“Amazon.

com from books to the World Strategic

Development through Years of Novelty”

Student Name: Abdelrazzaq A.AbuShahout

Student number: 3954808

University of Wollongong
Sydney business School

Word Count: 1905

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Table of content

1.0 Executive Summary...................................................................................3

2.0 Amazon.com in Brief.................................................................................4

3.0 Analytical Discussion................................................................................4

3.1 External Analyses..............................................................................4

3.1.1 PESTEL analysis..................................................................5

3.1.2 Industry analysis...................................................................7

3.2 Competition and strategic options.................................................9

4.0 Conclusion...............................................................................................11

5.0 Appendix..................................................................................................12

5.1 (Graph 1.0) Internet Usages Worldwide...................................12

5.2 (Graph 2.0) E-Retailing Industry Structure Analyses..............12

5.3 (Table 3.0) Amazon’s SWOT Analyses...................................13

6.0 Reference list...........................................................................................14

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1.0 EXECUTIVE SUMMARY

Amazon.com is one of the leading E-retailing companies in the world that has a

considerable presence within the online retailing industry. As a result of focusing on the

long-term sustainable growth by increasing operating income and efficiently managing the

working capital and capital expenditure, showing that of increased its online sales to record

$9.86billion in the first quarter of 2011 (Amazon.com 2011), that attained through long-run

organisation strategies which aimed to improve all aspects of customers shopping

experience, to offer lower prices, assuring the availability of products, delivery on timely

manner, diversification within product line, providing more information about products to

counter (feel, think, do) customers, and regularly developing their website to earn customer

trust and reliability for shopping online. In addition, its concerns of the recent environmental

issues (global warming). Hence, the company was able to sustain its competitive advantage

that derived from insistence on continues innovation and developing customer-oriented

strategies, to achieve the company mission to be “the Earth largest online retailer and the

most customer-centric company” (Amazon.com 2011). The report aimed to analyse the

strategic position and choices of Amazon, in years of shifting in customer purchasing trends

and globalization. For these reasons, we will spotlight on analysing the company

capabilities in term of its competitiveness and making the efficient choices in compatible

with the available resources, accordingly, which it will reflect on implementing the company

future strategies.

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2.0 AMAZON.COM IN BRIEF

Amazon.com founded in 1994 by its current CEO Jeff Bezos in United States, with not

more than some grands and car trunk to become the first e-commerce company that sell

books online, after increase the dependency of using the internet for buying goods and

services by people. However, the company mission creep from the earth most ‘customer-

centric’ company in the world, adding on that later anything they might buy online

(Amazon.com 2011). Moreover, Amazon.com maintained its position by assuring updating

their strategies to suit the changes surrounding the company, avoiding the occurrence of

strategies drift which refers to “the tendency for strategies to develop incrementally on the

basis of historical and cultural influences, but fail to keep pace with a changing

environment” (Johnson et al 2011, p.159).

3.0 ANALYTICAL DISCUSSION

Understanding the strategic position of Amazon.com requires using some common

business analytical methods will be discussed next:

3.1 External Analysis

In this term we refer to the macro-environmental factors that might distress the

organisation daily operations, and/or the process of implementing the strategies

within the industry that operates in. In this case it is obviously that there is no face to

face interaction between the customers and the company, thus, the company

website effectiveness and the widgets provided will reflects the company capabilities

to its customers, SWOT analysis showing some of the company Strength,

Weakness, Opportunities and Threats.(see Table 3.0 in appendix)

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However, the company survival plan not only depends on continues product and

service innovation, more importantly, it shown that it put into account the adaptability

of new environmental changes.

3.1.1’ PESTEL’ Analysis

As the company operates virtually to reach its target segments, we may point some factors

that affect e-commerce businesses. Therefore, PESTEL analysis here will be a useful tool

to be used to determine the critical factors for the company, which is an acronym refers to

the political, economical, social, technological, environmental ‘greens’, legal factors that

influence implementing the strategies to success or failure (Johnson et al 2011,p.50).

