AMAZON.COM, INC.

PRESENTED BY:

ALBOR Elida

HESSE Tatjana

LONDOÑO Maria Juliana

MENDOZA Christian

REINECKEN Enya

KEMAJOU Samira

WIDAK Inge

FALL -2021
 INDEX
STEP 1
1.Enterprise overview........................................................................... 3
1.1 History
1.2 Businesses and products
1.3 SBU

STEP2
2.Macro Environment Analysis........................................................... 10
2.1 PESTEL
2.2 Evaluation Grid

STEP 3
3. Analysis of Competitive Environment............................................
3.1 Degree of Competitive Intensity of the Industry
3.2 Long-term profitability of Amazon

STEP 4
4. Internal analysis of the target company........................................
4.1 Core Competencies
4.2 Value Chain & Business Model
4.3 Corporate & Business Strategies
4.4 Strengths and Weaknesses of the company

STEP 5
5. Amazon's SWOT Analysis................................................................
5.1 Identification of the problematics & opportunities in terms
of domestic & international growth
5.2 Proposed Strategic and growth approaches for Amazon
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STEP 1 : COMPANY'S OVERVIEW
1.1 HISTORY
Amazon.com was founded in 1994 by Jeff Bezos. So,
Who is Jeff Bezos? he is a graduate student from
Princeton University who after finishing his studies
started working for a firm in Wall Street in New York.
Bezos after realizing the huge opportunities the internet
will bring, moved to Seattle and created his own company
in 1994, with 300.000 USD of his parents with what he
created Amazon, which at first was an online bookstore.
(Past to Future,2019)

Three years later, the business was doing well and had already managed to create some
recognition, for which Bezos took Amazon to the IPO with a price of $ 17 per share, with
all the money raised from investors, Amazon began a rapid expansion process that
launched them from selling books to other types of products such as Music and video
streaming, technology and other consumer goods.

In the mid-2000s, Amazon launched AWS, what is it? is an on-demand cloud platform
that provides services to individuals, companies and governments. This innovation
helped make Amazon a technology company rather than an exclusively online retailer.

The first Kindle e-readers were launched in 2007. These relatively low-cost handheld
tablets revolutionized the e-book market, and by 2012 the Kindle would constitute
around 50% of all Android-operated tablet sales. Amazon Publishing service was
introduced after the Kindle's success in 2011. (Lacort, 2021).

In 2013 Amazon was recognized as the largest online retailer and then surpassed
walmart valuation with his market capitalization. Amazon started selling home smart
devices such as the Echo and Alexa.
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Amazon has sold over 100 million Alexa equipped devices, and the sales are
expected to continue to grow rapidly. (Podean, 2020). In 2017 Amazon.com
announced that it had agreed to buy the supermarket chain Whole Foods Market,
Inc., in a deal valued at more than $13 billion. Since then Amazon has continued to
expand into many other services. These include shipping fresh produce, drone
delivery, and many more innovations.

Amazon is the largest online marketplace,

where people can buy directly from amazon or
to a third party vendors, only with a credit or
debit card consumers can mail to their home
almost everything. But Amazon is not only a
market place, as for today Amazon counts with
a wide array of sub brands which includes the
Amazon Store, different devices and services,
Amazon Web Services and Entertainment.

Market Place Devices & Services

Amazon.com is the online retail Amazon manufactures innovative
store where third parties can sell devices such as the Kindle, which is
their products and customers an e-reader device and Alexa, a
benefit from the low prices, better smart home assistant product.
selection, and convenient services.
Amazon offers a wide selection of
products through the 1.7 million
small and medium businesses
around the world.

Amazon Web Services Entertainment

Amazon’s digital entertainment
AWS is a cloud platform, it offers
products enable customers to
over 175 fully featured services
access apps and games, stream or
from data centers globally. Millions
download movies, TV shows, and
of customers including startups,
music from anywhere in the world.
large enterprises, and leading
government agencies use AWS due
to the lower costs, they become
more agile, and innovate faster.

