Examining Amazon.com’s Historical and Current Strategies for Growth and Profitability

Recently, Amazon. com has enjoyed amazing sales and market share growth. However, Amazon. com is still running under an operating loss. This report will examine the historical strengths and weaknesses of Amazon. com, as well as the current opportunities and threats. The current strategic plan includes expanding into either online auctions or B2B exchanges. It is believed that Amazon. com’s many partnerships, as well as its technical expertise with online web platforms, would make it an instant leader in online auctions and B2B exchanges. After examining these metrics, I have come to the conclusion that Amazon.com.

• Increasing its international market share, possibly into the Middle East and China.

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• Increasing market share in current markets in North America and Europe.

Delay entrance into online auctions and B2B exchanges until Amazon.com shows a consistent profit and those profits can sustain the large expense of setting up a new business model. Evaluation of Current Objectives and Current Strategy Amazon. com has always had an objective to sacrifice short-term profits for building long-term growth, market share, and increased shareholder value.

Now, Amazon. com is concerned with developing an effective differentiating enterprise-wide strategy, all the while maintaining the desire for expansion. This includes the possibility of moving into online auctions, competing with eBay, and B2B exchanges, optimizing the partnerships Amazon. com already has.

Current Strengths and Weaknesses Strengths:

• Amazon. com has shown record sales and has reduced its operating loss dramatically and consistently increased market share and expanded product offerings.
• Amazon.com has a reputation for being one of the first businesses online and embracing the idea of taking orders through a website – first-mover advantage.
• Amazon. com has no physical stores. This creates low overhead which means a bigger profit margin on increased sales
• Amazon. com collects payments immediately and floats vendor payments 30-40 days, which generates a large working capital.
• Amazon. com has contracts and alliances with many suppliers.
• Amazon. com has a large and loyal customer base.
• Amazon. com has an online shopping platform that is the envy of the retail shopping world. • Amazon.
• com has partnerships with other retail companies to cross-sell products.

Weaknesses:

• Investment in other online companies resulted in a loss of close to $135 million. With the current economy, similar losses could be felt again.
• Amazon. com is still maintaining an operating loss.
• Shareholder pressure to show a profit is great. Analysis of Current Environmental Threats and Opportunities Threats:
• Increased competition.
• Overall poor economic environment.
• Possible repeal of the sales tax exemption.

Opportunities:

• Leverage the large customer base in expansion into new market segments.
• Use experience of expansion into foreign markets to further expansion into the Middle East and China, with large computer-savvy populations.
• Use well-known and easy-to-use platform to expand base of suppliers that use Amazon. com’s website offerings for their own online presence. Stakeholder Analysis
• Government agencies are interested in Amazon. com because of its wide reach. Being an international organization and crossing state lines within the United States, Amazon. com’s increase in sales could yield high profits to the countries and states in the form of taxes and permits.
• International government would also be concerned with an American presence and the affect that has on the people.
• Labor unions do not have much of a stake in what happens to Amazon. com because it has very few employees and all of the positions are traditionally not union jobs.
• Competing organizations are definitely interested in Amazon. com’s performance. Amazon. com has developed so many partnerships that it is difficult to increase market share and almost impossible to enter the market. If they were to expand into online auctions or B2B exchanges, Amazon.com’s reach may drastically cut into the market share of its competitors.
• Employees would be affected by Amazon. com’s performance because of stock options and the viability of the company.
• Suppliers would be concerned with Amazon. com offering competitive products at a lower price, similar to Amazon. com’s concern when they set up Stores. They would also be concerned with Amazon. com offering products that are competitive on the same site.
• Customers would benefit from an increase in availability of the products they desire on a platform that is well-known, safe, easy, and custom-tailored to meet their needs.
• Civic groups may be more interested in the Amazon. com as more products will be more available to the population.
• Public interest groups may take a greater interest in Amazon. com in a similar manner to the civic groups. They would also be interested in the working conditions of Amazon. com’s partners.
• Stockholders will most definitely be affected by any change in Amazon. com. Being so close to showing a profit rather than an operating loss, shareholders are interested in increasing sales, decreasing cost, and increasing market share. Identifying Current Problems
• The first alternative (online auction) encourages email marketing (spam) and television marketing (which has proven not to be cost effective in the past).
• Setting up a separate online auction takes the risk of diluting the image of the overall organization. Amazon. com is known for quality, and auctions are known for deep discount shopping. It also goes against the mission of creating one giant organization all under one brand.
• Competing with eBay on pricing structures sets up a price war, which minimizes the draw of Amazon. com’s quality and customer service.
• Setting up a B2B exchange could cause a conflict of interest for Amazon.
• com between existing partners and potential ones, stifling the availability of suppliers available in the exchange.
• Creating a B2B exchange that is not specialized waters down some of the impact.
• Coupled with competition from other exchanges, it could compromise Amazon. com’s existing partnerships.

Alternative Strategies

• Focusing on maintaining market share in existing markets.
• Not expanding into other markets until Amazon. com is showing a healthy profit and is able to finance the expansion with profits.
• Expand into other countries, developing even more of a presence, perhaps in the Middle East and China.

Recommendations

My recommendation would be for Amazon. com to focus its finances and energy on increasing its existing market share. Expansion has worked for Amazon. com all along, but I am concerned that it is becoming too large of a giant, potentially spreading too thin. If Amazon. com focused its efforts on expanding into other markets, like the Middle East and China, doing what it does best, and increasing market share in existing markets, it could show a profit for a while. Then, after the auction industry has settled down, Amazon. com could present itself as a fresh new alternative to the tired, worn-out ways of the likes of eBay and Covisint.

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