Amazon

Amazon

Introduction

        In 1995, Jeff Bezos decided to enter the retail book market by creating an online bookstore. With this new innovation, Amazon became the market leader for online shopping and started expanding into other products and services. Amazon.com aimed to be, “the world’s most customer-centric” (Gary J. 2010). Investing in new technology, innovation and marketing were the key drivers for Amazon to become market leader. Its success was more accentuated with the creation of Kindle, an electronic book reader. However, with all this success, Amazon was facing some problems; it was not making enough profits. Thus, we question ourselves shall Amazon go back to its core values and capabilities or shall they continue with the expansion.

In this report, we tend to identify the resources and competences of Amazon and analyze them using different frameworks like VRIN, Value chain, SWOT and MAS.

1. Identifying core capabilities

The capabilities of an organization are the set of resources and competences that this organization possesses. Appendix 1 shows what are the main capabilities of Amazon.

1.1 Physically

To start with, Amazon has diversity of products. Jeff Bezos, founder of Amazon, launched an online shop selling books. Then, Amazon expanded by offering other products such as music, video games, electronics, clothing and so on. Amazon focused on three pillars to improve customer experience. First of all, wide selection of products gave the company a competitive advantage. Secondly, offering low prices to accomplish a price leadership, on-time free shipping, and availability of products at all times. Lastly, Amazon aims to please customers.

Promotions and innovations of new products such as Kindle gave as well an added value to the company making Amazon a strong Brand. In addition, products shipped all around the world, warehouse and centers we located near airport. “They compromised some 19.7 million square feet of properties all over the world” (Gary J. 2010)

1.2 Financially

Financially, Amazon is investing a lot in technology. This is an advantage for two reasons: it is efficient in a way that offers low prices to consumers and improves customer experience by investing heavily in research and development. Amazon had a strong cash flow. Share price dropped in 2006 by 50%. However, shareholders were supportive of Amazon due to innovation and technology. Sales in Amazon are increasing annually but not making a lot of profit due to spending most money in investments and expansion.

1.3 Human

The last part of the resources is related to staff, partners and suppliers. Amazon recruited skilled people oriented to customer needs. Managers had previous experiences in top leading companies such as Microsoft and Apple. Alliances and partnerships allowed the company to stay innovative. Those partnerships helped Amazon serve customer best and offers them more products and services.

        Now that we have identified the core capabilities of Amazon, we can analyze them in details using different frameworks.

2. Framework 1: VRIN Analysis (as shown in Appendix 2)

2.1 V- Value

Amazon, which started initially as online bookshop, expanded its business by providing its customers diverse products categories. This provided them with competitive advantage over their competitors. Founder Jeff Bezos, planned to strategically place its fulfillment centers which would provide value to the customers by delivering them on time. Its strategy of venturing into partnerships, acquisitions and offering IPOs made Amazon financially strong and proved to be valuable, strengthening its core capabilities.

2.2 R- Rarity

Amazon’s capability of delivering goods to the customer on the same day was very rare. In addition, its ability of worldwide delivery to the customers is rare as well compared to its competitors. The fast delivery was possible because of the strategic locations of warehousing. Its investment in partnerships and acquisitions with focus on business sustainability provided them a competitive advantage over other players.

2.3 I-Inimitability

Being the first player in the field of E-commerce, they had quality and skilled managers that were well experienced who could drive innovative ideas to compete. Amazon’s ability to manage the orders consequently process them in a quickest way was one of the inimitable things it possesses. Amazon’s timely acquisitions and strategic partnership & alliances empowered them to possess inimitable competitive edge over market players.