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 1.2 BUSINESSES & PRODUCTS

THE COMPANY'S BUSINESS SEGMENTATION

There are a couple of things to keep in mind when analysing Amazon's segmentation
and the way the company generates money. Amazon makes money through its retail,
subscriptions, and web services, among other channels.Retail remains Amazon's primary
source of revenue, with online and physical stores accounting for the biggest share. AWS
is Amazon's largest source of operating profits and is growing at a robust pace.Amazon's
founder Jeff Bezos stepped down as CEO on July 5, 2021, in favor of Andy Jassy, who was
previously the CEO of AWS. (Reiff, 2021).

Amazon is divided in three different segments:

NORTH AMERICA
Amazon's North America accounted for $236.3
billion in 2020, which represents an increase of
38.4% from 2019 and it comprises about 61% of the
company's net sales for the year. Aside from retail,
the other primary source of revenue for North
America is subscriptions, including Amazon Prime,
which offers unlimited free shipping, and unlimited
streaming of movies, TV shows, and more. (Reiff,
2021).

INTERNATIONAL
This segment consists of Amazon's retail business for
consumer products and subscriptions internationally.
It also includes export sales from those stores. After
various years of operating losses, the International
segment generated an operating profit in 2020 of
$717 million in 2020, compared to an operating loss of
$1.7 billion in 2019. The percentage of operating
income this segment generates is about 3% of the
operating income for all segments. (Reiff, 2021).

The North America and International segment refers to geographical breakdowns of

Amazon's retail business. They generate revenue from retail sales in North America and
the rest of the world, as well as from subscriptions and export sales for those areas.

In fact, if looking up close to the company's segment breakdown, this 2 segments

dominate the revenue shares but are not as strong regarding the operating income.
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 AMAZON WEB SERVICES
Amazon's AWS segment generated net sales of $45.4
billion and operating income of $13.5 billion in 2020.
Net sales grew 29.5% while operating income rose
47.1% compared to 2019. Amazon controls about a
third of the global cloud market, nearly twice as much
as its next closest competitor. AWS's biggest rivals are
Microsoft Corp.’s (MSFT) Azure and Alphabet Inc.’s
(GOOGL) Google Cloud. (Reiff, 2021).

This last segment provides services to businesses, government agencies, and academic
institutions to store information and deliver content, it's certainly like an "infrastructure
platform in the cloud," for a variety of "solutions" such as hosting applications and
websites, providing enterprise IT, and content delivery.
The following charts represents the share that each Amazon segment has into both the
revenue and the operating income of the company:

REVENUE OPERATING INCOME

AWS
13%

North America
41%

International
AWS
27% 54%
North America
60%

International
5%
Source: iNVESTOPEDIA / Amazon 10-Q
Source: iNVESTOPEDIA / Amazon 10-Q

AMAZON PRODUCTS & SEGMENTATION OF THE BRAND

ONLINE STORES
This sector includes Amazon's e-commerce website's retail and digital
media revenues. Customers can choose from a wide range of electronic
and durable goods, as well as digital format items like e-books, images,
apps, music, and games.

MAIN COMPETITORS
LightInTheBox Holding Co. (LITB), Overstock.com (OSTK), Vipshop Holdings
Ltd. (VIPS), JD.com (JD), Wayfair Inc. (W) y Etsy (ETSY).
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 PHYSICAL STORES
Despite the fact that online shopping revenues account for the majority of
Amazon's revenue, its 2017 purchase of grocery retailer Whole Foods
Market significantly increased the company's physical retail presence.
Amazon also operates Amazon Books, Amazon 4-Star, Amazon Go, and
Amazon Pop Up, which are all physical stores.

MAIN COMPETITORS
Best Buy (BBY), Costco (COST), Target (TGT), Walmart Inc. (WMT) and Big
Lots (BIG).

SUBSCRIPTION SERVICES
Amazon offers a variety of subscription services Amazon Prime, the
company's most popular paid subscription service, has 150 million
subscribers worldwide as of January 2020. Subscriptions for ebooks,
audiobooks, digital video, and digital music are also available.

MAIN COMPETITORS
Netflix (NFLX), Apple (Itunes), Google (App Store).

