Question:

Critically examine the relationship and the need for compatibility between corporate strategic and
functional management policies.

Analyse the internal and external influences on corporate objectives and strategy.

Demonstrate the need for flexibility in strategic management and the practical limits of quantifying
corporate strategy.

Introduction
Amazon.com Inc. is the American electronic commerce company, which is popularly known as Amazon
(Rollins and Sandberg 2013). The organization has cloud services as well and is headquartered in
Seattle, Washington. In the United States, Amazon is the biggest internet-based retailer (Klaus 2013).
The organization was started initially as online bookstore and later with product diversification, it
expanded in United Kingdom, Germany, Canada, France, Italy, Mexico, India, China, Japan, Brazil,
Australia and Netherlands (Klaus 2013). In this report, strategic choices that Amazon has taken will be
discussed through internal and external analysis, competitive strategy, strategic choice and strategy
evaluation.

Corporate Objectives
Amazon was founded by Jeff Bezos in the year 1994 and sold its first book in 1995. After that, the
organization became one of the largest e-commerce giant in internet retail world. The vision
statement of the organization is “Our vision is to be earth's most customer centric company; to build a
place where people can come to find and discover anything they might want to buy online”
(Amazon.co.uk. 2016). In order to incorporate the vision, the organization has developed the best
transparent leadership style and its mission statement“Earth’s most customer centric company” reflects
it (Amazon.co.uk. (2016). The corporate values of the organization include customer obsession,
innovation, bias for action and leveraging commitment (Amazon.co.uk. 2016). The organization
allocates a lot of information from target market and finally introduces wide range of daily products in
cheap price. The organization collected revenue of US$ 107 billion in the year 2015, and it has net
income of US$ 596 million in 2015 (Amazon.co.uk. 2016). Amazon has its scope of expansion in
developing countries, especially in India.
 Figure 1: Amazon Revenue Earning
(Source: Mooney and Slobodian 2016)

External Analysis
Macroeconomic Analysis
Macro environmental analysis will be done by PESTLE analysis.

Factors Explanation

· Amazon was blocked in UK market in the past but

in the recent years, government does not affect its
Politics operation
· Stable political scenario of UK has let the
organization to operative exponentially

· Consumer spending in UK varies so as to control

inflation, which is reflected on interest rates, affecting the
sales of Amazon
· Due to credit crunch and house loan tightening, UK
Economics
e-commerce market has dropped slightly, giving rise to
open markets in India and China
· With globalization, Amazon will get the opportunity
to serve new products

· Online social networking has increased by 31.7%

in UK giving rise to increased online retail advertisement
Social
· High advantage to market products in the website
reducing cost of operation
 · Growth of internet by 28.9% has resulted more
social bonding, which will give rise to sales

· Technological innovation and enhanced

Information Communication Technology will surely give
rise to business broadening with cheaper cost
· Demand of technical devices such as TV,
Technology
Smartphone, Tablets and laptops has enhanced the
online shopping in UK
· Availability of rich media applications will enhance
sales in the forthcoming years

· There is no regulatory standards such as data

protection act for e-commerce in UK
Legal
· No harsh governmental standards for e-commerce
platform

· UK is highly aware of global warming and pollution

· With reduction in travel more online shopping will
Environment increase in future
· Increasing motive of corporate social responsibility
· Green concept in packaging and postage

Table 1: PESTLE Analysis of Amazon in UK

(Source: Ritala, Golnam and Wegmann 2014)

Competitive Analysis
Porter’s Five Forces will provide detailed competitive analysis for Amazon.

Threat from Substitute

Threat of New Entry

According to Chaudhari (2015), the threat of new market entry is quite lower for Amazon UK. This is
because the organization has developed itself to a huge extent and provides numerous range of product
for each category, which will not be supported by any new e-commerce company.

Rivalry among Competitors

The rivalry among competitors is high for Amazon UK. Hennig-Thurau, Hofacker and Bloching (2013)
pointed out that Amazon provides wide range of products for each category, still its competitors such
as eBay, Netflix, Apple, Google and Time Warner Cable are affecting its business in UK. On the other
hand, Reid (2015) pointed out that auction websites are competitive enough for Amazon such as eBay,
Ubid.com and other internet portal companies.

Bargaining Power of Customer

According to Irani and Silberman (2013), with high bargaining power of consumer, Amazon has to keep
competitive pricing strategy. On the other hand, Bao and Chang (2014) pointed out that Amazon has
very less overhead costs as it operates only through online. Amazon has huge customer centric tactics
that has resulted in reducing its negative publicity.
Bargaining power of Supplier
Armstrong et al. (2014) pointed out that with medium-high bargaining power of supplier, Amazon has
able to enrich its inventory with numerous suppliers from local companies in UK. Amazon’s goal is to
‘offer everything to everyone’. Furthermore, Scott (2015) pointed out that Amazon gives the
opportunities to local entrepreneurs and new business to expand their sales through online platform.

