business level 7 newzealand school of education

1. YELLANKI MANIDEEP
STUDENT ID: I156859
DATE: 22/10/2015

2. TABLE OF CONTENTS
1 Introduction and business strategy
2 Internal Environmental Analysis
2.1 Vision and mission
2.2 organisational structure and its values
2.3 Value chain analysis
3 External Environmental Analysis
3.1 PEST Analysis
3.1.1 Political and legal factors affecting the company
3.1.2 Economic factors affecting the company
3.1.3 Social and cultural factors affecting the company……………………….…….
3.1.4 Technological factors affecting the company
3..2 SWOT Analysis
3.2.1 Strengths of the company
3.2.2 Weaknesses of the company
3.2.3 Opportunities in the environment
3.2.4 Threats in the environment
3.3 Porter’s Five Forces Analysis
3.3.1 Threats of New Entrants
3.3.2 Threat of New Substitutes
3.3.3 Bargaining Power of Suppliers
3.3.4 Bargaining Power of Buyers
3.3.5 Rivalry among existing competitors
4 Conclusions
5 References

3. 1. INTRODUCTION:
Amazon Inc is an American based multinational electronic commerce company.
Headquartered is in Seattle, Washington, it is the world's largest online retailer. It was
founded by Jeffrey Preston bezos in the year of 1994 and site went online in 1995. The
name Amazon.com was chosen because the Amazon River is one of the largest rivers in the
world. It started as an online bookstore but soon diversified into selling DVDs, CDs, MP3
downloads, computer software, video games, electronics, apparel, furniture, food, toys and
some of main e-commerce main products. It is listed with the tagline, ‘Earth’s biggest
bookstore’. it has been consistently ranked as one of the best retail sites on the Internet and
is regarded as the universal model for successful Internet retailing in March 1998. Amazon is
extended to worldwide; it sells the products in 11 countries by shipping internationally. The
Amazon store has 88,400 employees around the globe; it has 244 million customers base.

4. BUSINESS STRATEGY
The main business strategy of Amazon was to get big fast by investing aggressively in new
product categories and new businesses, by spending money on brand awareness and
getting new customers. Mainly Amazon has focused on four areas such as convenience,
price, customer service, selection and lower prices. The site has been designed in a
convenient way to access the users; it also offers the reviews, email notifications,
recommendations of products based on previous search.
In 2007 Amazon launched Amazon Payments to directly compete with PayPal. This also
introduced barriers to entry for new players as they will have to adjust to current payment
methods. The new payment system worked as an add-on customer service and also
Introduced Amazon gift cards for inducing trial and repeat purchase. After that revenue
growth is increased, but net profit remains constant.

5. 2.1 VISION & MISSION:
Amazon vision statement “our vision is the earth's most customer centric company; to
build a place where people can come to find and discover anything they might want to
buy online”.
Its objective is “Not to discount a small number of products for a limited period of time, but
to offer low prices everyday and apply them broadly across our entire our product range”.
Amazon is mainly follows for three primary customer sets: consumers, sellers, and content
developers.

6. 2.2 ORGANISATIONAL STRUCTURE:
In April 1998, Amazon.com obtained three Internet organizations in the United Kingdom and
Germany, in October 1998; the Company re-dispatched two of these organizations under
the Amazon brand. The Company fused Amazon.com Joined deals on the European
destinations fundamentally expanded over the second from last quarter, setting up
Amazon.com as the most obvious online book retailer in these business sectors.
VALUES:
 Customer Obsession: We start with the customer and work backwards.
 Innovation: If you don't listen to your customers you will fail. But if you only listen to
your customers you will also fail.
 Ownership: Ownership matters when you're building a great company. Owners think
long-term, plead passionately for their projects and ideas, and are empowered to
respectfully challenge decisions.

7.  High Hiring Bar: When making a hiring decision we ask ourselves: "Will I admire this
person? Will I learn from this person? Is this person a superstar?".
 Frugality: We spend money on things that really matter and believe that frugality
breeds resourcefulness, self-sufficiency, and invention.
2.3 VALUE CHAIN ANALYSIS:
Amazon mainly follows the low cost strategy; it keeps the low prices on products to attract
the more customers. Amazon gains an unique service which is different from competitors.
They use drones for delivery service Nearly 86% of Amazon packages are under less 5lbs,
which makes drones the perfect delivery vehicles. Drones are used by Amazon to reach rural
areas, which delivery networks are not efficient. Drones can significantly improve delivery
times in dense urban areas.

