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Strength and growth come only through continuous effort and struggle – Napoleon Hill.
Amazon being a giant eCommerce company has now become every internet businesses’ icon and inspiration. The company which was founded by Jeff Bezos in the year 1994, have gone through continuous innovation and multiple investments that led to the company’s success in today’s global setting. In the assessment of Amazon’s profile and company background, the company appears to have a really strong and sustainable overall competitive advantage above any other online competitors.
In the assessment through the VRIO analysis (Barney, 1991), the organisational resources and capabilities of Amazon indicate a sustainable competitive advantage. One of these capabilities is in terms of market capitalisation that led Amazon to become one of the recognised valuable businesses in the world. In the attempt of the company to expand and diversify its product categories, Amazon numerous investment decision and acquisition of big to growing companies created a strong barrier to other online businesses that are also difficult to imitate as it was accumulated over time.
Another compelling capability of Amazon is the affiliate networks of the company. Through these networks, like Amazon Associates, it did not just drive traffic and boost the marketing aspect of the company but also contributes a lot in terms of profitability. Currently, a trend of using different social platforms linking the website has increasingly provided incentives to different groups of affiliates which in return gives greater scope for the company.
The company’s brand image and high equity in the global market is another capability that made it to the top. If we are to measure the brand equity of Amazon through Brand Insistence (Daye, 2019), the company created a strong awareness, emotional connection, relevant differentiation, accessibility and value to customers that built a foundation for the company’s attractive image. In regards to accessibility, the system of one-click shop 24/7 access and the introduction of the fulfillment by amazon (FBA) made it easier for customers and Amazon users or retailers to transact and do business. The brand equity they developed has strong competitive advantage that cannot be replaced at any time, especially in the field of the online retail market.
The utilisation of artificial intelligence (AI) in the whole process of doing business also created a sustainable competitive advantage as a huge amount of investment is required to acquire these technologies. Amazon became an AI powerhouse, from the robots being used in the warehouses to the sensors that were used in the Amazon physical stores (Amazon Go Convenience Store) where they embedded the concept of Just Walk Out shopping.
In the assessment of competitive advantage using Porter’s approach (Harvard Business Review, 2019), one of the prominent strategies that Amazon uses is cost leadership. We can see in detail through history and timeline, how the company tried to reduce all operational costs. The company invested in technologies that will not only do good for short term use but for long term purposes that were accumulated and used up to this date. The automation of processes and reduction of the four intermediaries which were the agents, publishers, distributors, and wholesalers allowed the company to offer their product and services at a lesser cost.
Growth strategies such as market development, market penetration, product development, and diversification contributed to the competitive advantage of Amazon. Drawing back to the company’s history, the company did not just settle in the US but also entered new markets such as the UK, China, India and recently here in Australia. The business also took advantage of the heightened consumerism and used multiple marketing campaigns to drive traffic. The adaptation of the company to the rapid change in online marketing and usage of all these growth strategies made Amazon one of the greatest pioneers of eCommerce.
Moving on to five forces analysis (Harvard Business Review, 2019), Amazon has a moderate to strong forces beginning with the competitive rivalry. The competition indicates a strong force due to the high aggressiveness of firms and the availability of different substitutes. The presence of Walmart and Best Buy, eBay and Flipkart in India creates a high competition and substitute. Apart from these factors is the low switching cost that imposes a strong force on Amazon as it has less barriers when transferring to another retailer. The bargaining power of suppliers is low especially that the gap between the suppliers as compared to the size Amazon is really high with low force of forwarding integration. The small numbers of supplier can be strong in the sense that changes in prices can directly impact the product cost.
In the bargaining power of customers, it is moderately high as the availability of other options like retail stores is still very common despite the growth of online shopping. Also, relevant information regarding a product is easily available online where customers can easily compare and decide where to order. The threat of substitute, on the other hand, has a strong force given that there are possible substitute and switching cost is low. Lastly, the threat of entry is the least or weakest force due to high economies of scale and cost of brand development.
In regards to the Blue Ocean Strategy (Kim and Mauborgne, 2005), where the demand is generated rather than competing with the existing ones. Amazon built a continuous strategy of creating and implementing its own Blue Ocean, such as Drone Delivery, Amazon Prime, Hour-delivery, Kindle solutions and many more. The main element of competitive advantage of Amazon is that it provides a great customer service experience, such as easy to operate, fast online order, smooth checkout, and stress-free returns. These factors made Amazon unique and have a competitive difference among all other competitors. The company deploys its strategy with the initial step which was to reduce the cost of products for a better customer experience that would attract the customer towards them. It has been perceived that Amazon uses the lower price differentiation in every product and services they offer. This is what makes it very difficult to compete and hence give Amazon competitive.
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