Firstly, The Political aspect here refers to the government’s initiatives around the world to

reinforce its internet infrastructure, make it accessible to as many as possible to more

users, hence, they would consider as potential customers for the company, especially in its

home country. Showing that “through President Obama’s $7.2 billion investment in stimulus

program, to expand broadband access to rural areas and widening the available spectrum

size over the next 10 years” (Weissberger 2011). Include enhancing the quality and the

speed in metropolitan areas. Though, it will have lower operating cost for internet providers

to offer more affordable prices to willing customers to join. Therefore, it will give

Amazon.com an opportunity to gain more market share not in US but worldwide.

Secondly, Economical factors varies and has different influences on businesses such as

Gross Domestic Product (GDP), Currency exchange rate, Minimum wage, for example the

GDP per capita in United States in 2010 estimated by $47.400 ranked number 10 in

comparison to the world (CIA 2011), thus, that means to Amazon.com their home people

are somewhat capable for buying goods and services, with annual household disposal

income $117.528 (US Census bureau 2011). This is a key success factor to Amazon to

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target segments in such countries that showing high economic indicators, after the last

GEC in 2008, such as India, China...etc.

Thirdly, the Social factor in other words the demographics of the targeted customer’s

segment characteristics such as age, population, gender, purchasing trends, and cultures.

Thus, Amazon.com had considered the significant growth of internet usage by %444.8

since 2000 to 2010, which estimated by almost Two billion users worldwide (internet world

stats 2011). Refer to graph 1.0 in appendix that shows the growth of users by region,

besides considering the excessive usage of social networking websites, that make a

specific group of people most of the time online for marketing purposes (new product and

offers advertising). However, Amazon.com had considered the overcoming risks from this

shift in purchasing trend, by increasing the company resources (infrastructure) in parallel

with its growth and take advantage to capture more market share.

Fourthly, the technological factor in the ‘globality’ era the end state of globalisation, and the

tendency and dependency to use the web 2.0 in daily people life to obtain information,

become critical factor for businesses to invade the market, therefore, Amazon noticed the

speed of spread of word mouth while people socialising rather than browsing web pages at

home, for that reason, Amazon had improved the company frequency to publish information

about their products and offers, to maintain website competency to enrich people with the

needed information, not only at home but while they travelling by launching Amazon smart

phone application, That is fast, convenient and secure (Amazon.com 2011). However,

taking into account the technological acceptance of the targeted customers, as the internet

considered as “Astroturfing” for businesses strategic survival, which is simply means the

fake grassroots support online (Breakenridge 2009).

Fifthly, the Environmental aspect is the concern of more people around the world these

days, that threatening not even the businesses but the mankind as well, hence, in the last

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study shows “Several internet retailers claim that it is better for the environment for

consumers to shop online and have their goods delivered to the home than to travel to the

shops” (Edward et al 2009). Accordingly, we will have lower cars trips for shopping centres

to reduce green house gases emission. In addition, to Amazon move for delivered product

packaging by 100% recycled cardboard, applied by frustration-free packaging that ease to

use by customers (Amazon.com 2011).

Sixthly, legal factor should be more critical to success or failure for the strategies applied.

Consequently, the company legal department has to keep tracking the new regulation at the

international and domestic side, preventing the legal fines that could have striking loss on

the balance sheet and company reputation, as licensing subscription and advertising issues

could impact who sell online as well through the company (Carter 2011).

3.1.2 INDUSTRY ANALYSIS: (Porter’s Five Forces)

Here we have to understand in-depth the factors that surrounding the business within the

market. For this reason, Poster’s five forces introduce dynamic techniques to analysing the

company position (Johnson et al 2011, p.54), to show the attractiveness of the industry in

term of profitability affected by:

The Threat to Entry (LOW):

In the light of barriers of entry Amazon achieved economic of scale by buying in bulk, this is

a sign to offer cheaper products and services prices to consumers. Moreover, the company

been in business for 15 years that gives advantage for Amazon.com “because they learnt

how to do things more efficiently” (Johnson et al 2011, p.57). Adding on that the company

brand awareness gives customers more reliability to deal with than others and being fraud

in somehow.

