Student Name: Mueed Babar

CMS ID: 123-16-0019

Class: BSAF-VII
Case Study: Amazon
Course: Strategic Business Management
Instructor: Mr. Adnan Kehar

1. What are the key issues?

Amazon is faced with some major issues currently. Next, Trump's comments accusing
the corporation of not paying taxes, deriving retailers from profits, and using bargaining
power to charge less than the cost of delivering the packages to the US postal service.
Third, it is necessary to pay labor taxes to cover the rent for the labor of the building.
Third, the company has reported many years of losses due to the adoption of
aggressive policies that focus more on growth than profitability.
And for that company is considering and is in discussions with 20 North American cities
to host its Head Quarters.
The problems occur from Amazon’s strategy of not charging the taxes from third parties
in its marketplace thus giving them edge to have least cost products and hence
delivered at lower prices than other physical retailers. The labor taxes, on the other
hand, problem arises from the very fact the Amazon considered Seattle as its
production head quarter, for it could avoid more taxes. Amazon must decide upon what
may go wrong with Trump’s continuous attacks. And, be concerned about labor taxes. It
would either pay all the employee’s taxes that approximates to $500 per employee or
come up with solution of headquartering the business somewhere in North America as
discussed. Both problems are both important and urgent but the later takes precedence
owing to being straight forward and the former less because of ambiguity of
consequences.

2. What is the market cycle of the case company?

Amazon operates in fast cycle industry as it is engaged in business that brings in the
idea of incorporating technology in retailing and delivering the products to the
consumers. Company has a very diversified portfolio which makes it necessary to
consistently change and find out new ways of satisfying customer needs better than
competitors do. However, the company has constantly been serving in grocery, and
other FMCG products which are in no way going to change rather the process and
customer reach technique may be changed thus making the company’s cycle standard.

3. Exploration of various alternatives and effect in decision-making

 The company must focus on relocating/expanding its headquarters in North
American cities which would allow to cope with increased imposition of taxes and
bearing higher employee costs.
 Alternatively, the company ought to consider paying labor taxes for setting the
rent rises off.
 The company must consider the policy that focuses more on profitability than
growth at given stage as the company has already invested very huge amounts
 in making growth. As it was done in 2001, where some costs were reduced and
some of non-profitable divisions were closed.
 The company must have back up plan for Trumps attacks and be more concerned
about the decisions against or in favor of the company are once announced.
 Yet the other way is to reduce the discount rates or increase the annual fees for
the prime members. Which helps in increasing the profitability.
Expansion may not be easier and thus require more time and resources.

4. Choosing the best alternative and your recommendations for

Preferred Outcome:
Amazon had better have increased focus on profitability rather than growth as it needs
more funds to be available and in order to avoid the investor pessimism. And as a result
of this, company would be able to have investor satisfaction and demand for its shares
would increase which increases the share prices. Consequences of this decision are
enormous positively. Like, increased investor trust, no difficulty in managing the
operations and the company could manage to pay labor taxes despite charging the
same prices (while reducing the percentage discounts) from the customers.
Furthermore, it would create a safe play environment for the company from the attacks
by president Trump if the company pay taxes.
Alternatively, Bezos increase the discussions with NA cities to Head Quarter its
company there in NA to avoid the issues currently faced. This would, however, take
time and he must be concerned about what may happen in that time gap.

5. It’s the basic question? How to do it – what to do when, or timing of

Action/implementation Plan
How are you going to act?
Adopt policy of making more profits and cut down the aggressive strategy and head
quarter the company in NA 20 cities. The company must not delay in taking these
decisions as the decisions are both important as well as urgent. It can adopt
profitability policy by not investing more in other projects and divesting or closing the
non-profitable divisions. This could be done through quarterly analysis of the all the
divisions and their respective performance. Head quartering in NA cities is done
through negotiations.

