Introduction
Businesses operate in two major kinds of environments; the internal and external environment. The internal environment concerns the surroundings that a firm has control over while the external environment concerns the forces that a business has little or no control over. As such, the strategic management of the company needs to develop strategies that help the business to triumph in these environments. This paper explores the general environment of Amazon Corporation, the five forces of competition affecting Walmart, the threats and significant opportunities available to Amazon, strengths and weaknesses, as well as the company’s resources, core competencies and capabilities.
The general environment refers to the macro environment popularly known as the PESTEL forces that stand for political, environmental, sociocultural forces, legal and technological forces. Hitt, Ireland, & Hoskisson (2020) identify demographic, economic, political/legal, technological, global, sociocultural and sustainable physical forces as the external environment forces that shape up a firm’s competitive environment. Demographic and technological segments are the two main segments of the general environment that rank the highest in their influence on Amazon. The following figure illustrates the external environment
Technological Segment
Amazon was founded on grounds of technology, and the entire business model is about technology. Technology has become a lifestyle, and this arching reality was brought about by outbreak of coronavirus disease in 2019 and spreading to most parts of the world in 2020. Technology drove lie during a moment when the world was near a standstill. Amazon business is driven by technology, ranging from Amazon prime services to cloud computing services. There is no Amazon without technology, which means that technology is an external force that exerts much power on the company’s environment. Amazon technological services are such as subscription services, streaming services, and web services among others. Amazon competes with technology giants such as oracle, IBM, oracle, Google, Apple Inc., Netflix among others who offer similar products. These companies are leaders in their respective industries, and competing with them is not a walk in the park. It means that Amazon has to ensure that its technology is up to date and that it has to offer technologically innovative products to compete in the dynamic marketplace. For instance, Amazon is known for its speedy delivery, thanks to the drone delivery services that creates convenience for customers.
Demographic segment
Demographic segment deals with the characteristics of the populations. Understanding the impact of populations and what different segment of the population need can be challenging. Amazon does not have a specific target market. Rather, Amazon corporation adopts a multi-segment positioning whereby the company sells to people of all regions, gender, professions, races, among other segmentation as long as people are above 14 years. The adoption of such approach of ‘one size fits all’ is challenging since different customer segments want unique products. Amazon is not able to tailor-make its products for distinctive categories. Also, it has also become difficult for Amazon to control the quality of goods it sells to customers, which is a challenge that has seen the online titan battle with suits involving product quality.
Five Forces of Competition
Forces of competition are five forces that affect firms in any given industry. The forces of competition were advanced by Michael porters in the analysis of the macro environments of businesses. These forces are threats of new entrants, the bargaining power of consumers, threats of substitute products, bargaining power of suppliers and the competitive rivalry among existing players. The two forces that are most significant to Amazon are the bargaining power of buyers and the competitive rivalry of firms in the industry. The following figure illustrates the porter’s five forces of competition.
Competitive Rivalry in the Industry
The twenty first century marketplace has become dynamic and competitive more than ever before. Competition between and among firms has become intense as each firm seeks to outdo the other to become the market leader. Amazon operates in various industries such as cloud computing services where it competes with giants in the industry such as Microsoft and oracle, the retail industry where it competes with titans like Walmart, as well as streaming services where it competes with providers like Netflix, YouTube and apple iTunes. Amazon core business is provision of ecommerce and is known as the Walmart of the internet for its wide range of online products ranging from books, audio books, electronics, and grocery among others. The corporation has gained so much success, which has seen other online companies come up. Competitors like Alibaba; a Chinese online company have fiercely come up in a bid to take Amazon’s market share, Indians FlipKart, jet.com, modcloth among others. Amazon is faced by intense competition left right and center. Amazon has addressed rivalry among competing firms by continuously innovating products and creating convenience for customers to remain ahead of the game. For instance, Amazon competes with Walmart home delivery services that take one day with the drone delivery services that takes minutes.
