Strategic Management and Amazon free essay sample

TMA 05 Block 4 Collaborative analysis Contents Part 1 External analysis (group A) 2 Internal analysis (group B) 4 Stakeholder analysis (group C) 10 Corporate-level strategy analysis (group D) 14 Competitive-level strategy analysis (group E) 17 Part 2 Critical assessment of the analysis 23 Part 3 Evidencing of contribution to groups 28 Part 4 Reflection on group decision making 30 Appendix 32 Part 1 1. Group A analysis INTRODUCTION Each member of team A used one of the many available frameworks to analyse the external environment of Amazon. com, focusing on the strengths, weaknesses, opportunities and threats facing the organisation. The findings of each member’s analysis were amalgamated to form the content of the following report. Using the following frameworks we have identified the SWOT factors facing Amazon. com: STEP, Strategic Group Analysis/Strategic Group Map, Porter 5 Forces, Porters Generic Strategies and Competitor Analysis. ANALYSIS The far external environment STEP analysis has shown: High barriers to entry for new competitors in the same cluster as Amazon. com, as there is a large investment in technology and marketing required in order to compete. We will write a custom essay sample on Strategic Management and Amazon or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Economic factors can affect the cost leadership approach of Amazon. Political issues are linked with sociological and therefore, are amplified for Amazon’s market. The near external environment Porter’s 5 forces: Supplier power is limited, as Amazon is potent customer, suppliers would not wish to lose them. Buyer power is low, as Amazon tends to offer the most competitive all round customer experience. The threat of substitute products is low due to the high barriers to entry, and there are no switching costs for customers (easy to buy from competitors) Amazon has joined forces with competitors (or hosts a web site for them) and therefore it can profit from their sales. Competitive environment Strategic group analysis has shown that Amazon stands alone, with its nearest competitor being eBay. This tends to show that it is a market leader. Amazon is successfully implementing a cost leadership / differentiation strategy enabling it to increase its market share. This helps Amazon to continue as a market leader. Amazon’s collaboration with its competitors has allowed it to source new items and gain economic rents from its partners. Amazon’s cash flow cycle allowed it to receive money from a customer before it has paid its supplier giving the financial market more faith in Amazon allowing it to finance itself more easily. CONCLUSION Team A has identified Amazon. coms key opportunities and threats through framework analysis. Growth, Technological, Collaborative and Flexibility opportunities enable Amazon to take advantage of changing STEP factors, conversely, Growth and Operations  threaten  Amazons  current and future position. Amazon has been able to use leverage within the market in order to persuade competitors to collaborate with them and therefore, gain economic rents from these partnerships. This has enabled Amazon to create intense market growth, which has both opportunities and threats and Amazons response will determine its future success within these fluid markets. TEAM PROCESS The activity was split into smaller tasks assigned to each team member in order to carry out our individual analysis reports on Amazon’s external environment, with each of us responsible for a certain framework. Due to our different availability, we were unable to organize teleconference meetings to make real-time decisions, and we communicate through asynchronous means on the Team A forum instead in order focused on coordinating our final report analysis, in which we used a consensus with qualifications approach. Appendix 1: SWOT [pic][pic]Bottom of Form [pic] Appendix 2: Strategic group map for e-commerce originations[pic] [pic] [pic]Bottom of Form 2. Group B analysis 1. Introduction Amazon. com is one of the largest online retailers offering a one stop shop solution to their customers. This reports objective is carrying out a SWOT audit of Amazons resources and capabilities using conceptsmodels from Unit 2 of Block 3: VRIN/VRIS, Porters value chain, and links between resource, capabilities and competitive advantage from Unit 2 of Block 3 (The OU, 2010). This is an outcome of individual analyses in 3 subgroups, team discussions and collaboration through agreement on tools, responsibilities and wiki structure. 2. Internal Analysis, a Resource Based View Internal analysis is used to determine relationships between resources and capabilities and how they are used to create value. The RBV suggests that sustainable competitive advantage determines organisations distinct capabilities (Johnson et al, 2008). Amazon therefore needs to exploit their capabilities (Hooley et al. 2008), in order to develop sustainable competitive strategy. The audit of Amazons resources and capabilities is shown in Appendix 1. Figure 1 highlights Amazons resources and capabilities using Barneys (1991) VRIS/N concept: to achieve sustainable competitive advantage, a resource must have four attributes; it must be valuable, rare, inimitable and not easily substituted (Block 3, The OU 2010 p. 61-64) a strength for Amazon. [pic] Figure 1, VRIS analysis (Unit 2, Block 3) 3. Resources and capabilities in the Value Chain The Value Chain analysis (Appendix 2) highlights how value is created or lost through internal activities and can indicate a need to extend the development of resources / capabilities: primary activities are those directly concerned with creation and delivery of Amazons services (Unit 2, The OU, 2010). It is clear where Amazon is able to create value through efficient activities and a well established process. Since sustainable competitive advantage is based upon resources and capabilities, value needs to be maintained or enhanced for Amazon. om to retain their position of sustainable competitive advantage (Unit 2, The OU, 2010, p. 60). Amazons business model offers a synergistic combination of the following benefits which help them to remain competitive: †¢ Shopping convenience †¢ Ease of purchase †¢ Speed †¢ Decision-enabling information †¢ A wide selection †¢ Di scounted pricing †¢ Reliability of order fulfillment Amazon. coms combination of services and logistical processes creates value for their customers which in-turn creates  sustainable  competitive advantage. Although these links can be hard to substantiate (causal ambiguity) (Unit 2, The OU 2009), Amazons resources/capabilities are valuable as they are difficult to replicate (e. g. knowledge). 4. Amazon. coms Dynamic Capabilities Amazons capabilities can be described as dynamic: processes used to manage resources in response to dynamic environment (Eisenhardt and Martin, 2000). The impact Amazon. coms dynamic capabilities have: †¢ proactive flexible strategy †¢ re-shaping competitive environment / industry standards †¢ superior response to customers demand / KSFs (Unit 2, The OU, 2010) †¢ gathering knowledge utilise resources to their best potential Since Amazon. com operates in a dynamic enviroment, they should avoid risks or exploit new opportunities (SWOT The OU 2010, p. 191) by combining strategic flexibility with adequate resources, supported by their capabilities. 