6. PASTEL Analysis and any identify key factors.

PESTEL Define Identify/ Reasons Actions/ Strategies
Political These variables -Trump attacks -Amazon should pay
confirm to what Amazon labor taxes as imposed
magnitude a state continuously for by the government. Or
can affect the using its bargaining as it is already in
economy or accurate power to pay less discussions with NA, it
trade. than cost for the ought to Head Quarter
parcels to US the business
postal. somewhere else
-Labor taxes outside.
imposition in -Amazon ought to
Seattle by respond Trumps
 government to set allegations by either
the increased rent reviewing its policy of
effect off for the paying less than costs
labor. or
Economic These variables are Not relevant Not relevant.
determinants of the
results of an
associated degree
economy that affects
a corporation
immediately and has
long-term effects that
ring.
Social These variables -performing well -Identify the customer
examine the market's and continuously trends and serve
social environment improving and accordingly.
and assess diversifying the
determinants such as products according
cultural to the demand
developments, from the market.
demographics, and -Like it launched
population analytics. Amazon Studio in
2010, it could
increase the
customer attention
by launching other
things like games
etc.
-People have
increased use of
the phones and
Amazon failed to
inject its Amazon
phone into the
market. If it had
been successful in
launching phone, it
would have
increased its
customer base.
Technologi These variables relate -Amazon app store Increase the apps in its
cal to technology has limited apps as Appstore to meet more
developments that compare to both customer needs.
will affect trade google and apple.
activities -Launch of Amazon
Dash Wand which
is used to scan the
grocery products to
see whether they
are fresh or have
got spoiled.
Legal Environmental: these -Accused of wiping
variables encompass physical retailers -Must come up with
all those influencing out of business by alternate solution that
 or determining d by putting its third- may be. Alter the
the comprehensive party retailers on agreements with third
environment. competitive party retailers for
Legal factor: These advantage through charging them taxes.
factors have each tax benefit of not However, practicability
extern al and internal charging them of this decision is
sides. There are sure taxes on its questionable as why
laws that have an marketplace. would it want to lose its
effect on the business customers.
setting during a sure
country whereas
there are sure policies
that firms maintain
for themselves. So
that they incorporate
each of those sides

7. Porter’s Five Forces Model

Five Define Identify/ Level Actions Strategies
Forces Reasons
Are
Rivalry Larger amount Its competitors High They should emphasize
of rivals with like, Walmart and on competitive
no products or Best Boy are advantage and strengths
facilities, aggressively of the e-commerce
lower the investing in organization. For
company's online retailing example, the company
authority. Low which results in must continue boosting
competition increased its brand image, which is
attracts competition and among the strongest in
competitors to thus they have the industry.
charge greater responded to its
prices and strategy.
receive more
earnings
Bargainin Customers ' -High quality of moderat Improve the quality and
g power capacity to information. e processes continuously.
of drive down
customer cost. The -Buyers have
s influencing some switching
variables are costs
how many
faithful client’s
-High availability
enterprises
have, their of substitutes.
meaning for
the enterprise
and how much
enterprise
invests in
finding fresh
clients. Less
 no customer
implies more
negotiation to
push the cost
down.
Bargainin The power of -Amazon has Moderat -Amazon ought to focus
g power the supplier to associates who e to low. on more integrated
of speed up are like suppliers system.
suppliers expenses of for Amazon.
entry. Supplier -It has Amazon
energy is marketplace.
impacted by -low supplier
the quantity
accessibility of contribution in
more like- overall supply
input
providers.
More
providers,
their
bargaining
power will be
lower. In
contrast, the
lower the
providers, the
greater their
capacity to set
input
expenses.
Threat of Instead of -Many substitute High -Amazon focus on
substitut other products providing low cost
e premium available. products to gain the
products. products and market share and have
facilities, customer loyalty in the
substitute long-term
products and
facilities are
used. No
substitute
accessibility
makes the
situation of
the business
stronger and
the business
charges
greater prices
with greater
earnings.
Threat of New entrants -No government Moderat -Improve customer
new affect the regulations for e service and increase
entrants. company's entering the customer loyalty.
cost business of
environment. retails.
The less time -Amazon has
and cost it built brand which
requires results in
entrant to join, customer loyalty.
the weaker -economies of
the situation scale are not
of the easy to achieve
company is as is clear from
the market Amazon history
availability of of remaining
rivals and loss-making
their capacity company for
to undercut many starting
the price. years.
8. Strength, Weaknesses, Opportunities and Threats (SWOT) analysis
for the Company
Identify Actions\Strategies
Strengths: Amazon.com is the online retail market's Through brick and mortar
biggest product. This resilience was retailing, it should
partially responsible for the company's increase its impact.
early years of rapid growth. It should increase its
The diverse product mix makes it easy range of goods.
for consumers to find on the company's It should continue to cut
website what they need or want,
costs and pass on lower
meeting the dream statement and
prices to consumers.
mission statement of Amazon. This
quality reflects the value of product, It should boost product
which is crucial to the success of the quality.
company. To order to remain
Making the industry's highest revenue is competitive, it should
one of the advantages of Amazon. This invest in new business
allows the company to invest in new areas
business ventures or the development of
new goods, for example.
Weaknesse Amazon.com Inc. has an easy-to-imitate The organization needs to
s: business model. Some companies, for increase its strategic
example, can quickly set up an online entrance into developing
shopping store that offers just about countries, promising
anything. enormous growth
Amazon derives most of its sales from prospects based on rapid
developed countries like the U.S. It
economic development.
would be hard for Amazon to enter or
Amazon should address
compete in such markets when other
companies became fully established in the issue of rivalry with
developing markets. competitors such as Wal-
The limited brick-and-mortar footprint of Mart, and Amazon should
the company often limits the ability to consider expanding its
attract customers to different types of brick-and-mortar stores to
products which are more sealable in help increase market
physical stores than in online stores. presence and awareness
of the brand.
Opportunit Amazon will enter industries that are It should expand its
y: expanding. Before other large online online business in
shopping companies take root, this step developing markets.
will build the identity of the company, It should improve the
allowing Amazon the benefit of a greater brick and mortar look.
competitive edge. It should develop its own
The organization can also launch more online payment systems,
brick-and-mortar stores with a strong or it should go into
brick-and-mortar footprint, such as Wal- banking, in cooperation
Mart, to increase competition among with local and
large retailers. international banks.
One of the issues facing the e-commerce
website of Amazon.com Inc. is the
persistent selling of counterfeit items,
usually contradictory to customer
expectations. This situation presents the
 corporation with an opportunity to
improve its technical and operational
policies to address fake revenues. An
automated process of consumer reports
and quality analysis, for instance, may
help reduce the number of counterfeit
products selling on the internet.
Threat: Cybercrime threatens practically every Amazon will tackle
online retail company. Amazon must counterfeiting and
keep stringent measures to counteract cybercrime by improved
cybercrime attacks against its online corporate and customer
operations. For example, the company security and protection
must intensify its network security initiatives in information
efforts. technology.
Amazon.com Inc. faces the issue of
imitation, considering that its business
model is easily imitable. The
materialization of this threat could
reduce the company’s market share.
Aggressive competition is an issue
against Amazon. Large retail firms, such
as Wal-Mart, are continuing their efforts
in improving their online retail presence.

