Amazon Company Strategies: Business and Corporate Levels

Amazon was the first virtual bookstore ever opened (Kargar, 2003). It was focused on selling books. However, to generate higher revenues, the company started to offer other products the customers such as electronics and DVDs (Kargar, 2003). According to the Guardian, “Amazon is the biggest online business” (Cadwalladr, 2013, para. 1). It sells thousands of items every day, and goods from A to Z are available 27/7 (Cadwalladr, 2013, para. 1). Moreover, today it has its products such as Fire Phone and Kindle. With the help of the Fire Phone, Amazon was trying to get into the mobile phone industry. However, it was not successful, as the competition on the smartphone market is intense (Streitfelf, 2014).

This essay provides an analysis of Amazon’s strategies. As Amazon focuses on multiple products, only the online retail industry is chosen as a key one. Other areas of operation are discussed briefly. The essay evaluates the company’s values on business and corporate levels. The analysis helps understand whether the strategies will be successful and effective in the long-term. Moreover, the nature of competition is described, and the main competitor is determined. A comparison of strategies on different levels is completed, and it allows seeing which strategy will be successful in the long-term. Additionally, analysis of the policies is made in slow-cycle and fast-cycle markets.

Business-Level Strategy

A business-level strategy can be defined as the way a company differentiates itself from its competitors (Ireland, Hoskisson, & Hitt, 2011). “Cost leadership, differentiation, focused cost leadership, focused differentiation, and integrated cost leadership/differentiation” are the key strategies, which a company chooses based on its advantages (Ireland et al., 2011, p. 99).

As it is mentioned in Amazon’s Annual Report 2014, “we strive to offer our customers the lowest prices possible through low everyday product pricing and shipping offers.” It could be said that Amazon applies a cost-leadership strategy, as it provides its clients with high-quality products at lower prices (Amazon.com, 2014, p.3). It tries to maintain the costs as low as possible. This fact allows the company to generate high revenues and stay competitive on the market.

It could be said that this strategy has been effective in the long-term. According to the statistics provided by the Securities and Exchange Commission EDGAR database, the net income for six months is higher in 2015 than in the same period in 2014 (U.S. Securities and Exchange Commission, 2015). It could be concluded that choosing the right business-level strategy is vital to Amazon’s success.

However, the company used a bit different strategy for Kindle. Amazon sells Kindles for a lower price than its competitors do (Filloux, 2011). Nevertheless, the primary goal of Amazon is to gain money from subscriptions and electronic books. Nonetheless, it has to be mentioned that Kindle is not the main business of Amazon. Consequently, focusing on the increasing popularity of Kindle and other devices is not its primary strategy.

Corporate-Level Strategy

As for the corporate-level strategy, Amazon, it could be said that Amazon uses a multi-level sales strategy. The approach implies that sales can be made on several levels (Wit & Meyer, 2010). In the case of Amazon, as Amazon was focused on Business-to-Consumer and Business-to-Business markets. However, today it is a platform where the sellers can have their relationships with their customers (AmazonServices, 2015).

There are also other strategies used by Amazon, but it has to be mentioned that this strategy is the main one. This approach allows Amazon to remain competitive on the market continuously. It attracts additional sellers to the website and dramatically increases the diversity of products. Moreover, it is beneficial to both sellers and Amazon, as both parties can gain profit. Additionally, this fact attracts more customers to the company, as a products’ variety significantly increases.

This strategy allowed Amazon to remain competitive on the market for an extended period. However, companies such as Alibaba Group and eBay have a similar approach. This fact might be a possible threat to the companies in the online retail business in the future. It could be said that Amazon needs to implement a new strategy in order to remain competitive in the long-term.

Competitive Environment

As it was mentioned earlier, Amazon competes in several different segments. Consequently, competition at each level will be analyzed separately. This fact allows seeing a critical competitor on each stage.

Speaking of the media industry, Amazon has several competitors such as iTunes (Apple), Netflix, and Play Market (Google). All the companies provide platforms, which allow customers to buy media content such as movies, books, songs, and applications. However, a majority of the companies mentioned above focus on a particular target group. For example, Apple customers mostly use iTunes, as it is a necessary software to synchronize different devices with each other (iTunes, 2015). A similar situation occurs with Play Market, as it is essential for the Android Platform. In turn, Netflix is limited only to the media and cannot compete with Amazon in other online retail industries.

As for the general merchandise, it could be divided into two groups, as some of the companies perform sales both physically and online. As for retail stores, such as Walmart and Best Buy, it could be said that the companies are not available 24/7, and store locations are limited. However, it has to be mentioned that with the development of the Internet, more and more companies become available both physically and online (Singh, Alhorr, & Bartikowski, 2010). This fact allows the companies to increase their market share and remain competitive on the market.

Speaking specifically of online retail, the principal competitors are Alibaba Group and eBay. It could be said that Alibaba Group focuses on the Chinese market. However, it is not true, as Alibaba Group is gaining popularity worldwide. In the near future, Alibaba plans to overcome Walmart and gain a significant share of the retail market (Chang, 2014). Consequently, it could be concluded that Alibaba Group is the principal competitors in the online retail industry. It is a potential threat not only to Walmart but also to Amazon.

Amazon and Alibaba Group

Alibaba Group Holding Ltd is a company, which was founded in 1998 (Yazdanifard & Li, 2014). It is rapidly gaining popularity in the world. As it occupies the online retail niche, and it is the main competitor of Amazon. Moreover, it is a significant threat to other retail companies.

