Amazon faces both opportunities and threats in its external environment. Opportunities include continued growth in e-commerce, potential for diversification and forward integration through new acquisitions, and expanding product offerings. Threats include intensifying competition from other retailers, fluctuations in foreign currency exchange rates that affect international sales, and increasing regulatory pressures. Internally, Amazon's strengths are its low-cost structure, leadership in e-commerce and cloud services, and loyal customer base. Weaknesses include a rising debt-to-asset ratio, lower operating margins compared to competitors, and some product failures. Potential strategic alternatives for Amazon include focusing on core competencies, expanding cloud-based services, and further global expansion

1. Strategy Assignment
FT MBA 2018 – 19
SHIVAM BATRA
Amazon External Strategy Analysis
External StrategyAnalysisisadeterminantof OpportunitiesandThreatstoan organizationdue to
the set of competitorsorplayersoperatinginamarketand by the determinantsof Industry
Structuresalongwiththe macro trendssuch as PEST.
Market Attractivenessplaysacrucial role too fordeterminingprofitabilityenjoyedbydifferent
playersinthe market.
Amazonhas alwaysdemonstratedremarkableorganizational abilitywhenitcomestocannibalizing
itsown revenue streams.The company’sinnovationmake itsexistingtechnologyobsoloete forthe
sake of beatingcompetitorstomarket.
Opportunities–
1. The e-commerce marketisforecasttoreach US$ 4.5 trillionby2021. (Refer Appendix Fig1.0)
2. Diversification&ForwardIntegration –
Amazonisboth a cloudplayerandan e-commerce brand.Itcan furtherdiversifyitsbrandtofind
fastergrowth.Diversifyingintonew andrelatedtechnological areascanhelpitachieve aftergrowth.
Also, acquiringnewbusinessestoooffersnew opportunitiesof fastergrowth.Amazonacquired
Whole Foodsmarketrecentlyandone othercompanynamedRingthatoperatesinHome Security.
Amazoncan expandintonewerareasthatcan helpitgrow itsmarketsize andsalesfaster.
(ReferAppendix Fig2.0)
3. Growingthrough NewProducts –
Amazonstartedsellingbooksonlinein1994 and today,with$208 billioninlasttwelve
months'revenue growingata 24% average rate overthe lastfive years,controlled40% of the e-
commerce market,accordingto the Journal. Thatgrowth hascome byaddingnew product
categoriesandacquisitions.Indeed,Amazonhasadded30product categoriesincludingmillionsof
productsand has acquiredover100 companies,accordingtothe Journal. Increasingthe range of
productsmade by Amazoncan also helpitimprove itsprofitmarginsandrevenue.Alexahasbeena
successbut still there isintensecompetitionfromthe likesof Google.However,releasingnew
productsalsorequiresanaccurate understandingof consumers’preferences.Otherwise,product
failurestoomayresultinlosses.
Threats–
1. HeavyCompetition –
Amazonisfacingheaviercompetitioninbothretail aswell ascloudbusiness.the competitionis
growingintense daybydayand there are several e-commerce brandsaswell ascloud businesses
competingwithAmazon.Bay,Flipkart,Alibabaaswell asIBM, Oracle and Microsoftare alsoamong
itsmajor competitors.Apartfromthemthere isstrongcompetitionfromthe physical retail brands.
The threat fromthe physical retail brandshas intensifiedwiththe entryof CostcoandWalmart into
E-retail.

2. Strategy Assignment
FT MBA 2018 – 19
SHIVAM BATRA
In 2016, Walmart’se-commerce salesgrew by29% and itmade a strongpresence inbothdeveloped
and developingcountriessuchasU.S, U.K,India,Japanetc. (ReferAppendix Fig3.0)
2. DollargettingstrongereachpassingdayisaffectingAmazon’sInternational Business.
Fluctuationsinthe foreigncurrencyexchangerateshave hadpotential negativeimpacton
profitsof the large technologybrandslike Amazon.
3. RegulatoryThreats –
Growinglegal andregulatorypressuresare alsoerectingbarriersandcausingtroublesforthe big
technologybrandsincludingAmazon.Especially,itisthe EuropeanUnionwhere the environment
has keptchangingfastand where toptechnologybrandshave facedthe biggestchallengesincluding
large fines.In2017, Amazonwashit bya fine of 250 millionEurosinbacktaxes.
Amazon Internal Strategy Analysis
Internal StrategyAnalysisisadeterminantof Strengths andWeaknessestoanorganizationdue to
the set of values,resources,competencies,industrystandardsetc. Ithelpsinsettingabenchmark.
Strengths–
1. Low cost structure,the largestmerchandiseselectionanda huge no.of IIIrdpartysellers.
(2006 – 2017; Amazonhas grownmuch rapidlycomparedtoentire USE-Commerce
Business). ReferAppendix Fig4.0
2. E-Commerce Leader&SignificantCloudPlayer–
Amazonisthe leadingcommerce brandgloballyandamajorcloudplayer.Risingcloudbusinessand
the successof prime are drivingthe brand’sfastgrowth. Itsprime membershipsgloballyhave
exceededthe 100 millionmark.In2017, it shippedmore than5 Billionitemsgloballythroughthe
prime service.Itisjustthe numberof Amazoncustomersthathas keptincreasing,butitsproduct
range and the varietyof productsavailable onitse-commerce platformtoo. AmazonWebServicesis
a leadingproviderof cloud-basedservices, the brandhasbroughta wide range of cloud-based
servicesaimedatmaximisingthe efficiencyof itsclients.
3. CustomerBase & Loyalty –
Amazon’sone majorstrengthisitslarge base of loyal customers.Toodrive customerloyaltyapart
fromfocusingonconvenience andcustomerexperience the brandhasusedprime memberships
whichisdrivingthe additionof newaswell asretentionof oldcustomers.Otherfactorsthathave
keptdrivingcustomerloyaltyatAmazoninclude asuperiorcustomerexperience (thisisanarea
that Amazontakesseriouslyandcontinuestodrive the barhigher),customerservice,qualityof
merchandise aswell focuson innovation(highinvestmentinR&D).
Weaknesses –
1. Increasinglong-termobligationstoassetsratio –Amazon’sdebtto assetratiohas risen
significantlyoverthe pastfewyearsanditis now one of the highestamongitscompetitors.
Refer Appendix Fig5.0& 6.0