9. Competitive Advantage includes, what type of Resources when

bundled to create organizational capabilities
Competitive advantage includes both tangible and intangible and human resources to
create organizational capabilities. In Amazon’s case, we see Amazon uses its brand
name to enter different segments of the market and while vying it gets profitable in the
given segment. It entered Jewelry market, Grocery market, Whole Foods Market and in
hardware market, it was successful. This would have been next to impossible without
financial resources. Amazon became able to expand its business or even carry its
business on without financials. Which as a result, given Amazon a brand name of being
the leading online retailer and subsequently entering in different markets.

10. What are the Four Criteria of Sustainable Competitive Advantage

which the company uses its resources and capabilities to get
competitive advantage and why is it so successful in it?
Resource/Capabil Valuabl Rare? Costly Non- Implication
ities e? to substituta
Imitate? ble
Competitive
Brand image Yes Yes Yes Yes
advantage
Temporary
Customer Base Yes Yes No Yes
advantage
Temporary
Global presence Yes Yes No Yes
advantage
Competitive
Product Range Yes Yes Yes Yes
advantage
Temporary
Technology Yes Yes No Yes
advantage
 Temporary
Customer loyalty Yes Yes No Yes
advantage
11. Define the purpose and identify the activities of company’s value
chain?
Amazon Primary Activities
Inbound logistics
Amazon does not have long-term contracts or deals with its sellers to ensure that
product is available, payment terms and credit limits are extended. Amazon's (FBA)
distribution is the core of Amazon's inbound delivery for corporate retail sector. Sellers
can also use FBA by stocking their products in Amazon fulfillment centers In this
situation, Amazon takes full responsibility for shipping, customer service and consumer
returns. Amazon uses logistics to support Amazon Marketplace beyond the stage, and
the company has been supplying logistics services to others since recently.
Operations
Amazon operations are organized into three segments:
1. The United States of America. The division runs websites that are based on
North America such as www.amazon.com, www.amazon.ca, and
www.amazon.com.mx.
2. Global. International. International. This division runs websites with a global focus
such as www.amazon.com.au, www.amazon.com.br, www.amazon.cn and others.
3. Web Services to Amazon (AWS). This section deals with global sales of start-ups,
companies, government agencies, and academic institutions for computing, space,
server, and other products.
Outbound logistics
Amazon's outbound distribution typically includes the following:
 Centers of delivery. The e-commerce corporation runs 109 fulfillment centers around
the world, and the company makes heavy use of automated technologies to handle
product delivery, packaging, selection and shipping.
 Arrangements co-sourced and outsourced.
 Digital shipping. Which include products and services that can be purchased from
the website of Amazon.
 Physical markets. In 2017, the e-commerce giant bought the Whole Foods chain.
Marketing and Sales
 Amazon marketing message conveys the benefits of the widest product and service
range, competitive costs, quick product delivery and superior customer service
overall.
 Many aspects of the brand messaging mix such as print and broadcast advertising;
automated use of product promotion, activities and interactions, public relations and
direct marketing to convey the marketing message to the target customer audience.
Service
 Amazon's annual report states "we aim to be the most consumer-centered company
on Earth" and therefore the company offers outstanding customer service.
 Amazon Marketplace and Prime has two product forms –Amazon site vendors and
customers.
 For sellers, Amazon offers Selling Coach program "alerting sellers about
opportunities to avoid outsourcing, adding selling selection, and sharpening their
prices to make them more competitive."

