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March 4, 2014
Amazon’s Strategic Plan
Lynette DeVaughn-Baker Steven Gengenbacher
Destiny Mujica Jose Rosas
Strategic Planning and
Team Amazon
Table of ContentsINTRODUCTION.......................................................3
History of Amazon................................................3
VISION STATEMENT...................................................5
MISSION STATEMENT..................................................6
INDUSTRY OVERVIEW..................................................7
EXTERNAL ENVIRONMENTAL ANALYSIS....................................7
Political, Governmental, and Legal Forces.................................7
Social, Cultural, Demographic, and Environmental Forces.....................8
Economic Forces...................................................8
Technological Forces...............................................10
Competitive Forces.................................................11
EXTERNAL FACTOR EVALUATION........................................12
Opportunities...................................................12
Expanding to New Countries..........................................12
Introduce a Spanish Website to Increase the Amount of Hispanic Customers.......13
Same-Day Delivery.................................................13
Promote Small Businesses...........................................13
Threats.........................................................14
Multiple Lawsuits..................................................14
Seasonality of the Business...........................................14
Aggressive Competition.............................................15
Seller Fee Rate....................................................15
INTERNAL FACTOR EVALUATION........................................15
Strengths.......................................................15
Disruptive Technology Innovator......................................15
Strong Brand Name Due to Customer Service Experience.....................16
Variety of Product Availability.........................................16
Most Visited Online Retailer..........................................16
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Weaknesses......................................................17
Limited Grocery Market.............................................17
Overzealous Expansion.............................................17
Network/Internet Reliability..........................................17
Third-Party Vendors and Their Impact on Customer Satisfaction................17
SWOT ANALYSIS MATRIX..............................................18
STRATEGIC POSITION AND ACTION EVALUATION (SPACE)..................19
Financial Strength..............................................19
Competitive Advantage...........................................19
Environmental Stability.........................................20
Industry Strength...............................................20
LONG-TERM OBJECTIVES..............................................20
STRATEGY SELECTION................................................22
IMPLEMENTATION ACTIVITIES.........................................23
Product Development Strategy....................................23
Implementation #1 – Market Segmentation (Marketing)......................23
Implementation #2 – Delivery Drone Development (Research and Development)....24
Implementation #3 – Amazon Trucks (Management-Operations)...............24
Implementation #4 – Optimize Supply Chain/Fulfillment Capabilities (Management-Operations)......................................................25
Implementation #5 – Increase Hub Cities by Upgrading Distribution Centers (Management-Operations)...........................................25
Implementation #6 – Offer Competitive Pricing (Marketing/Finance).............25
Market Penetration Strategy.....................................26
Implementation #1 – Increase Media Advertising (Marketing)..................26
Implementation #2 – Face-to-Face Advertising (Marketing)....................26
Implementation #3 – Increase Sales Promotion with Complimentary Items Associated with the Product (Marketing).........................................27
Implementation #4 – Improve Competency and Relationships with Third-Party Companies (Management-Operations)..................................27
Implementation #5 – Training of Employees (Management-Operations)..........27
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Implementation #6 – Focus on Customer Retention (Management-Operations).....28
CONCLUSION........................................................28
APPENDIX..........................................................29
Appendix 1 – Evaluation of Mission Statement....................29
Appendix 2 – SWOT Analysis Matrix...............................29
Appendix 3 – SPACE Matrix.......................................30
Appendix 4 – External Factors Evaluation Matrix.................31
Appendix 5 – Internal Factors Evaluation Matrix.................32
INTRODUCTION
History of Amazon
Jeff Bezos founded Amazon in 1994. Like Apple, Amazon
started in the garage of Bezos’ Bellevue, WA garage. Bezos’
wanted the name of his company to begin with the letter “A”
so that when searched it would appear at the top of the
alphabetic list. His vision was to become the biggest store
in the world, so he took the name Amazon after the biggest
river in the world. Gaining incorporation in 1994 in
Washington, Amazon sold its first book in July 1995. In
October 1995, Amazon went public and reincorporated in
Delaware in 1996. The company’s IPO was issued May 15, 1997
and assumed the NASDAQ stock exchange symbol AMZN.
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Marketing efforts for Amazon helped Bezos’ vision come
to completion. Bezos focused on building a brand name that
would far surpass any other online retailer, as he felt that
“brand names are more important online than they are in the
physical world.” In 2000, a logo was incorporated that
featured a curved arrow pointing from the A to the Z in the
word “Amazon”. This arrow, a marketing ploy, conveyed that
Amazon carries every product from “A to Z”. The arrow is in
the shape of a smile, which implies excellent customer
service, causing one to think of the adage, “service with a
smile.”