5. Conclusion In this report we collaboratively analysed Amazons resources and capabilities which informs their strengths and weaknesses (The OU 2010, p. 190), as illustrated in Appendix 3. For Amazon. com to manage change and to implement competitive strategy (Block 3, p. 92) is a challenge since they operate in a dynamic and global environment. Amazon. com will therefore need to continually renew resources and capabilities to react to the opportunities and threats in their external environment and to ensure that their cross functional capabilities are integrated. 7. References 1. Block 3, Reading 10: Hitt, H. A. , Keats, B. W. and DeMarie, S. M. (1998) Navigating in the new competitive landscape: Building strategic flexibility and competitive advantage in the 21st century, Academy of Management Executive, Vol. 12, No. 4 Academy of Managment 2. Block 3, Reading 3: Grant, R. M. 1991) The resource-based theory of competitive advantage: implications for strategy formulation,California Management Review, Vol. 33, Issue 3. By permission of the Regents. 3. Eisenhardt, K. and Martin, J. (2000) Dynamic capabilities: what are they? in The Open University (ed. ) Readings for Block 3, Milton Keynes, The Open University pp. 77-84 4. Grant, R. M. (2008), Contemporrary Strategy Analysis (6th edn), Oxford, Blackwell. 5. Leschly, S. , Roberts, M. J. and Sahlman, W. A. (2003) Amazon. com 2002, Harvard Business Review. 6. Lester, H. (2006), Creating a unique multi-channel customer experience, London, Fifty Lessons Ltd [online], http://openuniversity. fiftylessons. com. libezproxy. open. ac. uk/viewlesson. asp? 1=534 (accessed July 2009/2011) 7. Porter, M. E. (1985), Competitive Advantage, New York, Free Press. 8. The Open University (2009) B301 Making sense of strategy, Block 1 Introducing strategy, Milton Keynes, The Open University 9. The Open University (2010) B301 Making sense of strategy, Block 3 The strategy toolkit, Milton Keynes, The Open University 10. Viney, H. , Winchester, N. and Boojihawon (2010). B301, Block 3 The Strategy Toolkit: The Open University. 8. Appendices Appendix 1 [pic] Figure 1 Links between resources, capabilities and competitive advantage (adapated). [pic] Figure 2 Resources and capabilities of Amazon. Figure 3 The hierarchical structure of capabilities (The Open University, 2010 p. 80) (Adapted) Appendix 2 [pic] Appendix 3 [pic] 3. Group C analysis Introduction View comments on separate page Add your own comment Team Cs analysis is based on strengths, weaknesses, opportunities and threats of Amazons stakeholders as highlighted in the case study Amazon. com- 2002. The analysis is informed by a range of models including a stakeholder map and analyses of their power, classes and salience. Outcome of Group Analysis 3 most recent shown (view all) Add your own comment Strengths Amazon uses a superior online platform which can lead to competitors becoming partners so they can tap into that resource. This is a core organizational capability and exploits the technological skills of its highly qualified workforce, putting Amazon in a very strong position to build its businesses effectively, as evidenced by its other business areas (including warehousing, buying, shipping, security and distribution) and mutually beneficial partnerships (i. . with Toys R Us). Amazon has an experienced and accomplished CEO who has developed the Amazon brand into a household name following its successful diversification strategies. Customers use Amazon as a means of achieving convenience through shopping online with an established and recognized retailer with a reputation for secure handling of information and online safety. Weaknesses Amazons collaborative strengths also form part of its weakne sses in respect of reliance on third party distributors. This implies a shortage of expertise in some areas of Amazon’s operation, since they require this kind of collaborative relationship. Having such a strong reliance on the internet delivery model also leaves Amazon vulnerable to technological problems which could lose business and drive customers to its competitors who operate in broader ways (such as high street stores). The hasty expansion of Amazon’s businesses may affect internal procedures and systems. This could have a negative effect on levels of staff productivity and motivation which could have a detrimental effect on Amazon’s overall success. Opportunities Diversifying into new markets is an opportunity to grow its collaborative-focused businesses such as using Merchant. com to help other organisations manage their online services for a fee. This enabled Amazon to simultaneously exploit its superior technology and benefit its collaborative partnerships. Amazon has the potential to develop its technological advantages further in a similar way that it has with its Kindle. This could open up opportunities for collaboration with other high profile technology-focused companies such as Apple or Sony to design the next big gadget. Amazon has the potential to become ambassadors for Corporate Social Responsibility due to its local distribution channels (which are relatively green) as evidenced by the Kindle which has reduced the need for paperback books. This could support political affiliations, helping its long-term planning. Threats Hackers are a threat to Amazon’s online platform. If the wrong people get access to customer data it could destroy Amazon’s reputation for online safety. This could stop customers buying its products, and partners from collaborating. Changes in consumer buying habits can pose a significant threat. Between 2002 and 2007 the difference in spending between books and consumer electronics rose from $843m to $4,319m. Low entry barriers form a threat because there are potential competitors which Amazon must look out for to craft its strategies effectively. This, coupled with the potential for partners with ploys to gain best practice and then compete without collaboration means that Amazon must consider the true motives of its partners. Stakeholder Map I have identified Amazons stakeholders and attached a link to the stakeholder map. Stakeholders are described by Freeman ‘any group or individual who can affect or is affected by the achievement of the firm’s objectives’ (Freeman, 1984, p. 25) The stakeholders are prioritised by power, legitimacy and urgency, dependant on the number of categories they fit into they can be categorised in following sections: Latent Stakeholders – stakeholders who only have one attribute. Expectant Stakeholders – stakeholders who have two attributes. Definitive Stakeholder – stakeholders who have all the attributes. The more attributes stakeholders have the more of a priority they are to an organisation. Stakeholder Power Matrix View comments on separate page Add your own comment How should a business respond to variations in stakeholder power and