AMAZON WEB SERVICES

The company's cloud platform, Amazon Web Services (AWS), includes 175
services such as machine learning, artificial intelligence, storage, and
analytics. Startups, businesses, and government agencies are among the
AWS clients.
MAIN COMPETITORS
Alibaba Group (BABA), Oracle (ORCL), Microsoft (MSFT), Google (GOOG)

Other
(advertising services and other services)
4.99%
AWS
12.5%
The following charts reflect
Subscription services Amazon's Revenue streams
6.9%
Online Stores regarding the different business of
50.4%
the company's business model and
Third-party seller services
how it is divided:
19.2%

Physical stores
6.1%

Source: FourWeekMBA, / Amazon Annual Report,,2019

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 Principal competitors

Amazon's brands or companies

Source: Lacort, 2021

1.3 CHOSEN SBU TO APPROACH

-RETAIL-
AMAZON'S E-COMMERCE PLATFORM

Amazon works as an e-commerce

platform and sells its products via
platform. In fact, the most
considerable percentage of Amazon’s
revenue comes from the sales of these
products. Therefore, the company
competes with other third-party sellers
and brands to attract customers on the
marketplace while promoting its own
brand. (Chhabra, 2021).

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Actually, Amazon is dominating the e-commerce market, and has been continuously
changing the retail business, the company has evolved from a mere retail book business,
to a complete all e-commerce and technology company, by acquiring Whole Foods in
the past couple years and therefore dipping toes into new markets as the grocery
shopping market share, and even launching new retailing experiences as it is Amazon
Go, a store in which there is no staff to assist you in your shopping, neither needs you to
pass a credit card or billing information through other machine that's not you
smartphone. ( Bozkurt ,2021).

Certainly Amazon has a visionary idea to keep on track with customer's new goals and
needs, the company has nailed the main idea of future businesses maintenance, which
ultimately radicates in understanding the shopper behaviour .

"Amazon's retail strategy will push traditional brick-and-mortar retailers to

innovate and compete with each other via innovations other than basic
discount techniques. In the past, coverage and prices were the main
differentiators, but with the newest disruptor in the market, the commodity
is a reality more than ever; and these values are no longer as vital as they
were in the past"

-Bozkurt, 2021

Source: Bozkurt,2021

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STEP 2: MACRO ENVIRONMENT
ANALYSIS = PESTEL

Political stability of developed countries

P
Governmental support for the e-commerce industry[opportunity and threat]
Increasing governmental efforts on cyber-security and smooth operations of
e-commerce
Trade barriers and trade protectionism

Inflation rate Competition standards

E
Savings rate Country economic factors
Interest rate industry economic indicators
Foreign exchange rate E-commerce market
Economic cycle

The number of mobile users is continuously expanding nowadays, and this

S
element directly favors the expansion of companies like Amazon, as they are
expected to give greater convenience (Pratap, 2016). At the same time,
disparities in discretionary income levels between the rich and the poor in so
many countries around the world threaten Amazon's success.

T
E
Better packaging, as well as waste reduction, smarter energy utilization, and
other aspects of long-term commercial viability. This is directly related to
corporate social responsibility (CSR) investments and many firms' reliance on
non-renewable energy sources

Rising product regulation

L
Counterfeit product regulations
Consumer privacy regulations
Import and export regulations
Regulatory compliance

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PESTEL is a tool for evaluating the external environment that takes into account political,
economic, social, technical, environmental, and legal factors.
It can be used to examine the current environment or to reverse-engineer the impact of
enterprises on the external environment.

2.1.1 Political

Political factors play a significant role in determining the factors that can impact
Amazon’s long term profitability in a certain country or market.The government,its
policies and its rules determine the growth of an organisation in any given state or
country.Amazon operates alongside political influence. This aspect of the PESTEL
analysis model focuses on governmental activities and its effects on businesses and
their remote. In the case of Amazon, the following political external factors are important
in the development of the e-commerce industry.