Amazon is now the world’s largest online retailer with
its headquarters located in Seattle, WA. Amazon also
operates in 12 countries around the world, to include
Brazil, Germany, and Spain. Amazon currently carries a
plethora of retail items to include jewelry, clothing and
accessories, home furnishings and household goods, digital
content such as music and electronic books, games, art, and
even wireless services. Amazon also manufactures the Kindle
e-book reader and Kindle Fire tablet, and hosts cloud
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computing services that are comparable to Apple’s iCloud and
Microsoft’s Sky Drive services.
While Amazon does not have brick and mortar locations
available for shopping, it does have fulfillment centers and
warehouses, software development centers, and customer
service centers in multiple cities all over the world. Much
of the software development is done in Seattle, however,
there are centers in North America, Europe, Asia, and Africa
where software developers are employed by an Amazon
subsidiary A2Z Development. The customer service centers are
in fourteen different countries, including the United
States, India, Costa Rica, Jamaica, and Uruguay.
Each fulfillment center provides warehousing efforts
and order-fulfillment for third-party sellers on Amazon’s
website. The fulfillment centers are all located within
close proximity to airports and are extremely large with
many employees. After its 2012 acquisition of Kiva Systems,
a warehouse automation company, Amazon saw a high level of
automation in regards to its order fulfillment process.
Orders are placed online by consumers and then transmitted
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to the appropriate fulfillment center. Employees of the
fulfillment center walk up to ten miles per day picking and
shipping orders for customers, as Amazon ships millions of
products per day. Orders for Audible.com, Zappos.com, and
Woot are also distributed from Amazon fulfillment centers.
There are over fifty fulfillment centers across the globe,
with the majority of them being in the United States.
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VISION STATEMENT
Amazon’s current vision statement is:
“Our vision is to be the earth’s most customer centric
company; to build a place where people can come to find and
discover anything they might want to buy online.”
Amazon should consider changing the vision statement to
read:
“Our vision is to be the earth’s most expansive online
product market by increasing global awareness of our
available products and services.”
Amazon is considered a pioneer in the e-commerce realm,
as it was one of the first, entering when e-commerce was
slowly but surely gaining popularity. Bezos sought out to
make Amazon a widely recognized brand, and has successfully
done so. There are markets; however, where Amazon has not
reached its full potential. Mexico, for example, is an
environment where Amazon is known of, but products and
services are not as expansive and popular as they are within
the United States. There are no fulfillment centers,
software development, or customer service centers in Mexico,
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and service to Mexico is limited. Amazon will need to break
into the e-commerce market a little further in order to
expansively develop an increase in global awareness of its
products and services. In order to become the commonly
spoken brand that Bezos had a vision for in 1994, Amazon
will have to aggressively work to realize this new vision.
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MISSION STATEMENT
Amazon’s current mission statement is:
“We seek to be the Earth’s most customer-centric company for
four primary customer sets: consumers, sellers, enterprises,
and content creators.”
After a thorough evaluation of the original mission
statement, it was found that Amazon makes no mention of the
markets currently in or wishing to enter into, the product
or services offered; nor does it consider the survival
(growth and profits) of the company or the disruptive
technology it is known for. In addition, the philosophy of
Amazon is not mentioned, nor the self-concept or recognition
of concern for employees (see Appendix 1).
Amazon should consider changing the mission statement to
read:
“Amazon’s mission is to be a world-wide, customer-centric,
online company for four primary customer sets: consumers,
sellers, enterprises, and content creators; and with our
innovative technology we hope to offer a myriad of diverse
products for our customers to find any product or service
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they want to buy online by serving the needs of our
associates, suppliers, customers, and community.”
Amazon’s revised mission addresses nine components that
are necessary when creating a well rounded vision for an
organization. With the revision, the intended market (global
customers), Amazon’s self-concept (wanting to be the first
thought in a consumer’s mind when they attempt to purchase
something online), and the philosophy (being global and
customer-driven) and notation of the employees is addressed
All of which help to create an enduring statement of purpose
for Amazon, answering the question, “What is our business?”
INDUSTRY OVERVIEW
The e-commerce industry is not a small industry. Dating
back to 1979, e-commerce is a trend that continues to grow.
More than 80% of people who made online purchases, including
more than 50% of those people making more than one purchase
online. E-commerce is especially popular amongst college
students, who typically purchase textbooks and other school
materials online. Online shopping continues to gain
popularity because it is less time consuming, easier to
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compare prices, has more competitive pricing, and there is
less money spent on gas. E-commerce sales are growing
exponentially at 10%, and expected to reach $1.4 trillion by
2015. The United States comes second to Europe in online
shopping percentages, with the majority of online shoppers
falling within the 31-44 age demographic.
EXTERNAL ENVIRONMENTAL ANALYSIS
The purpose of an external environmental analysis is to
develop a finite list of opportunities that could benefit a
firm and threats that should be avoided. As Amazon continues
to evolve and become more competitive, it is essential that
they focus on external factors to assist in developing
strategies that will allow themselves to take advantage of
opportunities, while minimizing possible threats. Below will
show forces that could ultimately provide opportunities, or
threats, to Amazon.
