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.

Evaluating Firm Strengths and Weaknesses: The Resource-Based View

Following is the SWOT analysis of Amazon.

STRENGTHS:

• Cost leadership strategy
• Efficient and effective logistics and supply chain
• Brand value
• Huge network of global sellers
• Quality Services and customer support
• Quality and variety of products

WEAKNESSES:

• Diversification has made Amazon to lose its focus on the core competencies
• No local store for direct selling
• Selling at a very thin near zero margins
• Free shipping offers even thin down the margins further

OPPORTUNITIES:

• Setting up physical stores to improve local presence and improve sales
• Portfolio expansion through acquisition
• Diversification of the product line
• Investing more on its own products and services (e.g. Alexa and Cloud services are very successful products and services)

THREATS:

• Competition (e.g. Alibaba)
• Price competition from other online retailers (e.g. Walmart)

Amazon environmental opportunities

Amazon has grown from a book business to the biggest retailer.

Now Amazon is the leading cloud computing provider.

Amazon also produces its flagship e-readers, tablets and Alexa (smart device).

Amazon is also into the streaming business with Amazon prime and provide contents and a direct competition to bigger names like Netflix and Apple Tv.

Amazon future growth threats

Amazon has a big competition from Walmart. Walmart is making big online push and supplimented by the stores and order online and store pickup options are really good. So Amazon has a potential competitor with a large presence in every part of the country.

Other threat is from its membership model. The membership model may not be very lucrative for lots of users as it is costly (currently $79 per year).

Amazon.com performance and competitive advantage

Amazon has created competitive advantage by being able to reduce the price. Amazon is has large vendor network to get the price cheap. Since it is an online retailer and not a brick-mortar shop, the infrastructure cost is almost not there. So Amazon is able to sell the products in very competitive price.
Amazon has optimized its shipping and have been able to reduce the shipment cost. The Sunday delivery with USPS is a very brilliant move. It has a better deal with UPS.

Amazon has created advantage by just being big. The vastness in all aspects, helps reduce competition with other smaller retailers.

Amazon.com

Amazon.com, is an American electronic commerce and cloud computing company founded by Jeff Bezos on July 5, 1994. Amazon is the largest Internet retailer in the world. Amazon has made phenomenal growth starting as a book selling .com company to the largest retailer of the world.

As of May 2018, the board of directors is:
    Jeff Bezos, President, CEO, and Chairman
    Tom Alberg, Managing partner, Madrona Venture Group
    John Seely Brown, Visiting Scholar and Advisor to the Provost at University of Southern California
    Jamie Gorelick, partner, Wilmer Cutler Pickering Hale, and Dorr
    Daniel P. Huttenlocher, Dean and Vice Provost, Cornell University
    Judy McGrath, former CEO, MTV Networks
    Jon Rubinstein, former Chairman, and CEO, Palm, Inc.
    Thomas O. Ryder, former Chairman, and CEO, Reader's Digest Association
    Patty Stonesifer, President, and CEO, Martha's Table
    Wendell P. Weeks, Chairman, President, and CEO, Corning Inc.