Bargaining Power of Customers
Customers are important stakeholders in any business and Amazon is no exception. Amazon places customers at the heart of its operation as evidenced by its mission and vision statements. For instance, Amazon vision is to be the earth’s most customer centric company. That means that customers are at the center of the strategic objectives of the company at all costs. The bargaining power of customers is very for Amazon, given that the firm does not offer differentiated products. As such, customers can easily switch from Amazon to its competitors at no cost. To address with the high bargaining power of buyers, Amazon places customer satisfaction at its core by ensuring that first time buyers are converted to repeat customers.
Improvements to Address the Forces
To address the industry rivalry and bargaining power of customers in the near future, Amazon can engage in strategic partnerships with suppliers in a form of vertical acquisition. The company can also borrow from Walmart to provide great discounts and sales promotions from time to time to ensure customers retention. Also, promotions are likely to attract new customers from competing firms who will be willing to try their luck at winning prizes and discounts.
Threats
While Amazon is a leader in its industry, it is not without threats. Competition from national and foreign firms that been Amazon’s thorn in the flesh. Following its success as an ecommerce company, many online retailers have come up and imitated Amazon’s business model such as eBay, best buy, Wayfair, apple, target among others in America. In the international front, competitors like Alibaba of china and FlipKart of India are determined to unseat Amazon from its market position.
Opportunities
Reading through the threats facing Amazon might make it seem like all is lost, but there is hope at the end of the tunnel. Amazon has the potential to promote its brand further through its collaboration efforts to help small scale businesses to emerge and grow from the impacts of covid-19. To take advantage of this opportunity, Amazon can consider taking initiatives in markets where it is absent to popularize its brand such as in sub-Saharan African countries where it is fairly limited.
Greatest Strength and Significant Weakness
Efficient delivery system through Amazon drone delivery is the core strength of the company. The company provides delivery of goods within hours, which affords convenience to customers. The drone delivery proved to be a great strength in 2020 following the outbreak of covid-19 whereby movement was restricted, yet people needed to buy goods and continue living. The wide range of goods and services that the corporation sells were delivered within minutes because Amazon has invested in its strategic warehouses and drone delivery systems (SEC. 2020, p 44).
Amazon grapples with the weakness of poor quality products. While Amazon concentrates with convenience in terms of speedy delivery, low priced goods and helping to convert site visitors into customers, it has done so at the expense of quality monitoring. The company was recently engaged in a legal battle when a battery bought from the company stores exploded, thereby causing damage to property. If such cases continue, customers are likely to switch to competitors they perceive as offering high quality and reliable products.
Strategy to Capitalize On Strength and Fix Weaknesses
Amazon should continue to pursue strategic alliances and acquisition strategies such as the way it did to Zappos. Acquisition of Zappos has been one of the most successful strategic moves, and a replica of the same can see the company provide more goods and services and deliver them on a timely basis. To fix the weakness of product quality, Amazon needs to revise the supplier code of conduct to ensure suppliers bear responsibility for such default products. Subjecting suppliers to quality inspection will make suppliers more accountable, thereby supplying quality products.
Amazon Resources, Capabilities and Core Competencies
Amazon is a household name and its name is known the world over. Amazon is a strong brand name, given its pioneer in ecommerce. The company has vast market knowledge about ecommerce and online business; given that it was the first mover with 27 years of experience. The experience of more than two decades is not just experience to underscore. Secondly, Amazon has core resources and capabilities in its strategically positioned centers that enable it to utilize speedy delivery. Amazon is also known for successful acquisitions, such as the acquisition of Zappos and WholeFoods Inc. (SEC. 2020, p 48). As such, other companies that might want to form strategic partnerships will not shy off from forming alliances to give competitive advantage to the corporation.
Amazon core resource in terms of brand equity and market capitalization cannot be underscored. Although Amazon is a recent entrant in the market; it has surpassed Walmart in terms of market capitalization that is estimated to be $900 billion against Walmart’s $300 billion. Amazon also has artificial intelligence capabilities that help reduce the cost of operations (Rancord society 2019, para 3). Amazon has enhanced the use of robots and other automated technologies to improve efficiency and reduce cost in accordance to its cost leadership business strategy.
