Amazon – Research Paper

Amazon – Research Paper

Author’s Name

Institutional Affiliation

Paper Outline

1. Executive Summary……………………………………………………………3
2. Situational Analysis……………………………………………………………4
3. Competitive Overview…………………………………………………………6
4. Amazon’s Strengths, Weaknesses, Opportunities, and Threats…….…………7
5. Strengths………………………………………………………………….……7
6. Weaknesses…………………………………………………………………….9
7. Opportunities……………………………………………………………….….9
8. Threats……………………………………………………………………..…10

5. Problem Analysis and Description……………………………….….……….11
6. Solutions, Evaluations and Recommendations………………….….……….13
7. Implementation and Success Matrix……………………………….………..15
8. Conclusion………………………………………………………….……….16
9. References………………………………………………………….…….…18

Executive Summary

The report performs a situational analysis of Amazon by looking at its vision, mission, stakeholders, as well strengths, weaknesses, opportunities, and threats. It emerges that the company works hard to meet and even exceed its buyers’ expectations through the delivery of quality items. The company appreciates the relationship it has with its stakeholders, including its workers, buyers, shareholders, and members of the community where it operates. Even as Amazon tries to expand its market share, it experiences substantial constraints exploring China and it is contemplating halting most of its e-commerce activities in the region. The Amrican multinational corporation should identify how much it misses from selling in China and develop mechanisms that would help it achieve good performance regardless of the ongoing U.S.-China trade war.

Amazon – Research Paper

Situational Analysis

            Amazon is one of the leading technology companies in the U.S. together with others such as Facebook, Apple, and Google. The American multinational corporation with its headquarters in Seattle, Washington deals with a number of practices such as artificial intelligence (AI), digital streaming, e-commerce, and cloud computing (Amazon, 2019). The company commenced as an online seller for books in 1994 when Jeff Bezos founded it, but later widened to sell a variety of products including toys, apparel, electronics, software, jewelry, food, and furniture among other items (Amazon, 2019). The company continues to explore new markets as a way of expanding its revenue and coverage, and the group leaders believe the firm has a bright future.

Amazon puts a lot of effort to realize its mission and vision taking into account that being reluctant could allow its competitors the opportunity to secure a wider portion of the market. The firm understands that working hard to achieve the company’s mission and vision because they demonstrate the corporation’s values to both employees and the general public (Braun et al., 2012). More essentially, Amazon is dedicated to attaining its mission and vision because they offer guidance when nearing the future. The creation of the organizational mission and vision makes it possible for the firm to understand the goals and objectives it needs to achieve (Braun et al., 2012). Companies tend to focus on attaining their mission and vision because it becomes easier to advance communication. Amazon’s mission statement is to strive to offer its buyers the lowest possible prices, the utmost convenience, and the best available option. The mission statement vividly outlines what the consumers should expect from their interaction with the company, which includes products and services that surpass their expectations and needs. The firm’s vision statement is to be the world’s most customer-oriented firm, where consumers can purchase and discover anything they want. Amazon’s vision reflects the desired reputation it wants to attain as that of a being a platform where all buyers in the world feel cared for and satisfied in all manners.

Amazon understands the need to work closely with its stakeholders to facilitate the execution of the company’s plans and objectives. The firm pays much focus on its stakeholders because they offer Amazon practical and financial support (Matuleviciene & Stravinskiene, 2015). The company appreciates its workers so much, and perceives them as an essential part of its undertakings. The management employs various motivational approaches such as offering satisfying pay, promoting hardworking employees, and establishing a work environment that is conducive. The group puts much effort to address the misunderstandings that that emerge among its workers to keep away disruptions that could interfere or slow operations. Amazon views its buyers as part of its stakeholders because they provide the revenue the company really needs to conduct its operations. The company tries to employ suitable employee relationship management, and puts much effort to deliver quality items and services that would appeal to consumers (Amazon, 2019). Amazon places its buyers’ needs first, and knows the value of sustaining apt relationship with all its customers. The e-commerce giant focuses on how it relates with its shareholders, who invest their stakes in the business. The shareholders provide suitable guidance, especially on matters of investment and financial planning. Amazon works hard to attract more investors through the delivery of appealing services and high quality items because an increase in the number of purchasers heighten revenue generation, and this is what investors want to see (Amazon, 2019). Also part of Amazon’s stakeholders is members of the community in the places where the company operates. The corporation works hard to strengthen relationship with the members of the community by developing various projects that would benefit everyone through corporate social responsibility (CSR). Amazon, for example, develops renewable sources of energy for different communities, and engages in activities that conserve the environment (Amazon, 2019). The corporation seems to understand that proper connection with its stakeholders is essential to the firm’s prosperity and works hard to form healthier relationships by aligning its desires and interests to that of the enterprise and all those who matter to it.

