amazon’s vision statement is “To be Earth’s
most customer-centric company, where customers can find and discover anything
they might want to buy online.” It underscores the organization’s main aim of
becoming the best e-commerce company in the world. The following components
or characteristics are emphasized in Amazon’s vision statement:
1. Global reach
2. Customer prioritization
3. Widest selection of products.
The “global reach” component in Amazon.com Inc.’s vision statement is all about
international leadership in the e-commerce market. Thus, a corresponding strategic
objective is global expansion, especially through market penetration and market. The
“customer prioritization” component shows that the firm considers customers as the
most important stakeholder group in the online retail business. Moreover, it indicates
continuing efforts to broaden the product mix, under Amazon.com Inc.’s marketing
mix approach.
Amazon’s mission statement is as follows: “We strive to offer our customers the
lowest possible prices, the best available selection, and the utmost convenience.” It
promises an attractive e-commerce service to satisfy customers’ needs. The
following components or features are identifiable in Amazon’s mission statement:
1. lowest prices 2. Best selection 3. Utmost convenience. The “lowest prices”
component of the mission statement guides Amazon.com Inc.’s pricing strategy.
Such low prices are a selling point that makes the company’s e-commerce website
and service attractive. A corresponding strategic objective is to reduce operational
costs. It also points to having the best selection. The availability of a wide variety of
products on the company’s website is a major factor that attracts customers.
Moreover, It emphasizes convenience. Convenience is a common criterion that
consumers use in evaluating the quality of the online retail service.

2.2 Strategic Business Units

 Primary Business Units
TOWS Matrix

Amazon used the TOWS matrix to help it look at options, and to ultimately identify
high leverage strategies. Strengths, weaknesses, opportunities and threats are looked
at in a more systematic way than in a typical SWOT analysis. A TOWS analysis
helps one to focus on: leveraging strengths, avoiding weaknesses, make the most of
opportunities, and manage threats.
Strategic Position & Action Evaluation (SPACE) Matrix Analysis
The Strategic Position & ACtion Evaluation matrix (SPACE Matrix) is a strategic
management tool that focuses on strategy formulation especially as related to the
competitive position of an organization. It can be used as a basis for other analyses,
such as the SWOT analysis, BCG matrix model, industry analysis, or assessing
strategic alternatives (IE matrix). It is a systematic appraisal of four key issues that
balance the external and internal factors that should determine the general theme of
the strategy: ➢ External • Industry Attractiveness • Environmental Stability ➢
Internal • Competitive Advantage • Financial Strength
Quantitative Strategic Planning Matrix (QSPM)
The Quantitative Strategic Planning Matrix is a strategic tool which is used to
evaluate alternative set of strategies. The QSPM incorporate earlier stage details in
an organize way to calculate the score of multiple strategies in order to find the best
match strategy for the organization. The QSPM comes under the third stage of
strategy formulation which is called “The Decision Stage” and also the final stage
of this process.

 Corporate Strategic Business Units

BCG Matrix
The BCG Matrix is a planning tool that uses graphical representations of a
company’s products and services in an effort to help the company decide what it
should keep, sell or invest more in. It plots a company’s offerings in a four square
matrix, with the y-axis representing rate of market growth and the xaxis representing
market share.
Analysis of BCG Matrix :
Cash Cows: There are some product categories that bring in enough revenue for a
business entity to regulate its operations of different business units. These products
are labeled as a cash cow and the manager’s task is to take leverage of these products
and utilize their high market share for gaining high revenues. Amazon has generated
a great deal of cash through the sale of its retail goods, prime subscription and e-
books, making them a cash cow for the company.
Stars: The second category of products i.e. Amazon Prime Air, is a part of the star
or rising star, which holds a high market share. As the name reflects, these products
are emerging as the leading revenue generator for an organization. They do not yield
the same financial return as cash cows, but the future growth of these business units
is promising, thus encouraging the management to continue with the investment in
them. Even though these products require high investment, they are in a growing
phase which suggests that these business units are likely to become cash cows once
the industry has reached maturity.
Question Marks: The next quadrant included in BCG Matrix is question marks.
Amazon Fresh have the chances of growing into a profitable business, however the
limited market share makes it impossible to use these business units as prime
revenue generator. The industry is still in growth phase, which indicates that
question marks may emerge as a rising star if the business is able to set the right
direction for these products.
Dogs: The last category in BCG Matrix includes Amazon Auction, Amazon Studios
which are not generating high sales and have not been able to establish a notable
market share.
2.3 Balance Scorecard
 STRATEGIC FORMULATION

3.1 PESTEL Analysis

Summary of PESTEL Analysis
Political, economic, social, technological progress indicates an increasing and
attractive market to be exploited by Amazon.com. The Chinese and Indian markets
have shown exceptional growth. The use of internet as a social networking channel
has created new opportunities to be exploited. Additionally, as environmental
awareness increases globally, it is important that Amazon.com’s strategy support
environmentally friendly activities. The global nature of Amazon.com’s activities
also suggests that strategies developed should comply with the different legal
obligations internationally.

3.2 PORTER’S 5-Forces Analysis

Amazon.com Inc. continues to lead the online retail market as a result of integrating
the issues identified in this Five Forces Analysis into the firm’s strategies. Michael
Porter developed the Five Forces Analysis model as a tool for the external analysis
of firms. In the case of Amazon, the external factors define the conditions of the e-
commerce industry environment, with focus on the online retail market. The
company remains the biggest player in this market. To keep this position in the long
term, Amazon must regularly evaluate the external factors in the online retail
industry environment.