influence? Completing a power matrix will help Amazon develop a communication plan that is aligned to each stakeholders focus and concerns. The matrix prioritises Amazon stakeholders in order of importance. The positioning on the grid is important; High power, interested people: these are the people with the greatest influence, every effort must be made to engage these stakeholders †¢ High power, less interested people: put enough work in with these people to keep them satisfied, but not so much that they lose interest. †¢ Low power, interested people: These people can often be very helpful with the detail of your project. †¢ Low power, less interested people: moni tor these people, but do not overburden them with excessive communication. †¢ Figure 1: Stakeholder power matrix of Amazon |High level of interest |Low level of interest | |High level of power |Shareholders, Partners, Customers |Government, Suppliers, creditors | |Low level of power |Pressure groups, the press, local communities, environmental agencies,|Every stakeholder will have some form of | | |employees |power | Stakeholder Classes Analysis Amazon. om stakeholder classes In carrying out stakeholders’ analyst (Mitchell et al, 1997) identify three attributes:   Power, legitimacy and urgency. He then formulated seven areas to class them in. |Stakeholder |Attributes: |Classification |   | | |power | | | | |legitimacy | | | | urgency | | | | | | | | |Management |X |Dominant |Bezos and his team are the brains behind | | |X | |Amozon. om | | |X | | | | | | | | |Third party sellers |X |Dependent |Z-shops/auctions | | |X | | | | |   | | | | | | | | |customers |X |dema nding |Always looking for new changes | | |X | | | | |   | | | | | | | | |employees |  Ã‚  Ã‚  Ã‚   X |Dangerous/dependent |The back bone of the company | | |X | | | | |   | | | | | | | | |partners |X |Definitive |Large corporation/Toys R Us | | |X | | | |   | | | | | | | | |suppliers |X |Definitive |close proximity | | |X | | | | |   | | | | | | | | |Government |X |   |Amazon. com have to abide by certain rules | | |X | |and regulation | | |   | | | | | | | | Stakeholder Salience Analysis The following analysis considered the salience of amazon. com’s stakeholders. STAKEHOLDER SALIENCE |  Ã‚   |Attributes Possessed |Stakeholder Classification | |Stakeholder |Legitimacy |Power |Urgency |   | |Bezos (owner) and Senior Management TeamBoard of Director|   |   |X   |Stakeholder dominant | | |X |X | |   | |Partners suppliers (eg Sotheby’s)    |   |   |Mutual power- dependence | | |X |X |   |relationship | |Shareholders |   |   |   |Mutual power-dependence relationship| | |X |X | | | | |   | | | | |Specialist employees and managers |   |   |   |Mutual power-dependence relationship| | |X |X | | | |Non specialist employees |   | | |Firm dominant | | |X | | | | |Small businesses Individuals that sell stock on website |   |   |   |Stakeholder interests – legitimacy | |   |X | | |not implied | |Third party sellers incl. mall Medium sized   traders |   |   |   |Basis for legitimacy of relationship| |that amazon purchased equity in |X | | | | |Media, Government, Customers |   |   |   |A relationship exists | | |X | | | | NB. Some legitimate stakeholders have little influencepower but it is important to remember that power can be acquired or lost (Mitchell et al, 1997). In addition, I have amended the table to reflect that stakeholders are more likely to move temporarily into a state of urgency. Managers need to pay particular attention if this occurs with stakeholders that possess both legitimacy and power. The first two listed have the highest salience  for managers. However, the needs of the other stakeholders need to be  considered in particular dormant shareholders who can  exert power  with urgency if necessary. References View comments on separate page Add your own comment The Open University, (2010) B301, Block3, The Strategy Toolkit, Milton Keynes, The Open University Stakeholder Map ( The Open University, Block 3, The Strategy Toolkit, 2010, p. 81-82) Stakeholder Power Matrix The Open University, Block 3, The Strategy Toolkit, 2010, p. 106) The Open University, (2010) B301, readings for Block 3, Milton Keynes, The Open University Stakeholder Classes (The Open University, Block 3, The strategy Toolkit, 2010, p. 101) The Open Univers ity, (2010) B301, Block 4,Collaborative Analysis, Milton Keynes, The Open University Amazon. com Case Study (The Open University, Block 4, Collaborative Analysis, 2010, p. 40-70) 4. Group D analysis Outcome of Group Analysis TEAM D – AMAZON. COM’S CORPORATE-LEVEL STRATEGIC CHOICES Bottom of Form ANSOFF’S VECTORS Top of Form Bottom of Form Recommendation: Amazon continues to pursue both market penetration and diversification. Market penetration: †¢ Amazon places an emphasis on customer experience; there’re no switching costs for their ‘customers for life’. †¢ Their technological platform makes it hard to compete due to start up costs and high levels of technical staff required to run the website (valuable, non imitable). Diversification: †¢ It already meets minimum requirement for the market’s KSF, and capitalises on the organisations resources and capabilities. †¢ There’s no unacceptable financial risk to endanger liquidity of the capital structure. †¢ Should not affect the organisations internal systems and procedures, or relationship with its stakeholders. Weaknesses: Possible over-dependence on third parties: contingencies would be required. †¢ Non English speaking market is as yet untouched potential – forming new partnerships where necessary to allow for diversification into new geographic markets of non English speaking readers is suitable, feasible and acceptable. CORPORATE RELATEDNESS Bottom of Form Recommendation: diversification. †¢ Amazon. com offers a single portal to provide convenience to their customer for the online shopping experience. †¢ Book business success expanded to shippable consumer goods. †¢ Diversification approach born through strategic alliances. †¢ Intangible resources were developed forming foundation for capabilities and core competencies. Used expertise and scaling capabilities to enter new markets and offer backend services, therefore gaining positioning with a USP. †¢ Foundation and infrastructure in place, therefore allowing to support the diversity of the offering concurrently. †¢ Synergies between organisations provided an entry point for everyone but allowed each organisation to operate independently. Using the value-creating strategies of diversification table (Hitt et al, 2003), Amazon is located within the Low opportunity of sharing assets/h igh corporate relatedness quadrant (APPENDIX 2 – CORPORATE RELATEDNESS). The high corporate relatedness could partly be explained as the result of their strategic alliances. Although having positioned the company as low operational relatedness, in this company synergy exists as the value created offering several products in a single website exceeds the value the user would have in the possible event they had to pay double shipment costs. SUITABLE, FEASIBLE, ACCEPTABLE Bottom of Form Suitable: Diversification complies with Amazon’s