Businesses operate in two major kinds of environments; the internal and external environment. The internal environment concerns the surroundings that a firm has control over while the external environment concerns the forces that a business has little or no control over. As such, the strategic management of the company needs to develop strategies that help the business to triumph in these environments. This paper explores the general environment of Amazon Corporation, the five forces of competition affecting Walmart, the threats and significant opportunities available to Amazon, strengths and weaknesses, as well as the company’s resources, core competencies and capabilities.
The general environment refers to the macro environment popularly known as the PESTEL forces that stand for political, environmental, sociocultural forces, legal and technological forces. Hitt, Ireland, & Hoskisson (2020) identify demographic, economic, political/legal, technological, global, sociocultural and sustainable physical forces as the external environment forces that shape up a firm’s competitive environment. Demographic and technological segments are the two main segments of the general environment that rank the highest in their influence on Amazon. The following figure illustrates the external environment
Technological Segment
Amazon was founded on grounds of technology, and the entire business model is about technology. Technology has become a lifestyle, and this arching reality was brought about by outbreak of coronavirus disease in 2019 and spreading to most parts of the world in 2020. Technology drove lie during a moment when the world was near a standstill. Amazon business is driven by technology, ranging from Amazon prime services to cloud computing services. There is no Amazon without technology, which means that technology is an external force that exerts much power on the company’s environment. Amazon technological services are such as subscription services, streaming services, and web services among others. Amazon competes with technology giants such as oracle, IBM, oracle, Google, Apple Inc., Netflix among others who offer similar products. These companies are leaders in their respective industries, and competing with them is not a walk in the park. It means that Amazon has to ensure that its technology is up to date and that it has to offer technologically innovative products to compete in the dynamic marketplace. For instance, Amazon is known for its speedy delivery, thanks to the drone delivery services that creates convenience for customers.
Demographic segment
Demographic segment deals with the characteristics of the populations. Understanding the impact of populations and what different segment of the population need can be challenging. Amazon does not have a specific target market. Rather, Amazon corporation adopts a multi-segment positioning whereby the company sells to people of all regions, gender, professions, races, among other segmentation as long as people are above 14 years. The adoption of such approach of ‘one size fits all’ is challenging since different customer segments want unique products. Amazon is not able to tailor-make its products for distinctive categories. Also, it has also become difficult for Amazon to control the quality of goods it sells to customers, which is a challenge that has seen the online titan battle with suits involving product quality.
Five Forces of Competition
Forces of competition are five forces that affect firms in any given industry. The forces of competition were advanced by Michael porters in the analysis of the macro environments of businesses. These forces are threats of new entrants, the bargaining power of consumers, threats of substitute products, bargaining power of suppliers and the competitive rivalry among existing players. The two forces that are most significant to Amazon are the bargaining power of buyers and the competitive rivalry of firms in the industry. The following figure illustrates the porter’s five forces of competition.
Competitive Rivalry in the Industry
The twenty first century marketplace has become dynamic and competitive more than ever before. Competition between and among firms has become intense as each firm seeks to outdo the other to become the market leader. Amazon operates in various industries such as cloud computing services where it competes with giants in the industry such as Microsoft and oracle, the retail industry where it competes with titans like Walmart, as well as streaming services where it competes with providers like Netflix, YouTube and apple iTunes. Amazon core business is provision of ecommerce and is known as the Walmart of the internet for its wide range of online products ranging from books, audio books, electronics, and grocery among others. The corporation has gained so much success, which has seen other online companies come up. Competitors like Alibaba; a Chinese online company have fiercely come up in a bid to take Amazon’s market share, Indians FlipKart, jet.com, modcloth among others. Amazon is faced by intense competition left right and center. Amazon has addressed rivalry among competing firms by continuously innovating products and creating convenience for customers to remain ahead of the game. For instance, Amazon competes with Walmart home delivery services that take one day with the drone delivery services that takes minutes.
