Strategic Development Assignment Examining Business Scenario of Amazon

Question

Task:
You are required to prepare a report on strategic development assignment critically discussing about the three strategy development models considering an organization of your choice.

Answer

Introduction to strategic development assignment

Every successful business needs a foolproof business plan, which in itself includes a strong mission and vision statement, purpose of the business organization and who are its customers. It is the vision and the mission of the organization which lays the foundation for the goals of the organization, which in turn have to be fulfilled by various strategies undertaken in order to achieve those goals and objectives set by the organization (Rothaermel, 2016). Hence, Strategy in simple words can be defined as a set of steps/actions/ Long term plan which is needed to be taken in order to achieve the business goals and objectives (Lasserre, 2017).

In order to come up with a well-defined business strategy and a strategic plan for the business, a series of tools and models can be deployed to assess the market, its opportunity, competition, market size and others. In this assignment, we would learn about few such strategy development models (SWOT, PESTEL & Ansoff Matrix) and how they can be used in the business. (For this Particular Assignment, let us take example of e-commerce giant Amazon for explaining the aforementioned strategy development models)

SWOT Analysis

(Hovardas, 2015)

SWOT analysis is one of the most fundamental strategic development tool which is almost used by every business organization across the globe. The hugely popular tool is used to build and test the business strategies of business organizations. SWOT analysis identifies and compares the strength and weakness of the business with the external opportunities and threats posed to the business (David & David, 2016). SWOT analysis becomes important as it helps to identify a business environment keeping in mind the factors which are internal (Strength & Weakness), External (Opportunities & Threats) and other such factors which can have an impact on business profitability and growth. Let’s see briefly how to apply the developmental tool in a business example, by conducting a SWOT analysis of e-commerce giant Amazon.com. 

Strength of Amazon

• Strong Brand Presence
• One of the highest brand valuation.
• Market leader
• Customer obsessed (Diehl & Bishop, 2017).
• Focusses on differentiation & leadership ( The list is countless)

Weakness of Amazon

• Some of the Product failures (Fire Phone & Kindle Fire)
• Engaged in Tax controversy
• Business model can be easily copied
• Business losses in certain markets( APAC)
• Limited or no Brick & model presence

Opportunity of Amazon

• Leverage the growing opportunity in the developed and under developed markets.
• Increase the number of physical stores to give a serious threat to Walmart.
• Reduction in the counterfeit products through its technological supremacy.
• More acquisition of domestic e-commerce players in developing economies and further increase its market share (Trigeorgis & Reuer, 2017)

Threats for Amazon

• One of the biggest threat is increase in cybercrime activities across the globe.
• Increasing govt. regulation in APAC
• Walmart developing its e-commerce capability is a big threat to Amazon.

Hence, after evaluating the SWOT analysis, Amazon can tweak its business strategy to leverage the opportunity with its strength, minimize its weakness and by keeping a steady eye stay aloof from the threat.

PESTEL Framework

(Cong, 2015)

Akin to SWOT analysis we learnt above, PESTEL framework is yet another relevant strategic framework for business organization. PESTLE is a mnemonic which can be expanded from its initials wherein P stands for Political, E for economics, S for Social, T for Technological, and L for Legal & E for Environmental. PESTLE analysis is a macro environmental tool, which implies that it helps the business to keep a bird view of the whole environment and turn to it before contemplating a business idea or a plan (Menon, 2018). PESTLE Framework is called a Macro-environmental framework due to the simple reason that any changes in PESTLE conditions cannot be controlled by the organization at any given point in time. Let us conduct a brief PEST analysis of Amazon for better understanding of the strategic development tool.

Political Factors (How it Impacts Amazon’s Business in respective political climate)

• Political stability of the developed, under developed or developing economy has to be seen.
• Support of the government in the political climate related to the e-commerce business (Greenspan, 2017).
• Other governmental regulation in terms of business expansion, cyber security and many others.

Economic Factors (How important are the economic factors to Amazon)

• Before venturing to any country, Amazon has to ascertain the economic stability for the country. 
• Ascertain the disposable income of the people and their spending patterns and earnings (Aithal, 2018)
• Economic recession in China can be a big threat for Amazon. 

Socio Cultural Factors 

• Increasing disparity in wealth can be a threat for Amazon.
• Rise in increasing consumerism in the developing countries is a big opportunity for Amazon.
• Increase in the online buying habits of consumers is again an opportunity for Amazon (Guest, 2017).

Technological Factors

• Increasing cybercrime activities is a major threat of the e-commerce player
• Technology is getting obsolete with every passing day, posing both a threat and opportunity for Amazon.
• Countries are building and investing good sum of capital in increasing its IT efficiencies, thus proving it to be an opportunity for Amazon.

