Chapter 5: Creating Business Strategies

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Amazon.com Prime Strategy

Amazon is banking on its Prime membership program to fuel growth. Amazon’s Prime membership program was the first of its kind. With an Amazon Prime membership, which cost $99, members can enjoy incentives such as:

  • Free two day shipping on Amazon Prime products
  • Free music streaming services
  • Free TV and movie streaming service
  • Free e-book service

They truly differentiated themselves from their competitors. In the United States, there are very few competitors that pose a serious threat to Amazon. Amazon’s biggest threat happens to be Amazon. They are continuing to make large wagers to that leave many analyst thinking how big is too big. Amazon is growing economies of scales its crucial for its success and the future can only tell. Amazon has been criticized for its music streaming service not have the depth of Spotify and Rhapsody, and its TV/Movie streaming service not having the depth of Netflix. However, Amazon just added HBO streaming to its service. Amazon clearly has a content strategy that we will certainly being seeing more of.

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Chapter 4: Exploring the External Environment

amazon-sales-tax state

Amazon’s Battle Against Sales Tax

Amazon once had a strong competitive advantage against brick and mortar stores. The advantage was not charging sales tax and may be slowly disappearing. Amazon currently lists 21 states on their website that they collect sales tax for. Customers only have to pay sales tax if their order has a shipping destination to one of the 21 listed states. A study, from Ohio State University, found that sales dropped 10% in states charging sales tax. The reason why Amazon only collects tax in some states is because they only have to collect tax where they have a tax nexus, or a physical presence in. To combat this tax nexus law, ruled by the U.S Supreme Court in 1992, Amazon will cut deals with states they open distribution centers in and trade jobs in order to charge less or no taxes for a specific period of time, but not all states will bargain. Sales tax is bad for Amazon and good for local businesses.

Source: http://www.bloomberg.com/news/2014-04-22/amazon-sales-take-a-hit-in-states-with-online-tax.html

 

Chapter 3: Resources, Capabilities, and Activities

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008.

Amazon’s Strengths and Weaknesses

Amazon is still a fasting growing company, making large profits a hope of the future. One of Amazon’s strongest ventures is still its marketplace, especially its Prime membership program. The customer loyalty numbers are expected to grow, and we can expect to see more and more benefits. It is estimated in 2013 that 15% of purchases were made from Prime members. Amazon’s marketplace is unique because it motivates sellers to beat other merchants and offers a extremely attractive fulfillment services. A large amount of the merchants are even willing to take a small loss. The fulfillment service makes it easy for sellers and provides fast and reliable shipping for customers. These are crucial to Amazon’s success. Another strength of Amazon is its $144 Billion market cap with no dividend, even though some see no dividend as weakness for shareholders. Amazon still has many global markets that are still developing. Many of Amazon’s strengths can quickly turn to weakness, and only time will tell if this giant will continue to grow as a profitable company.

Chapter 2: Vision & Mission

Amazon.com’s Vision & Mission

Amazon.com’s mission explains more of what their business model is today. In the recent years they have been targeting technology and media firms such as Apple and Google. With the Kindle, Amazon Fire TV, Amazon Cloud Drive, and Media store, they have slowly made themselves a serious threat. Amazon also has a device unveiling on June 18th, that most believe will be a new mobile telephone play with superior sensor technology that has not been introduced yet.  Amazon’s marketplace is continuing to grow and Amazon desires to convert more to their prime membership, that coincides with its mission statement today.

Amazon Mission Statement

With a mission “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices,” Amazon.com and other sellers offer millions of unique new, refurbished, and used items in categories such as books; movies; music & games; digital downloads; electronics & computers; home & garden; toys; kids & baby; grocery; apparel; shoes & jewelry; health & beauty; sports & outdoor; and tools, auto & industrial.

Source: Find out more about Amazon.com’s mission

Chapter 1: Introducing Strategic Management

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Jeff Bezos is the founder and CEO of Amazon.com and has been a dominant force behind the success of the Amazon.com. His strategic leadership has had a strategy of “grow first, revenue later”. Amazon was born in 1994 and did not turn an annual profit until 2003. However, Jeff Bezos shares increased substantially from the 1997 IPO to today. Bloomberg Business stated that his net worth plummeted from just below $37 billion to as low as $29 Billion in Q1 2014.

Amazon.com and Jeff Bezos leadership embodies the three themes that run through out our textbook.

  • Firms and industries are dynamic in nature
  • To succeed, the formulation of a good strategy and its implementation should be inextricably connected.
  • Strategic leadership is essential if a firm is to both formulate and implement strategies that create value.