Competitive Overview

Amazon faces competition from other companies that offer e-commerce services, and needs to work hard to attract more consumers as well as occupy a larger portion of the local and global markets if does not want interference from other operators. The company needs to watch out for the competition from eBay, which engages in both business-to-consumer and business-to-business sales. The company (eBay) slowly transformed into a household name since its foundation in 1995. Today, thousands of transactions take place on the company’s websites everyday making it the second largest online seller in the U.S. in sales share with 6.1% (Dolata, 2017). Amazon also faces stiff competition from Walmart, which is ranked one of the fastest developing e-commerce retailers over the past few years. Walmart surpassed Apple to occupy the third position in the American e-commerce sector. Amazon should worry about Walmart’s online sales that increased by 43% in the fourth quarter of 2018 in the American market. Walmart delivers its grocery very fast, and now offers a wide range of products and services to its customers. Home Depot places significant threat as well, and its continued establishment of stores across the U.S. proves the company focuses on attracting more consumers. Amazon is under significant threat from Best Buy, which sells its products in the U.S., Mexico, and Canada. Best Buy, in Minnesota, specialized in electronic sales but now ventures into other areas.

Globally, Amazon experiences stiff competition in China, which now compels the management to consider ceasing its operations in the region. Amazon China not only witnesses fierce competition from leading players such as JD.com and Alibaba but small domestic firms like Gome, Suning, and Pinduoduo. The present market share for Amazon in China is less than 1%, yet the figure stood at 16% in 2011 and 2012 (Dolata, 2017). Amazon’s management confirms the company is slowly retreating from China, and may be shutting down its e-commerce services in the next few months. Amazon buyers, however, will still access other operations like Kindle e-readers and cloud computing.

Amazon’s Strengths, Weaknesses, Opportunities, and Threats

The SWOT analysis provides a suitable framework for understanding the factors that influence Amazon’s activities. One advantage with the tool is allows a company or the evaluator to build on the firm’s strengths, and to reverse the weaknesses. The company is able to take suitable steps towards developing its operations further once it identifies its core competencies, which could make it easy to advance the firm’s activities. Furthermore, SWOT analysis proves to be an effective tool because it offers the chance to maximize the firm’s response to opportunities, and to overcome possible threats that could harm or slow down operations.

Strengths

Amazon relies on its strengths to acquire a wider portion of the market and to attract more buyers. The company enjoys the strongest brand name in the e-commerce sector, and the strength is partially responsible for the rapid growth and development the firm has witnessed in the recent years. The other strength that puts Amazon ahead of its competitors is the diversified approach the company employs as part of its business structure. Amazon, for example, is at a stable position to compete globally because it manages a large portfolio. The company owns Amazon Music, Amazon Prime, Amazon Web Services, and Amazon Studios all which operate under the Amazon brand (Amazon, 2019). The large revenue base puts the firm at a strong position financially because the firm managed to generate more than $25 billion in revenue in 2018 compared with the $17 billion garnered in 2017 (Amazon, 2019). The Furthermore, investing in IT services, private labeling, brick-and-mortar retail services, consumer electronics, and cloud computing gives Amazon the power to compete favorably. The company boasts of the advanced technology it employs to conduct its activities. The ability to apply the latest technology makes it possible for the company to react to latest trends, and provides the chance to deliver quality products and services.

The company enjoys other strengths that allow it to compete favorable in the global market despite the competition it experiences. The firm identifies itself as a low cost structure because it does not incur huge costs associated with managing physical stores (Amazon, 2019). Furthermore, online marketplaces potentially permit for selling more items without escalating the marginal costs. The wide variety of products Amazon sells gives it competitive advantage over its competitors. Whereas Amazon sells about 526.3 million different products via its website, Walmart provides only 38 million or just 8% of the number of items that Amazon sells (Dolata, 2017). The huge variation in range is the reason why many online buyers are more likely to visit Amazon’s site than Walmart or any other competitor in the U.S. Further, Amazon manages to surpass its competitors because it liaises with many third party sellers who prefer the online platform because of its high volume of traffic. The company shipped more than 2 billion third-party seller goods in 2016 and the number increases yearly.