KSF (Selection, Price and Convenience). It also maximises resources and capabilities through the application of Barney’s VRIN model. Diversification overcomes threats including reducing competitors through forming mutually beneficial alliances. It operates according to Bezos’ vision for an online shop where anything can be bought. Feasible: Amazon’s strategy can be resourced because it uses a relatively inexpensive online platform and draws on trustworthy suppliers and skilled staff. Diversification shouldn’t affect Amazon unless they use unknown partners who don’t deliver. The competition’s likely to emulate Amazon or form partnerships with them. Neither approach should pose a threat. Acceptable: Amazon has a developed marketplace platform meaning low input costs and the ability to exploit its existing technology. It’s well established partnerships, meaning that its stakeholder relationships are likely to remain positive. Amazon’s able to rapidly deliver its provision meaning that diversification is unlikely to cause problematic procedural issues. TEAM PROCESS Bottom of Form Project Lead was the only assigned role. Due to larger group-numbers and less areas to cover 3 subgroups were formed and final allocation for separate report areas were agreed upon. Individual reports were put forward and best-bits merged to create a summarised version. These summaries were merged once again for the final  wiki. Wordcount: (545 words) APPENDIX 1 ANSOFFS VECTORS APPENDIX 2 – CORPORATE RELATEDNESS REFERENCES. APPENDIX 1 ANSOFFS VECTORS Market Penetration The use of the internet and access to high speed internet connection has enable Amazon. com with the use of its open minded and innovative team, to launch and develop what is today the biggest online bookstore anywhere in the world. The results of the stage 2 analyses indicate that a market penetration strategy was used effectively. Strategically located, Amazon developed brand eputation through its superior technology, skilled workforce and logistical capabilities that facilitated rapid growth and allowed Amazon to gain price advantage. Market Development At one point Amazon was roughly doubling its sales every quarter: at this stage they had nearly 340,000 customers with further hits numbering 80,000. However despite some countries having internet restrictions, as more of the world becomes internet-enabled, there is still potential for further growth here. Another weakness is that there are a limited number of offers for non English titles. Product Development From their original market plan which was sales of books, Amazon not only developed their product range, but they also developed their services as well, providing the ‘ultimate customer experience’ They then went on to launch an entire host of other items, including the launch of the Kindle eBook which resulted in an existing product (books) being made available to Amazon customers in a new way. Diversification Five years after starting up Amazon. com embarked upon a new strategy â€Å"the marketplace initiative. †   Online auctioning was implemented by the firm; this however was done by third party companies and individuals. Amazon was just the source through which these third party products were sold and Amazon was not accountable for these goods and services. This lead Amazon to realise they now served 2 different sets of customers: buyers and sellers. APPENDIX 2 – CORPORATE RELATEDNESS [pic] Adapted from Block 3 The strategy toolkit p. 223 REFERENCES.  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Block 3 – The strategy toolkit Making Sense of Strategy.  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Block 4 – Collaborative Analysis Making Sense of Strategy.  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Readings for Block 3 – Reading 15 Making Sense of Strategy.  ·Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Team A, B C wikis. 5. Group E analysis Outcome of Group Analysis Introduction Team E undertook an evaluation of Amazons competitive level strategy, reporting back using Gerry Johnson et al. (2006) three sets of generic testing criteria: a) Suitability: In line with Jeff Bezos vision of uilding a place where people find and discover anything they might want to buy online (Amazon2002), Amazon is consistent with and fulfils the market KSF (A ppendix, Fig. 1) that it operates within by offering product variety, order fulfillment and competitive prices in a truly virtual model that eliminates a large portion of fulfillment costs and inventory risk. In theory, Amazons cost-leadership and differentiation strategy is suitable, since they are able to meet their customers’ needs (Fig. 2) and it gives them the opportunity to exploit their strengths[i]. Their strategy can become problematic if their technology platform is not continually being developed and therefore able to cope with Amazons continuous expansion. Amazon capitalized their resources and capabilities,[ii] to build awareness, increase traffic and sales. They were also pursuing their online commerce opportunities and solidifying and extending their position in the large markets where they noticed substantial opportunities. [iii] Amazon has accelerated their online commerce by creating value for their customers (Appendix, Fig. 3) and obtaining sustainable competitive advantage. b) Feasibility In practice, Amazon can achieve the required level of operational performance by delivering cost leadership advantage (Fig. 4 and Table1), assigning the necessary market capital due to its IPO, to raise capital and invest $800 million in technology (Grant: economies of scale and learning. Drivers: Quality of purchased products, features and performance and complementary services), creating market share, which stems from its original success and good name (Grants input costs/economies of scale and learning) and lowering costs by initiating redundancies and closing distribution and customer service centers (Grant: residual efficiency / input costs. Drivers: Technology embodied in design, the skill and experience of employees, location and degree of vertical integration). c) Acceptability There is a risk that Amazons relationships with their stakeholders (Fig. 5) can be affected if their increased purposed growth does not take in account that: †¢ International growth can add pressure to their internal systems and procedures which could affect profits. †¢ Increase in oil prices affect delivery costs. †¢ Not enough expertise in markets they are diversifying into a loss in returns. Increased third party suppliers/sellers may not provide same level of servi ce as Amazon directly, could impact the reputation potentially losing customers One of the key issues in shareholders management is the maximization of the long term cash flow by maintaining dynamic capabilities to preserve a degree of flexibility that can allow it to react to changes and keep the shareholder returns acceptable. Recommendations †¢ Have service level agreements of what is expected of suppliers and continue to monitor and develop customer feedback. †¢ Source local suppliers and distributors in countries such as Germany, UK, China Amazons overall sales, resulting in higher efficiency and better quality service. Setup business in countries with stable economies and governments †¢ Ensure their technology platform is continually being developed †¢ Carry out market research into the suitability, feasibility and acceptability of new strategies, products and services offered Process used by the team Team E was split in three sub-teams that bought together all three headings of the framework into one single agreed final report. [pic] [i] (Team A wiki, Appendix1 SWOT) [ii] (Team B wiki Fig. 2 RC Amazon) [iii] (Team A wiki, Appendix 1 SWOT) References 1. Leschly, S. , Roberts, M. J. and Sahlman, W. A. (2003) Amazon. com 2002, Harvard Business Review. 