Bargaining Power of Customers
Customers are important stakeholders in any business and Amazon is no exception. Amazon places customers at the heart of its operation as evidenced by its mission and vision statements. For instance, Amazon vision is to be the earth’s most customer centric company. That means that customers are at the center of the strategic objectives of the company at all costs. The bargaining power of customers is very for Amazon, given that the firm does not offer differentiated products. As such, customers can easily switch from Amazon to its competitors at no cost. To address with the high bargaining power of buyers, Amazon places customer satisfaction at its core by ensuring that first time buyers are converted to repeat customers.
Improvements to Address the Forces
To address the industry rivalry and bargaining power of customers in the near future, Amazon can engage in strategic partnerships with suppliers in a form of vertical acquisition. The company can also borrow from Walmart to provide great discounts and sales promotions from time to time to ensure customers retention. Also, promotions are likely to attract new customers from competing firms who will be willing to try their luck at winning prizes and discounts.
Threats
While Amazon is a leader in its industry, it is not without threats. Competition from national and foreign firms that been Amazon’s thorn in the flesh. Following its success as an ecommerce company, many online retailers have come up and imitated Amazon’s business model such as eBay, best buy, Wayfair, apple, target among others in America. In the international front, competitors like Alibaba of china and FlipKart of India are determined to unseat Amazon from its market position.
Opportunities
Reading through the threats facing Amazon might make it seem like all is lost, but there is hope at the end of the tunnel. Amazon has the potential to promote its brand further through its collaboration efforts to help small scale businesses to emerge and grow from the impacts of covid-19. To take advantage of this opportunity, Amazon can consider taking initiatives in markets where it is absent to popularize its brand such as in sub-Saharan African countries where it is fairly limited.
Greatest Strength and Significant Weakness
Efficient delivery system through Amazon drone delivery is the core strength of the company. The company provides delivery of goods within hours, which affords convenience to customers. The drone delivery proved to be a great strength in 2020 following the outbreak of covid-19 whereby movement was restricted, yet people needed to buy goods and continue living. The wide range of goods and services that the corporation sells were delivered within minutes because Amazon has invested in its strategic warehouses and drone delivery systems (SEC. 2020, p 44).
Amazon grapples with the weakness of poor quality products. While Amazon concentrates with convenience in terms of speedy delivery, low priced goods and helping to convert site visitors into customers, it has done so at the expense of quality monitoring. The company was recently engaged in a legal battle when a battery bought from the company stores exploded, thereby causing damage to property. If such cases continue, customers are likely to switch to competitors they perceive as offering high quality and reliable products.
Strategy to Capitalize On Strength and Fix Weaknesses
Amazon should continue to pursue strategic alliances and acquisition strategies such as the way it did to Zappos. Acquisition of Zappos has been one of the most successful strategic moves, and a replica of the same can see the company provide more goods and services and deliver them on a timely basis. To fix the weakness of product quality, Amazon needs to revise the supplier code of conduct to ensure suppliers bear responsibility for such default products. Subjecting suppliers to quality inspection will make suppliers more accountable, thereby supplying quality products.
Amazon Resources, Capabilities and Core Competencies
Amazon is a household name and its name is known the world over. Amazon is a strong brand name, given its pioneer in ecommerce. The company has vast market knowledge about ecommerce and online business; given that it was the first mover with 27 years of experience. The experience of more than two decades is not just experience to underscore. Secondly, Amazon has core resources and capabilities in its strategically positioned centers that enable it to utilize speedy delivery. Amazon is also known for successful acquisitions, such as the acquisition of Zappos and WholeFoods Inc. (SEC. 2020, p 48). As such, other companies that might want to form strategic partnerships will not shy off from forming alliances to give competitive advantage to the corporation.
Amazon core resource in terms of brand equity and market capitalization cannot be underscored. Although Amazon is a recent entrant in the market; it has surpassed Walmart in terms of market capitalization that is estimated to be $900 billion against Walmart’s $300 billion. Amazon also has artificial intelligence capabilities that help reduce the cost of operations (Rancord society 2019, para 3). Amazon has enhanced the use of robots and other automated technologies to improve efficiency and reduce cost in accordance to its cost leadership business strategy.