As for its corporate strategy, it focuses on Business-to-Business and Customer-to-Customer business models (Yazdanifard & Li, 2014). Moreover, it also provides an online platform for other sellers. Additionally, the company also offers services in different spheres, such as online retail. Moreover, in order to reach people around the world, AllieExpress was introduced. It presented its security verification procedure, Trustpass (Yazdanifard & Li, 2014). Today it is widely used by the companies, which conduct their business in e-commerce. It can be said that in terms of the corporate-level strategy, Amazon and Alibaba Group have many similarities.

As for the business-level strategy, it could be said that Alibaba Group also implements a cost-leadership strategy. The company provides low prices for high-quality products (Yazdanifard & Li, 2014). It helps the company to remain competitive on the market and gain a significant market share. As mentioned earlier, Amazon uses a comparable strategy. However, Alibaba offers similar products for even lower prices.

It could be said that Alibaba Group uses the same techniques as Amazon. It focuses on different spheres, but the main area of operation is the online retail business. Moreover, it also provides a platform for different sellers. Additionally, Alibaba Group tries to offer products at a low price. It could be said that corporate-level strategies are similar. However, it has to be mentioned that Alibaba Group currently has a leading position on the market. It can be said that it has an adverse impact on Amazon, as it might lose its market share. Consequently, Amazon has to establish and implement another strategy to stay competitive on the market.

In conclusion, it could be said that Alibaba has more chances to stay competitive in the long-term. As it was mentioned earlier, it already dominates the online retail market, and it will become more popular soon. It is a surprising fact, as the company uses the same strategies as Amazon. However, it is able to implement them in a different way to generate higher revenues and attract more sellers and buyers.

Slow-Cycle Market

Alibaba Group might be competitive and successful in the long-term. However, its business and corporate-level strategies might not be effective in different conditions. In slow cycle markets, a cost-leadership strategy might not be the most suitable one. It could be said that the competition will be lower. Consequently, as the products will be rare, there would be no point in attracting customers with a low-cost leadership strategy. Prices could be higher. In this case, Alibaba would experience a loss in revenues.

In terms of the corporate strategy, it could be said that there would be no need to increase the number of sellers rapidly. As the products will be unique and rare, it will allow Alibaba Group to remain competitive on the market. It could be said that the level of demand will be the same since Alibaba group will provide unique products.

In conclusion, it could be said that Alibaba Group’s strategies would not be as effective as they are now in slow-cycle markets. However, Amazon would not be successful too. Either in this case, the most suitable strategy is a focused-differentiation or integrated approach. In this case, companies would need to focus on providing particular products to the defined target group.

Fast-Cycle Market

It could be said that in the fast-cycle market, a cost-leadership will be a suitable business-level for both Alibaba Group and Amazon. However, Alibaba Group will still dominate the market. As it has prices, which are more competitive.

However, it has to be mentioned that fast-cycle markets involve a high pace of sales. This fact implies that companies are not able to stay sustainable in these types of markets for an extended period. Even if Amazon and Alibaba Group still change the strategies, they would not be able to get high revenues as they have now.

Conclusion

In conclusion, it could be said that Amazon is a famous and competitive company in the online retail business. As for the business-level strategy, it focuses on the cost-leadership and provides low prices for its customers. Speaking of the corporate strategy, it applies a multi-level sales strategy and offers products and services in different spheres. Using these strategies helps the company remain competitive in the long-term.

However, the tactics are not unique, as Alibaba Group uses similar strategies. Moreover, Alibaba Group occupies a significant share of the market. It could be said that it will be able to attract more customers in the near future.

Moreover, these strategies could be used in the long-term. However, in the slow-cycle market, these strategies would not be suitable and lead to the loss of revenue. It could be said that even though Alibaba Strategy was successful in the long-term, it might be a failure in the slow-cycle market. In this case, Amazon would be lucky, as it offers products at a higher price. In this case, the most suitable way is to change the strategy to the focus policy and pay attention to the wants of a particular niche.

In the case of the fast-cycle markets, both of the companies experience losses. However, Alibaba’s pricing will generate additional revenue, and this fact allows the company to stay competitive on the market. However, it has to be mentioned that Amazon would not experience a major loss of financial resources.

References

Amazon.com. (2014). Annual Report. Web.

AmazonServices: Amazon services offers solutions for online success. (2015). Web.

Cadwalladr, C. (2013). My week as an Amazon insider. The Guardian. Web.

Chang, Gordon. (2014). Watch out Walmart: Alibaba to become world’s largest retailer by 2016. Forbes. Web.

Filloux, F. (2011). Amazon’s new Kindles have massive potential for publishers. The Guardian. Web.

Ireland, D., Hoskisson, R., & Hitt, M. (2011). Understanding business strategy: Concepts plus. Mason, OH: South-Western Cengage Learning.

iTunes. (2015). iTunes. Web.

Kargar, J. (2004). Amazon.com in 2003. Journal for the International Academy for the Case Studies, 10(2), 33. Web.

Singh, N., Alhorr, H., & Bartikowski, B. (2010). Global e-commerce: A portal bridging the world markets. Journal of Electronic Commerce Research, 11(1), 1-5. Web.

Streitfelf, D. (2014, Sept. 8). Amazon cuts struggling phone’s price to 99 cents. The New York Times. Web.

U.S. Securities and Exchange Commission: Amazon com inc (filer) CIK: 0001018724. (2015). Web.

Wit, B. & Meyer, R. (2010). Strategy synthesis: Resolving strategy paradoxes to create competitive advantage. Hampshire, UK: Cengage Learning EMEA. Web.

Yazdanifard, R. & Li, M. (2014). The review of Alibaba’s online business marketing strategies which navigate them to the present success. Global Journal of Management and Business Research, 14(7), 33-38. Web.

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