Running head: CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC.

CMA Strategic Management Assignment 1: Amazon.com, Inc.

by

Imran Khan

CMA BC Strategic Management April 18, 2012

CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC.

CONTENTS Amazon.com, Inc. SWOT Analysis.....................................................................................................1 Discussion on Primary and Secondary Stakeholders .........................................................................................................................................................4 Porter's Chain Analysis.........................................................................................................................5 Porter's Five Forces Analysis...............................................................................................................6 Supplier Power - Suppliers consider amazon.com as an important and prestigious company and are strongly committed to their business. The companies do not charge their products until the moment that amazon.com sell them (frequent strategy from big companies). For small companies and publishers, amazon.com keeps a maximum of five items in their stock in order to reduce costs.................................................................................................6 References............................................................................................................................................8 References.............................................................................................................................................8

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CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC.

Amazon.com, Inc. SWOT Analysis The SWOT analysis for Amazon.com, Inc. is as follows: Strengths: Market Share and Revenue growth: Since its inception in 1997, Amazon.com, Inc. has increased its client base from 1.5 million to approximately 30 million customers via a decade of conducting e-commerce. Its revenue grew over the same period by an estimated 838% with consistently higher annual net positive cash flow from 2009 onwards. (1) Diversified Portfolio of products and services: The company has a huge variety of products and services as offering to its customers (either directly or via forming strategic alliances with other sellers). Strong Brand Image: Its strategic expansion beyond North America has fostered a strong brand image Business Evolution Amazon has continually re-invented its offering of products and services and operates under a business model whereby it has the opportunity to increase revenue without incurring a proportionate rise in direct costs. Weakness: Unsustainable rate of expansion As it expands its business across different countries, finding specific set of key HR skills that has sustained the success of its business model so far may be harder to find. Fluctuations in Annual Revenue Profile Amazon typically accounts of approximately 39% of its annual sales over the 4th quarter on an annual basis. 1

CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC.

This may leave its business vulnerable to external market conditions in regards to the timing and availability of sales and shipment. (1) Highly Capital Intensive Operations Due to its massive technological infrastructure, amazon has to account for significant expenses to keep up to pace with rapid changes in technological advances. Sub-optimal distribution channel The rapid global expansion and increases in its offering of products and services may present numerous difficulties with the distribution channel. Opportunities: Investment in new technology Due to its market presence and as a leader in CRM, it has the opportunity to invest heavily in e-commerce infrastructure to sustain its business model Formation of strategic alliances with various providers: include other stores such as Toy R Us, Office Depot, and so forth may allow further diversification of products and grow its brand image. Web services: Techniques where third parties can access technical contents in order to improve and develop their applications (e.g. Facebook), can allow Amazon.com to innovate the platform without incurring massive investments. Global expansion: The rapid growth of use of Internet and broadband throughout countries may allow amazon.com to expand its brand to international markets. Threats: Increased competition in e-commerce space with low barriers to entry Expansion to foreign markets may bring applicable foreign exchange, local 2

CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC.

economic and political risks Changes in Government regulations may bring about additional expenses in the form of upgrade and change in technological infrastructure Increases in prices for commodities such as oil, paper and supplies may create disruptions and loss of profit margin in its distribution channel The opportunities identified here may fall under the PESTEL framework under the following categories: Investment in new technology Economical, technological and social. Formation of strategic alliances with various providers: Economical and legal. Web services: Economical, technological, and social. Acquisitions and Global expansion: Political, economical, and legal The threats identified here may fall under the PESTEL framework under the following categories: Increased competition in e-commerce Political, economical and legal Expansion to foreign markets Political, economical and legal Changes in Government regulations Political, technological, legal and social. Increases in prices for commodities Political, economical and environmental.

CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC.

Discussion on Primary and Secondary Stakeholders The Companys main stakeholders are: Primary: Consumers - Amazon attracts consumers via retail websites, and focus on selection, price, and convenience. The business strives to offer the lowest prices by improving operating and distribution channel efficiencies. (1) Enterprises Secondary: Sellers Amazon offers programs that enable sellers to sell their products on their websites and their own branded websites and to fulfill orders through them. Since they are not the direct seller of record in these transactions, the revenue they generate come in the form of earn fixed fees, revenue share fees, per-unit activity fees, or some combination thereof. (Reference) Content Creators

CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC.

Porter's Chain Analysis The Major primary activities for Amazon are: Inbound Logistics Operations Outbound Logistics Marketing and Sales

Service The Major Secondary activities for Amazon are: Procurement Human Resource Management Technological Development Infrastructure

In my opinion, the two most critical activities are highly important to the companys success are: Marketing and Sales Without proper effort put on marketing and sales, Amazon may not survive in an intensely competitive e-commerce environment. Marketing and sales allows them to distinguish their business offering from their competitors and meet their revenue targets. Technological Development A critical part of Amazons business model is to offer a superior but simple experience to their customer base that is also stable and safe for financial transactions. Without a focus on such activities, amazon may see an erosion of market share and suffer from diluted brand image.

CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC.

Porter's Five Forces Analysis Supplier Power - Suppliers consider amazon.com as an important and prestigious company and are strongly committed to their business. The companies do not charge their products until the moment that amazon.com sell them (frequent strategy from big companies). For small companies and publishers, amazon.com keeps a maximum of five items in their stock in order to reduce costs. Buyer Power -Low prices is the principal attraction that amazon.com offers to each individual buyer. Competitive Rivalry - Amazon.com is one of the first companies into the e-commerce field. Due to their market presence and continual focus on delivering customer satisfaction, the level of competitive rivalry is essentially minimal. Threat of Substitution - Due to heavy investment in technology and subsequent innovations that foster superior customer experience, the threat of substitution for their business is low. Threats of New Entry - Due to the advance in technology in e-commerce space, the threat of new entrants are fairly high. The most threatening force is the threat of new entry due to continual lower costs of barriers to entry and as brick-and-mortar stores such as Walmart, Indigo and Borders begin to offer similar type of e-commerce experience such as Amazon via the web The least threatening force is supplier power due to the continued market presence and reach of Amazon in the market place. They yield a considerable amount of influence over their suppliers and as a result, supplier power is seen as the least threatening force

CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC. in Porters Five Forces Model.

CMA STRATEGIC MANAGEMENT ASSIGNMENT 1: AMAZON.COM, INC.

References (1) Amazon.com: 2011 10k Annual Report