Amazon

Amazon

            In regards to revenues, Amazon is the largest internet-based firm in the world. It was founded by Jeff Bezos in 1994, with the primary purpose of selling books online. Nonetheless, the firm currently sells everything, from books, food, furniture, to container houses. During the initiation of the company, there was another firm that had the same business strategy, Computer Literacy, which sold its wares online as early as 1991. Though Amazon had a greater convenience as its model facilitated the delivery of product to the address of the customer. In 1998, the company expanded its products and commenced on the sale of music and computer games. Subsequently, the company became an international entity by purchasing online bookstores based in Germany and New York. Further, at the turn of the millennium, Bezos company was involved with software, home-improvement items, toys, and consumer electronics. In the middle of 2000, Amazon unveiled the Amazon Web Services- this transformed the company to a tech-oriented on top of retailing online.

According to Bezos, the secret of a successful online retailer is “Get Big Fast.” Two years after launching the company, the customer base had grown to nearly 180,000. In the following year, registered accounts totaled to over 1,000,000, with the revenues reaching $148 million. In expanding further, Bezos was forced to take the company public. It enabled the company to raise $54 million from the NASDAQ exchange (Gregory, 2019). The popularity of Amazon over the two decades was attributed to its model of delivering purchase, offering various products, outstanding services and state of the art innovations that enabled the company to determine the wants and the needs of its customers by relying on previous purchases.

Vision, Mission and Core Values of Amazon

The success of Amazon is endorsed by strict measures that ensure fulfilling the vision and mission statements. Theoretically, the vision gives the organization direction to achieving its desired future condition, whereas the mission statement, portrays the goal of the business and offers strategic ways of managing. These statements defend the competitive advantage of the company against firms such as eBay, Walmart, and Costco Wholesale. Additionally, they influence the operations of Amazon’s subsidiaries, like Wholes Foods Market.

The mission statement of Amazon is “We strive to offer our customers the lowest possible prices, the best available selection, and the utmost convenience” (Gregory, 2019). The mission assures that the company will offer e-commerce services that will satisfy the needs of the customers. In attracting customers, Amazon will sell products at low prices, select the best products, and emphasizes convenience in accessing the products on its website (Amazon.com). On the other hand, the vision is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online” (Gregory, 2019). From this sentence, it is clear that the company wants to become the best e-commerce entity in the world and views customers as its most significant stakeholders.

Core Values

In 1998, after the acquisition of Telebuch and BookPages in Germany and the U.K. correspondingly by Amazon, Bezos got an opportunity of articulating the core principle of the firm. The founders of Teebuch, together with Alison Allor (worker in the human resource department), contemplated Amazons’ values by the authority of Bezos. They drafted down five core values. They are customer obsession, ownership, frugality, a high bar for talent, and bias for action. Later on, a sixth value – innovation – was added (McCracken, 2019 ).

In the Amazon viewpoint, a manager or individual contributor is termed as an Amazon leader. Therefore, the core values are leadership principles. Under customer obsessions, leaders ought to be obsessed with customers. They should put effort meant to earn and keep the trust of the customers. They should pay attention to the competitors, although priority is to the customers. Ownership demands the leaders to be long-term oriented. They should not value the short terms results more than the long terms and act on behalf of the whole company, not only their teams. In the high bar for talent, leaders are stimulated to recognize exceptional talent and seriously coach others. Bias for action advocates for speed in the business processes while frugality requires leaders to accomplish more from fewer resources.

Organizational Structure and Job Specialization

The president and chief executive officer of Amazon is Jeff Bezos. He also serves as the chairman of the board of directors. Bezos has a degree in computer science and electrical engineering and is ranked the top 10 richest people globally. Amazon has advanced because of the immense business size. As of mid-2018, 560,000 individuals were employed by amazon and had over 300 million customers worldwide (Rutakirwa, 2018). Due to its magnitude, it has a complex organizational structure. This structure enables managerial control and implementation of strategic management initiates. According to Meyer (2019), Amazon has a functional organizational structure. This structure is based on the business functions and determines the relationship of the organization’s components. The structure has three main features; global hierarchy, global function-based groups, and geographic divisions.