Overview Amazon.com Inc. competes against a variety of firms, including smaller

online retail stores and large firms like Walmart. The global scope of the e-
commerce business also exposes Amazon to a diverse set of external forces. The
following are the intensities of the external factors affecting Amazon, based on
Porter’s Five Forces Analysis model:
1. Competitive rivalry or competition (strong force)
2. Bargaining power of buyers or customers (strong force)
3. Bargaining power of suppliers (moderate force)
4. Threat of substitutes or substitution (strong force)
5. Threat of new entrants or new entry (weak force)
3.3 SWOT Analysis
 STRATEGIC IMPLEMENTATION

4.1 3 Year Strategic Plan for the company

1. Market Development
Acquire a growing, profitable e-retailing company in India to take advantage of the
growing market.
➢ Suitability:
• The PESTEL analysis reveals consumer spending is rising in India
(Times Online, 2007)
• From the analysis of global internet trends India ranked as the fifth
highest in Internet usage (Internet World Stats, 2007)
• Government policy has targeted three million broadband users,
therefore increasing consumers’ likeliness to shop online (Euro
monitor, 2007)
• From the strategic group’s analysis competitors such as Wal-Mart
and Tesco aim to increase their geographic scope and thus may enter
the Indian market (Research and Markets, 2005). Therefore it is vital
for Amazon.com to gain from first mover advantage to establish its
presence
➢ Feasibility:
• The SWOT reveals that one of the strengths of Amazon.com is the
experience and knowledge in successful acquisition and integration
such asbooksurge.com and dpreview.com and Brilliance Audio
• Amazon.com need to borrow to finance the acquisition, which may
be problematic as they are already highly geared at 68%
• By acquiring an Indian e-commerce company they will also be
acquiring the local knowledge
➢ Acceptability:
• Internet users are forecasted to increase 254% from 2006 to 2015,
presenting a growing market and, therefore reducing risk and
increasing the potential of high returns (Euro monitor, 2007).
• Shareholders are more favorable towards long- term investments,
such as this strategy therefore there is a higher chance of
acceptability (CEO Letter to Shareholders, Amazon.com 2006
Annual Report.
• By acquiring a company there is the risk of cultural conflict
2. Service Development
Providing a ‘greener’ delivery option. Consumers will be given the choice of
selecting the standard delivery option or the ‘greener’ delivery option. The
‘green’ option means that the items will be delivered in a biodegradable
plastic container. The consumer will be encouraged to return the box after
use in return for a ‘green point’. After collecting a certain amount of points,
the consumer will be sent an e-voucher to be spent at Amazon.com. Boxes
will be re-used by Amazon.com in future deliveries, which in the long-term
will reduce cost of packaging and ensure less wastage.
➢ Suitability:
• This strategy will address the issue of increased environmental
awareness, as highlighted in the PESTLE analysis.
• This is an important issue for the e-retailing industry as all products
need to be sent to customers.
• This strategy builds on Amazon.com’s past efforts to maintain
environmental awareness as highlighted in the Resource Based View
analysis.
➢ Feasibility:
• Biodegradable plastic containers, whilst currently available, will
require extensive research by Amazon.com to ensure that all
products can be transferred safely to consumers. Amazon.com has
an active research and development department which can be
utilized for this purpose.
• Amazon.com has highly experienced workers (as shown in the Value
Chain) who should be able to create and manage the new ‘green
points’ system and e-vouchers.
➢ Acceptability:
• There is a risk that the consumers will not return the boxes for reuse. The cost-
benefit mentioned above will therefore not be
obtained.
• As society becomes more socially aware, consumers will want to
make a difference through their packaging choice.
• Governments may take an interest in the greener initiative and may
supportAmazon.com in some capacity.
• Value creation and the possibility of reduced costs should lead to
increased returns for shareholders.
3. Market Penetration in China
Amazon.com entered the Chinese e-commerce market in 2004 by taking
over Joyo.com. However, as the GE matrix indicates, Amazon.com is
underperforming and has lost its position as market leader. In order to
address this underperformance, the options below attempt to build a
stronger brand image and increase market share.
Implementation Market Goal
Option 1
Extensive marketing through
various medium e.g. TV, outdoor,
Press and Radio
Raising awareness and
brand building
Option 2
Increase product range and
suitability through introducing
the Merchant Programme
Increasing market
share and sales
➢ Suitability:
• The PESTLE analysis reveals a high economic growth in China and
high consumers pending
• Global internet trends shows that China has the second highest
internet usage in the world
• In the GE matrix, China is the most attractive market for
Amazon.com.
➢ Feasibility:
• Amazon.com has the resources in skills, experience and knowledge
to undertake global operations successfully as demonstrated in the
UK, German and Japanese markets
• Market penetration into China will be less capital intensive than
entering a new market
• Amazon.com has successfully implemented the Merchant Program
in the U.S.
➢ Acceptability:
• Amazon.com’s investments in China must be fully harnessed to
exploit the market potentials thus reduces financial risks
• The Merchant Program will create value for the Chinese consumers
since it increases the chances of local merchants to sell specialized
or local products
• Penetrating the Chinese market will have long term benefits which
increases shareholder value.
 CONCLUSION AND RECOMMENDATIONS

Based on the analysis done on Amazon.com, it is highly recommended that they

should adopt the following strategy:
“Establish new operations internationally to provide products & services in South
America, North Africa and Middle East. In addition to expanding current operations
in Europe and Asia.”