2. Viney, H. , Winchester, N. and Boojihawon (2010). B301, Block 3 The Strategy Toolkit: The Open University. 3. Grant, R. M. (2008), Contemporary Strategy Analysis (6th edn), Oxford, Blackwell. 4. Porter, M. E. (1985), Competitive Advantage, New York, Free Press. 5. Lester, H. (2006), Creating a unique multi-channel customer experience, London, Fifty Lessons Ltd [online], http://openuniversity. fiftylessons. com. libezproxy. open. ac. uk/viewlesson. asp? 1=534 (accessed July 2009/2011) 6. Block 3, Reading 3: Grant, R. M. (1991) The resource-based theory of competitive advantage: implications for strategy formulation, California Management Review, Vol. 33, Issue 3. By permission of the Regents. 7. Block 3, Reading 10: Hitt, H. A. , Keats, B. W. and DeMarie, S. M. (1998) Navigating in the new competitive landscape: Building strategic flexibility and competitive advantage in the 21st century, Academy of Management Executive, Vol. 12, No. 4 Academy of Management. 8. 8. Viney, H. , Winchester, N. and Boojihawon (2010). B301, Block 3 The Strategy Toolkit: The Open University. 9. Leschly, S. , Roberts, M. J. and Sahlman, W. A. (2003) Amazon. com 2002, Harvard Business Review. APPENDIX Bottom of Form 1. Amazon. coms Key Success Factors. [pic] 2. Amazons customer needs. [pic] Figure 2, Amazon’s customer needs. 3. Markides'(1999) who, what, how’ framework (Block 3, p. 231). [pic] Figure 3, Markides'(1999) who, what, how’ framework (Block 3, p. 231). 4. Grants eight drivers of cost advantage (Block 3, p. 235) [pic] Figure 4, Drivers of cost advantage. 5. Drivers of Amazon’s cost advantage (Block 3, p. 242) |  Economies of scale |Technical input–output |Amazon can purchase in bulk the firm is able to spread the costs | | |relationships; |of the items over a larger volume of output. Large warehouse | | |indivisibilities; |stores like Amazon dominate the retail industry that used to be | | |specialization |made of small, local stores. The threat of substitute products is| | | |low due to the high barriers to entry, and there are no switching| | | |costs for customers (easy to buy from competitors) | |Economies of learning |Increased individual skills; |Organizations ‘learn by doing’. One of Amazon’s KSF is its | | |improved organizational |technologically experienced employees. . | | |routines | | |Production Techniques |Process innovation; |Amazon. com sells its entire inventory every 25 days! | |re-engineering of business | | | |processes | | |Product design |Standardization of designs and |Amazon have diversified into e-books via the Kindle, made | | |components; design for |possible by their knowledge of technology, research/development | | |manufacture |and unique resources | |Input costs |Location advantages; ownership |Amazon is successfully implementing a cost leadership / | | |of low-cost inputs; non-union |differentiation strategy enabling it to increase its market | | |labour; bar gaining power |share. Supplier power is limited, as Amazon is potent customer, | | | |suppliers would not wish to lose them. Buyer power is low, as | | | |Amazon tends to offer the most competitive all round customer | | | |experience. | |Capacity utilization |Ratio of fixed to variable |Amazon’s cash flow cycle allowed it to receive money from a | | |costs; fast and flexible |customer before it has paid its supplier giving the financial | | |capacity adjustment |market more faith in Amazon allowing it to finance itself more | | | |easily. |Residual efficiency |Removal of organizational |Team A identified Amazon’s $800m investment made in advanced | | |slack; achievement of |technology in order to stand as the platform above competitors. | | |X-efficiency; presence of |Team B identified that Amazon’s skilled staff and e-business | | |employee motivation and strong |systems as two of its most valuable attributes. | | |organizational culture; | | | |managerial effectiveness. | | Table 1, Drivers of cost advantage. 6. Amazon’s stakeholder map. [pic] Figure 5, Amazons Stakeholders. Amazon needs to consider the implications their strategic decisions have on their Stakeholders â€Å"any group or individual who can effect or is affected by the achievement of the firm’s objectives† (Freeman, 1984, p25) Part 2 Critical assessment of group analysis a) External analysis (Group A) Amazon’s internal environment was analysed to identify their opportunities and threats (Appendix 1, figure 3). The distinction of Amazon’s far, near and competitive environments (appendix 1, figure 1) could have been illustrated (Block 3, p. 18). a) Far environment Amazon’s far environment’ (Block 3, p. 18) include ‘sociological, technological, economic and political’ forces (STEP model Block 3, p. 18). The relationship between these factors was explained, but not identified. The ‘online retail spending forecast’ (Block 4, Exhibit 3, on p. 57) identifies a sociological force, showing the changes in their customer behaviour and the apparel opportunity. The increase in active and new customers and a rise in internet purchases are shown in Exhibit 1b (Block 4, p. 54). Technological development provides a opportunity for growth and is supported by the international internet statistics, 2002 (Block 4, Exhibit 11 on p. 0). ‘Legal’ and ‘environmental’ considerations should have been considered, referring to the extended model of Fahey and Narayanan’s framework (Block 3, p. 23). Amazon’s international expansion (Block 4, Exhibit 4b) lead to increased legal factors affectin g their operations due to different governments and regulations and can impact profitability (Block 3, p. 25). b) Near environment The failed to illustrate the analysis of Amazon’s near environment using Porter’s five forces framework (Block 3, p. 27). International internet statistics, 2002 (Block 4, Exhibit 11 on p. 70) shows that ‘government’ should be included as a sixth force (Block 3, p. 18 – Rugman and Verbeke), since it affect the structure of Amazon’s industry and profitability (Readings for Block 3, p. 17). See Appendix 1, figure 2. ‘Growth, technological, collaborative and flexibility opportunities’ was vaguely mentioned and further influences could have been identified i. e. brand development (Doyle, 2002), advanced technology and infrastructure which is not imitable (Block 3, p. 60 – Barney’s VRIN) and differentiation. c) Competitive environment The strategic group map (Block 3, p. 45 – Grant, 20 08, p. 118) clearly showed