Strategic Evaluation and Recommendation

Strategic Evaluation and Recommendation

Potential Business Level Strategies for Amazon

A business-level strategy is a detailed course of action that an organization or a business implements to gain competitive advantage exploiting the competencies of products and the market while still providing value to the customers. The customers are the main focus of business-level strategies. It determines the type of customers the business targets, when, where, and how the business will target them.

There are four general business-level strategies that businesses can implement, and these strategies have two scopes in which the organization can practice or implement them. Amazon currently utilizes the cost leadership business-level strategy, where they target a large customer base by offering standardized products at low prices. Amazon makes use of its tremendous buying power to purchase goods cheaply. The organization does not possess any physical stores saving on costs. This lack of physical presence allows the organization to pass on the saving to the clients and still maintain a high-profit margin.

A potential strategy that Amazon could adopt is the differentiation strategy. This strategy targets a large customer base based on the organization’s uniqueness, which sets it apart from its competitors. To implement this strategy, Amazon would have to construct physical features that are unique to attract customers. The company will then have to charge their customers extra to offset the cost of them being unique. According to Banker et al. (2014), the differentiation strategy offers organizations a more sustainable financial performance than the cost leadership strategy. The differentiation strategy would also offer Amazon protection against Porter’s five forces (Grundy, 2006). The customers’ loyalty and organization’s uniqueness can safeguard the organization from rivals. Loyalty and uniqueness can also dissuade customers from switching to other alternatives. The high price the organization charges sets them in a better place in case the suppliers increase prices.

The second potential business-level strategy that Amazon can adopt is the integrated cost leadership and differentiation strategy. This strategy is also known as a hybrid strategy. The plan encompasses offering clients differentiated features and low-cost products. The approach focuses on two fields that provide a competitive advantage, differentiation, and cost. Products in this strategy will not be as pricey as those in the differentiation strategy, and the organization will also offer unique features. The hybrid strategy works on the principle that mid-priced products that distinguish themselves from other products appeal more to customers.

Potential Corporate-Level Strategies for Amazon

Corporate-level strategies are strategies put in place that affect the entire business as a whole. Corporate level strategies aim to maintain the financial success of a company and maximize the business’ profitability. Corporate level strategies have three main types that include growth, stability, and retrenchment. The three have subdivisions within them. The current corporate strategy that Amazon has in place is the concentric diversification strategy. The concentric diversification strategy falls under the corporate growth strategy.

A potential corporate level strategy Amazon can implement is a corporate stability strategy that focuses on the profits of the organization. This strategy aims to increase the profits of the organization rather than expanding to new unknown markets. The organization can increase profits by cutting operation costs, raising the price of their products, and selling assets.

Amazon can also adopt another type of growth strategy different from the one that they currently practice. The strategy is a forward or backward integration strategy. In the forward integration, Amazon would be able to assume the roles that a distributor in the forward supply chain used to occupy by constructing infrastructure and warehouses. The infrastructure and warehouses would facilitate direct selling to retailers. In the backward integration, Amazon can take over activities previously carried out by suppliers in the backward supply chain.

Potential Global Strategies for Amazon

A global strategy refers to the plans an organization has in place that facilitate the expansion of the business outside its borders. There are four main global strategies that companies that want to conduct business activities in other countries need to consider. The first global strategy is an export strategy. Companies that implement this strategy mainly focus on domestic operations. The company has no intention of globally expanding, but it exports some of its products to take advantage of the international market.

The second strategy is the standardization strategy that companies implement and treat the entire world as the same market. Companies that have this strategy have the idea that one type of product can meet the needs of the whole market. The products do not need any form of customization, and they are the same everywhere. The third strategy is a multi-domestic strategy. This strategy customizes products to the needs and preferences of the market to which the organization will sell the products. Companies with this strategy localize their overall management in their home countries and give managers of other branches, some room to make some changes. The managers of branches have an understanding of what the locals want and also the needs of the markets.

The final one is the transnational strategy, which is a combination of some elements of the multi-domestic and standardization strategies. Companies use this strategy when there is pressure from other international competitors, and the organization still has to deliver products and services per the needs of the local customers.

Recommendation

For Amazon, I would recommend a combination of the integrated cost leadership and differentiation strategy coupled with the forward integration corporate strategy for growth, and the multi-domestic global strategy. I feel that the combination of the three is best suited to the operations that Amazon conducts, and they will serve to improve the quality of the products while delivering the best to their customers. The combination will also help enhance the returns of the organization.

A hybrid business-level strategy allows the organization to deliver on two competitive fronts, offering differentiated products at a slightly higher price than the generic products. The products are also within the affordability range of the customers who want quality products but cannot afford the products offered by businesses with a differentiation business-level strategy such as Apple Inc. The corporate growth strategy, forward integration, will enable Amazon to assume the roles of the distributors rather than outsourcing, saving the organization money. The multi-domestic global strategy allows the organization to tailor the goods and services they produce to fit the local market, improving customer satisfaction.

References

Banker, R. D., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision.

Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, 15(5), 213–229.