Political, Governmental, and Legal Forces
Through the years Amazon’s trademarks, service marks,
copyrights, patents, domain names, trade dress, trade
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secrets, proprietary technologies, and similar intellectual
property has been critical to their success. With Amazon
being a domestic and international company, it is vital that
Amazon files both, U.S. and international, patents to cover
their distinct proprietary technology for current and future
innovations.
Social, Cultural, Demographic, and Environmental Forces
Amazon’s expansion into new products, services,
technologies, and geographic regions offers opportunities
and threats to their business processes. Some threats
include having limited to no experience in the newer market
segments, difficult technology challenges in those newer
markets, service disruptions, failures, or quality issues,
and profitability, if any, may be lower than earlier
activities and Amazon may not be successful enough in these
newer activities to recoup their investments in the newer
regions. Consequently, this could damage their reputation,
limit their growth, and negatively affect results.
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Economic Forces
Without knowing what economic factors may develop in
the coming years, Amazon may experience significant
fluctuations in their operating results and growth rate.
With a significant amount of Amazon’s expenses and
investments being fixed they may not be able to adjust their
spending quickly enough to the developing factors, which
could ultimately hurt their revenue and sales growth. Due to
Amazon being an international company, general economic and
business conditions worldwide can have a vast influence on
their products and services, which could either hinder or
positively impact revenue and profit growth.
Amazon’s sales and operating results may also fluctuate
due to some of, but not limited to, the following:
The ability to retain and increase sales to
existing customers, attract new customers, and
satisfy the customers’ demands;
The ability to retain and expand the network of
sellers;
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The ability to offer products on favorable terms,
manage inventory, and fulfill orders;
Timing, effectiveness, and costs of expansion and
upgrades to the systems and infrastructure;
The success of the geographic, service, and
product line expansions;
Variations in the mix of products and services, as
well as, in the level of merchandise and vendor
returns;
The extent to which use of our services is
affected by spyware, viruses, phishing and other
spam emails, denial of service attacks, data
theft, computer intrusions, outages, and similar
events;
The extent to which we offer free shipping,
continue to reduce product prices worldwide, and
provide additional benefits to our customers;
Changes in usage or adoption rates of the
Internet, e-commerce, digital media devices and
web services, including outside the U.S.; and
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The introduction of competitive websites,
products, services, price decreases, or
improvements.
Another economic force that could have a potential
threat on Amazon would be their inability to successfully
optimize and operate their fulfillment centers, which could
potentially harm their business reputation. If Amazon does
not adequately predict customer demand or otherwise optimize
and operate their fulfillment centers successfully, it could
result in excess or insufficient inventory or fulfillment
capacity, result in increased costs, impairment charges, or
both, or harm their business in other ways. A failure to
optimize inventory will increase Amazon’s net shipping cost
by requiring long-zone or partial shipments. As they
continue to add fulfillment and warehouse capability or add
new businesses with different fulfillment requirements,
their fulfillment network becomes increasingly complex and
operating it becomes more challenging.
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Amazon relies on a limited number of shipping companies
to deliver inventory to their warehouses and completed
orders to their customers. If they are not able to negotiate
acceptable terms with these companies or they experience
performance problems or other difficulties, it could
negatively impact their operating results and customer
experience.
Third parties either drop-ship or otherwise fulfill an
increasing portion of Amazon customers’ orders, and they are
increasingly reliant on the reliability, quality, and future
procurement of their services. Under some of their
commercial agreements, they must maintain the inventory of
other companies, which increases the complexity of tracking
inventory and operating their fulfillment centers. Amazon’s
failure to properly handle such inventory or the inability
of these other companies to accurately forecast product
demand would result in unexpected costs and other harm to
their business and reputation.
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Technological Forces
With Amazon being a web-based company, this means that
they process, store, and transmit large amounts of data,
including personal information. This causes a threat for
potential data loss or other security breaches, including
breaches of vendors’ technology and systems which could be
exposed and cause a risk of loss or misuse of information
and could result in litigation or liability that could
otherwise harm their business.
Amazon also faces the risks related to system
interruption and lack of redundancy. At times, Amazon
experiences occasional system interruptions and delays that
make their websites and service unavailable or slow to
respond and prevents them from efficiently fulfilling orders
or providing services to third parties, which could have an
effect on net sales and the attractiveness of Amazon’s
products and services.
Another factor with Amazon being an e-commerce store,
their computer and communications systems and operations
could be damaged or interrupted by fire, flood, power loss,
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telecommunications failure, earthquakes, acts of war or
terrorism, computer viruses, physical or electronic break-
ins, and similar events or disruptions. Any of these events
could cause system interruption, delays, and loss of
critical data, and could prevent them from accepting and
fulfilling customer orders and providing services, which
could make their product and service offerings less
attractive and subject them to liability.
