Amazon Case Brief

Student Name: Tiffany Means

Word Count: 1,600 words (excluding references)

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Table of Contents

Introduction to Amazon's history, mission and strategic posture..............................................2

Formulation of case for reform using Strategic Management...................................................7

Implementation: Evaluation of recommendations for Amazon.................................................7

Conclusion..................................................................................................................................8

References..................................................................................................................................8

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Introduction to Amazon's history, mission and strategic posture

Amazon is the largest digital retailer and e-commerce company globally, and provides e-

commerce, cloud services, advertising and branded proprietary product lines. These include

the Amazon e-commerce platform, Alexa, Kindle and Fire TV devices, and Amazon Web

Services cloud and digital solutions. Currently, Amazon is the global market leader in these

segments, although incumbents such as Walmart and Alibaba are providing the company

with stiff competition. The company's mission is to provide its stakeholders with the best

service and experience possible, in areas such as e-commerce and digital services. With

reference to Porter's generic strategies, Amazon has adopted the cost leadership strategy of

providing e-commerce and digital services at the lowest price, which remains consistent with

its mission but less appropriate for its current competitive environment, where greater

differentiation is necessary to stand apart from aggressive competitors such as Walmart and

Alibaba.

Analysis of key issues

This section will analyze Amazon's key issues using a SWOT (strengths, weaknesses,

opportunities and threats) framework, incorporating the key environmental, socio-cultural,

economic, political-legal and technological forces impact the firm.

In terms of strengths, Amazon has been highly successful in developing an integrated e-

commerce system, advanced digital analytics capabilities and strong supply chain

capabilities. These have allowed the company to emerge as the global leader in the e-

commerce space, and benefit from the rising demand for e-commerce in emerging markets

such as the American Mid-West and East Asia. Furthermore, Amazon has invested

significantly in community engagement initiatives through its $2 billion Housing Equity

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Fund, cloud skills training, and partnerships with nonprofits such as Magic Breakfast.

Amazon has also implemented specialised product offerings such as Amazon Fresh, Amazon

Pharmacy and Amazon Prime to capture new market segments. Furthermore, Amazon has

invested heavily in its cloud capabilities, which have allowed it to build infrastructure,

platform and software as a solution capabilities across the technology stack. These have

allowed Amazon to diversify into businesses such as computing, analytics and AI, beyond its

core business in e-commerce. Furthermore, the company is performing excellently on a

financial basis. For the 2020 financial year, the company had net sales of US$386 billion, a

year on year increase of 37% compared with 2019, with an operating income of $22.9 billion

and a net income of $21.3 billion, buoyed by excess demand from the COVID-19 pandemic

(Hahn et al, 2018). Finally, Amazon has strived to continue diversification into new

segments, such as music and video streaming and organic foods, through strategic mergers

and acquisitions.

In terms of weaknesses, Amazon has faced labor strikes and boycotts due to its treatment and

poor benefits for workers. Furthermore, it has faced criticism for its fast-paced and

exploitative work culture, which has allowed the company to exceed competitor delivery

rates for its Prime fast shipping product. Amazon has also been unable to localize its products

sufficiently to keep up with competitors such as Alibaba in China and Lazada in Southeast

Asia, which remain dominant in those regional catchments (Hahn et al, 2018).

In terms of opportunities, Amazon should continue to diversify its retail, web services, and

cloud services business, and build platform ecosystems similar to Alibaba/WeChat in China.

This would allow the company to reap larger profit margins from its ecosystem players.

Furthermore, Amazon should continue to invest in sustainable supply chains and energy

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production, which would present a new, regulatory-compliant form of energy and business

for the company.

In terms of threats, the company continues to face regulation over its labor policies and its

monopolistic status as the leading e-commerce technology leader in the US. Amazon should

therefore invest heavily in a stakeholder engagement strategy to understand the key concerns

of its workers and regulators, and collaborate with them to alleviate their concerns.

Furthermore, the company faces challenges from incumbents such as Walmart and relatively

newer players such as Alibaba in China, which will continue to erode the company's market

share in e-commerce (Hahn et al, 2018).

The key social, political and economic trends facing Amazon are as follows. Foremost, from

a social perspective, Amazon has been facing calls to improve its human resource

management to provide its workers with a safe working environment and living wages. From

an economic perspective, Amazon has been enjoying strong financial performance, but that

has also fed a bubble in terms of its market capitalization, which has increased exponentially

over the past year. From a political perspective, Amazon is facing significant antitrust

investigational scrutiny from the US Federal Trade Commission and US congress over its

potential role in suppressing competition in the tech sector (Arnett et al, 2018). Finally, from

a technological perspective, Amazon has actively embraced the acceleration of digitalization

among enterprises, and has experimented with the use of autonomous vehicles and robots to

substitute for workers.

