Detailed analysis

1. PROJECT REPORT
ON
Business Policy Strategic Analysis &
Management
Submitted By:
Vipul Dinodia (458)
NEW DELHI INSTITUTE OF MANAGEMENT
60 & 50 (B&C), Behind Batra Hospital,
Tughlakabad Institutional Area, New Delhi, 110062
Website: www.ndimdelhi.org

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TABLES OF CONTENT
Sr. No. Particulars Page No.
1. Report Objective 3
2. Company Overview 4
3. Vision & Mission Statement Analysis 5
4. External & Internal Analysis
PESTEL Analysis 7
5-Forces Analysis 10
External Factors Evaluation (EFE) Matrix Analysis 15
Internal Factors Evaluation (IFE) Matrix Analysis 18
VRIN Framework 21
5. Setting Objectives
Balance Scorecard 22
6. Generating Strategic Options
SFAS 24
Tows Matrix 25
7. Strategic Choice
Primary Strategic Business Units:
SPACE Matrix 27
QSPM 29
Corporate Strategic Business Units:
Portfolio Matrices:
BCG Matrix 30
IE Matrix 32
Grand Strategy Matrix 33
8. 3 Year Strategic Plan for the company 35
9. Conclusions & Recommendations 39
10. Annexure-I 40

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Report Objectives
The report objectives and the structure of the report will consist of four main
sections that will enable us to recommend a strategic direction to
Amazon.com, these are:
1. To establish background information on Amazon.com’s current strategic
position.
2. To investigate, analyze and evaluate Amazon.com’s external and internal
environment.
3. To generate strategic options that Amazon.com could adopt derived
directly from the internal and external analysis.
4. To decide on the best option we would recommend to Amazon.com and
detail the implementation implications of this option

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Company Overview
Amazon.com was one of the first major companies to sell goods over the
Internet and has become a worldwide established name. Amazon.com is an
American e-commerce company that is based in Washington. It was founded
by Jeff Bezos in 1994 and began as an online bookstore but due to its success,
Amazon.com has developed separate websites for Canada, UK, Germany,
France, China and Japan.
Amazon.com's product lines available at its website include several media
(books, DVDs, music CDs, videotapes and software), apparel, baby products,
consumer electronics, beauty products, gourmet food, groceries, health and
personal-care items, industrial & scientific supplies, kitchen items, jewelry,
watches, lawn and garden items, musical instruments, sporting goods, tools,
automotive items and toys & games.
In India, Amazon is now gearing up to play a role in the grocery retail sector
aimed at delivering customer needs.
Amazon.com has a number of products and services available, including:
• Amazon Marketplace
• AmazonFresh
• Amazon Prime
• Amazon Kindle Fire
• Amazon Fire TV
• Amazon Payments
• Amazon Games
• Amazon Art
• Amazon Video
• Amazon Drive
• AmazonBasics
• Amazon Elements
• Amazon Studios
• Amazon Web Services
• Amazon Local
• AmazonWireless
• AmazonFresh
• Amazon Prime Pantry
• Amazon Dash
• Amazon Prime Air
• Prime Now
• Amazon Go
• Amazon Video Direct
• Amazon Music Unlimited
• Amazon Tickets
• STEM Club
• Amapedia
• Amazon Unbox
• Amazon Vine
• Amazon Connect
• Amazon Webstore
• Amazon Home Services
• Amazon Destinations
• Amazon Book