Competitive Forces
As the internet continues to grow, so does Amazon’s
competition. This mean Amazon will need to continuously
evolve and maintain their intense competitive nature to
survive. Unfortunately, their competition doesn’t solely lie
in e-commerce. It includes retail, e-commerce services,
digital content and digital media devices, and web services.
Many of their current and potential competitors have greater
resources, longer histories, more customers, and greater
brand recognition, which may favor them in better terms from
vendors, adopt more aggressive pricing and devote more
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resources to technology, infrastructure, fulfillment, and
marketing.
Similarly, their competition may intensify as their
competitors enter into business combinations or alliances
and established companies in other market segments expand
into their own market segments. In addition, the Internet
facilitates competitive entry and comparison shopping, and
increased competition may reduce Amazon’s sales and profits.
EXTERNAL FACTOR EVALUATION
The preceded factors can be evaluated by an External
Factors Evaluation (EFE) matrix (see Appendix 4) to help
Amazon determine key opportunities and threats that can
relate to them and their competitors. With weighted score of
a 2.56 informs investors that Amazon has been able to
effectively and efficiently perform well against all
potential threats to their industry and company, along with
taking advantage of all opportunities presented to them.
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Opportunities
Expanding to New Countries
With Amazon being an e-commerce retailer, it provides
them an opportunity to expand to new countries relatively
easily. Just like its e-commerce and retail competitors, the
ability to go abroad has always been an incentive for
businesses. As certain markets become more saturated in the
United States it is imperative that businesses begin looking
at providing an international component to their business
processes. This allows Amazon, specifically, to look into
regions where certain products and services may not be at
the reach of a button, or the click of the mouse, like the
European states.
Introduce a Spanish Website to Increase the Amount of Hispanic
Customers
By introducing a Spanish-only website to their
customers, it provides an avenue for Amazon’s Spanish-
speaking customers to feel comfortable when purchasing an
item off of Amazon. This enables an opportunity for Amazon
to broaden their target market with Hispanic customers;
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considering they are becoming one of the most dominate
ethnicities in the United States. Like Amazon, this also
provides an opportunity for them to expand their market
segmentation and their possible e-commerce retail shop.
Same-Day Delivery
With an increasing demand of faster delivery methods
for online retailers, Amazon is currently providing, and
testing, Same-Day Delivery service in 11 different cities
around the east and west coasts of the United States. This
service enables customers to receive their order within 7-9
hours after purchasing their product online which provides a
competitive advantage for Amazon and its affiliates.
Promote Small Businesses
As the demand for e-commerce shopping continues to
rise, so does the demand for product availability. As Amazon
continues to grow, so does the number of sellers on their
website. These sellers include Amazon, corporate businesses,
third-party vendors, and entrepreneurs. When you combine
these two demands, you get the need to find different ways
to lure sellers to your site against your competitors and
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the industry as a whole. This provides an opportunity for
Amazon to promote small businesses on their website as a
marketing tactic to appeal to small business owners wanting
to get their name out to the public eye.
With the websites that have rolled out in the past
couple of years, like Etsy and Pinterest, the need and hype
for small business continues to grow. To make sure Amazon
does not lose any of it current or potential sellers to its
competitors, they will need to introduce ways that show they
support small business owners. An example of this would
include Amazon hosting a weekend where they can feature
small businesses on their website by geographic locations.
This enables customers in that region to view small business
owners in their area and give them the ability to buy
locally, as opposed to buying from a large, corporate
business.
Threats
Multiple Lawsuits
Amazon, along with its competitors, faces the dangers
of potential lawsuits. These lawsuits may include patents,
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customer dissatisfaction, and security breaches. Being one
of the largest e-commerce retailers in the world causes
Amazon to be one of the prime targets for security breaches.
Unfortunately, they outsource their encryption and security
systems, so it is the third party’s responsibility to verify
that their system is secured.
Seasonality of the Business
Amazon’s business is affected by seasonality, which
historically has resulted in higher sales volume during
their fourth quarter, which ends December 31. They
recognized 38%, 36%, and 35% of their annual revenue during
the fourth quarter of 2010, 2011, and 2012, respectively.
The cause of this seasonality trend can be determined by the
holiday season beginning in October and lasting into
December.
Aggressive Competition
Amazon’s current and potential competitors include:
physical-world retailers, other online e-commerce and mobile
e-commerce sites, media companies, companies that provide e-
commerce services, companies that provide information
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storage or computing services or products, and companies
that design, manufacture, market, or sell consumer
electronics, telecommunication, and media devices. The main
competitive factors in these areas for all industries
include the quality, speed, pricing, variety in selection,
convenience, and reliability in the services and products.
Seller Fee Rate
Most e-commerce retailers, like Amazon, have a seller
fee rate for all those that sell products online their
websites. It is a constant competition within the industry
to keep current sellers selling on their site. For Amazon,
this means providing a low-cost fee that allows sellers to
sell their product, with a fee, but still allow for them to
make a profit off their purchases. This will keep the
sellers happy and loyal to Amazon.