3. Strategy Assignment
FT MBA 2018 – 19
SHIVAM BATRA
2. Amazonhas weakeroperatingMargins –The lasttwo quarterssaw a small rise but before
that itsoperatingmarginsstayedbelow 3% since the middleof 2016. Inlast quarterof 2017,
itsoperatingmarginsgrewto3.5% and theninthe firstquarterof 2018 to 3.8%. Compare it
withthe 45% operatingmarginsof Facebookandthere isa wide difference.
3. ProductFailures – All the productsmade byAmazonhave not beenahuge successlike
Kindle orAlexa.Some of itsproductshave alsofailedinthe past. Technological development
ishappeningata fastrate andamid the huge competitionsometimesall yourproductsare
not successful asyouexpect.
Strategic Alternatives for Amazon
IdentifyCore Competencies
Amazonisexpandinggloballyandisbecominga dominantleadereachpassingday;butisthisbeing
done withan articulatedstrategy?Whatshouldbe the nextrevolutionizingstepforAmazon?These
are the questionsstrikingmymindveryoften;Ibelieve itmustnow identifyitscore competencies
and targetthem.For instance,itmustnow move to eliminatenon-corediversifications suchas
Kindle venturewithAmazonasitprovedtobe a not thatbig successor a failure completely.
Diversifyinto CloudbasedServices
ThoughAmazonalreadyfollowsthisstrategythroughAmazonWebServices(AWS) whereinitoffers
clientportfoliotothe small andmediumsize firmsthatcomprisesdatastorage,hostingservices,etc.
The expansionof AWSwouldbe alignedwiththe corporate strategieskeepinginmindthe growth
imperative,customerbase expansion,resourcemanagement,marketsegmentexpansionetc.
Perhapsthere canbe no betterstrategicoptionthanexpandinganddiversifyingintothe cloud-
basedbusiness.Ascloud,computingissettoemerge asthe hottesttrendof thisdecade andalong
withthe othertrendof the increasingusage of BigData by marketers,Amazoncanclearlyestablish
itself inthese segmentsandattainmarketleadershippositions.
Expand Globally
In orderto grow exponentially andactualize economiesof scale aswell asleverage synergies,
Amazonneedstoexpandglobally. ThoughAmazonalreadyisexpandingandhasa scope to do so in
itscurrent BusinessModel, itmustalsosetuplocal portalsinthe countriesinwhichitwishesto
enter.Forinstance,AmazonnowhasdedicatedportalsinmanycountriesincludingIndiaandthis
model canbe followedinothercountriesaswell.Further,itneedstoadoptaGlobal approach
whereinitscore global deliverymodel isadaptedtothe local conditionstherebyactualizinga
mergingof the global andlocal or Global.
Amazonshouldstarttargetingspecificcountries&regionstoo.Forinstance, Scandinaviancountries
where the populationinthose countriesare highlyconnectedaswell ashave highincomes. The high
disposable incomesinthese countrieswouldleadtoagreat businessopportunity.Also,Amazon
needstofocuson Brick & Mortar WarehousesinEU regionasthe deliveryandthe leadtimesare
longeras comparedtoIndia.Ex.In Italyit usuallytakeslongertime toreceiveaproduct.
It shouldalso targetboththe BRICS(Brazil,Russia,India,China,andSouthAfrica) aswell asthe
MINTs (Mexico,Indonesia,Nigeria,andTurkey) marketsaspartof itsglobal expansionstrategies.
AmazonisalreadydoinggoodinBRICS butit’stime for itto expandbase inMINT and become global
leader.

4. Strategy Assignment
FT MBA 2018 – 19
SHIVAM BATRA
Appendix
Figure 1.0 - E-Commerce Sales ($) Actual & Forecasted
Figure 2.0 - Amazon's Diversification Process
0
1
2
3
4
5
2014 2015 2016 2017 2018 2019 2020 2021 2022
Total E-commerceSales ($)

5. Strategy Assignment
FT MBA 2018 – 19
SHIVAM BATRA
Figure 3.0 - Revenue stream of Amazon & its competitors (PS- Walmart has maximum revenues from offline stores business
but is growing in E-commerce rapidly)
Figure 4.0 – Amazon v/s U.S E-Commerce Growth
208.1
48.8
511.9
128.2
114.9
265.6
52
27.9 10.5
Revenues (US$ Billion)
Amazon Ali Baba Group Walmart Google Microsoft Apple Target Best Buy Ebay
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
2004 2006 2008 2010 2012 2014 2016 2018
Amazon v/s U.S E-CommerceGrowth Rate
Amazon Growth Rate U.S E-Commerce Growth Rate

6. Strategy Assignment
FT MBA 2018 – 19
SHIVAM BATRA
Figure 5.0 – Amazon v/s Walmart Long Term Debt Growth
Figure 6.0 – Amazon v/s Walmart Debt – Asset Ratio
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
2015 2016 2017
Lon-Term Debt Growth
Amazon Walmart
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
2015 2016 2017
Debt to AssetRatio
Amazon Walmart