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Vision & Mission Analysis
Amazon.com Inc.’s vision and mission statements have pushed the company
to become the largest online retailer in the world. This success is attributed to
stringent measures to ensure that the mission and vision statements are
fulfilled. The corporate vision statement provides organizational direction
toward a desired future condition of the business. The corporate mission
statement presents business goals and guides strategic formulation in the
company.
Amazon’s vision statement shows a future of global dominance in the online
retail industry. On the other hand, Amazon’s mission statement focuses on
effective and high-quality service. The fulfillment of these official statements
facilitates further enhancement of the e-commerce business for long-term
success in the global market.
Amazon.com’s mission statement is responsible for the attractiveness of the
company’s online retail offerings. The vision statement also creates a strong
motivational force to push Amazon’s e-commerce business to be the best in
the world.
Amazon’s vision statement is “To be Earth’s most customer-centric
company, where customers can find and discover anything they might
want to buy online.” It underscores the organization’s main aim of becoming
the best e-commerce company in the world. The following components or
characteristics are emphasized in Amazon’s vision statement:
1. Global reach
2. Customer prioritization
3. Widest selection of products
The “global reach” component in Amazon.com Inc.’s vision statement is all
about international leadership in the e-commerce market. Thus, a
corresponding strategic objective is global expansion, especially through
market penetration and market. The “customer prioritization” component
shows that the firm considers customers as the most important stakeholder
group in the online retail business. Moreover, it indicates continuing efforts to
broaden the product mix, under Amazon.com Inc.’s marketing mix approach.

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Amazon’s mission statement is as follows: “We strive to offer our customers
the lowest possible prices, the best available selection, and the utmost
convenience.” It promises an attractive e-commerce service to satisfy
customers’ needs. The following components or features are identifiable in
Amazon’s mission statement:
1. Lowest prices
2. Best selection
3. Utmost convenience
The “lowest prices” component of the mission statement guides Amazon.com
Inc.’s pricing strategy. Such low prices are a selling point that makes the
company’s e-commerce website and service attractive. A corresponding
strategic objective is to reduce operational costs. It also points to having the
best selection. The availability of a wide variety of products on the company’s
website is a major factor that attracts customers. Moreover, It emphasizes
convenience. Convenience is a common criterion that consumers use in
evaluating the quality of the online retail service.

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PESTEL ANALYSIS
PESTEL analysis is used to identify how future trends in the political,
economical, social, technological, environmental and legal environments
might influence an organization.
Factors Key Point
Relevance to
Amazon.com
Political
Government policies promote
competition through telecom
liberalization, e-commerce
promotion and legislation
More affordable internet
access and increase in
internet users
High government investment in
national ICT infrastructures
Faster, better and more
reliable internet access for
national users
Relaxed EU and North American
competition policies on e-retailing
as opposed to heavy industries
Rapid expansion into new
markets through
acquisitions
Economic
High interest rates slow UK
consumer spending. The credit
squeeze and the housing slump
has reduced consumer spending in
the USA. However, consumer
spending is rising in China and
India due to high economic
growth in both countries.
Amazon.com may consider
entering India and
developing the Chinese
market.
Internet retailing will see
tremendous growth between
2006 and 2011 with sales rising
over 100%. This growth is fuelled
by the number of on- line
households in the US, which has
increased by 85% since 2000.
More potential customers
for Amazon.com.
By 2011, 617 million households
across the world will have an
annual disposable income
exceeding US$5,000. 143 million
of these will be in Asia- Pacific.
Second only to Western Europe
with 185 million.
More potential customers
for Amazon.com.

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Social
Increase in online social
networking
Marketing needs to take
advantage of this new
channel
Product category risk and
financial risk decrease online
shopping
Need to consider
overcoming risks to
increase users.
Growth of internet from 2002 to
2007 is 244.7%. 18.9% of world
population use the internet
Opportunity to increase
market share.
Technological
There is an increase in
broadcasting, information and
telecommunications
technologies for internet access
Increased frequency of use
and sources (e.g. mobile
devices, TV etc) for
internet access by online
shoppers
Rapid development of ‘high-speed’
network services (e.g. broadband)
increases usability of media-rich
applications
Media-rich contents are
easily made available to
online shoppers
Environmental
Global Warming/ Pollution
Awareness
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.
Legal
No uniform regulations
governing e-commerce
covering all the countries e.g.
Data Protection Act in UK and
Federal Trade Commission in
USA
Be aware of both the
domestic and international
laws
EU Electronic Commerce Directive Could impact the growth of
transatlantic e-commerce
given its strict regulations