The global functions based groups is the most robust feature of the organizational structure. The main business functions have assigned teams that are led by a senior manager. This structure is advantageous as it stimulates the smooth running of e-commerce processes in the whole organization. More so, it favors the expansion of the organization in novel markets. The organizational structure of Amazon has multiple function-based groups. The major ones are eight, namely; office of the CEO, finance, Amazon Web Services, business development, consumer business, accounting, international consumer business, and legal and secretariat. The structure of Amazon also encompasses the geographical divisions. In this category, groups have the same objectives and are based on geographical areas. The purpose of these groups is to understand the economic conditions in the respective regions; therefore the company will understand the regional market and will be in a better position in managing the issues. In the last category of functional organization structure, is the global hierarchy. It is the most common organizational structural feature and involves vertical lines of authority and command. For instance, directives by the senior executives are applied in all of the relevant offices of Amazon globally.

Although the organizational structure is sophisticated, it is possible to classify it into the four levels of management. The uppermost level is made of the CEO, Jeff Bezos, and the board of directors. The top-level is made of the executive team members termed as “S-team.” The teams entail individuals (team leaders) that report directly to Bezos (Kim, 2019). All of the members having being elevated within the organization. The medium levels of management comprise of the senior managers within the three categories of functional organizational structure, whereas the lowest level consists of employers who work in the three categories and organized into teams. Bezos demands the teams to follow the “two-pizza rule.” That is, the meetings should be small enough to be fed with only two pizzas.

The successful growth of Amazon is achieved through Bezos’ strategy of assigning a set of people a specific area to complete. From the CNBC article (Kim, 2019), a couple of the s-team members are highlighted, together with their job specializations. For instance, the first three executives; Jeff Wilke, Andy Jassy, and Jeff Blackburn, specialize in worldwide consumers, Amazon web services, and corporate development, respectively.

Principles of great management entail organizing, planning, leading, and controlling. However, these fundamental principles are easily applied in the hierarchical organizational structure. Therefore, applying them in the structure of Amazon management is problematic. From the CBC article, the S-team are termed as decision-makers, and Bezos states that, at times, he delegates all the duties to them. Thus, the concepts of excellent management are somehow equal between the top level and medium level management. It is because all of them have teams and are in charge of specific duties or functions.

External forces

In understanding better the external forces impacting Amazon, the PESTEL analysis model will be applied. Through PESTEL, external forces- political, technological, economic, sociocultural, legal, and environmental conditions-will be identified.

Most of the operations of Amazon are affected by political aspects. These aspects revolve around governmental activities. The aspects include political stability, government funding for e-commerce, and advances of governmental efforts on matters of cybersecurity. All these elements may serve as opportunities or threats to Amazon. Nations characterized by political stability, such as United States, favor the growth and diversification of Amazon. Extensive support from the government advocates for continued development in relevant markets. Finally, policies that regulate cybercrimes influence the establishment of Amazon. In U.S., there is a cybercrime policy dubbed Computer Fraud and Abuse Act. It favors the growth of Amazon as cyber-criminals intending to disrupt its processes will be prosecuted.

Trends in the sociocultural or demographic aspects have shown to influence the performance of companies. The common trends that happen are changes in wealth disparity, in buying habits, and in consumerism. During the selection of areas to set up, Amazon needs to investigate the wealth disparity of the region. It is because the increase in wealth increases the levels of disposable incomes, and the vice-versa is true. On the other hand, the promotion of consumerism leads to improvements in the markets, in turn increasing the likelihood of success of a company.

Stable economies increase the probability of success of Amazon. This phenomenon positively affects the macro-environments, therefore, minimizing the risks for the expansion of Amazon. In addition, a good economy will raise disposable incomes, thus leading to the development of markets, which will enhance the financial performance of Amazon. Various issues cause economic recessions. In the case of China, the coronavirus epidemic has been anticipated to reduce the GDP (Kirby, 2020). Growth or expansion of businesses in this area will be hindered.