INTERNAL FACTOR EVALUATION
The following factors can be evaluated by an Internal
Factors Evaluation (IFE) matrix (see Appendix 5) to help
Amazon determine other key strengths and weaknesses. With a
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weighted score of a 3.60, informs investors that Amazon has
been able to effectively and efficiently perform well by
fortifying its weaknesses, while utilizing its strengths.
Strengths
Disruptive Technology Innovator
One of Amazon’s strengths is being the leading
innovator in disruptive technology. In the recent years,
Amazon has provided their customers with Kindle Books,
Amazon Instant Videos, Amazon Cloud, Kindle Tablets, and
possibly providing their customers with a drone service to
enhance their Same-Day delivery service. Being one-step
ahead of their competitors allows Amazon to have a
competitive advantage in their industry.
Strong Brand Name Due to Customer Service Experience
Amazon’s detail to their customer service experience,
being a customer-centric organization, has provided them
with a strong brand name. This includes success from their
fulfillment centers, their processes, and all the way
through their post-delivery customer care.
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Variety of Product Availability
Amazon offers a unique variety of product availability
through various avenues which includes their third-party
vendors, small business owners, and internal products and
services. This unique product availability allows Amazon to
offer multiple resources to its customers. They include
books, movies, music, games, electronics, home and garden,
beauty, health, grocery, toys, baby items, clothing, shoes,
sports, automotive, and many other products to their current
and future customers.
Most Visited Online Retailer
With Amazon being listed as the most visited online
retailer informs us that the products and services offered
to its customers is of high quality. Their attention to
detail provides an aptitude for successful marketing through
word of mouth and their online customer shopping experience.
Weaknesses
Limited Grocery Market
Amazon is known to offer more physical products that
can be used for business, personal, or public use. What many
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customers do not know is Amazon offers grocery items on
their website. Some grocery items include wine (in select
states), gourmet foods, regular grocery items, and Amazon
Fresh which provides produce items to the customer within
the same day of it being ordered.
Overzealous Expansion
Amazon faces the threat of overzealous expansion with
their eagerness to be a leading innovator in technology and
its products and services. This potential threat can
inadvertently hurt Amazon’s reputation and how others may
view their products and services, which could hinder sales.
Network/Internet Reliability
One common threat that lies throughout the e-commerce
industry is the reliability of the company’s networks and
the internet. At any moment, should their network go down,
their products and services will not be available for their
customers, affecting sales. Amazon’s security for its
network is also outsourced. This causes a potential threat
to data loss and security breaches.
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Third-Party Vendors and Their Impact on Customer Satisfaction
A major threat to Amazon’s reputation is the potential
for third-party vendors to have a strong impact on customer
satisfaction by not holding to their part promises. In doing
so, it could have an effect on how their customers view
Amazon’s products and services. Consequently, this may lower
their customer satisfaction rating and their reputation.
SWOT ANALYSIS MATRIX
The SWOT Analysis allows Amazon to measure their
competencies and identify opportunities. To best utilize its
importance and effectiveness, it is important for Amazon to
visually see what their strengths, weaknesses,
opportunities, and threats are. They can do this by creating
a SWOT Analysis Matrix that allows them to combine their
strengths with both opportunities and threats (SO, ST), or
combine their weaknesses with potential opportunities and
threats (WO, WT) (see Appendix 2). In doing so, Amazon will
be able to utilize its strengths to overcome any threats, or
take advantage of any opportunities. When combining their
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weaknesses, Amazon can potentially avoid any short fallings
by avoiding potential threats can come along with their
weaknesses, or by focusing on their opportunities will allow
them to fortify any weaknesses they may have.
Once Amazon has developed this step of the process, it
gives them an opportunity to develop strategies that can do
four of the following:
Create a strategy that allows Amazon to utilize its
strengths to take advantage of its opportunities (SO);
Create a strategy that allows Amazon to utilize its
strengths to overcome any potential threats (ST);
Create a strategy that allows Amazon to focus on their
opportunities to fortify any weaknesses (WO); or
Create a strategy that allows Amazon to avoid any
potential threats due to their weaknesses (WT)
For example, Amazon can use their strength of being a
disruptive technology innovator to develop a Spanish website
for their Hispanic customers, or they utilize their strength
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of having a strong brand name to overcome the power of
aggressive competition.
STRATEGIC POSITION AND ACTION EVALUATION
(SPACE)
Financial Strength
The financial position of Amazon is strong, in that
Amazon has a large variety of products offered online.
However, Amazon does not offer everything that people may
want to buy. Examples of such include livestockand produce.
The financial position of Amazon is also partly due to the
fact that Amazon is the most visited online retailer.
Consumers tend to consult Amazon for lower prices and bigger
variety when shopping online.