Political stability of developed countries, especially the USA and European

countries[opportunity and threat]Amazon benefits from political stability. In the
pestel analysis framework this condition creates an opportunity for the company to
expand or diversify its business in developed countries. For example , Amazon could
expand its brick-and-mortar operations in the United states to complement its e-
commerce business. . The company always gainsstate or country.Amazon operates
alongside political influence. This aspect of the PESTEL analysis model focuses on
governmental activities and its effects benefits from the stability of political regimes
since they later usually creates an additional opportunity for the firm to enlarge its
business , especially in highly urbanized economies .Even a stable political
government can create threats for a company. The European Union is investigating
Amazon.com regarding the use of retailers’ data who sell on Amazon Marketplace . If
the regulators found Amazon guilty it can face severe consequences such as political
issues and can affect Amazon’s brand image and profitability at the same time.
Governmental support for the e-commerce industry[opportunity and threat]On the
other hand, the external factor of overall government support for e-commerce is
also an opportunity. Such governmental support facilitates Amazon’s continuing
expansion in relevant markets. For example, a few months back the Indian
government stopped Amazon and Flipkart from selling products of those companies
they have equity stakes. Government supports companies like Amazon due to their
huge investment but it still have to comply with government laws and regulations
which is sometimes very difficult..
However, the same external factor threatens the company because of rising
competition, such as involving Chinese online retail firms that are expanding their
operations. The growing popularity of the online retail business is a result of
governmental encouragement. This growing industry of online retailing can also
prove to be a risk for Amazon facing tough competition from big brands,especially
foreign companies making their way into online retail.For example , in china
government support chinese e-commerce companies to flourish their businesses.
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 Increasing governmental efforts on cyber-security and smooth operations of e-
commerce which favors Amazon’s business.[opportunity]The Government presence
improved business conditions through efforts in fighting cybercrime.This aspect of
the political factors affecting Amazon shows how major opportunities that the
company can exploit to increase its resilience in the macro-environment of the
information technology services and e-commerce.
Amazon can potentially lead to many troubles from the political point of view
especially when it comes to Asian countries .One of such partially political , partially
economic issues is taxation . Amazon however manages well it's both political and
governmental influences.
Trade barriers and trade protectionism is another important political factor that
affect the functioning of Amazon.Trade protectionism in the USA from the Trump
administration currently threatens the existence of foreign firms in the country.
While Amazon is an American firm, a considerable amount of its goods come from
overseas, and thus its operations may be threatened by a possible reduction in the
number of foreign imports.

2.1.2 Economic

The aggregate demand and aggregate investment in an economy are determined by

macroeconomic factors such as inflation rate, savings rate, interest rate, foreign
exchange rate, and economic cycle. Even if microenvironmental elements such as
competition standards have an impact on the firm's competitive advantage,
Amazon.com, Inc. may anticipate the growth trajectory of not only the sector but also
the organization using country economic factors such as growth rate, inflation, and
industry economic indicators such as: industry growth rate, consumer spending, and so
on.
In 2015, e-commerce expanded by 23%, and this trend was marked by wide market
expansion. However, this aspect made most of the linked markets extremely competitive
(Pratap, 2016).

Amazon has managed to preserve its position despite the macroenvironmental

development's key trends. Because online retailing's business expansion and income
availability led to a jump in the company's financial performance, relative economic
stability in most developed countries predicted Amazon's success.

2.1.3 Societal

The culture and way of life of a society have an impact on the culture of an organization
in a given context. Customers of a given market and how marketers at Amazon.com, Inc.
develop the marketing message for Catalog & Mail Order Houses industry consumers
are heavily influenced by the population's shared views and attitudes.
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The number of mobile users is continuously expanding nowadays, and this element
directly favors the expansion of companies like Amazon, as they are expected to give
greater convenience (Pratap, 2016). At the same time, disparities in discretionary income
levels between the rich and the poor in so many countries around the world threaten
Amazon's success. However, rising demand in developing countries raises the prospect
of market development, with a focus on more active online purchasing behavior.
(Greenspan, 2017).