Ansoff Matrix

(Dawes, 2018)

The matrix is also popularly known as Product/Market Expansion grid. The model which came into existence in the year 1957 shows the 4 strategies a business organization can use to grow, at the same time also helps to ascertain the risks involved at each and every stage(Welter, Mauer & Wuebker, 2016). The 4 stages are: Market development, Diversification, Market penetration and Market development. Let us quickly understand the matrix by applying to the e-commerce giant Amazon.

Market Penetration

Here the focus in on expanding sales in the existing market. Amazon can focus on Market penetration through the following activities:

• Continuous Advertising Programs.
• Loyalty and other marketing Programs
• Increasing the on field sales resources
• Pricing 
• Increasing the availability of its products (D’Agostino, 2018).

Market Development

These kind of strategies focusses on selling existing products into new markets. Let’s see an example below:

• Working on New pricing
• Working towards new packaging
• Finding new channel partners
• Focusing on new developmental programs(Goel, Verma & Mutairi, 2020)

Product Development

Product development is one of the trickiest in the Ansoff Matrix, as it involves with developing, creating and introducing new products in the existing markets. For instance, Amazon couple of Years back introduced its Fire Fly phone in the US markets, and the phone was a big failure, thus putting a big question mark on its innovation capabilities. 

Diversification (The trickiest One)

According to Ansoff Matrix, Diversification is when a new product is introduced into a new market. After wrapping up with its Market penetration, market development & product development, Amazon focused its business interest towards the acquisition of whole foods and AWS, this can be seen as its diversification strategy (Nandakrni, 2017)

Conclusion

The Essay can be brought to a meaningful conclusion here by saying that Strategic development tools are the essential frameworks to attain the organization goals and objectives with a finally curated strategy in mind. Just like Amazon in the present and its past have utilized various development models to become a market leader, it is recommended to other various business organizations to follow the same path and before taking any strategic step in the direction of growth, they are advised to have a in depth study of the micro and macro environmental factors which can affect the business. 

References

Aithal, P.S., 2018. Strategic Management Research in India: Contribution of Top Business Schools during last 5 Years–A Critical Study. International Journal of Advanced Trends in Engineering and Technology, 3(1), pp.133-145.

Cong, N., 2015. Driving Forces of the Mobile Phone Industry Growth in India: Based on the PESTLE Framework. strategic development assignment International Journal of Management Sciences, 6(7), pp.332-339.

D'Agostino, J.L., 2018. The Impact of E-commerce on Brands: An Analysis of Amazon and a Plan for the Future (Doctoral dissertation, University of Oregon).

David, F. and David, F.R., 2016. Strategic management: A competitive advantage approach, concepts and cases. Pearson–Prentice Hall.

Dawes, J., 2018. The Ansoff Matrix: A Legendary Tool, But with Two Logical Problems. But with Two Logical Problems (February 27, 2018).

Diehl, K. and Bishop, B., 2017. Strategic Analysis of Amazon Madison Morgan November 16, 2017 MGMT 275.

Goel, P., Verma, P., & Al Mutairi, Q., 2020. Customer Experiences, Expectations and Satisfaction Level Towards Services Provided by Amazon. International journal of Tourism and hospitality in Asia Pasific, 3(1), pp.89-101.

Greenspan, R., 2017. Amazon. com Inc. PESTEL/PESTLE Analysis, Recommendations. Retrieved from Panmore Institue: http://panmore. com/amazon-com-inc-pestel-pestleanalysis-recommendations.

Guest, D.E., 2017. Human resource management and employee well?being: Towards a new analytic framework. Human Resource Management Journal, 27(1), pp.22-38.

Hovardas, T., 2015. Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis: A template for addressing the social dimension in the study of socioscientific issues. Aegean J Environ Sci, 1, pp.1-12.

Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.

Menon, A., 2018. Bringing cognition into strategic interactions: Strategic mental models and open questions. Strategic Management Journal, 39(1), pp.168-192.

Nadkarni, D., 2017. The Four: The Hidden DNA of Amazon, Apple, Facebook and Google. Anvesha, 10(3), pp.55-56.

Rothaermel, F.T., 2016. Strategic management: concepts (Vol. 2). McGraw-Hill Education.

Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic Management Journal, 38(1), pp.42-63.

Welter, C., Mauer, R. and Wuebker, R.J., 2016. Bridging behavioral models and theoretical concepts: effectuation and bricolage in the opportunity creation framework. Strategic Entrepreneurship Journal, 10(1), pp.5-20.