Weaknesses

The company needs to consider how its weaknesses could affect its services and work towards embracing measures that would prevent further interference. One of the weaknesses that could affect the company is it applies an imitable business model, which makes it easy for competitors to copy how it conducts its businesses. Other corporations can easily create e-commerce websites through which buyers can buy whatever they need. The other weakness at Amazon is the company has limited infiltration in developing markets that bars the firm from gaining from the improved economic status of these areas. It is difficult or even impossible for consumers in particular countries to purchase from Amazon because either the company does not operate in the region, or charges high cost to deliver products. The management must address the issue of limited penetration in particular markets if aspires to improve its revenue. The third weakness Amazon must address as soon as possible is the limited brick-and-mortar availability, which derails its attempts to venture into the non-online sector. Amazon, however, showed the interest to venture into the non-online market through its acquisition of Whole Foods.

Opportunities

Amazon tries to utilize the opportunities available to it improve its activities. The company has high chances of venturing into developing markets considering its strong position in the sector where it already serves. It is easier for the company to exploit developing markets because most areas are yet to witness the operations of e-commerce services that are as fast and reliable as Amazon. Other than entering into developing markets, Amazon has the chance to venture in markets where consumers adhere to different cultural practices and beliefs now that globalization encourages the movement of people from one region to the other (Amazon, 2019). The growth in technology is an opportunity that could help Amazon improves its operations even further. Advancement in technology gives Amazon the chance to come up with products that rely on technological functions as it is already doing with Alexa that can offer a wide variety of services and responses to the owner, fire tablets (a form of a computer), and Amazon Kindle which allows consumers to purchase, browse, read, and download e-newspapers, magazines, books, and other digital media through wireless networking (Amazon, 2019). The organizational leaders should identify the opportunities and work towards utilizing them for the organization’s benefit.

Threats

The management at Amazon should focus on overcoming the threats that could affect its activities. Competition from other companies remains to be the major threat against Amazon. The company competes with different companies such as Home Depot, Walmart, Costco, Apple, Google, eBay, as well as other platforms such as Alibaba and JD.com that have a larger share of the Chinese market (Dolata, 2017). The high competition presents numerous challenges for the management, especially when it comes to selling consumer electronics that are readily available nowadays due to the entry of new firms in the production of such products (Dolata, 2017). Another threat the company must look into with the urgency it deserves is the increased cybercrime that can easily compromise the activities of online retailers. Some of the big companies such as Uber and Panera Bread have already become victims of cybercrime and recorded huge losses following the attacks. Amazon should pay considerable attention to the possible effects of cybercrime of its activities because it mostly relies on e-commerce to avoid being a victim.

Problem Analysis and Description

The Chinese market for e-commerce is promising and any company operating in this area would want to venture into the region. Internet users in China passed 1.53 billion individuals in 2015, a sign that online transactions are rampant. Today China is the world’s leading e-commerce market with more than 49% of the globe’s online transactions emanating from the Asia Pacific state. Hilmola et al. (2018) inform that almost 20% of all the retail sales in China were executed via the internet in 2016 with e-commerce sales contributing for 8.8% retail transactions across the world. Furthermore, the online transactions approached $1.35 trillion in 2018 and are anticipated to reach $2.1 trillion by the time 2019 comes to an end. It also happened that the number of online purchasers passed 557 million with the entire amount anticipated to reach 636 million come 2020. Hilmola et al. (2018) further predict that e-commerce transactions in China could surpass those of the UK, the U.S. France, Japan, and Germany combined come 2020. The high prevalence of internet users should be a motivating factor for Amazon to restructure its activities such that they appeal to Chinese buyers.

Other factors in the China are likely to appeal to foreign investors such as Amazon, and businesses aspiring to venture into the area should find ways of gaining from these opportunities. China, for example, has a large population of nearly 1.4 billion citizens, which makes it possible to get affordable labor (World Bank, 2019). The high population in the country is one of the reasons the nation developed its economy during the 1990s when many people got jobs in different sectors. China has a stable economy, which could be beneficial to foreign investors. China’s GDP grows by about 9% yearly, and the World Bank (2019) considers the growth the fastest in any big economy. More essentially, China’s position as the globe’s leading exporter as well as the country’s stable economy increase the consumers’ purchasing power (The World Bank, 2019), a situation that could benefit Amazon. Other factors that could be beneficial to Amazon when it operates in China include the country’s increased participation in the global market, and high household saving rate ranging between 40%-50% (The World Bank, 2019).