2.1.4 Technological

Technological advancement is another crucial factor in determining an organization's

strengths and weaknesses.Technological is fast moving on has has changed drastically
over years.This advancement directly affects Amazon considering the centrality of
technology in its business. Automation, technical innovation, change and technical
awareness are the factors that help companies to plan for their future intelligently.It
guides them to adapt new technologies, plan their manufacturing, logistics, and
distribution.The consequence of technologies and related trends on the remote or
macro environment are covered in this aspect of the PESTEL analysis.
Technology is the backbone of Amazon. Technology made Amazon one of the most
profitable companies in the globe. Amazon is focusing on technology in terms of cloud
computing that is amazon web service a very system to satisfy its customers.
Amazon is looking to use technology to the fullest for the delivery system. Amazon Prime
Air is a future delivery system to deliver packages to consumers using unnamed Aerial
vehicles also known as drones. Amazon is also working with different regulatory
authorities to comply with their requirements and design a sound air traffic
management system.

2.1.5 Environmental

Varying markets have different norms or environmental regulations, which might have
an impact on a company's profitability. Even within a country, states can have disparate
environmental and liability legislation. In the United States, for example, Texas and
Florida have separate culpability rules in the event of an accident or an environmental
disaster.Similarly, many European governments provide beneficial tax incentives to
businesses who invest in the renewable energy sector.
Before entering new markets or starting a new operation in an existing market, a
company should thoroughly assess the environmental criteria that must be met in those
markets.

13
The environment's long-term viability is a vital aspect in global development, and the e-
commerce industry is no different. This company requires better packaging, as well as
waste reduction, smarter energy utilization, and other aspects of long-term commercial
viability. This is directly related to corporate social responsibility (CSR) investments and
many firms' reliance on non-renewable energy sources (Pratap, 2016).
CSR initiatives, for example, contribute to customer happiness with a firm and its
marketing activities, while business sustainability indirectly leads to standardization,
stronger brand awareness, and better corporate image.

2.1.6 Legal

Legal factors similar to political factors deal with rules and regulations.In a number of
countries the legal framework and institutions are not robust enough to protect the
intellectual property rights of an organization. A firm should carefully evaluate before
entering such markets as it can lead to theft of organizations secret sauce thus the
overall competitive edge. Compliance is important for global businesses, including
Amazon. Any type of distribution concerns certain legal issues and challenges, including
labor related ones and many essential elements of legal compliance. Amazon e-
commerce operations must therefore adhere to legal requirements. The effects of
regulations on the macro environment are determined in this aspect of PESTEL analysis.

Rising product regulation is seen as a result of societal demands on consumer safety

and customer security. There are different consumer privacy acts that could create a
threat in the micro environment of Amazon.for example California consumer privacy act
2018 is one of them and took effect in 2020. Giant Tech Companies like Amazon, Apple
and Facebook were required to inform users about what type of Data they collect and
how they share or use this data.

In the PESTEL analysis framework, the external factor creates opportunities for
Amazon.com to intensify its efforts in reducing counterfeit sales on its online retail
website. Counterfeit product regulations are necessary and demand of the consumers.
This can be considered as an opportunity for Amazon to increase its efforts to maximize
the counterfeit sales on e-commerce platforms.Amazon has already an anti counterfeit
policy in place. Every product offered by sellers on Amazon platform must be authentic.

Also the company has opportunities in growth based on the external factor of changing
import and export regulations. For example Amazon can expand its global operations to
exploit the increasing ability of sellers to access overseas suppliers. Moreover, the e-
commerce company has opportunities to strengthen its brand image through
appropriate corporate social responsibility policies that address rising environmental
protection regulations. Such effort can increase business competitiveness in the remote
environment aspect. Based on this aspect of the PESTEL analysis model, Amazon can
ensure long term e-commerce success through regulatory compliance.