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The Threat of Substitute (HIGH):

Large segment of customers would like to feel, think, then buy rather than buy, feel, then

think (Milligan & Smith 2006), therefore, physical retailers still considered as dominant

competitor for e-retailer businesses. So Amazon’s in order to avoid the customers cognitive

dissonance, has to provide as much details that covers all the product aspects,

Furthermore, the increase demand on exchange books, goods, services between people

through different websites such as textbookexchange.com and u-exchangeonline.com

rather than buying brand new stuff with higher prices. Thus, Amazon strategically trying to

match the prices to the cost with lowest profit margin, moreover, able its subscribers to sell

with their own prices as they assess their goods.

The Power of Buyers (HIGH):

The simplest explanation is the lower switching cost for Amazon.com customers, as it

becomes simpler to compare prices from different e-retailer and choose the affordable one.

In view of that, Amazon.com has to use small cost-plus pricing method to compete with

others not in account of quality.

The Rivalry between Competitors (HIGH):

Shopping websites launching everyday for instance most of the customers will use

google.com to look after something, but to be the first on the search result is good as it give

hundreds of alternatives with same product or service, therefore, the switching cost for

customer are low here as they are able to compare prices from different sources. Even

though, the strong brand of Amazon.com gives it advantage to be in favour in any price

competition. (See graph 2.0 in appendix)

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The Power of Supplier (MODERATE):

Amazon.com suppliers differ from the price, capabilities and low bargaining power in term

of low switching cost. Simply though they will be willing to stay in relation with such a huge

company (Chiles & Dau 2005).

3.2 COMPETITION AND STRATEGIC OPTIONS

Under the competition between strategic groups those whose are organisations within

the same industry with similar strategic characteristics and competing on similar bases

(Johnson et al 2011, p.69). Hence, we were able to identify this group members including

Amazon, such as Barnes & Noble Inc., eBay Inc., Hastings Entertainment Inc., Columbia

House Company, Borders Group, Yahoo, Wal-Mart, Tesco...etc (Datamonitor report 2010).

The rivalry between them based on, firstly, geographical basis (Market penetration),

accordingly, Amazon strategic choice was by developing the market through operating nine

websites in different languages to conquer more markets. Secondly, product line depth

(Diversification) and product development were other strategic choices, but to a certain

extent they are having similar products prices. Furthermore, providing better services

considered as critical success factor that is valued by customers, as the fulfilment facilities

plays a vital role in success of e-retailing businesses these days to deliver the product on

timely manner to the customers (Rao 2010). Conversely, all the organisation capabilities

can be substitute by customers who like to feel/think/do for physical items.

More importantly, in the light of “Blue Ocean” thinking by Amazon.com, it was the first

mover to launch e-Book reader, as well they divided the market into three different potential

customers, the regular online customers and sellers who are willing to sell the products

through Amazon’s website and take advantage of Amazon’s fulfilment facilities, in addition

to developers who can access to Amazon’s infrastructure to create their own websites.

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Targeting those customers in countries where the consumer expenditure is high would be a

strategic choice. Consequently, Amazon.com distinct with its sales and distribution

competences, by effective sales promotion and execution, efficiency and speed of order

processing, speed of distribution and quality and effectiveness of customer services (Itami

& Noto 2007, p.136).

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4.0 CONCLUSION

In summary, the analysis shows that the organisation ability for continual innovation

sustained its distinct competitive advantage, through the whole value network for the last 15

years in e-retailing industry, in addition, to its strategic capabilities competences to adapt

the changes effectively. Nevertheless, Bezos was concerned of the depressed customer

sentiment after the Global Financial Crisis (GFC). In fact, that would have a negative impact

on Amazon’s growth in some regions that still showing sluggish economic recovery

performance. Whereas, Amazon’s still depends on its increasing revenues from main

company market (U.S), generating net sales of $5.47 billion in FY2010 (Amazon.com

2011). Simply recommendations will be based on short forecasting as no definite clue what

will happen in the future. Therefore, market penetration such as Australia, China, India the

most appropriate strategy for Amazon.com as it relies on its online sales, and those

countries showing significant growth and increasing the individuals expenditure, thus, they

need to integrate their valued capabilities from different organisational areas to achieve its

objectives with respect to its stakeholders expectations.