Amazon’s position in ‘geographical scope’ and ‘product range’. Amazon is a market leader since it is not easy to imitate their brand, their infrastructure or the way they do things (Barney’s VRIN). Although all the criticism on organisations pursuing a dual strategy I feel that they are correct in stating that Amazon compete both on a cost leadership and differentiation strategy (Block 3, p. 46 – Porter, 1985, p. 12). Porter’s generic strategies (Block 3, p. 46) could have been used to support this, as illustrated in figure 4. This report gave me an insight of Amazon’s industry, their competitors and competitive environment; they pursue both cost leadership and differentiation strategies. To identify the opportunities and threats they should have referred to the SWOT analysis in their appendix. b) Internal analysis (Group B) Amazon’s internal environment was analysed with the objective to identify their strengths and weaknesses. See appendix 1, figure 3 for the SWOT ordering framework (Block 3, p. 191). ) Internal Analysis, a Resource Based View Figure 1 (appendix 1) illustrates the ideal relationship between Amazon’s resources, capabilities a nd competitive advantage (Block 3, p. 67); which should have been adapted more specifically to Amazon. ‘Casual ambiguity’ (Block 3, p. 61) is noticeable due to the difficulty to link and establish Amazon’s resources, capabilities and competitive advantage. Their KSFs should have been identified, since resources and capabilities arguably will only have value if they permit to satisfy the KSFs (Block 3, p. 61). Amazon’s tangible, intangible resources and their capabilities were illustrated in figure 2, appendix 1. Further referencing could have been made to the case study for example Exhibit 2b (Block 4, p. 56), the comparison between Amazon and a typical book retail operating cycle. This shows Amazon’s unique resources and capabilities which are not easily imitable. Grant’s (1991) steps of strategy formation (Readings for Block 3, p. 49) could have been included and annotated with an example within Amazon. Barney’s VRIS concept (Block 3, p. 61) was illustrated well and it has been reported back to the SWOT analysis. The analysis did not identify which of Amazon resources have all four attributes and if it provides sustainable competitive advantage. b) Resources and capabilities in the Value Chain Value creation was shown (Appendix 2) using Porter’s value chain. Amazon’s services and logistical processes are seen to add value, for example their operating cycle in comparison to a book retailing operating cycle (Block 4, Exhibit 2b). This highlights the importance of Amazon’s assets in achieving competitive advantage. The limitation of the value chain analysis is that it mostly concentrates on identifying an organisation’s strengths and not their weaknesses. c) Amazon’s Dynamic Capabilities Appendix 1 the ‘hierarchical structure of capabilities’, illustrated Amazon’s excellence of customer support through their cross-functional capabilities. Capabilities are dynamic since Amazon is required to adapt their resources and capabilities to the changes in their competitive environment and to the industry’s KSFs. Amazon’s dynamic capabilities allow them to have a proactive flexible strategy which helps building on their strengths with the support from resources and capabilities to exploit opportunities or avoid risks. They concluded with a focus on Amazon’s strengths and weaknesses and looking at their resources and capabilities. They should have identified where Amazon need to renew their resources and capabilities to react to the opportunities. c)   Stakeholder Analysis (Group C) Team C analyzed Amazon’s stakeholders reporting back on SWOT. a) Stakeholder Map and Power Matrix The stakeholders map identifies Amazon’s stakeholders and is supported by the stakeholder power matrix which indicates whether stakeholders have the capacity to influence the implementation or the criteria upon which Amazon’s strategy is based. It is not clear if Amazon’s strategy is based on ‘criteria or operational power’ (Block 3, p. 106). This can be referred back to the ‘resource dependency theory’ (Block 3, p. 97 – Pfeffer, 1981), showing how one business unit within Amazon can be dependent on another. Amazon therefore needs to take stakeholders into consideration who contributes significant resources when strategy is formulated. b) Stakeholder classes To identify stakeholder types emerging from combinations of attributes: power, legitimacy and urgency (Readings for Block 3, p. 9) they should have used the ‘qualitative classes of a stakeholder’ (Readings for Block 3, p. 99). The analysis of Amazon’s stake holder groups, classified them with the use of the former mentioned attributes. It involves a different aspects to take into consideration which they supported with examples from Amazon but did not report back to the weaknesses and threats. c) Stakeholder Salience Analysis Amazon’s stakeholders were categorised in terms of salience. The possession of attributes should be treated as dynamic, since situations might arise due to urgency and this would influence the decision (Mitchell et el. , 1997). Stakeholders can affect Amazon’s objectives (Block 3, p. 6) due to salience which is linked to CSR i. e. they are using environmentally friendly packing. A stakeholder working in warehousing or distribution might have felt that this is urgent where others did not, but since more customers are environmentally focused this provided a coalition of power to make the decision. a) SWOT analysis This group should revise the structure of their outcome by ending with the SWOT analysis where they mainly had to focus on the threats and weaknesses (Appendix 1, figure 3). Amazon’s weaknesses such as their dependency on third party distributers could also be an opportunity to exploit, using their resources and capabilities. The changes in consumer behaviour identified as a threat; could also be an opportunity for them if the changes in the market are in their favour. They supported this with facts from the exhibits, increase in spending. Further evidence could have been used to confirm what attributes (power, legitimacy and urgency) their consumers have. From a stakeholder perspective they have identified Amazon’s strengths, weaknesses and opportunities and threats well. d) Corporate Analysis (Group D) Amazon’s corporate-level strategy was evaluated using Ansoff’s vectors with the recommendation to pursue both market penetration and differentiation strategies and reporting back to suitability, acceptability and feasibility (Johnson et al. , 2006). I do not agree with their recommendation; as they need to pursue another strategy when the market is saturated to continue growing. Amazon’s business plan included both the ‘retail model’ and their ‘marketplace model’ (Block 4, p. 40) which they then later integrated showing Amazon’s different growth strategies. a) Retail Model Amazon started as a book retailer with modest inventories, depended on distributors with a focus on growth following a ‘market penetration strategy’ (Block 3, p. 208 – Ansoff’s growth vectors). Amazon