Figure 2: Porter’s Five Forces Analysis of Amazon

(Source: Armstrong et al. 2014)

Internal Analysis Strategic Capabilities

Organizational resources and competences
Scott (2015) opined that organizational resources are consisted of human, capital and physical factors.
Amazon currently has 132,600 employees and more than 260 million registered clients. Some of the
human resource policies that this organization enlists are employee empowerment, career choices, pay
to quit and virtual contact center. On the other hand, Lafferty and Edmondson (2014) pointed out that
the organization has the widest range of supply chain. This consists of local entrepreneurs, retail
business sector and IT sector products, which indicates Amazon has the top range products in its
market. As a result, the organization has created itself as the benchmark for other organizations in
terms of cost cutting and product diversification.

Basic and Unique Resources

Basic and Unique Resources of Amazon

· Products consist of digital goods and services,

books, household products and many others
· Warehouse
· Development system and employee training
Basic Resources
· Customer database
· Customer service support
· Online marketing channel and promotion
· Kindle services
 · Brand Popularity
· Supply chain

· Most diversified product category

· Strong revenue growth
· One click payment
· Product development
· Competitive pricing (heavy discounts)
Unique Resources · ‘Amazon Web Services – EC2 and S3’
· Quick delivery logistics
· Long term partnership with third party
· Senior management team has strong negotiation
ability
· Flexible business expansion

Table 2: Basic and Unique Resources of Amazon

(Source: Malaga 2012)

Business Functions
The business function is consisted of online retail, internet services and Kindle ecosystem.

Business Functions of Amazon.com Inc

· Traditional business consisting of online products,

also known as traditional retailer
· Online retail is considered as the low cost retailer
Online retail
· Biggest product selection consisting of family
products, teenager products and digital gadgets
· Claims to be the long-tail retailer

· Consisted of both retail business and Kindle

Ecosystem
· Started to provided services such as Amazon
Internet Services Prime, video-streaming, retail purchases at convenient
price
· ‘All you can eat’ and subscription business model
· Amazon Web Services (AWS)

Expanding the family of Kindle tablets in the UK market

Electronic eBook reader
Kindle ecosystem
Acts as both traditional retailer and manufacturer
Business Model canvas in given in Appendix 1

Table 3: Business Functions of Amazon.com Inc

(Source: Fowler, Pitta and Leventhal 2013)
Basis of Competitive Strategy
Key Market Segments
According to Bruce and Solomon (2013), Amazon.com identifies the most appropriate market segments
for its wide range of products. Reczek, Haws and Summers (2014) pointed out that Amazon has product
range from all category of people and thus, it has the widest range of consumer. The market segments
of Amazon.com are given below.
Market segmentation of Amazon.com is given in figure 3. Johnston (2014) pointed out that Amazon.com
is not restricted to any behavioral segment, which indicates it has the widest range of products. The
products are available in all countries and are recently launched in China. Products such as baby toys
and handicapped items are available online, which indicates consumers of all age are satisfied with the
products. Amazon products are available for any type of family, any income group and middle-education
level people.

Figure 3: Market Segmentation of Amazon.com

(Source: Hathaway 2014)

Business Strategy
Through Porter’s Generic Strategy Framework, business strategy will be defined.
 Figure 4: Porter’s Generic Strategy Framework for Amazon.com
(Source: Gopaldas 2015)
According to Mata and Quesada (2014), the broad functions of Amazon consists price determination
and cost cutting. Both of these functions reduces the cost of products and even reduces the
organizational expenditure. On the other hand, Kim (2014) pointed out that Amazon has ensured
differentiation in terms of both product and price. The organization maintains different pricing strategy
such as competitive pricing for saturated products and premium pricing for latest entries. Chaffey, Smith
and Smith (2012) pointed out that Amazon ensures bulk supplies and keeps strong relationship with
them. In this way, focus on cost reduction has been ensured by Amazon, which gave rise to accelerated
consumer loyalty.