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2.2 Evaluation grid

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STEP 4: INTERNAL ANALYSIS
OF AMAZON

4.1 RESOURCES, CAPABILITIES AND CORE COMPETENCIES

4.1.1 Resources and Capabilities

The strategic capabilities of a company are what defines its long term-term survival and
success (Cardeal & António, 2012). In accordance with the resource-based view (RBV),
the resources and capabilities available to a company decide over the competitive
advantages it has on the market. Amazon as one of the biggest companies in the world
(Ventura, 2021) has a plethora of both at its disposal. The physical resources of the e-
commerce giant are comprised of a wide variety of products like books or electronics,
warehouses, customer databases and the technological infrastructure. With almost eight
billion USD of profit in the second quarter of 2021 (Rabe, 2021) Amazon has vast
financial resources to further diversify and upgrade its physical resources as well as hire
more employees to support the steady growth of the company. With more than 1.3
million employees Amazon has a great pool of human resources whose skills it seeks to
improve constantly through different competency programs and workshops (Chevalier,
2021). These human competencies paired with the vast material and financial resources
Amazon possesses create the reliable supply chain and delivery service the company is
known for as well as giving it unrivalled sway over the online retail market (Chevalier,
2021). Together with its capabilities they create the core competencies and ensure the
competitive advantages that are responsible for Amazon’s longstanding success and
growth.

4.1.2 VRIO Analysis of Amazon’s Core Competencies

To create a true competitive advantage that is sustainable long-term, the following four
criteria need to be fulfilled by a capability: Value, Rarity, Inimitability and full exploitation
by the Organization. The capabilities of a company can be judged with this framework
and thus its core competencies determined, although capabilities that do not satisfy all
criteria can contribute to the growth of a business as well. For Amazon, the potential
core competencies are the following:
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 CORE EMBEDDED IN
VALUABLE RARE INIMITABLE IMPLICATION
COMPETENCY ORGANIZATION

COMPETITIVE

BRAND NAME X X X X

ADVANTAGE

CUSTOMER TEMPORARY

X X X

EXPERIENCE ADVANTAGE

DISTRIBUTION COMPETITIVE

X X X X

NETWORK ADVANTAGE

PRODUCT COMPETITIVE

X X X X

RANGE ADVANTAGE

CUSTOMER TEMPORARY

X X X

LOYALTY ADVANTAGE

MARKET COMPETITIVE

X X X X

CAPITALIZATION ADVANTAGE

TECHNOLOGICAL COMPETITIVE

X X X

CAPABILITIES ADVANTAGE

Arguably the most important competency Amazon possesses is its brand name. Amazon is
the world’s largest e-commerce retailer (Chevalier, 2021) and its name is well known all
over the globe. It has achieved the place of the most popular shopping website worldwide,
giving Amazon a crucial advantage on the market. The brand image it has created through
a focus on customer service and strategic marketing is both highly valuable and rare.
Achieving such a presence and trust in the brand is a time- and resource-intensive process
which makes copying or challenging it near impossible for competitors. This core
competency is thus creating an important and sustainable competitive advantage for
Amazon.

Another vital factor is Amazon’s extensive distribution and logistics network. With about
175 fulfilment centers and a large number of third-party partners such as delivery
companies, Amazon has the ability to deliver products quickly and for low prices both in
the US and world-wide (Pratap, 2020). This network allows for millions of products to be
sold on the site every day, which makes it very attractive for businesses to distribute theirs
via Amazon. While it is possible for other companies to build up their own logistic network,
reaching the size and influence of Amazon would require significant capital investments as
well as time. Additionally, the strategic placement of the warehouses and distribution hubs
enhances Amazon’s efficiency and contributes to making this core competency a driving
force behind the company’s success.

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The wide product range Amazon offers is another valuable resource. Its extremely
varied assortment is unrivalled by any other e-commerce retailer and with over a million
new sellers joining the platform every year it is constantly expanding (Dunne, 2021). The
large customer base, reliable services and good reputation make Amazon a popular
place for sellers of all size and product categories. Over twelve million articles ranging
from electronics to clothing to home décor are available on the marketplace. Being
famous for having almost any product possible, Amazon has become the go-to website
not just for shopping itself, but also for searching for new products (Anthony, 2021). This
creates another competitive advantage for the company.

