Amazon Case Study

November 26, 2013

Q: Amazon has hugely diversified over the last seven years. Outline the facets
of this diversification. Outline what type of Multiproduct strategy it pursues?

At its’ inception, Amazon thrived as one of the few companies able to succeed as an
e-commerce site. Amazon was initially founded as an online bookseller but has since
diversified, and expanded to selling a variety of products. Today, Amazon sells
household products, electronics, furniture, and many other retail products.

As Amazon proved in can be successful in one market, it moves on to a next

promising one. For example, it developed the Kindle, one of the leading e-readers.
There are a variety of kindles varying in color, size, functionality, and more, meant
to suit each consumer’s needs. Now, Amazon is even readying itself to enter the
tablet world, as it has released its Kindle Fire, an Android platform-based product to
compete directly with the Apple iPad. Similar to Apple’s app store, owners of the
tablet will be able to access a similar app store.

Product diversification isn’t the only way that Amazon has diversified. Additionally,
Amazon has diversified in its membership and payment plans. The company now
has a number of distinct programs. At the most basic level is its normal, free of
charge membership. Secondly, there is “Amazon Prime”, which offers free 2-day
shipping, free streaming, and more, all for an annual fee. One other plans it has
“Amazon Student”, which offers free 2-day shipping and a few other perks for an
annual fee.

When implementing multiproduct strategies, firms use what is called the

multidivisional (M-form) structure. There are three strategies associated with this
M-form structure. Amazon most likely uses the cooperative M-form and the related
constrained multiproduct strategy. According to Understanding the Business
Strategy, the cooperative M-form is an “organizational structure in which horizontal
integration is used so that divisions can share resources and activities (135)”
Amazon acts as one entity, with many divisions, all selling different products. Each
of the divisions have the access to the same knowledge, as they work mutually
rather than against each other.