then evolved towards a ‘product development’ (Ansoff, 1987) growth strategy to incorporate a wider variety of products (Block 3, p. 40). During the expansion in 2000 (Exhibit 4, p. 8) they pursued a market development or a diversification strategy depending if they entered the new markets with existing or new products. Throughout Amazon’s evolution they have invested in buildin g out and integrating their technology to further develop their capabilities. b) Marketplace Model Amazon augment their retail commence model with the ‘marketplace initiative’ (Block 4, p. 40) focussing on third-party sellers. Retailers became interested in outsourcing their online presence. Amazon therefore served as an e-commerce outsourcing partner, developing commerce models and an auction capability, entering and building partnerships and they introduced zShops. Here they focussed pursuing on both market development and product development strategies. c) Integrating Amazon Amazon’s customer culture focuses on providing their customers with ‘selection, price and convenience’. They changed to a ‘single-store strategy’ from having third-party commerce in distinct areas to selling alongside them on their website. Amazon continually expands their product lines by diversification (Ansoff, 1987) of commerce and developing multiple partnership strategies such as marketing deals and syndicated stores etc. As a result Amazon remains competitive and continually grows. The apparel opportunity posed different options to Amazon i. e. partnerships or stocking the items themselves. I personally feel that the integrated approach would be better, as they would then share their resources and capabilities which will enable them to exploit further opportunities. d) Recommendation and suitability, feasibility and acceptability Amazon has to continually adapt to their growth strategy due to the importance of ’market share, service capabilities and differentiation’ (Barney’s VRIN), to exploit opportunities and overcome weaknesses. Looking at Amazon’s retail, marketplace and integrated models we have seen them pursuing multiple growth strategies (see appendix 1, Ansoff’s four growth strategies)which was suitable at the time and feasible due to their resources and capabilities and lastly acceptable (Johnson et al. , 2006) due to expanding the selection available to customers. I agree with their recommendation to pursue a strategy of diversification especially looking at the apparel opportunity but in other areas of the business they might consider product development or market development strategies depending on the SWOT analysis. e) Corporate relatedness Since Amazon establish economies of scope with their operating models (Block 4, Exhibit 2b) and have the ’technology, processes and competencies’ which other retailers prefer to outsource. I therefore agree that Amazon has an opportunity of sharing their assets whilst having low corporate relatedness (Hitt et al. , 2003 – Block 3, p. 223) with the retailers or partners. e) Competitive analysis (Group E) The outcome of Amazons competitive level strategy evaluation did not recommend which of Porter’s competitive strategies should be pursued (Block 3, p. 245). a) Resources and capabilities available to the Amazon Amazon integrate, build, and reconfigured their internal and external competencies to address changing environments and to build their dynamic capabilities (Reading’s for Block 3, p. 77 Teece et al. ). Investments resulted in online retailing technologies, website personalization features, warehousing, reliable IT systems, customer relationship systems and new products leading to competitive advantage through both cost and differentiation (Block 3, p. 245) strategies. b) The industry key success factors (KSFs) KSFs refer to the limited number of areas in which satisfactory results will ensure successful competitive performance† (Rockart and Bullen, 1981). Amazon needs to focus on their success to build their capabilities, this helps to understand the key areas in which they should invest their time and resources. Amazon’s KSFs is identified in Appendix 1, figure 6. c) The nature of Amazon’s external environment To evaluate Amazon’s competitive level strategy they need to look at their external environment to identify their competitive position and determine opportunities and threats (Porter’s five forces framework). Group A’s external analysis should have been used. Supplier power is low as Amazon provide their customer base a ecommerce platform. Buyer power is low, since Amazon provides the most competitive all round customer experience (SWOT – strength); including variety based on their operating cycle (Block 4, p. 56). Amazon capabilities of ecommerce platforms (Barney’s VRIN) give them competitive power; supported by their customer-centric culture (Block 3, p. 247). Competitors fail to compete directly with Amazon, as they provide customer experience which is not imitable. The threat of substitution is moderate; customers can find the products from competitors i. e. Barnes Noble or Ebay. Their selection, price and convenience (SWOT – strength) makes them unique. The barriers to enter are high; Amazon therefore exploited their capabilities in commerce and by developing partnerships with other retailers (SWOT – opportunity). d) Objectives of key stakeholders Markides'(1999) who, what, how’ framework (Block 3, p. 31) gives an overview of who Amazon’s customers are, what value proposition do they make to customers i. e. variety of products at low cost. And the way the value is delivered i. e. through their reliable web infrastructure. Amazon’s stakeholderâ₠¬â„¢s main objective is a ‘vision of ultimate selection’ by providing ‘a place where people can come to find and discover anything they might want to buy online’ (Block 4, p. 40). With their focus on serving customers (see appendix 1, figure 6) they started embracing ‘selection, price and convenience’ on which they base their customer experience. In addition to these objectives, also feel that the main focus for the key stakeholders for Amazon is growth and profit maximisation. ) Recommendation and suitability, feasibility and acceptability Amazon’s core competitive strategy has been to focus on the customer experience; however, they also compete on time, price, convenience, loyalty, reputation and innovation. They focussed on Grant’s ‘drivers of cost advantage’ (Block 3, p. 235); this shows that a competitive strategy should not only be based on a cost focus. My recommendation is that they continue pursuing both a co st and differentiation advantage; by developing their capabilities across functions. Creating a sustainable competitive advantage, Amazon differentiates with service and cost sectors made possible with their strong, supportive and complex organisational culture (Block 3, p. 246) Amazon’s integrated cost leadership and differentiation strategy is ‘suitable’, as it identifies their opportunities i. e. he apparel opportunity where they capitalise their resources and capabilities which conforms to the KSFs. Their strategy of both options is ‘feasible’ but I feel that the partnership