Implementing Corporation Diversification - Amazon

Following is the corporate structure of Amazon.
Amazon has following seven segments:

• Software development
• Retail product management and merchandising
• Information technology
• Operations and customer service
• Finance and administration
• Human Resources
• Legal operations

For more refer: https://www.hierarchystructure.com/amazon-corporate-hierarchy/

Diversification Strategies

Amazon started as a online bookseller in 1995. Following chronology shows how Amazon has diversified over the years:

1995: Launched itself as a online book seller
1998: Included  CDs & DVDs into the inventory
1999: Added toys, video games & electronics

2002: Launched Amazon Web Services (AWS) cloud computing
2007: Launched e-reader named Kindle
2011: Introduced Prime Instant Video Streaming Service
2014: launched Amazon Echo


Amazon has already created a brand value. This brand value is going to help Amazon in moving into the right diversified field.

Vertical Integration Strategies

In microeconomics and management, vertical integration is an arrangement in which the supply chain of a company is owned by that company. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. (wikipedia)

 Amazon's integration into hardware by producing Kindle Fire tablets is a step for vertical integration.  Kindle fire uses touch screen control-integrated source from the previously from new supplier. that shows the growing demand of new suppliers to reduce cost. This is an example of vertical integration strategy by Amazon.

Tacit Collusion

I don't think Amazon follows Tacit collusion. It is actually trying to be the cost leader and provides products with less price than the competitors.

Real Options Analysis

Amazon in January this year, raised the monthly Amazon Prime membership rate from $10.99 per month to $12.99 per month, an increase of 18%. The new monthly rate will cost members about $156 for the year.
However Prime’s annual plan will remain at $99. So it will actually prompt the users to take advantage of the annual plan instead of monthly plan.


For more information please : http://fortune.com/2018/01/19/amazon-prime-membership-price/

Product Differentiation - Amazon

Amazon one of the most innovative companies in the world. Following are the product differentiation for Amazon.

Amazon has positioned itself as the largest online retailer in almost all the product line. Actually the Arrow in company logo itself suggest that company is providing A to Z product lines through online.

Amazon caters the need of all age groups of the customers from kids to adults to old ages. Also variety of product lines from books to music to Alexa device.

Amazon sells traditional retail items also various services (Product insurance, Installation etc.).

Amazon has come up with the concept of Amazon Exclusive. Amazon Exclusive are the products that are only available in Amazon. Amazon has been very successful in bringing global sellers  as Amazon exclusive product provider.

Amazon has come up with the innovative website. Products are categorized and each category is differentiated by brands, type and other filters making it easy for the customer to narrow down the search for the product which the customer looking for. For example someone is searching for Shirts first it will select the category as Shirt then, will select sections like Man/Women/Kids. The level of filtration would continue for various levels. This really provides the customer a great level of convenience to look into the specific need and make easy selection.

 

Cost leadership strategy - Amazon

Amazon is following the cost leadership strategy. It is striving to provide quality products are low price to its customers. Amazon has taken various steps to achieve that:

1. Improved the supply chain
2. Better global supplier list
3. Improving processing time and effort by introducing innovations like robots.
4. Improved delivery mechanism through UPS and USPS
5. Sunday delivery to lower the USPS cost
6. Better return management. The recent collaboration with Kohls for returns

Amazon has been very successful in implementing its cost leadership strategy and able to provide quality products a better price than its competitors.