8. EXTERNAL ENVIRONMENTAL ANALYSIS
3.1PEST ANALYSIS:
PEST or PESTEL analysis is a tool which is used for planning and understands the big picture
of business environment. It represents all the major external forces such as political,
economical, socio cultural, technological, environmental and legal issues which are affecting
the company. So it is the best tool for analysis the threats and possibilities.
POLITICAL:
Regulations: Recently Amazon had designed drones to deliver the products to customer in
30 minutes in us; the service is called as prime air. But federal aviation administration (FAA)
proposed a rule to Amazon drones that it should be fly on daylight hours only, To operate
the drone under 55lbs,operator must pass the test to get a license. The government rules
are affects the company strategies.
ECONOMICAL:
Currency fluctuations: in various countries where currencies are highly devaluated in
comparison with the dollar, it may bring additional costs to the company. Furthermore
some products prices may be increase, affecting the main attraction of the company (lowest
prices).
Economical tendencies: In some cases the customer wants to buy in their surrounding
stores, rather than buying online. In some situations customers prefers commercial stores,
paying the money and getting the product instantly. Because going to online, processing the
payments and waiting for several days to get the product is difficult.
SOCIAL:
Ethical and religious factors: In some cultures Internet use is not allowed due to the fact that
at some point contents may damage their cultural, ethical and social believes.
Internet growth rate is outstanding, with the more number of internet users increasing
every day. Amazon has the opportunity to increase their market share. While the social

9. networks like facebook and twitter are accessed by millions of users daily. Social networking
sites are also offers marketing directly on their website. Amazon can increase marketing
about their products and services through social networking websites.
TECHNOLOGICAL:
Amazon.com is a company is created a web services, introduced a new innovation of online
cloud storage platform to the customers for free. It gives the cloud space for customer to
store the media and files in a convenient way. In the late 2007 Amazon launched a first own
manufactured device for e book readers, which is named as kindle.
ENVIRONMENTAL:
Global Warming Awareness by Less car journeys, more shopping online. Have to become
more “green” to attract consumers Changing business methods and environment to
become more “green”, i.e. with postage and packaging, work environment. Amazon is
offering cloud storage and cloud computing which can eliminate the need for hardware and
storage devices for the general public. This means we could potentially see millions of
electronics like hard drives and computer components no longer needed in mass
production.
LEGAL:
Increases use of e-commerce for customers and businesses; copyright management issues.
It embraces legislative constraints or changes such as health and safety legislation on
company mergers and acquisitions. In 2014 Amazon faced a serious legal issue regarding
unauthorized in-app charges by violated the Federal Trade Commission act USA. It could
effects the growth of e-commerce.
SUMMARY OF PEST:
Political, economic, social, technological progress shows that raising and innovative strategy
marketing is an achievement by amazon.com. The American markets have shown better
growth. The social networking sites have created many opportunities. Environmental
awareness increases throughout the country. It is an important factor that Amazon.com
Company supports eco-friendly activities.

10. 3.2 SWOT ANALYSIS:
Drawing from the internal and external Analysis, we can summaries Amazon.com strengths,
weaknesses, opportunities and threats in the following SWOT Analysis.
STRENGTHS:
 Amazon Company is a profitable organization. In the past years Amazon was
experienced a huge losses, because its initial set up costs.
 Amazon mainly focused on information technology (IT) and customer relation
management (CRM) to support business strategy. The customer’s data and buying
history, company carefully records in their web services. This recording data enables
them to offer the different specific products, or group of items to the customers.
 Amazon company is the worldwide largest online retailer, it derives strengths from a
three strategies which is mainly follows cost leadership, differentiation, and focus.
These strategies derive the value of company and its helps for share holders.
WEAKNESSES:
 The company has to be reconsidering its strategy of offering free shipping to
customers, because shipping costs will be more, the cost will erode profits of the
company.
 In Wal-Mart and target stores people can buy the product instantly by seeing and
touching in physical. So the Amazon doesn’t have physical appearance to buy some
products.
 To gain the market share Amazon Company sold the products at zero margins, the
strategy helps in increases of revenue growth .but it is very difficult for getting
profits to company. Then competitors take an advantage to gain their market shares.
OPPORTUNITIES:
 Amazon could expand more services and products in to worldwide. By providing
unique and individual products to the customers.
 Amazon could upgrade its current payment system by adding the services like
PayPal. It’s hard to provide bank details or other personal information when