The three competencies listed above all contribute to the customer experience, a factor
Amazon has put a strong focus on. As the experience customers have when shopping
online has a great influence on their satisfaction and thus the popularity of any online
business, the easy to navigate Amazon website and streamlined purchase process
heavily contribute to the company’s success. With options like Prime memberships, free
shipping and fast deliveries Amazon provides premium customer service to its users.
However, other competitors also make efforts to constantly improve their customer’s
experience and although they cannot quite match the services Amazon offers right now,
some have developed substitutes that might very well become a serious threat in the
near future. For this reason, the good customer experience Amazon provides gives it
only a temporary advantage (Pratap, 2020).

The experience a customer has also strongly influences their loyalty to the company.
Through its positive image and customer obsession Amazon has achieved a strong
loyalty from its customer base by providing them with quality service for a low price.
When looking for a product to buy, Amazon is continually the first choice for many
people as they know they can rely on Amazon to deliver it quickly and hassle-free.
Especially the added benefits and convenience of Amazon Prime are a driving factor for
building up that trust and loyalty (Pratap, 2020). Yet programs and initiatives to build up
customer loyalty are anything but unique and other big companies like Walmart invest
considerable amounts into ensuring their customers keep coming to them instead of
the competition. Amazon certainly holds a strong position when it comes to customer
loyalty, this provides however only a temporary advantage over its rivals.

One other facet that gives Amazon a truly unique and hard to copy advantage is its high
market capitalization. As of November 2021, Amazon is the fifth most valuable company
world-wide with a market cap of 1.7 Trillion USD (Companies Market Cap, 2021). Its
value has been rising steadily in the past years and as one of the profiteers of the
pandemic it received an unprecedented boost in 2020, increasing its market cap by
77%. This does not only give Amazon the means to invest in promising ventures and
acquire smaller businesses, but this level of market capitalization is also near impossible
to imitate for any other company and thus gives the company an advantage over its
rivals.
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Amazon's status as the efficient and customer focused online retail giant would not be
sustainable without the company's knowledge on how to leverage technology and
constantly improve it. As an online retailer, being able to successfully use data and
technology is an absolute necessity. From the "one click to pay" method for facilitating
online shopping to the implementation of drones for faster delivery services, Amazon is
always working hard to improve the customers' experience through the use of
technology (Cabem, 2018). The creation of its own AI, Alexa, is further proof for the
company's future orientation and awareness of the importance of technological
innovation (White, 2019). On top of that, Amazon is actively using Big Data and
algorithms to assess the shopping behaviour of its customers and suggest relevant
products according to their and other people’s search history to increase sales.
Amazon's knack for creating sophisticated tools and leveraging technology is however
not inimitable and many other companies use algorithms, robots and technological
innovation to further their efficiency and success, even if not quite to the extent of
Amazon. So, while it is certainly vital to the company's success and strongly embedded
into the organization, its technological capabilities cannot be counted as a true core
competency.

When considering the points discussed, it can be said that Amazon has several core
competencies that create its strategic advantages. The branding of Amazon, its extensive
distribution network, broad range of products offered, and the high level of market
capitalization are the main contributors to Amazon’s continuous success. Other aspects
like its use of technology and focus on customer experience impact the company’s
growth as well but rank lower as they are not unique to Amazon. It would be however
possible to turn for example the technological facet into a true core competency by
developing more advanced and unique methods and algorithms and thus giving
Amazon another advantage over its competitors. Furthermore, there are other non-
competencies that Amazon needs to further improve like its attempts to build up a
brick-and-mortar presence. Developing those non-competencies into fully fledged core
competencies while also maintaining its existing strategic advantages is one of the big
challenges Amazon has to face to continue its rise as the most successful online retail
company in the world.

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 4.2 VALUE CHAIN & BUSINESS MODEL

4.2.1 VALUE CHAIN

Source: Kandemirli, 2018

24
 4.2.2 Business Model

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Ware Peo e ru
st s, scrip
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ime

Source: Pereira, 2021

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 4.4 BUSINESS AND CORPORATE STRATEGIES

4.4.1 Business-Level Strategy

A company’s business-level strategy determines how the company sets itself apart from
its rivals and strengthens its performance on the market (Surbhi, 2017; Ireland et al.,
2011). Based on the core competencies and strategic advantages a company has, there
are four different strategies that can be chosen: Overall cost leadership, cost focus,
differentiation and differentiation focus. Amazon’s strategy of choice for the most part is
overall cost leadership. The retail giant offers its customers products and services of
good quality while keeping the price at a below-average level. With its wide distribution
network, short shipping times and strong focus on customer convenience Amazon has
become the go-to place for online shopping and the company’s strong position on the
market allows it to cut prices on many of its products through economics of scale or
even strategic evasion of taxes (Gardner, 2021).