option is more feasible, due to the complexity of the apparel industry. The strategy is ‘acceptable’ since the apparel commerce was forecasted to grow at 34% from 2002 – 2007 with an estimated market segment at $203 billion per year. Although this seems like a profitable option there is still a risk involved due to the complexity of the industry. Part 3 Ev idencing of contribution to groups a) Stage 2 Group B was responsible to undertake an analysis of Amazon’s resources and capabilities. We were divided into three subgroups, where my subgroup was responsible for identifying Amazon’s resources and capabilities and their attributes; evaluate their competitive advantage and strategic implications. Amazon’s resources and capabilities provide the basic direction of their strategy and I incorporated this into Grant’s strategy formation framework. Drawing from the internal analysis I was able to identify Amazon’s strengths and weaknesses (SWOT analysis) and we illustrated the links between Amazon’s resources, capabilities and competitive advantage (Block 3, p. 67). See my individual contribution (Resources and capabilities/strengths and weaknesses, 20 June 2011, 00:30): http://learn. open. ac. uk/mod/forumng/discuss. php? d=541629#p4181476 Once everyone posted their individual analysis I took on the role as ‘project manager’ to encourage each sub-group to combine their contributions, see my post (Sub-group planning for wiki draft, 20 June 2011, 14:15): http://learn. open. ac. uk/mod/forumng/discuss. php? d=539832#p4187538 I chased the progress of both sub-group 1 and 3 to post their collated contribution for their group. (Sub-groups 1 3, 21 June 2011, 23:13) http://learn. open. ac. uk/mod/forumng/discuss. php? d=539832#p4216747 I was assigned the task to produce the final report in SWOT format based all the contributions with a deadline for day 12 (22/06/2011) and my efforts was then reviewed. See final SWOT Analysis, 23 June 2011, 09:27: http://learn. open. ac. uk/mod/forumng/discuss. php? d=547063#p4236069 I was assigned the role as editor of all the contributions and posted the information onto the Wiki, which was further checked by Nadia. We have been corresponding in regards to the outcome of the group analysis and wiki structure on the forum (wiki structure): http://learn. open. ac. uk/mod/forumng/discuss. php? d=542800#p4143951 Further evidence of my contribution is evident on the editing I have done on the wiki; please see the link for the history: http://learn. open. ac. uk/mod/ouwiki/history. php? id=530424group=181907 I really enjoyed working as part of Group B, the communication and team work between members was really good. The project manager (Nadia Curtis) assigned everyone’s responsibilities out well including the deadlines. b) Stage 3 Group E was undertaking a critical evaluation of Amazon’s competitive-level strategic choices. This group started off slowly and it seemed that most people were reluctant to be the project manager. I suggested that we all should post the important aspects that needs to be included in the analysis and from there assign responsibilities (Responsibilities delegation, 25 June 2011, 14:08): http://learn. open. ac. uk/mod/forumng/discuss. php? d=556960#p4264437 Diana Sacuiu took lead and decided on subgroups and delegation of responsibilities reporting back to suitability, acceptability or feasibility. My sub-group was responsible for looking at Amazon’s competitive-level strategy from a ‘suitability’ point of view. My individual task was to identify Amazon’s resources and capabilities and the way they relate to external opportunities (Diana Sacuiu, 26 June 2011, 20:20): http://learn. open. ac. uk/mod/forumng/discuss. php? d=558651#p4277348 I identified Amazon’s resources and capabilities and explained how they are used to exploit opportunities, how capabilities are developed and enables them to pursue both an integrated cost-leadership and differentiation strategy (Block 3, p. 247). See link (Competitive level strategy from a suitability point of view, 28 June 2011, 23:36): http://learn. open. ac. uk/mod/forumng/discuss. php? d=558823#p4305912 We put our sub-groups information together which I edited and included figures to reduce our word count: 1. Draft 1: http://learn. open. ac. k/mod/forumng/discuss. php? d=562267#p4310586 2. Draft 2: http://learn. open. ac. uk/mod/forumng/discuss. php? d=562267#p4313345 3. Draft 3: http://learn. open. ac. uk/mod/forumng/discuss. php? d=562267 #p4322730 4. Draft 3 (2): http://learn. open. ac. uk/mod/forumng/discuss. php? d=562267#p4324685 I further supported sub-group three with a figure to help reduce their word count, see my post (30 June 2011, 16:05): http://learn. open. ac. uk/mod/forumng/discuss. php? d=562267#p4324971 I also checked the spelling, format and I added the relevant references to our group’s final report (1 July 2011, 14:05): http://learn. open. ac. uk/mod/forumng/discuss. php? =562267#p4335805 Although this group did not collaborate as much, we were able to finish our evaluation of Amazon’s competitive-level strategy and reporting back upon its suitability, acceptability and feasibility, see final wiki link: http://learn. open. ac. uk/mod/ouwiki/view. php? id=530430group=181907page=Outcome+of+Group+Analysis Part 4 Reflecting on group decision making Looking at the collaborative work of the groups I will be identifying if the process is rational, political with evidence of power positions o r authority (Readings for Block 3, p. 250) or if there are any noticeable importance of chance which can be referred to as the garbage can model (Readings for Block 3, p. 257). From doing the collaborative exercises I have noticed that the decision- making process which included deciding what information to include for the outcome of each group was a political process (Pettigrew, 1973 Readings for Block 3, p. 246). Political behaviour has been defined as behaviour of individuals, or in collective terms; by sub-units, within an organisation that makes a claim against the resource-sharing system of the organisation (Readings for Block 3, p. 247) or in this case the group. It was decided within the groups which individuals will take on which roles such as editor, project manager and project chaser etc. The groups were then divided into sub-groups which had specialized tasks which are interdependent for the outcome. I have noticed power conflicts within the groups due to the perception of interdependence (Thompson, 1961- Readings for Block 3, p. 248) of resources for the final outcome. This was when each sub-groups’ contribution was collaborated for the final outcome, as it seemed to be influenced by the editor or project manager exercising authority over what information to use (Talcott Parsons – Readings Block 3, p. 249) . This shows that the decision making process deviates from the proposed rational model of decision making, I therefore agree with Simon’s (1979, Block 3, p. 261) assumption of ‘bounded rationality’ and ‘satisficing’ (Block 3, p. 262) for the decision making process of the groups. Group B agreed that the final wiki should be checked by Nadia and I did not ag