The main of this report is to analyze the situation for understanding the key issues. In this report strength and weakness is analyzed by performing SWOT and VIRO analysis. In this, the case the Amazon is selected for performing the analysis. The selected company is the world’s largest online retailer. The success of this company has encouraged others retailers that includes physical, brick and mortar retailers to get in to the online presence (Peppard& Ward, 2016). The online retailer Amazon is compared to the Wal-Mart for its large presence in different countries and the aggressive strategy of pricing followed by them. However, the recent development and steep competition requires amazon has to rethink its business model of operating at close to zero margins. In addition to this, the company has not made sufficient profit as a result it is an impediment to the growth of the company
The most primary issue relating to the business strategy of Amazon are stated below:
Amazon offers free shipping due to which the company is losing its profit margin in products of small amounts.
The suggestion and recommendation of the market researchers and analysts have play a significant role in the decrease in profits.
The product category range of amazon is very small.
In the part below the SWOT Analysis regarding the business strategy of amazon has been discussed precisely.
The SWOT analysis refer to the STRENGTHS, WEAKNESSES, OPPORTUNITIES and THREATS that a business is exposed to. Every aspects of SWOT analysis is discussed briefly.
Strengths:The amazon is the largest online retailer it focuses mainly on the three prolonged strategies that are cost-leadership, differentiation and focus. By following the strategies the company thrives its gains from the course of its action and help its shareholders originates the values of the items from the company (Hill et al., 2014).
Weaknesses:Free shipping being the part of amazon offers has risk of making losses and hence might not able to optimize on costs because of its strategy.
Opportunities:As amazon facilitates the payment in online basis in a secured and trusted environment. This helps the business to to scale up by considering the concerns over online shopping as for the customer’s security and privacy are the primary concern.In addition to this, it also improves the margin of the company because it allows the company to take the advantage of using its own payment gateways (Hubbard et al., 2014).
Threats:As identity threats and hacking leads the consumers data exposed so it is a concerns for amazon to maintain its privacy.
The VRIO framework acts a tool that utilize internally by firms that analyzed their resources and capabilities that determine their competitive advantage implications that are temporary competitive advantages ,sustainable advantages, competitive disadvantages or competitive party (Madsen& Walker, 2015). There are four components of measures that contributes to the analysis are. Values, rare, imitability, exploitations.
Values are generally defined as the resources or the capability valuable in enabling the firm’s ability to leverage opportunity that can be defend against threats.
Rare shows that how easily acquired and readily available is the resources and capabilities to the industry and other firms.
Imitability refers to the substitution that could be easily replaceable for the resources or capability.
Exploitation refers as firms that are properly utilize the resources or the capability to its most ideal state or maximize its potential or optimizes its potential.
The Amazons does not fails in its business as shown by VRIO shows. Most of their resources and different goods and products that were launched fetched them with profits and successes. Few items failed for amazon was Fire Smartphone. However, amazons generally astonished its customers with its innovations and creativity. As the failure will be labeled as competitive disadvantages for the business due to waste of money, efforts to produce an effective items that could not be valuable, rare or imitable.
The Competitive party defines as the items that are valuable but are not rare and can be easily substituted with other goods. Amazon underestimate these items but these items itself generates revenues streams. No revenue is not acceptable compared to without revenues as in the long term it is not justifiable (Shin et al., 2014). As many retailers uses common features that amazon uses like Amazon Supply. The Amazon’s New York better than no revenues, even to the long term it is maintainable, video on demand, Brilliance Audio, European Warehouse etc. though these features are initiated by other competitors but if amazon were to suddenly loose these competencies then in term of short term, the business would have suffered significantly.
The early acceptance and achievements of the retailers has been the crucial strength for Amazon. Moreover, into the Amazon’s present business model, this would quickly be incorporated. These possessions and competencies can be regarded as advantages of temporary nature as it continues to flourish as mainstream. It is only a matter of time previously follows suit. Partnerships with the giants industry like Sotheyby’s grow their business through amazon that definitely has competitive advantage over its market benefits. Items such as instant video, x-ray for the purpose of movies, its various acquirements of small retailers integrates with the large retailers through amazon, and it has advantages over it.
It is their innovation and those items that lead industry from where the most competitive advantages of Amazon Inc. comes from.
Amazon Inc. is one of the leading online retailers in the US market. Since the last 10 years it can be observed from the past statistics and financial performances that the company has grown immensely (Parnell, 2013). The company has not only diversified its marketing strategies but also expanded its customer base through introduction of a huge variety of range of various categories of product.
From the statement of financial analysis it can be observed that the total revenue have increased over the year. In 2006, the total revenue was $10,711 Million that increased to $107,006 Million in 2015. This also resulted in the significant increasing gross profits during the period. Gross profit for the year 2015 stands at $35,355 Million. Moreover it was also observed that the total equity have also increased over the years for the company.
Referring to the stock price chart of Amazon Inc. it can be observed that since its inception, the stock price of the company has increased significantly over the year till 2015. But unfortunately in the year 2016 there is a clear sign of declination in the price of stocks. This is a crucial factor to be considered while assessing the financial health of the company and must be rectified immediately.
From the above case study of Amazon Inc., it can be concluded that it is one of the leading online retailer not only in the US market but also internationally. The major strengths of Amazon being its three pronged strategic thrust. Moreover, through its huge range of product categories and consumer friendly policies it was able to attract a large pool of customers and grew up quite significantly over the year. From the financial statement it was observed that until 2015 the company was able to make substantial profit and it share price were also on a increasing trend. However, since the year 2016 there seems to be some serious issue in the internal management of the company that had a bad impact over its share price. Since 2016, the stock price of Amazon tends to decline which is needed to be investigated and corrective actions are required to be taken with immediate effect.
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