In some areas Amazon has even managed to implement a hybrid strategy, combining its
cost leadership with differentiation. The “Kindle” e-book is one such example, offering a
product with unique features at a lower price than other providers (Arsalan, 2018). The
integration of these two approaches is challenging, Amazon has however successfully
managed its implementation in certain areas through its flexibility and affinity for risks.
And while unlike the Kindle most other products sold on Amazon can also be found on
other sites, the company’s excellent service combined with the cheap prices allow it to
retain its leading position on the online retail market.

4.4.2 Corporate-Level Strategy

The corporate-level strategy states the orientation and direction as well as the ultimate
goal of a company in the long run (Surbhi, 2017). It determines which businesses the
company operates in and how the company achieves its growth (Seker, 2020). In this
case, Amazon uses both internal and external growth strategies to expand its influence
and success. Most of Amazon’s profits are invested right back into the company, for
example in the development of new consumer electronic products (Samson, 2021). On
top of constantly working on its own new innovations, Amazon also grows through the
regular acquisition of smaller businesses. Not only does Amazon achieve a bigger share
in the online retail market through merging with similar companies, the purchase of
corporations like the streaming platform Twitch or the retail chain Whole Foods is the
primary enabler of Amazon’s diversification strategy (Samson, 2021).

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Taking risks and entering new markets has allowed Amazon to expand its portfolio of
offers and services well beyond just online retailing which reduces the dependence on a
single business sector and generates new, independent revenue streams. Amazon has a
moderate level of diversification, being active in online retail as well as only loosely
related markets such as web services and entertainment, even if these still make out
only a comparatively small fraction of Amazon’s revenue (Curry, 2021).

S
From its early days on, Amazon has used vertical integration to improve its performance
on the market. So far it is only partial, as Amazon has focused mainly on downstream
integration. After setting up its own warehouses that work on low cost and high
efficiency, Amazon has now started to develop its own logistics and delivery business
(Juneja, 2021) to improve its services for its customers. The company already has
experience in this area and with its scale and knowledge of automated and drone
technologies Amazon is in the perfect position to enter this market. At his stage, Amazon
still relies on its partnerships with logistics companies, making it a tapered integration.
Yet it is likely that Amazon will carry out all of its shipments itself at some point in the
near future and even offer its services to third-party sellers which would lead it to
become a serious rival to established shipping companies such as UPS or Fedex (Dans,
2021).

Amazon has a strong global presence. The company operates in over a dozen countries
all over the world and accounted for about 14% of all global retail e-commerce in 2019,
its sales only topped by the Chinese Alibaba Group (Chevalier, 2021). After establishing
itself in the US and the rest of North America, Amazon has grown a strong presence in
many European countries like Germany or the UK with its subsidiaries, but also in Japan,
Singapore and Australia. By localizing its storefronts and creating country-specific
websites adjusted to the local language and currency Amazon has made its offers more
accessible to its international customers (Samson, 2021). Amazon is currently also
aiming to establish itself in India and the Middle East through the acquisition of local
retailers (Samson 2021), yet it continues to fail to do so in China. Amazon has been
trying to establish itself in this very lucrative market since it acquired the online book
retailer Jojo in 2004, but it still only accounts for a tiny fraction of online retail sales there.
Amazon’s failure is largely due to its inability to compete with the established Chinese
online retail giant Alibaba that completely dominates the Southeastern market (Arias,
2020).

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 4.5 STRENGTHS AND WEAKNESSES OF AMAZON

4.5.1 Strengths

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AMAZON'S SWOT ANALYSIS

STRENGHTS

S
WEAKNESSES

W
OPPORTUNITIES

O
THREATS

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