11. purchasing the product in online. So such type of service could be used by customers
easily
 Amazon can roll out more products under its own brand, in other words it can
manufacture more products with its own brand instead of selling products made by
its partners.
THREATS:
 The main threats to Amazon are hacking and theft of consumer data and exposed.
Amazon has to upgrade the online security to protect their customer’s privacy and
data.
 The Amazon Company sells gifts on many occasions and festivals, mainly at
Christmas. This indicates there is an element of seasonality to the business. By
trading in US markets in different cultures such seasonality may not be long last.
•Global Expansion
(BRIC)
•Video-On-Demand
Segment
• Seasonal
• Brick and Mortar
Stores
• E-Commerce
Maturing
• Free shipping
leads to profit
losses
• Possible Brand
Confusion
• Customer
Service
• Diverse Product
offerings
• Constantly
Evolving
Strengths Weaknesses
OpportunitiesThreats

12. 3.3 PORTER’S FIVE FORCE MODEL:
Porter’s Five Forces analysis is used to assess the attractiveness of different industries, and
therefore, it can help in illustrating the sources of competition in a particular industry.
The analysis on industry and competitor environment is important for organizations,
because it’s useful for managers to understand the competitive forces acting on and
between the organizations in the same company.
SUPPLIER POWER:
The low concentration of suppliers positively affects Amazon, due to limited bar gaining
power. One of the main advantage of amazon.com suppliers is they don’t charge for
products until the company sells to the customers. This is the common strategy which big
companies follows, and also amazon.com pays the total money to suppliers after 35 days of
product has been sold to the customer.
BUYER POWER:
The Amazon Company gives loyalty to their customers on buying products in their site. the
loyalty programs includes fantastic services that demand on-line. Customers can easily solve
their problems online instead on-phone. When customers require special customizations,
they are less likely to switch to producers who have difficulty meeting their demands. Buyer
customization positively affects Amazon.
COMPETITIVE REVALRY:
There are many competitors like yahoo and e-bay which is diversified company firms same
as Amazon. Competitors also have low cost strategy or differentiation strategy to sell items
from suppliers.
A consumer can buy a book from local stores, non-book retail store or small individual store,
consumer could also choose to purchase their products in online, and here price is main
factor and playing a major role in purchasing a product.

13. SUBSTITUE:
The threat of substitutes for Amazon is high With the exception of its patented technology
(such as 1-Click Ordering), there are quite a lot of alternatives to Amazon’s products and
services. Books can be purchased at a local store with discount prices, in university library
books can borrowed for free. The music selections which are offered by amazon.com can be
substitutes with purchasing in local retailers stores. Substitutes for Amazon web services are
less, while people have the option to create their own web platform by using their own
programming and web designs.
NEW ENTRANTS:
Threat of new entrants is low. It would take a more time to reach the magnitude of
inventory and status for a new company which Amazon maintains. It would be extremely
difficult for a startup company in the business to increase revenue compete with
amazon.com on a lower level.

14. 4. CONCLUSION:
In this report the main strategy of the amazon.com company are analyzed. It uses the low
cost strategy and effective innovative ideas to gain the advantage over competitors. Bezos
knows inside out and he knows how to gain customer satisfaction by fulfilling his needs,
thus created loyalty and guarantee the customers will purchase again and again, Because of
the exciting nature of the brand. The tools used in report are clearly shows amazons
followed strategies are suitable. The Amazon gains a unique brand and business with these
business strategies, in e-commerce business the company shows its extremely diversified
nature.

15. 5. REFERENCES:
 http://media.corporate-ir.net/media_files/irol/97/97664/reports/123198_10k.pdf
 http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-irhome
 http://www.theleadermaker.com/core-values-amazon-com/
 http://www.purposefulidentity.com/values-mission-value-drivers-vision/values-
statement-2011/Amazon-com-Retail-industry-28.html
 The E commerce Industry , A case study of Amazon’s Fulfillment System
http://teacher.tcm.ncku.edu.tw/course_file/cases/amazon.pdf
 Waller, M., Johnson M. E., & Davis, T. (1999). Vendor-managed inventory in the retail
supply chain. Journal of Business Logistics, 20(1), 183-203.
www.portal.acm.org/citation.cfm?id=1225718
 Case study on Amazon.com http://www.docstoc.com/docs/10321910/Case-
study-on-Amazoncom