Despite the numerous gains a foreign investor would experience by entering China, Amazon faces considerable challenges exploring the market, and the company needs to reconsider its plans if it needs to perform well in the country. Amazon moved to China in 2004 following its acquisition of Joyo, but regardless of the efforts to stabilize its operations in the region, its market share has never surpassed 15% (Amazon, 2019). Being an American company where the cultural practices and beliefs are quite different from the Chinese, Amazon must have failed to restructure its activities such that they conform to the local requirements. As a result, more Chinese consumers opt to purchase from Alibaba and JD.com that offer what local consumers want because of their awareness of the Chinese cultural requirements.

Apart from being unable to comply with the requirements of the Chinese culture, Amazon faces considerable competition from the leading e-commerce retailers in the country. Alibaba is one of the major operators in the Chinese online sector, and the company continues to widen since its beginning in 1999. Alibaba got $39.9 billion in revenue for the 2018 financial year, and the company’s local activities accounted for about 74% of the total revenue and the global activities generated 8.6% of the entire sum (Alibaba, 2019).  Alibaba has competitive advantage over other operators include its large market base and the ability to satisfy consumers because of its efficient Customer Relationship Management Department. Operations by JD.com further make it hard for Amazon to exploit the Chinese e-commerce market. The company (JD.com) is another e-commerce retailer that makes it difficult for Amazon to perform well in China. JD.com is one of the two major B2C e-commerce sellers in China and generated about $67.18 billion in 2018 putting it ahead of Alibaba (JD.com, 2019). JD.com’s effort to meet its consumers’ needs and the application of an effective distribution network gives the company competitive advantage over other operators. JD.com, nevertheless, need to address the weaknesses that could derail its activities such as weak response to new entrants and improper relationship with consumers from other cultures.

Solutions, Evaluations and Recommendations

The problem Amazon faces in China requires the company to embrace measures that would restore its operations in the region. A suitable way to improve performance would be to rely on the teachings of Hofstede’s cultural dimensions framework to acquire insight on what the Chinese culture requires. Hofstede identifies five dimensions of culture-related value systems to elaborate the character of various cultures across the world. The initial dimension is power distance, which refers to magnitude to which less influential persons agree that power is not distributed equally (Rashed et al., 2016). The company should know that unlike the U.S. power distance is quite high in China implying that hierarchy is openly outlined or structured in the society. The second dimension Amazon must consider is individualism which Hofstede refers to as the magnitude at which a society advocates for individual or collective relationships (Rashed et al., 2016). The company should know that individualism is low in China contrary to the Americans, thus making it necessary to consider factors that would promote collectivism. The third dimension in Hofstede’s framework is masculinity which is how much the society supports or does not promote masculinity power (Rashed et al., 2016). China scores high in this area and this could help Amazon to provide more males with higher position compared to female employees as the culture demands.

Amazon should consider the other features of Hofstede’s framework if it aspires to record good performance in China. Uncertainty avoidance is the fourth dimension in Hofstede’s framework, and it is the measure of tolerance for ambiguity in a society (Rashed et al., 2016). The Chinese scores low in this area meaning that Chinese people welcome varying perceptions and thoughts contrary to the Americans who tend to be rigid. Amazon while carrying out its operations in the Asia Pacific country should take note of situation and allow workers choose from a wide range of options. The fifth and the final dimension in Hofstede’s structure is long-term orientation measuring how a society acknowledges perseverance (Rashed et al., 2016). Amazon while operating in China should know the country scores high in this aspect, thereby implying that the Chinese are pragmatic and flexible in their approach of dealing with problems. The American company, therefore, should make sure it relates with employees and stakeholders as the framework by Hofstede requires; otherwise, it may still experience the hurdles that now force it to halt its operations in the region.

More fundamentally, Amazon could increase its chances of performing well in the Chinese market by utilizing its strengths and overcoming its challenges. The company, for example, could use it large revenue base to hire professionals who shall offer advice on how to perform well in China. The company should ensure that the personnel have adequate awareness on what the Chinese culture requires in terms of quality, organizational leadership, motivation, pricing, and communication among others. Furthermore, the company could use its financial prowess to customize its operations such that they comply with the Chinese culture. The firm, for instance, may label some of its products using the Chinese language and as well as provide other directives in a language many locals can understand. However, it may be hard for the company to attract more consumers if most of the items are labeled in English or are packaged using Westernized approaches.

