Essay Sample on Key Strategies Employed by Amazon

Introduction

The tremendous rise of Amazon in the industry means that the firm has established and implemented different growth strategies hence sustaining success over several years of operation. These strategies are essential in that they can significantly enable a company to improve not only on sales but also in the profit levels. Numerous entrepreneurial ventures or businesses can embrace different growth strategies which may include but not limited to those related to market penetration, diversification, market development, cost-leadership, acquisition of other firms, and product expansion, among other strategies (Alkasim, Hilman, bin Bohari, Abdullah, & Sallehddin, 2018). Amazon is not a distinguished case since it has embraced several strategies which have been facilitating its fast growth in the previous years.

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The Customer-Focused Strategy

Jeff Bezos has ensured that Amazon embraces a customer-centric approach as one of the vital strategies not only for survival but also for continued profitable existence of the company in the industry (Farfan, 2019). A customer-oriented approach ensures that a firm provides products and services based on the wants and needs of the potential and existing clients, instead of what offered by the competitors in the market. The mission and vision statements of Amazon are founded based on providing unwavering commitment towards achieving a customer-driven or centric business around the world, primarily through online platforms (Farfan, 2019). Amazon is known for delivering commodities at relatively low prices, which are highly contributed by the reduced cost structure. The company has and continues to enlarge its product mix primarily on its e-commerce platform to ensure that more customers have a wide variety of products to choose from and meet their needs. Books, music, electronics, grocery products, and electronics represent some of the hundreds of millions of different products provided by Amazon (Farfan, 2019).

Additionally, the customer-oriented approach used by Jeff Bezos has proved to be essential in facilitating high levels of customers' satisfaction for Amazon products. The organization has heavily invested in customer relationship management (CRM) department, which continues to assist the firm in establishing and sustain improved satisfaction not only among the existing clients but also among the prospective customers. Amazon's approach to being a customers' -oriented entity has ensured that the firm has a broad base of loyal customers, which are vital for the success of the particular business. Amazon's focus on some of the aspects related to high-quality products, ever-improving customers' experience, and innovation serve as sufficient evidence of how the firm is dedicated to addressing the wants and needs of the customers.

Cost-Leadership Strategy

A cost-leadership strategy in businesses involves the reduction of the production expenses below the average of the respective industry or even the competitors in the market and simultaneously increasing operational efficiencies (Alkasim et al., 2018). The reduction of the production costs coupled with improved efficiencies may assist the business to provide quality commodities at relatively low prices in the industry with an attempt of attracting more customers and gaining a significant market share (Alkasim et al., 2018). In our scenario, Amazon uses a cost-leadership approach by embracing a low-cost structure. The structure means that the firm incurs little to no costs to run and maintain physical retail outlets and instead utilizes its online platform to sell almost every product (Jurevicius, 2019). Another potential advantage of embracing online marketplaces is that an increase in the number of units sold does not attract subsequent marginal costs (Jurevicius, 2019). Amazon is in a better position to control its costs efficiently and reduce its inventory replenishment time, thanks to the firm's emphasis on economies of scale (Jurevicius, 2019).

Amazon has also invested in strategic partnership and alliances with other firms like Evi Technologies, which has been essential in creating a strong value chain for the firm through superior logistics and distribution networks. The value chain system has helped Amazon to maintain a low-cost structure hence becoming a bit easier for the company to implement a cost leadership strategy. The strategic alliances are vital in minimizing not only the shipping costs but also the time taken to fulfill the orders. The savings of both time and, in turn, facilitates the relatively low prices charged to the commodities to be purchased by the customers.

Diversification Strategy

Diversification is a growth strategy which demands that the business widens its scope by venturing into new markets and consequently coming up with new products for the newly established markets (Deligianni, Voudouris, & Lioukas, 2017). Diversification has already proved to be vital not only in growing the revenues and sales levels but also in maintaining reduced costs for the businesses. Amazon has, over time, implemented diversification as a growth strategy. Initially, Amazon was established as an online bookstore and was mainly meant for the U.S market. However, Amazon has discovered other lines of businesses such as music, furniture, electronics, and fashion, among others. These new products in different industries have and continue to be significant in promoting the sales and revenues for the Amazon. Additionally, the company has invested in its online platform to ensure that it enters different markets around the world instead of being restricted in the U.S boundaries. The new products related to areas such as those of fashion, jewelry, and music were meant to address the needs of newly targeted markets or audiences (Farfan, 2019).

