Analytical Essay: Identification and Evaluation of Strategic Capabilities of Amazon and eBay

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Analytical Essay: Identification and Evaluation of Strategic Capabilities of Amazon and eBay

1. Introduction

This report seeks to strategically the article, “No-deal Brexit will ‘instantly disrupt’ UK’s role as £174bn global data hub”, extract from The Guardian’s online International edition from the views of Amazon and EBay (Appendix A, page 16) with respect to the economical nature of their businesses. The purpose of the report is to identify and evaluate strategic capabilities of Amazon and Ebay as a result this specific change in world events. The article implies that there will be a disruption of the free flow of commercially valuable data between Europe and the UK, causing sectors across the world to face great increases in costs of trade and possible increased issues with cross-border trading.

Amazon and EBay are companies of the same ecommerce industry that would be negatively affect by the no-brexit deal. They are known as each other’s biggest competitors. This report will first give a PESTEL analysis of the environment in relation to the no-deal brexit, evaluating its political, economic, social, technological, environmental and legal aspects. The findings from the analysis will be reviewed, discussed and justified by supporting evidence.

It will later compare and contrast the position of these two organizations in terms of the strategic environment and evaluate the opportunities and threats it presents by use of the Ansoff Matrix and SWOT analysis. It will include an assessment of the position of each organisation in coping with the no-deal brexit, discussion of the potential impact of external trends on each organization so as to advise which company is superior in handling these changes.

2. External Environmental Analysis

Pestle Analysis

Political

Most analysts expect a potentially declining EU power in terms of diplomacy once the UK ceases to be its member. Oliver (2016) points out that the United Kingdom is projected to become the most populous country in the EU and have the largest army in years to come, and losing the United Kingdom will mean stronger EU political and military strength. In turn, Brexit could trigger a domino effect and enable other countries to leave the EU, leading to EU disintegration (Oliver, 2016). Further political freedom may also be achieved by the UK. However, the UK’s separation from the EU may make it more difficult for some other countries, particularly the UK’s historic allies, to maintain friendly political ties with both the EU and the UK (Oliver, 2016).

Economic

Research by Kokotovic and Kurecic (2017) found that there are no positive economic effects of Brexit causing a sharp decline in the British economy and a significant decline in the price of the British pound after the referendum, which is explained by the lack of confidence of investors and the decrease in foreign direct investment rates. Capital Economics (2016) argues that Brexit may also lead to higher prices for imported goods in the United Kingdom due to the loss of opportunities for free trade with EU countries; that is, UK goods sold in the EU and EU goods sold in the United Kingdom may become more costly due to tariffs and quotas being imposed between those countries. Overall, Brexit has created economic uncertainty, particularly around the EU and the UK.

Social

Changes in the social aspect are likely to occur after Brexit is introduced. Andor (2016) stresses that, without UK aid, most European universities ‘ expenditure will be smaller, reducing scholarships and making it more difficult for some students to enter higher education. Hunt and Wheeler (2017) point out that another social aspect likely to be affected is migration, which affects UK citizens working throughout the EU and EU citizens working in the United Kingdom. New laws may allow them to apply for visas to complicate the work migration process around the world. In the meantime, the United Kingdom will be able to independently control the number of migrants being allowed into the country, but one of the main reasons why the United Kingdom has decided to leave the EU has been its concern about the migration (Bloomberg, 2016). While changes for migration law may create some difficulties for citizens, one of the positive consequences of this move may be the fact that the United Kingdom has decided to leave the European Union. The country’s lower immigrants and people with different backgrounds, the simpler it is for the indigenous population to preserve their national culture and dignity, which in effect leads to the world’s cultural separation.

Technology

Without the UK, the EU could not cope with the technology of such progressive countries as South Korea and Japan, resulting in the EU stagnating in terms of technological growth.

Legal

As far as law is concerned, there will be improvements to trade laws between the EU and the UK apart from making changes in migration law. The sides will need to re-negotiate the terms of free trade that currently exists between the two that will influence the export and import rates between the EU and the UK and minimize the exchange of goods between them (Vargano & Dolle, 2016).