 Amazon should consider other ways it could utilize its abilities and overcome its weaknesses to achieve better outcome in China. Amazon could also utilize its ability to sell a wide variety of items to attract more Chinese consumers although this would require appropriate marketing approaches. Chinese buyers would be more compelled to purchase from Amazon when they can access some of the products that are not available at some of the leading retailers in the country, and this will have direct impact on organizational performance. Amazon could also attract more buyers in China by using its technological superiority to develop more products that help to solve some of the issues people encounter in their daily encounters. Also important towards helping Amazon succeed in China is utilizing the low cost strategy and enlightening buyers that the company offers items at relatively affordable prices compared with other operators. Amazon would also achieve the desired outcome if it increases its brick-and-mortar availability to allow more buyers access the products, especially if they lack the means to purchase online. Developing more stores where buyers can purchase goods would not only make it easier for the company to reach out to more buyers, but will also create room to understand what buyers need and their reaction to the products and services.

Implementation and Success Matrix

Amazon needs to settle on an effective approach for implementing the recommendations that would help it achieve the desired outcome. The company should hire a team of qualified personnel to guide it on what the Chinese market requires to find it easier to execute its operations in the region. The team appointed to adjust the company’s operations to fit into the Chinese market should continuously study the trends and suggest options that would help the e-commerce retailer gain a firmer position in the highly competitive sector. The management, however, should closely monitor the activities of the selected team to ensure they conduct their activities in accordance with the company’s policies, as well in line with the purchasers’ expectations. A suitable way to know the company is heading towards the right direction would be to monitor the revenues Amazon generates from the Chinese market. Increasing revenues would suggest that the firm is one the right path towards stabilizing its operations. More essentially, Amazon should monitor the reviews it gets from Chinese customers and assess whether they are positive or not. Positive criticism and continued encouragement would mean that Amazon is heading towards the right direction in improving its operations in China. Nonetheless, Amazon would still have to alter its approaches if it does not record growth even after implementing the recommendations.

Conclusion

Amazon is the world’s leader in e-commerce sales, but must strategize its plans to perform well in China where the company is slowly halting its services. Amazon works very hard to achieve its mission and vision, and understands the importance of maintaining close relationship with stakeholders, including the buyers, workers, shareholders, and members of the community where the company operates. Amazon has a large portfolio which makes it possible to generate high revenue, employs advanced technology, and sells a broad range of products. The company, however, needs to venture in developing countries and increase its brick-and-mortar availability. The opportunities Amazon could utilize to improve its operations include the chances of entering developing markets and growth in technology, while the threats that could disrupt its activities are stiff competition locally and globally and increased cybercrime. The stiff competition deters Amazon from performing well in China where the company is now closing some of its operations. Furthermore, the inability to adhere to Chinese culture making it difficult for the American multinational corporation to interact with local purchasers makes it hard to perform well in the Chinese market. Amazon can only increase its chances of performing well in China if it learns and applies what the Chinese culture requires, and if it utilizes its strengths and overcomes its weaknesses.

References

Alibaba. (2019). Alibaba.com. Retrieved from www.alibaba.com/showroom/alibaba-official-

            website.html.

Amazon. (2019). Amazon. Retrieved from www.amazon.com/.

Braun, S., et al. (2012). Effectiveness of mission statements in organizations – A review. Journal

            of Management & Organization, 18(4), 430-444.

Dash, A. (2013). Competitive advantage: Its importance and impact on design strategy.

            International Journal of Application or Innovation in Engineering & Management, 2(12),

            7-10.

Dolata, U. (2017). Apple, Amazon, Google, Facebook, Microsoft: Market concentration –

            competition – innovation strategies. SOI Discussion Paper, No. 2017-01.

Hilmola, O., & Tolli, A. (2018). Evaluation of Chinese e-commerce cost and lead time

            performance to Estonia. Quality Innovation Prosperity, 22(1), 14-26.

JD.com. (2019). JD.com. Retrieved from www.jd.com/.

Matuleviciene, M., & Stravinskiene, J. (2015). The importance of stakeholders for corporate

            reputation. Engineering Economics, 26(1), 75-83.

The World Bank. (2019). Overview: China. Retrieved from

            www.worldbank.org/en/country/china/overview.