The diversification strategy of Amazon has also been facilitated through its focus on strategic partnerships and acquisitions. Amazon has acquired some organizations such as Whole Foods and Zappos.com, which has played a significant role in ensuring that the company can enter into new products and markets (Farfan, 2019). Diversification strategy of Amazon has also been facilitated by its stance towards allowing third-parties to sell their merchandise through its sites. Severally, the third parties provide products or services which rare or non-exist within the retail sector of Amazon (Jurevicius, 2019). These third parties provide a wide variety of products to a broad range of customers who visit Amazon's online site.

Conclusion

The success of Amazon through the leadership of Jeff Bezos has been facilitated by the above-discussed strategies such as cost-leadership, customer-centric approach, and diversification, among others which may not have been elaborated here. These strategies, such as cost-leadership have and continue to be efficient in attracting more customers because consumers usually opt to purchase high-quality products at relatively low prices as it is in the case of Amazon. Also, Amazon's customer-centric approach has ensured that the firm remains innovative to assists in increasing the levels of customer satisfaction. The online platforms and the well-established logistics and distributions networks have been of considerable importance in promoting customers' satisfaction, thus leading to the widening of a loyal customer base and promoting brand equity to prospective clients.

Amazon is an innovation-driven company which highly relies on experimenting introducing a successful product or service in the market. Therefore, the firm has encountered different missteps despite its unbeaten run in various years. One of the slip is attributed to the introduction of products which have flopped or even ultimately becoming failures in the market. For instance, the firm made a slip-up by introducing Amazon auctions (zShops) mainly to counter the success of e-Bay. The zShops failed to meet the expectations of the proponents despite receiving substantial funds for promotion. However, it is essential to highlight that the auctions and zShops eventually facilitated the invention of Amazon's Marketplace, which is one of the best performing offerings of the company (Davis, 2016). Also, fire phone and Kindle fire represent some of other Amazon's products that flopped thus adversely affecting the revenue and profit margins of the company. Bezos also initially made a misstep when Amazon was enjoying considerable profits beyond the selling books. Bezos decided to risk the company's funds by building multiple warehouses along the United States. In its early phases, the decision contributed to reduced stock prices, although it later proved to be vital in assisting the firm to be among the leading online discount stores (Gregersen, 2015).

I would recommend that the company focuses on investing more in the acquisition strategy. The company can acquire some of the e-commerce companies like e-Bay and Alibaba to boost the potential of the firm in entering new and more markets both in developed and developing economies around the globe and simultaneously reducing the competitiveness in the industry. I would also recommend Amazon to increase its physical stores in different countries across the world to improve its competitive strength against retailers with huge brick-and-mortar presence like Walmart. Amazon must continue to invest in technological innovations to curb the problem of counterfeit products and different cyber-based crimes.

References

Alkasim, S. B., Hilman, H., bin Bohari, A. M., Abdullah, S. S., & Sallehddin, M. R. (2018). The mediating effect of cost leadership on the relationship between market penetration, market development, and firm performance. Journal of Business and Retail Management Research, 12(3).

Davis, S. (2016). How Amazon's Brand And Customer Experience Became Synonymous. Forbes. Retrieved from https://www.forbes.com/sites/scottdavis/2016/07/14/how-amazons-brand-and-customer-experience-became-synonymous/#611501483cd5

Deligianni, I., Voudouris, I., & Lioukas, S. (2017). Do effectuation processes shape the relationship between product diversification and performance in new ventures?. Entrepreneurship Theory and Practice, 41(3), 349-377.

Farfan, B. (2019). Amazon's Mission Statement. The Balance Small Business. Retrieved from https://www.thebalancesmb.com/amazon-mission-statement-4068548

Gregersen, H. (2015). The one skill that made Amazon's CEO wildly successful. Fortune. Retrieved from http://fortune.com/2015/09/17/amazon-founder-ceo-jeff-bezos-skills/

Jurevicius, O. (2019). SWOT analysis of Amazon (5 Key Strengths in 2019). Strategic Management Insights. Retrieved from https://www.strategicmanagementinsight.com/swot-analyses/amazon-swot-analysis.html