Environmental

It is also likely that Brexit will have an environmental impact on the UK. Strict environmental protection goals have always been set by the EU (Himmel, 2016). To order to keep their level of pollution down, the UK will need to implement more environmental protection laws without the EU’s strict regulation.

3.1 Assessing the Strategic Position of Amazon

Amazon business strategy is cost management The global online retailer operates with an extremely thin profit margin and is competitive through a combination of economies of scale, creativity in different business processes and a steady diversification of industries. Amazon Business Strategie follows: 4 consumer concern, not market emphasis, inventiveness, determination and long term thinking (AMAZON, INC., FORM 10-K, 2018): Amazon’s business strategy is driven by the following:

New niches and segments are reached periodically. Just launched as a physical book store in 1997, Amazon now sells everything online on a global scale. Competitive advantage of advanced international logistics is the cornerstone of Amazon. That strength was used extensively by the engineering giant to effectively diversify companies. Amazon Home Services was recently launched as a quick way to purchase and schedule local professional services in order to further its diversification strategy.
Amazon Ecosystem Strengthening. Amazon ecosystem includes investors, writers, bloggers, advertisers, software developers and readers, researchers, journalists and journalist knowledge markets who are told that resources are being made available on the Amazon platform. Senior management Amazon is committed to optimizing the benefits of each aspect of the company’s ecosystem, and to improving relationships between the components.
Customer service priority uncompromised. Amazon business strategy relies on consumer fixation. The world’s largest retailer of the Internet by revenue focuses instead of short-term income on long-term growth. Amazon doesn’t take too much trouble in its effort to ‘fail to be Earth’s most customer-centered organization.’ Alternatively ‘Amazon sends a chair to represent the customer in every boardroom— a physical reminder to innovate.’
Concentrate on the principles of Amazon management. Another source of Amazon’s competitive advantage is the maximum contribution from human resources. Amazon’s work is extremely challenging and workers should have a heavy task load, sometimes losing balance between work and life. Amazon’s 14 principles of management, including concern with consumers, the highest standard and a deeper scope, play a key role in increasing human resources feedback.

Ansoff Matrix

The Ansoff Matrix has been a crucial planning tool for many businesses since it was first created and launched in1957 to make good judgements about company growth in goods and markets (Hussain, 2013). This indicates that all four development approaches are used in an interconnected and correlated way by Amazon.

In the Amazon business, websites in different countries have continuously been actively infiltrated. The e-commerce giant focuses in its software on user experience and personalization. Their market share has increased considerably; their core business and strategy have not yet changed accordingly (Hussain, 2013). It ensures that the service stays the same, but is marketed to new customers.

In a bidding to increase revenue according to (Hussain, 2013), ‘marketing new products to current customer markets can increase growth in the vectors and markets where there is a decline in existing product.’ The Amazon Product Development Group is now developing its own electronics brand as Amazon Fire Stick, Amazon Kindles and Alexa by Amazon, to name just a few, are now producing its own. This is due to their expansion and international influence over a long period of time. The experience at each local site offers customer satisfaction and product quality in the same way as the US. Previously, Amazon.com Inc. has worked in 13 countries, including Canada, Great Britain, China and India.

Diversification Amazon has diversified its business in both fragmented and conglomerated markets, in an attempt to constantly grow its market share. Amazon has developed its own line of electronics and began to acquire companies like Food Giant, Whole Foods, online shoe retailer Zappos, and the Twitch video streaming company in order to diversify its conglomerates.

3.2 Assessing the Strategic Position of EBay

Strengths

The internal policy factors that support business growth and global competitiveness are highlighted in this dimension of the SWOT analysis framework (Gupta et al, 2016). In the case of eBay Inc., these internal factors are advantages that allow the e-commerce industry to grow and develop. Stronger brands, economic efficiency, economies of scale, regional operations specificity and high service efficiency are all strong elements. One of the main competitive advantages of Ebay’s strong brand is the fact that it is easily recognized by customers and traders. Economic efficiency is a strength that helps eBay to fulfill its corporate vision and mission statement and helps to make the company one of the biggest players offering Internet services for online markets and classes. In addition, regional operations lead to flexibility and competitiveness in responding to challenges in regional online retailing / sale markets. EBay is also increasing cost-effectiveness. Its strength is focused on the organizational structure of eBay, which includes geographical divisions that organize local markets in particular.

