Week 5 Blog Post Chapter 6

This week we will discuss the topic of cost leadership strategies for the retail giant Amazon. The book, Gaining and Sustaining Competitive Advantage, states that cost leadership is a strategy that “focuses on gaining advantages by reducing its economic costs below all of its competitors. “Amazon has reduced the threat of incipient entrants and rivalry with its economies of scale. Currently, Amazon employs a multitude of strategies, but cost leadership has been their most efficacious to remain competitive and achieve low operating cost to maximize profits. Which has led them to transmute the game in e-commerce and technology. Amazon makes most of its revenue from AWS amazon web services since 2016 which is their cloud computing division. Now Amazon is currently focusing on reducing its supply chain operations cost through prime air and its fulfilment centers across the nation. Reducing transportation cost will significantly ameliorate Amazon's bottom line.

Week 4 Blog Post Chapter 5

In this blog post we will discuss Amazon VRIO Framework for Amazon's prime air logistics

The question of value: Prime air will add value to the organization. It is using its resources
to reduce logistics cost, which in turn will increase his bottom line.

The question of rarity: This is a rarity because there are only a few companies such as FedEx,
UPS, and U.S. Postal service that can deliver most of Amazon's packages at such an
enormous magnitude.

The question of imitability: This new strategy will definitely make Amazon have a
  competitive advantage of being able to deliver 2-day shipping of the products that it sells.

The question of organization: Amazon does have the resources and capital
to take full advantage of this new strategy.

More info on Amazon Air https://www.youtube.com/watch?v=Efs3PyR8iBw

From my last post, I discussed some key ideas about Amazon and Porter’s five forces analysis model. This week we will review how Amazon deals with their own
environmental opportunity.

ENVIRONMENTAL THREATS AS OPPORTUNITIES

The opportunities for Amazon to neutralize its threats is a key strategy for the organization. They have covered all of their bases. As far as Barriers to entry / Rivalry: Amazon has made it quite difficult to compete in the emerging markets. Substitutes: Amazon is currently advancing in technology in the handheld products and the smart home sector. At some point, there will be no substitutions for their products. Suppliers/Buyers Amazon has numerous suppliers which in turn keeps the prices low for buyers.

OPPORTUNITIES AND INDUSTRY STRUCTURE

Amazon is in a hyper-competitive industry in the retail space. Amazon uses various strategies,  for example, proactive disruptive innovation. They also have the flexibility to change from one strategy to another at a low cost and at any time. Emerging industry: they are one of the leaders in the voiced controlled home base technology, Alexa. Amazon also gets a strategy from network industries. For example, the first mover often becomes a winner-take-all strategy, such as the recent acquisition of whole foods.

Evaluating Amazon threats

Amazon Evaluating environmental threat.

Amazon is the leader in the online retail market space. Using Michael Porter Five Forces Analysis model is an excellent tool for the external analysis of Amazon to stay competitive. Amazon must regularly evaluate its internal and external factors in the online retail industry environment to remain an e-commerce leader.

 Porter Five Forces are:

1. Competitive rivalry:  Walmart is an aggressive competitor with physical stores and an online presence.
2. Bargaining power of customers: Amazon consumers have access to information regarding the retailers and the products they sell.
3. Bargaining power of suppliers: Amazon suppliers control their own products. This could impact the company’s online retail operational costs.
4. The threat of substitutes or substitution: The customers can easily switch from one online retailer to another by just a simple click of a button.
5. The threat of new entrants or new entry: Amazon benefits from its brand / high economies of scale. Newcomers will need to achieve similar performance to compete with Amazon.

Outside of the Porter Five Forces Analysis Amazon has favorable geographic locations. Amazon is currently opening new facilities around the country to make deliveries faster to the customer’s home and office.