12. Describe Company’s Business strategic positioning and key

business strategies
Company’s business strategic position is on same for the less. It is following low cost
strategy. The company has been focusing more on growth and has followed aggressive
strategy for overall business, and provides all its products at lower costs than any other
competitor does.

13. Develop a Competitive Profile Matrix (CPM)

Total Weight 1.00. Rating 1to 4

Company Walmart

Critical Success Weig Ratin Weigh Ratin Weighte Ratin Weight

Factors ht g ted g d Score g ed
Score Score
Brand Image .2 4 .8 3 .6
Customer .2 3 .6 2 .4
base/market share
Diversification
.1 4 .4 2 .4
Profitability
.2 3 .6 3 .6
Technology
.1 3 .3 3 .3
adoption
.2 4 .8 3 .6
Financial position
Total 1.00 17 3.5 13 2.9

14. Develop External Factor Evaluation (EFE) Matrix

Total Weight 1.00. Rating 1to 4

Key External Factors Weight Rating Weighted

Score

Opportunities
1. Penetrate developing markets .25 3 .75
2. Focus on joint ventures with .18 3 .54
associates
3. Increase prime member base .1 3 .3
Threats
1. Law suits against the company for .17 2 .34
tax avoidance
2. Government intervention for .20 2 .4
wiping out of other retailers
3. Competitors may imitate strategy .10 1 .1
TOTAL 1.00 20 2.43

15. Develop an Internal Factor Evaluation (IFE) Matrix

Total Weight 1.00. Rating 1to 4

Key Internal Factors Weight Rating Weighted

Score

Strengths .2 4 .8
1. High market shares .2 4 .8
2. Brand Image .2 4 .8
3. Diversification/global presence .15 3 .45
4. Low cost .15 4 .6
Weaknesses
1. Limited penetration to developing .10 2 .2
markets
2.
3. ...6… add as needed
TOTAL 1.00 22 3.65

16. Develop a Grand Strategy Matrix for the Company

GSM Differentiation Cost Leadership

Broad Amazon operating here

Narrow
17. Develop an Internal-External (IE) Matrix
The IFE Total Weighted Score

EFE Score Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

Strong
I II III
4.00

2.90
Medium
IV VI
3.00 V

Low
VII IX
1.00
VIII

2.80

IFE Score

18. Develop a Quantitative Strategic Planning Matrix (QSPM) and

recommended option (03 Points)
Total Weight 1.00. Rating 1 to 4

Strategic Alternatives

Head Head Quarter

Quarter in in Seattle
NA only and
Key Internal Factors manage the
Weight costs.

Strengths AS TAS AS TAS

1. High market shares .2 4 .8 4 .8
2. Brand Image .2 3 .6 3 .6
3. Diversification/global presence .2 4 .8 3 .6
 4. Low cost .25 4 1.0 3 .75
Weaknesses
1. Limited penetration to .15 2 .30 2 .30
developing markets
1.
2. ....6… add as needed
SUBTOTAL 1.00 20 3.50 16 3.0
5

Option# 1 Option # as
needed

Key External Factors

Weight

Opportunities AS TAS AS TAS

1. Penetrate developing markets .2 3 .6 3 .6
2. Focus on joint ventures with .15 3 .45 3 .45
associates
3. Increase prime member base .2 3 .6 3 .6
Threats
1. Law suits against the company for .15 2 .3 1 .15
tax avoidance
2. Government intervention for .15 2 .3 1 .15
wiping out of other retailers
3. Competitors may imitate strategy .15 1 .15 1 .15
SUBTOTAL 1.00 14 2.4 12 2.1
SUM TOTAL ATTRACTIVENESS SCORE 5.9 5.15