Weaknesses

In the SWOT model, the emphasis is on internal strategic factors that impede growth and development of enterprises (Gupta et al. 2016)t. With eBay these internal factors are the deficiencies that make the quality of the online marketing / retail network, classified listing websites and ticket exchange business difficult to boost. Their weak points of limited focus on technology, limited flexibility towards market conditions, and an imitable business model are required to improve competitiveness and efficiency. The company’s top priority is not creativity. This weakness in our internal market limits the global ecommerce company’s growth and competitiveness, as innovation is the major driving force for growth in companies that have website trading or mainly internet operations. On the other hand eBay’s organisation, which in some respects helps but disadvantages to its business, maintains strong centralized functional units. The imitative essence of the business model of the organization is a vulnerability that leads to competition with new entrants in general.

Opportunities

The external strategic factors that facilitate or support business growth and improvement are defined in this dimension of a SWOT analysis (Gupta et al., 2016). This is where eBay Inc. is able to grow on the basis of external factors in the e-commerce market. The management of the company should establish suitable plans that address these challenges. The key opportunities for EBay include extending operations to include more customers, growing innovation levels, and improving the quality of customer service. EBay is able to diversify its online activities into other markets, growing sales and spreading the threat between more competitive e-commerce markets, and taking advantage of rising online shopping and technological trends.

Threats

In this component of the SWOT analysis method, the emphasis is placed on external competitive factors which can affect business performance. The organization has an opportunity to improve its creativity for competitivity through product development. This case shows that EBay’s output may decrease because of such external factors in its business environment. This is a threat to profitablity and sustainability in the online trade sector, which is secured by the company. EBay’s major threats are strong competition, imitation and potential disruption of industry by new technologies. The company faces rivalry between large and small e-commerce companies such as Amazon. This strategic external factor is an obstacle to growth in the sector. Imitation is a hazard, since other businesses or entrants can use available technology to imitate eBay’s business model for website operations. EBay is facing potential competition in the market, based upon technological changes that can alter the business performance of the company dramatically. In order to respond to external strategic considerations in this dimension of the SWOT analysis, managers must ensure a continuous improvement in competitive benefits.

4. Implications of External Environment Changes for Amazon and EBay

Amazon advises its retailers in the UK to consider stockpiling some goods outside the UK, to ensure that the market for their products can be maintained in a no-deal scenario, at least in the short run. In reaction to the imminent no-deal Brexit. It is not unlikely that Brexit will bring about multiple political, cultural, technical, regulatory and environmental changes while it can be a difficult task to forecast Brexit’s effect and clearly distinguish between its positive and negative impacts. Irrespective of the result of Brexit, both the EU and the United Kingdom must concentrate on achieving a consensus, preserving good ties and, above all, working together to tackle global problems such as terrorism, environmental problems and global warfare.

Rob Hattrell states that the decision to withdraw from the European Union is a chance for eBay-ownered companies which have been primarily exporting and, thus, since Brexit was announced (Osborne, 2017), exporting goods from the United Kingdom have been on the rise. He also said this was due to British small businesses ‘ strong entrepreneurial row, producing valued and searched goods throughout the world (Osborne 2017). He claimed that companies are very agile in their capacity to restructure and reconfigure and respond at enormous speed to macroeconomic challenges (Osborne, 2017). In addition, Brexit is another transition, and EBay needs to concentrate on consumers as this region can increase because household income is subject to economic pressure because one of the way people can mitigate this is by using our platform for purchases (Osborne, 2017).

5. Conclusion

The report aimed at identifying and evaluating Amazon and Ebay’s strategic capacities, as a result of this change in world events. The article implies that the free flow of valid commercial data between Europe and the United Kingdom will be disrupted, causing industries around the world to encounter significant increases in trade costs and possible increased cross-border trading issues. From the analysis conducted on Amazon and EBay, it can be seen that Amazon will have a greater advantage of EBay in terms of revenue in the case of the no-deal Brexit. However, EBay may have opportunities of increasing the revenue as households may have to turn to their platform to resell in the end.