The backbone of Amazon is technology. Its growth and popularity was favored by technology. Amazon process units use technology to the fullest. For instance, its platform- Amazon.com- relies on a substantially large cloud computing to serve customers in the whole world. Recently, they launched Amazon Prime Air- an innovation to their delivery system whereby they will be delivering packages to consumers by the use of a drone or Aerial vehicle (Rutakirwa , 2018). Therefore, investments made in information technology form a competitive advantage for the likes of Amazon.

In recent times, there is great emphasis on the impacts of businesses on the environment. Most of the customers are attracted by firms that show business sustainability through green consumption. When Amazon engages in programs meant to improve the environmental conditions, it strengthens its brand image. These undertakings of low-carbon lifestyles expedite the boosting of corporate image. There are multiple ways of achieving these lifestyles, such as enforcing policies that increase the saving of energy.

Recommendations In Changing Competitive Landscape

Amazon is facing myriads of emerging competitive forces. In creating strategic solutions to this competitive landscape, it is crucial to analyze the forces that are strong and weak. A detailed analysis of the competitive forces is accomplished by the use of Porter five forces analysis. The model entails five elements that ought to be investigated.

Figure 1: Porters Five Forces Analysis model

            From the model, threats of a new entrant are one of the competitive forces. Concerning Amazon, this can be a strong or weak force due to that it will take substantial resources – time, money, and strategies- for the competitors to reach the level of Amazon. They are a few cases of entrants that have posed threats to Amazon; they are eBay and Alibaba. Other cases that significantly affect Amazon are the threat of substitutes and the bargaining power of customers. Buyers have a high bargaining power due to that there is a high quality of information, availability of numerous substitutes, and the switching costs are low. The suppliers’ bargaining power is a weak force due to that Amazon deals with a wide range of suppliers.

In order to flourish in the fluctuating competitive landscape, Amazon needs to strategize and first find solutions to the strong forces; consumers and substitutes. Amazon has to stress the competitive advantage and strengths. The strategy Amazon can apply is improving its brand image. As mentioned above, enhancing business sustainability boosts the brand’s image. Also, being consistent, knowing that the first impressions can be lasting, replying to criticisms, and figuring of ways to appeal and attract customers, mostly the elderly, as they rarely use websites services and mobile apps (Xu, 2019). In solidifying the brand, Amazon can engage in public relations, and use search engine optimizations. In eliminating the bargaining power, Amazon can address the issue by improving the quality of services, like enhancing the website usability to optimize the experience of users.

References

Gregory, L. (2019, February 13). Amazon.com Inc.’s Mission Statement & Vision Statement (An Analysis). Panmore Institute. Retrieved March 1, 2020, from https://panmore.com/amazon-com-inc-vision-statement-mission-statement-analysis

Kim, E. (2019, January 23). Amazon’s Executive Org Chart, Revealed. CNBC. Retrieved March 1, 2020, from https://www.cnbc.com/2019/01/23/who-are-amazons-top-executives-2019.html

Kirby, J. (2020, February 28). Will Coronavirus Cause a Global Recession? We Still Don’t Know. Vox. Retrieved March 1, 2020, from https://www.vox.com/2020/2/28/21153492/coronavirus-recession-china-stock-market-economy

McCracken, H. (2019, April 12). These Are Amazon’s 38 Rules for Success. Fast Company. Retrieved March 1, 2020, from https://www.fastcompany.com/90334069/these-are-amazons-38-rules-for-success

Meyer, P. (2019, February 16). Amazon.com Inc.’s Organizational Structure Characteristics (An Analysis). Panmore Institute. Retrieved March 1, 2020, from https://panmore.com/amazon-com-inc-organizational-structure-characteristics-analysis

Rutakirwa, T. (2018) Analysis Of Amazon. Management And Organisations. Retrieved March 1, 2020, from https://www.researchgate.net/publication/335429756_ANALYSIS_OF_AMAZON_MANAGEMENT_AND_ORGANISATIONS

Xu, D. (2019, December). Economic Analysis of Core Financial Competitive Forces in the Internet age. In 2019 International Conference on Economic Management and Model Engineering (ICEMME) (pp. 515-517). IEEE.