Amazon Part 1: Competitive Strategy

This is a very competitive business environment. It may be easy and cheap to start a business to conduct online, but the challenge would be on ending up to be an another one in the crowd (Marc, 2018). To avoid this one should have a good Competitive Strategy that can make one’s company unique and make it stand on the top. “Amazon” is a pioneer in e-commerce business in most countries. Competitive Strategy is one of the key components to make a business successful. This is that mantra that made Amazon to have focus, brought more sales, higher profits, more customers and employers than the competitors in most countries. Amazon’s Competitive Strategy made their business stand for the long-term (established in 1994) instead of being a bubble (a short living one) in the existing market with all the new emerging companies.      

One of the crucial elements to have for a business in this competitive world is “Creation of Value.” Amazon stood unique at its time when it launched its eCommerce site (by observing the growth rate of internet by Jeff Bezos). Luckily there was not much competition for the company, but the crucial element here is foreseeing the technology and predicting the future with the change in people’s taste, changes in their behavior. Jeff Bezos saw the price drop that he can bring in while not having stores instead keep the stuff in a warehouse and delivered them to the people directly to their homes. This idea started with books and then later on implemented to all other things that we are shopping now. They even spread their wings to cloud services, logistics, consumer technology, media, entertainment and so on (Vipin, n.d.). Most starting businesses don’t have the power to effectively go full-fledged into the market due to the price, but an innovative idea can make them stand unique that people might show interest in supporting them. Similarly, Amazon started slow and steady to win the race. The first mover advantage kind of helped them or gave them the initial advantage to succeed in their market.

Types of competitive strategies

According to Porter’s classification, there are three types of competitive strategies (Marc, 2018)

  • Differentiation strategy: Strategy to make/stand significantly different than the competitors.
  • Cost leader strategy: Strategy to make lowest possible cost than the competitors
  • Focus strategy: Strategy to focus on specific segments of the market, implementing both Differentiation and Cost leader strategies.

Amazon stood at a Focus strategy of being a new idea to the market using the technology and bringing down the prices than its competitors. This made the company to stand in the 8th place on Fortune 500 companies this year (2019).

Amazon developed a sustainable competitive advantage with the following steps:

  1. Understood the market (people & technology) and understood what customers want 
  2. Established a value proposition that grabbed people’s attention
  3. Worked out the key things that need to do really well to support and deliver the value proposition
  4. Understood what the strengths and core competencies are and how to use these innovative ways to provide value to the chosen market
  5. Designed business model to support and deliver the value proposition
  6. How to stay long-term business focused and how to differentiate from competitors
  7. Identify assumptions about the future, as well as their probability and impact
  8. Create a balanced scorecard and set performance targets

And understood the outcomes of the developed sustainable competitive advantage (Marc, 2018) like:

  • To whom it will be sold to (customers and market segments);
  • Why they will buy from them and not their competitors (the value proposition); and
  • How to consistently deliver value proposition.

Change is inevitable, in order to stay on the top, one should always compete with oneself, one’s competitors and stay on top of changing technologies and trends. At one point the growth comes to a saturation point where no more growth can be observed, so the problem is same with Amazon in terms of its eCommerce business and so Amazon started to grow in different streams like logistics, cloud, media, entertainment and so on. It started to expand its horizons around different countries, so it has to address all the issues like dealing with various cultures, various marketing strategies accordingly, how can it compete the existing competitors and so on. Very careful steps need to be taken as even a small mistake can turn the tables upside down.