Using Porter's Five Forces to analyze Amazon's competitive environment, it is clear that the

company faces an increasingly crowded and competitive e-commerce and digital service

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space. Foremost, the rivalry between Amazon and competitors such as Walmart, Alibaba and

Sea Group (for e-commerce) and Google (for digital and cloud solutions) has accelerated,

eroding Amazon's market share. While barriers to entry still remain high for establishing end-

to-end e-commerce and digital solutions platforms, the growing emergence of niche players

in a fragmented e-commerce and cloud solutions space has demonstrated that barriers to entry

may fall in the future. This may result in greater competition for Amazon. Furthermore,

buyers have come to expect shorter delivery times and lower prices amid the rising

competition, which has increased their buying power, while low-priced substitutes by the

likes of Alibaba, eBay and Sea Group have continued to erode Amazon's market share

(Arnett et al, 2018).

In terms of the organization, Amazon's management has been led successfully by Jeff Bezos,

and the company's executives continue to retain a plurality of the corporate stock. However,

the management has been criticized for being slow to move on antitrust issues and fair labor

practices (Bloodstein, 2018). The organizational structure is fairly hierarchical, but remains

sufficiently cross-functional as to continue to encourage autonomy and innovation at the local

level. Marketing, operations and financial management have been professionalized in recent

years, with significant responsibility given to local state or country teams to run their own

marketing and operational processes. Culturally, the company also benefits significantly from

a customer-driven and customer-focused mindset, which continues to encourage Amazon

teams to constantly take customer perspectives and value to the customer into account (Arnett

et al, 2018).

Reviewing the above analysis, it is clear that Amazon's critical success factors lie in its

technological and supply chain capabilities, alongside its relentless focus on customer needs

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and customer service excellence, while its weaknesses lie in its compliance to existing

regulation. It is clear that Amazon is a highly efficient, diversified and agile company, and

continues to be a market leader in the e-commerce and cloud solutions sectors despite its

longstanding dominance. However, Amazon needs to reform its regulatory compliance to

continue to retain its license to operate.

Formulation of case for reform using Strategic Management

Amazon's management can improve in ensuring the long-term survival of the company by

ensuring stronger compliance to antitrust regulations and fair labor practices. Currently, it is

clear that Amazon is performing very well from a financial and operational standpoint, and

that its customer needs are well met. However, frequent labor strikes and labor organizing,

alongside continued antitrust investigations, demonstrate how the company is increasingly

seen as an exploitative employer and monopolistic tech giant whose actions have been

harmful to the interests of its workers and the general public (Bloodstein, 2018). For

example, Amazon has been accused of surveilling worker activism and involvement in labor

unions, violating COVID-19 safe distancing principles in their warehouses, and providing

sub-optimal pay, paid break privileges and health benefits. Hence, Amazon needs to invest

more heavily in engaging workers and regulators to rehabilitate its reputation as a responsible

player.

Implementation: Evaluation of recommendations for Amazon

Amazon should focus on engaging stakeholders beyond its customers and shareholders, to

embrace and meet the needs of its regulators, partners and workers. This would ensure that it

continues to have a strong license to operate and remains a competitive employer in retaining

and attracting top talent. Amazon should thus invest in a holistic stakeholder management

strategy to engage workers, labor unions and regulators on how to best meet their needs.

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This strategy would include the following key steps. Foremost, Amazon should recognize the

potential for accepting unionization as part of its labor policies and raising minimum wages

for its workers, alongside working with regulators on the antitrust investigation led by the

U.S. Federal Trade Commission. Amazon should aim to be transparent, particularly on thorny

issues such as data usage from third-party sellers on its platforms. Amazon should also divest

from loss-making segments, such as those of its globally-focused online stores, in favor of

more profitable divisions such as Amazon Web Services. Finally, Amazon should continue to

move forward with its diversity and inclusion efforts, and ensure greater gender and

ethnicity-based diversity on its board of directors and workforce (Arnett et al, 2018).

Conclusion

Amazon will remain dominant in its e-commerce and cloud service positions, and its

prospects for growth and profitability will continue to be strong. However, the company

needs to consider how to more effectively engage its workers and regulators to avoid

potentially costly lawsuits, boycotts and regulatory censure and provide a safe, responsible

workplace for its employees, in order to continue preserving its reputation and license to

operate. Even as CEO Jeff Bezos hands the mantle over to incoming CEO Andy Jassy in the

third quarter of 2021, it remains to be seen how Amazon will continue transforming itself.

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References

Arnett, J., Goldfinch, B., & Chinta, R. (2018). Multi-dimensional nature of innovation at

Amazon. International Journal of Business Innovation and Research, 15(1), 1-13.

https://doi.org/10.1504/IJBIR.2018.088461

Bloodstein, B. (2019). Amazon and Platform Antitrust. Fordham Law Review., 88, 187.

Retrieved from

https://heinonline.org/HOL/LandingPage?handle=hein.journals/flr88&div=9&id=&page=

Galloway, S. (2017). The four: the hidden DNA of Amazon, Apple, Facebook and Google.

Random House.

Garner, B. A. (2018). Amazon in the global market. Journal of Marketing and

Management, 9(2), 63-73. Retrieved from https://gsmi-ijgb.com/wp-content/uploads/JMM-

V9-N2-P06-Blake-Garner-Global-Market.pdf

Hahn, Y., Kim, D., & Youn, M. K. (2018). A Brief Analysis of Amazon and Distribution

Strategy. The Journal of Distribution Science, 16(4), 17-20.

https://doi.org/10.15722/jds.16.4.201804.17