Competitive Advantage
Amazon has a high competitive advantage due to
disruptive technology and strong customer service. Amazon is
developing the audio market, Kindle Cloud Service (which has
potential government contract security), online stores, and
possible drone delivery. In regards to customer service, 30
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users have rated the customer service level to be near
perfect. Amazon provides extensive customer service training
for its employees to ensure excellent customer service.
Additionally, small business owners that sell products and
services via Amazon are given the opportunity to be rated by
fellow consumers. Should a third-party vendor be given a low
rating, chances are they will not be able to sell
merchandise or services through Amazon. It also helps that
Jeff Bezos, CEO, personally and directly handles customer
service issues that may arise.
Environmental Stability
Despite Amazon being the number one online retailer,
there are some functions within the delivery aspect that can
cause for problems. Same day delivery is a function within
ecommerce that some consumers look for. While Amazon has
limited same delivery, it is a function that is currently
being improved upon. The promotion of small businesses that
sell items by way of Amazon is another function that is
inactive. While the option to buy directly from the small
businesses listed versus Amazon is available, there is no
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form of direct promotion of the small businesses that sell
items through the website.
Industry Strength
Amazon only offers expansive product availability in
the United States, United Kingdom, Canada, and Germany. Only
Kindle and eBooks are offered in countries such as China,
India, and Japan. As mentioned before, same day delivery is
a limited but improving function within the ecommerce
industry.
LONG-TERM OBJECTIVES
In tandem with the Comprehensive Strategic Management
Model, once the External and Internal audits have been
completed, Amazon’s next step is to develop long term
objectives (LTO). These objectives should be based off an
understanding of what the environment is dictating to Amazon
and should encompass what they expect to achieve in a three
to five year period, which will help to motivate the
organization to move towards Amazon’s vision.
When developing clear objectives, it should be
questioned if the factors being addressed are:
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quantifiable
measureable
realistic
understandable
challenging
hierarchical
obtainable
congruent
timeline specific
Following these guidelines, the first LTO for Amazon is the
strategic objective of:
“Offering same day delivery in 100 cities across the
continental United States by 2019.”
This objective is crucial in the alignment of the
strategic management model by following the direction of
Amazon’s vision, mission, and external audit. Same day
delivery is a market yet to be conquered. Getting a handle
on same day delivery will be crucial in Amazon’s global
expansion; however, Amazon must first conquer the task in
the United States. Amazon must consider methods of delivery,
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which will vary by city, fulfillment logistics, and pricing
when selecting a strategy to achieve the LTO.
The second long term objective Amazon should focus on
is the financial objective of:
“Increasing profit over competition by 30% in five
years.”
Amazon’s operating cash flow increases quarterly, as does
their net sales, which showed an increase of 24% in the
third quarter of 2013. As Amazon continues to grow and offer
a variety of products, increasing their profit over the
competition by 30% in five years is both a challenging and
obtainable undertaking.
STRATEGY SELECTION
The next step in the Comprehensive Strategic Management
Model is to select the strategies that will be used to
accomplish the long-term objectives. Choosing the right
strategy should be based on prediction, but also requires
skill, knowledge, research and experience.
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In order for Amazon to tackle the LTO of offering their
same day delivery service in 100 cities across the US, an
intensive strategy of product development should be put in
place. Due to Amazon’s healthy and strong foundation, they
are able to pursue this effort by improving their
competitive position with the existing service of same day
delivery. With the development of the same day delivery
service, including but not limited to the logistics of the
delivery process and pricing, Amazon would have the
opportunity to gain a grasp on same day delivery practices.
This then will enable them to develop the service in new
geographic locations.
After analysis of the SWOT Matrix, Amazon should use
their strength of having a strong brand name due to the
customer service experience, to avoid their threat of
aggressive competition. To accomplish this, Amazon will turn
to another intensive strategy. Market penetration can be
utilized when seeking to accomplish their LTO of increasing
their profit over their competition by 30%. To achieve this
objective, Amazon should focus on improving their customer
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Team Amazon
service marketing efforts in order to increase market shares
and, consequently, expecting their competitors’ shares to
decline.
IMPLEMENTATION ACTIVITIES
As described in the previous sections, two strategies
have been selected that will help the company achieve the
long-term goals defined by the strategic planning team.
Product Development and Market Penetration strategies were
found to be the most relevant to achieve these long-term
goals.
To support these strategies, the following
implementation plan was chosen for each of the strategies.
Product Development Strategy
Long-term goal: Offer Same-Day Delivery in 100 cities across the continental U.S. by
2019
Implementation #1 – Market Segmentation (Marketing)
Amazon recognizes that the Same-Day Delivery product
will be attractive only to affluent people willing to pay
the extra fee to have the goods delivered in on the same
day. The results from this effort will directly impact the
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Team Amazon
expansion of the products offered to more cities in the U.S.
It is projected that the number of cities with Same-Day
Delivery will increase exponentially as the market sees the
value and recognizes the maturity of the product processes.
