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Leaders hip 68
Example  of  Strategic  Plan  Model  -­  Amazon  
S t rat egic Tweet
Highlights  by  David  Willden
Leaders hip
Amazon   is   the   5th   most   admired   company   in   the   world.How   did   it 1
S t rat egic become   so   successful   so   quickly?   Strategy!   Investing   in   the   right   plans   at
P lanning the  right  time  and  staying  the  course. Share

The   purpose   of   this   article   is   to   review   Amazon’s   strategy   development

S t rat egy model   and   the   external   assessment   tools   it   used   in   helping   it   to   formulate 2
A pproac hes and   select   top   strategies.   This   article   is   part   1.   (Please   note   that   external
assessment   tools   are   but   a   small   but   vital   part   of   Amazon’s   strategic
planning  process.)
S t rat egy
Cons ult ing 0
We   share   a   link   to   Amazon’s   strategic   plan,   however,   this   article   provides
helpful  context.
S t rat egy
Amazon   embraced   what   known   as   a   “design   school   model”   of   strategy
I nnov at ion development.   Despite   the   title,   the   model   is   simple   to   understand   and   can 93
be   highly   effective.   It   is   the   one   used   most   by   professors   and   consulting
S t rat egy organizations.   The   diagram   below   is   Henry   Mintzberg’s   illustration   of   the Follow  Us:
Models model.

       
S t rat egy
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 Example  of  Strategic  Plan  Model  -­  Amazon  

Business  Strategy
SAS.com/Business-­Strategy

Measuring  Strategy  vs.  Execution.

Download  Free  White  Paper  Now.

Organizations  often  struggle  in  finding  a  compelling  competitive  position.

Successful  organization  can  begin  to  drift  away  and  total  fail  at  what  it  takes
to  be  successful.  This  tool  can  begin  to  help  an  organization  get  into  the
game.

External  Appraisals    

To  do  this,  Amazon  conducted  the  external  analysis  using  the  following
analysis  frameworks:

PESTEL  Analysis
Industry  and  Competitor  Analysis
Competitor  Analysis
Global  Internet  Trends
GE  Matrix

PESTEL  Analysis

The  “PESTEL"    framework  helped  Amazon  to  identify  trends  that  could
impact  them  in  six  key  areas:

(P)  Political  factors:  areas  to  focus  on  include  political  direction,  taxes,
trade  restrictions
(E)  Economic  factors:  includes  GDP,  inflation,  interest  rates,
exchange  rates  and  other  macro  and  micro  economic  factors
(S)  Social  factors:  includes  social  trends,  population  growth  rate,  age
distribution,  career  expectations,  etc.
(T)  Technology  factors:  includes  equipment,  information  technology,
R&D
(L)  Legal  factors:  include  health,  safety,  employment,  discrimination,
consumer  and  antitrust  laws
(E)  Environmental  factors:includes  weather  and  climate

Competitive  Position

The  external  appraisal  includes  Amazon  looking  at  its  competitive  position  to
determine  opportunities  and  risks  and  where  it  should  focus.  To  do  this,
they  use  Porter’s  5  force  tool  that  helps  them  to  understand  the  strengths
and  weakness  of  its  competitive  position,  and  where  they  might  consider
moving  forward.  In  simplest  terms,  the  model  looks  assumes  there  are  five
important  forces  that  determine  competitive  power.  These  are:

Supplier  Power:  How  powerful  are  your  suppliers?  Is  it  easy  for  them
to  drive  up  their  prices  and  are  you  stuck?  If  there  are  a  number  of
suppliers  providing  the  same  product  at  the  quality  and  price  you
want,  then  the  suppliers  don’t  have  much  power.  However,  if  the
supplier  provides  a  unique  product  that  others  can’t  compete  with,
then  they  have  more  power.
Buyer  Power:  How  easy  it  is  for  buyers  of  your  product  to  drive  your
prices  down?  If  what  you  provide  is  unique  and  in  demand  then  you
are  in  a  good  position.  Otherwise,  you  may  need  to  compete  from  a
price  perspective.
Competitive  Rivalry:  How  many  competitors  do  you  have?  How
capable  are  they  compared  to  you?  If  you  provide  a  unique  product
or  service  that  others  can’t  match,  then  you  have  competitive  power.
Threat  of  Substitution:  Can  your  customer  find  a  substitute  product  to
yours  to  get  the  job  done?  The  ideal  is  a  product  that  can’t  be
substituted.
Threat  of  New  Entry:How  hard  is  it  for  people  to  enter  your  market
and  compete  with  you?  Your  advantages  may  be  patented  products,
economies  of  scale  or  complexity.

Example  of  Strategic  Plan  Model  -­  Amazon  

Competitor  Analysis

Amazon  has  hundreds  of  competitors.  The  challenge  is  which  ones  to  focus
on.  They  focused  on  large-­scale  internet  retailers  that  offer  a  broad  range  of
products.   This   exercise   helped   Amazon   to   better   understand   who   their
competition  is.  Ebay  and  Wal-­Mart  are  examples.

Global  Internet  Trends

The   internet   is   Amazon’s   key   channel.   The   20   top   countries   in   internet

usage,  and  grow  patterns  were  identified.

GE  Matrix

This   is   a   matrix   used   to   screen   portfolios   of   business   units.   Both   the

attractiveness  of  the  industry  and  the  strength  of  each  business  unit  within
the  industry  is  plotted.  Here  is  what  the  matrix  looks  like:

Example  of  Strategic  Plan  Model  -­  Amazon  

Industry  attractiveness  is  determined  by  the  following  factors:

Growth  rate
Size
Demand
Competition
 Profitability
Global  opportunities

Business  unit  strength  is  determined  by:

Market  share
Market  share  growth
Brand
Distribution  channels
Production  capacity
Profit  margin  comparisons

Recommended  Reading

Click  here  to  visit  Amazon’s  strategic  plan

Example  of  Strategic  Plan  –  Amazon’s  Internal  Analysis
Amazon  –  Use  of  Ansoff-­Matrix  Strategy  Tool

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Example  of  Strategic  Plan  Model  -­  Amazon