Strategic Choice
Ansoff Matrix will explain ‘Strategic choice’ of Amazon.com.
 Figure 5: Ansoff Matrix of Amazon.com
(Source: Ivanova, Scholz and Dorner 2013)
According to Sheth, Parvatiyar and Sinha (2015), Amazon.com needs to penetrate into new market by
more advertising programs and loyalty programs. This is because Amazon has a lot of products
available in its website that is not known by the consumers of UK. Such products are art supplies,
medical equipment, and central government job exam materials. On the other hand, Pousttchi and
Hufenbach (2014) pointed out that product development of Amazon.com has to be ensured by
packaging system and new area development plan. Packaging will ensure product robustness and even
act as the mode of advertisement.
According to Shamma and Hassan (2013), in the new market, such products are required to be included
by Amazon that has the highest demand in other countries such as technical gadgets and home
equipment. On the other hand, Hannah et al. (2014) pointed out that in new market, penetration pricing
of products is to be ensured so that new consumers are engaged. Furthermore, Panagiotelis, Smith
and Danaher (2014) opined that Amazon.com needs to include new services such as virtual money,
payment gateway elegancy and coupons for retail megastores.

Strategy Evaluation
Suitability
According to Lund and Marinova (2014), in the UK market, a large number of people is spending more
time in social networking sites than in television. Therefore, Amazon has the opportunity to give more
advertisements through social networking sites, which will engage more consumers. Amazon does not
consider marketing programs such as marketing campaign and events (Yadav et al. 2013). Therefore,
for product expansion, it needs to ensure physical campaign in crowded areas, which will allocate more
consumers. On the other hand, introduction of new products in the market will ensure huge suitability
as the amount of entrepreneurship in increasing rapidly in UK. Such businesses will be able to sell their
products via online platform such as Amazon.

Serial Number Factors Explanation

· High demand with high supply

1 Economic sense and therefore low price for quality
products

· Lower fixed cost and variable

cost due to rise in sale
· Increasing operational
2 Economics of scale
efficiencies
· Cost advantage leading to price
reduction

· Rising businesses in UK and

3 Environment and capabilities
entrepreneurship

Table 4: Suitability Analysis

(Source: Yadav et al. 2013)

Acceptability
Amazon can accept the strategies discussed in Ansoff Matrix because it is practical enough for the
organization to expand its market in new nations through product diversification. Amazon’s amount of
revenue earning is highest among its competitors in UK and therefore this may aid in establishing any
new market (Yadav et al. 2013). On the other hand, the online services will include new coupon
generation for retail megastores in the form of virtual money. This is acceptable for the organization, as
it will in turn generate more revenue.

Feasibility
All the strategies that have been presented in the Ansoff Matrix require a lot of capital. Amazon has the
ability to share 20 percent of its capital that is earned from other countries for establishing new markets
(West, Ford and Ibrahim 2015). Therefore, it is feasible for the organization to establish new markets
through events and marketing campaigns.

Serial Number Factors Explanation

· Supporting fund from revenue

1 Funding generated by other matured markets
· Fund from investors

· Small businesses and entrepreneurs

2 People · Human resource through campus
drive

3 Time · Within 10 months to 12 months

· Demand forecasting
4 Information · Availability of suppliers
· Availability of entrepreneurs
 · Identification of competitors

Table 4: Feasibility factors fulfillment of Amazon

(Source: West, Ford and Ibrahim 2015)

Figure 6: Feasibility forecasting of Amazon

(Source: Picard 2014)

Conclusion and Recommendation

Brief conclusion
Amazon.com has been found to grow gradually in UK and other nations. The strategic issues are related
with advertisements strategy and market penetration with new products. Therefore, through strategic
analysis, it has been formulated that the organization needs to initiate marketing campaign and physical
events in crowded locations. The products are available only in online store and therefore, Amazon
needs to get in tough physically with the people of UK and in new markets as well so as to enhance
brand awareness and consumer loyalty. Through feasibility test, it has been found that revenue will
positively accelerate in the next four years, and therefore Amazon needs to organize such marketing
events in future.

Capitalizing Strength
Amazon has reached in various nations in terms of market expansion by offering best discounts and
daily products for its valuable consumers. On the other hand, Amazon does not organize marketing
events. As this organization is following only product differentiation and cost cutting, hence it can be
said that the company has been capitalizing its strengths.
Main Weakness
Amazon is moving away from its core competence of book selling to new product diversification, which
may impact its business. Offering free shipping to its consumers Amazon might be in danger by losing
margins. Amazon operates in near zero margin business model, but still meaning profit has not been
gained by the organization.

Managing Threats
Amazon is trying to manage its threats only by product diversification and entering into new markets.
This is the best way to reduce threat as risk is getting minimized and opportunity for revenue earning is
increasing with expansion.

Contradiction
There is no contradiction in between strategic choices and vision taken by Amazon. Vision clearly
indicates that consumer can find any product in their website and so it is following product
diversification, which has resulted in building the top e-commerce platform globally.