This implementation will need to leverage on other
implementation efforts’ success to drive the costs down and
help reach the desired return of investment.
Implementation #2 – Delivery Drone Development (Research and
Development)
Amazon’s out-of-the-box way of thinking landed on the
idea of developing a delivery drone. This drone will be
branded as Prime Air, a 30 minute delivery service to
addresses located within 10 mile radius from the fulfillment
center. The drones will carry products with a weight of
equal or less than 5 pounds, which is roughly 86% of all
deliveries Amazon makes today. The product is still under
development but it has initiated tests of drone delivery in
2013, and will continue throughout 2014. There are two main
concerns that are preventing the project to complete: FAA
regulations are expected to delay the project as the service
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Team Amazon
is first of its kind and the drones need to operate under
the law and protected also by the law. The second concern is
the device’s security, as it is possible that people will
attempt to steal the packages or damage the units. Most
likely the drones will deliver only if these two concerns
are cleared. If the delivery address doesn’t have a secured
landing area, Amazon is envisioning setting up safe “drop
spots” to start off. Besides the fact that this service will
contribute with the customer satisfaction and retention, the
company will cut down delivery costs.
Implementation #3 – Amazon Trucks (Management-Operations)
Amazon has a strong relationship with major carriers
like UPS, Fedex, and USPS but Same-Day Delivery service
could increase the delivery cost substantially. Therefore,
extending the operations and logistics to cover delivery
could help them control delivery costs and negotiate better
delivery rates with the carriers. The trucks will be
expected to deliver to areas with higher demand and
profitability, to be able to cover the costs associated with
the service.
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Team Amazon
Implementation #4 – Optimize Supply Chain/Fulfi llment Capabilities
(Management-Operations)
The drone and Amazon Trucks delivery alternatives will
require the supply chain and fulfillment capabilities to be
optimized. These options will enable them to keep control of
the overall fulfillment process of their delivery service.
The pilot testing period for the drone and trucks delivery
will provide results based on performance improvement
metrics. These metrics will be evaluated before launch and
will resolve deficiencies and optimize processes. These
metrics will be under constant evaluation as the new supply
chain components gain maturity.
Implementation #5 – Increase Hub Cities by Upgrading Distribution
Centers (Management-Operations)
A critical component that will fuel the efficiency of
the fulfillment process will be the upgrade of existing
distribution centers into hub cities. Amazon will need to
analyze and project a timeline for the upgrade order. The
upgrade will need to be hand-in-hand with the selection of
Same-Day delivery service to have the desired effectiveness.
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Team Amazon
It will be expected that year-by-year 5%, increments of the
total number of centers will be achieved until all strategic
spots are covered to keep up with Same-Day Delivery demand.
Implementation #6 – Offer Competitive Pricing (Marketing/Finance)
Amazon will have fierce competition for the Same-Day
delivery market. Online competitors like eBay and Shutl are
moving as quickly into this market. Additionally, local
retailers are also making moves to provide that type of
service. These two threats will require competitive pricing
to successfully establish the product into the market. The
profits are expected to suffer initially but it is also
expected that other implementations, like the delivery
options, will help reduce costs and allow this product to be
profitable sooner.
Market Penetration Strategy
Long-term goal: Increase profit over competition over 30% in 5 years
Implementation #1 – Increase Media Advertising (Marketing)
Amazon’s dominance as an online retailer could imply
that media advertising is no longer a critical element for
the company. On the contrary, the constant expansion into
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Team Amazon
different markets and expansion of the product and services
catalog require constant investment on advertising. The
primary market is online and the company has focused and
will keep focusing here. However, new services like Same-Day
Delivery, Amazon Local, and others services that compete
more directly with local retailers require the use of more
traditional media advertising like television, newspapers,
and magazines to reach the people who do not use or do not
require smart phones or online devices on a regular basis.
Amazon needs to close the gap and gather more traditional
customers to expand the footprint.
Implementation #2 – Face-to-Face Advertising (Marketing)
The Amazon model is purely online but the local
services being promoted will now require a more direct
presence. There are many highly renowned services that are
not known by many customers, especially the ones who do not
shop online. Services like Amazon Prime, Amazon Mom, Amazon
Student, Amazon Instant Video, and the upcoming Amazon Prime
Air need to be showcased directly in retail locations (i.e.
malls, strip malls, baby and student related events).
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Team Amazon
Implementation #3 – Increase Sales Promotion with Complimentary
Items Associated with the Product (Marketing)
Media and Face-to-Face advertising will require sales
promotions to complement the offering. It is important that
every new customer uses the services to get their business;
therefore, targeted promotions providing complimentary
products or trial offers to promote the use of the services
will help customers not accustomed to shopping online to
feel more comfortable taking the first step (e.g. Amazon
Prime with a complimentary gift card to start shopping
without any compromise of credit card information).
Additionally, the offer would include concierge service so
they could experience first-hand Amazon’s premium customer
service. This service would guide the new customer to setup
their account and make their first purchases.