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5.0 APPENDIX

(Graph 1.0) internet users in the world by geographic region-2010

Source: www.internetworldstats.com/stats.htm

(Graph 2.0) E-Retailing Comparative Industry Structure Analysis

STRENGHT WEAKNESS
 Leading Brand In E-Retailing  Offering Free Shipping Would

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  Experience Consider A Challenge In The
 Heavy Investment In Long-Run
Innovation(R&D)  Patent Violation Issues Erodes
 Diversified Product Selection To Stakeholders Confidence
Strengthen Customer Satisfaction
 Point Of Differentiation (Kindle)
 Smart Phones App.
OPPORTUNITIES THREATS
 Acquisition Through Alliance And  Launch Of Apple Products (Ipad)
Merger To Strengthen Product Increase Competition
Diversification  Currency Exchange Fluctuation
 Technical Website Support (Ease Have An Impact On Lower Prices
To Use) Personalisation Offered
 Increase Internet Usage Would
Increase Sales In Some Specific
Targeted Regions
(Table 3.0) Amazon.com SWOT analysis
Some Information Source (www.datamonitor.com)

6.0 Reference List

1. Amazon.com 2011, accessed on 26/4/2011
http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-faq#14296

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 2. Breakenridge, D 2009, PR 2.0: new media, new tools, new audiences, pearson
Education inc., ISBN:97803215110075

3. Carter, B 2011, the Amazon strategy, SapientNitro, accessed on 2/5/2011

http://www.ideaengineers.sapient.com

4. Chiles, C, Dau, M 2005, An Analysis of Current Supply Chain Best Practices in the
Retail Industry with Case Studies of Wal-Mart andAmazon.com, accessed on
27/4/2011      
related:dspace.mit.edu/bitstream/handle/1721.1/33314/62312050.pdf?sequence=1
Amazon.com supply value chain

5. Central Intelligence Agency (CIA) 2011, the World Factbook, Accessed in 26/4/2011
https://www.cia.gov/library/publications/the-world-factbook/geos/my.html

6. datamonitor 2010, Amazon.com, Inc.:Company Profile, accessed on 27/4/2011      

http://web.ebscohost.com.ezproxy.uow.edu.au/bsi/pdf?sid=def6b53e-886a-43f3-
bfc3-6ae28aa696bc%40sessionmgr14&vid=5&hid=21

7. Edwards, J, McKinnon ,A and Cullinane ,S 2009,”Carbon Auditing the ‘Last Mile’:

Modelling the Environmental Impacts of Conventional and Online Non-food
Shopping”, accessed on 28/4/2011      
http://isisaccreditation.imrg.org/80257418006E81C9/484AE15036BC4CF18025757D
00344948/$file/Online-Conventional%20Comparison%20Heriot%20Watt
%20180309.pdf

8. Internet world stats 2011, “INTERNET USAGE STATISTICS: The Internet Big
Picture World Internet Users and Population Stats”, accessed on 27/4/2011      
http://internetworldstats.com/stats.htm
9. Itami, H & Noto, L 2007, Analysing resources and capabilities, Blackwell publishing,
accessed on 28/4/2011      
http://www.blackwellpublishing.com/grant/files/CSAC05.pdf

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 10. Milligan, A, Smith, SH 2006, See, Feel, Think, Do – The power of instinct in
business, accessed on 26/4/2011      
http://www.smithcoconsultancy.com/wp-content/uploads/2008/07/sftd-reviews.pdf
11. Rao, V 2010, Global corporate community and knowledge base: internet retailing,
accessed on 26/4/2011      
http://www.citeman.com/9999-internet-retailing/

12. US Census bureau 2011, Current Population Survey (CPS): Annual Social and
Economic (ASEC) Supplement, accessed on 27/4/2011      

http://www.census.gov/hhes/www/cpstables/032010/hhinc/new01_001.htm

13. Weissberger, A 2011, Web Start-up Bubble leaves Internet Infrastructure in the dust,
accessed on 26/4/2011      

http://essaysbox.com/2009/06/amazons-pest-swot-and-porters-five-forces-analysis/

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