Implementation #4 – Improve Competency and Relationships with Third-Party Companies (Management-Operations)
One of the contributors to an extended product catalog
is Amazon Marketplace. This is a service for sellers wanting
to sell the same or different products in new and used
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Team Amazon
condition. Currently, the products sold through this channel
are not fully supported by Amazon’s customer service. This
is an area of opportunity since customers would depend on
the third-party vendor’s ability to be up to par with
Amazon’s customer service. To address this problem, Amazon
will need to improve the competency and relationship with
these vendors by reducing potential issues and by offering a
Buyer Protection program.
Implementation #5 – Training of Employees (Management-Operations)
Training of employees in an ongoing basis will ensure
that Amazon’s customer service remains as a competitive
advantage.
Implementation #6 – Focus on Customer Retention (Management-Operations)
As more competition is added to the market, the more
saturated the market will become. Amazon cannot afford to
lose market share, and a customer retention effort will
contribute to reduce the turnover. It is less costly to
maintain a customer than to gain one; therefore, Amazon will
use advanced analytics to identify customers shopping habits
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Team Amazon
and provide incentives to get their business back. The
Buyer Protection service and improved problem solving
techniques when dealing with delivery problems or
returns/exchange would enhance the customer experience.
CONCLUSION
Amazon’s need for a strategic plan is instrumental for
the organization to maintain a competitive advantage in
their ever growing industry. Moving forward, it is critical
for Amazon to have a plan for strategy evaluation in place.
This evaluation will ensure the strategic management plan is
a cyclical process, allowing for not only an evaluation of
the effectiveness of the change strategy, but also a review
of those underlying bases of that strategy, a system to
measure organizational performance, and an opportunity for
contingency planning. It is important for Amazon to
understand that the evaluation process should be
administered even when things are going well, in order to
avoid becoming stagnant.
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Team Amazon
APPENDIX
Appendix 1 – Evaluation of Mission Statement
Components
Statement Customers ProductsServices Markets
Survival,Growth,Profits
Technology
Original Yes No No No Yes
Updated Yes Yes Yes Yes Yes
Components
Statement Philosophy Self-Concept
Concernfor Public
Image
Concernfor
Employees
Original No No Yes No
Updated Yes Yes Yes Yes
Appendix 2 – SWOT Analysis Matrix
Strengths Weaknesses
Opportunities SO
Using the disruptive technology innovator to create a Spanish Website
WO
Overcome limited grocery market with Same-Day Delivery service
Threats ST
Utilize strong brand name to overcome aggressive
WT
Work on expansions toavoid the threat of seasonality of the
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Team Amazon
competition business
Appendix 3 – SPACE Matrix
Financial Position (FP)
Variety of Product Availability 6
Most Visited Online Retailer 6
Total 12
Total ÷ 2 6
Competitive Position (CP)
Disruptive Technology Innovator -3
Strong Brand Name/Customer Service -1
Total -4
Total ÷ 2 -2
Stability Position (SP)
Same-Day Delivery -6
Promote Small Businesses -4
Total -10
Total ÷ 2 -5
Industry Position (IP)
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Team Amazon
Expanding to New Countries 4
Same-Day Delivery 2
Total 6
Total ÷ 2 3
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X-axis = CP + IP (-2) + 3 = 1Y-axis = SP + FP
(-5) + 6 = 1
Aggressive
(+1,+1)
+1 +2 +3 +4 +5 +6 +7
+1
+2
+3
+4
+5
+6
+7
-1
-2
-3
-4
-5
-6
-7
-1-2-3-4-5-6-7
Team Amazon
Appendix 4 – External Factors Evaluation Matrix
Opportunities Weight Rating WeightedScore
1 Expanding to New Countries
0.15 2 0.30
2 Introducing Spanish Websites
0.01 1 0.01
3 Same-Day Delivery 0.20 3 0.60
4 Promote Small Businesses
0.20 2 0.40
Threats Weight Rating WeightedScore
1 Multiple Patent Lawsuits
0.01 2 0.02
2 Seasonality of the Business
0.10 3 0.30
3 Aggressive Competition
0.20 4 0.80
4 Seller Fee Rate 0.13 1 0.13
Total
1.00 2.56
Appendix 5 – Internal Factors Evaluation Matrix
Strengths Weight Rating WeightedScore
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Team Amazon
1 Disruptive TechnologyInnovator
0.15 4 0.60
2 Strong Brand Name 0.20 4 0.80
3 Variety of Products 0.15 4 0.60
4 Most Visited Online Retailer
0.15 3 0.45
Weaknesses Weight Rating WeightedScore
1 Limited Grocery Market
0.05 2 0.10
2 Overzealous Expansion
0.05 3 0.15
3 Network/Internet Reliability
0.20 4 0.80
4 Third-Party Vendors Impacting Customer Satisfaction
0.05 2 0.10
Total
1.00 3.60
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