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Summary of PESTEL Analysis
Political, economic, social, technological progress indicates an increasing and
attractive market to be exploited by Amazon.com. The Chinese and Indian
markets have shown exceptional growth. The use of internet as a social
networking channel has created new opportunities to be exploited.
Additionally, as environmental awareness increases globally, it is important
that Amazon.com’s strategy support environmentally friendly activities. The
global nature of Amazon.com’s activities also suggests that strategies
developed should comply with the different legal obligations internationally.

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5-FORCES ANALYSIS
Amazon.com Inc. continues to lead the online retail market as a result of
integrating the issues identified in this Five Forces Analysis into the firm’s
strategies. Michael Porter developed the Five Forces Analysis model as a tool
for the external analysis of firms. In the case of Amazon, the external factors
define the conditions of the e-commerce industry environment, with focus on
the online retail market. The company remains the biggest player in this
market. To keep this position in the long term, Amazon must regularly
evaluate the external factors in the online retail industry environment.
Overview
Amazon.com Inc. competes against a variety of firms, including smaller online
retail stores and large firms like Walmart. The global scope of the e-commerce
business also exposes Amazon to a diverse set of external forces. The
following are the intensities of the external factors affecting Amazon, based on
Porter’s Five Forces Analysis model:
Competitive
rivalry or
competition
Threat of
substitutes or
substitution
Bargaining power
of suppliers
Threat of new
entrants or new
entry
Bargaining power
of buyers or
customers

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1. Competitive rivalry or competition (strong force)
2. Bargaining power of buyers or customers (strong force)
3. Bargaining power of suppliers (moderate force)
4. Threat of substitutes or substitution (strong force)
5. Threat of new entrants or new entry (weak force)
Competitive Rivalry or Competition with Amazon.com Inc. (Strong
Force)
Amazon competes against strong competitors. This aspect of Porter’s Five
Forces Analysis model tackles the effects of firms on each other. In the case of
Amazon.com Inc., the following external factors are responsible for the strong
intensity of competition or competitive rivalry in the online retail industry
environment:
• High aggressiveness of firms (strong force)
• High availability of substitutes (strong force)
• Low switching costs (strong force)
Retail firms are generally aggressive, and they exert a strong competitive
force against each other. For example, Amazon.com Inc. directly competes
against giants like Walmart, which has a significant and expanding e-
commerce website. Amazon also experiences the strong force of substitutes
because of their high availability. For instance, Walmart’s physical or brick-
and-mortar stores are substitutes to Amazon’s online retail service. Other
brick-and-mortar bookstores and smaller retailers also compete against
Amazon. Furthermore, low switching costs impose a strong force on the
company. Low switching costs correspond to low barriers for consumers to
transfer from one retailer to another, or from one company to a substitute
provider. Based on the external factors in this aspect of the Five Forces
Analysis of Amazon, competition must be a strategic priority to ensure the
company’s long-term competence.
Bargaining Power of Amazon’s Customers/Buyers (Strong Force)
This aspect of Porter’s Five Forces Analysis model determines the influence of
consumers on firms and the industry environment. The following external

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factors support the strong intensity of the bargaining power of customers in
affecting Amazon:
• High quality of information (strong force)
• Low switching costs (strong force)
• High availability of substitutes (strong force)
Consumers have access to high quality information regarding the services of
online retailers and the products they sell. This external factor affects
Amazon.com Inc. in terms of the ability of customers to find alternatives to
Amazon’s online retail service. In relation, the low switching costs make it
easy for consumers to transfer from Amazon to other firms, such as Walmart.
Also, the high availability of substitutes further empowers consumers to shift
from one retailer to another. For example, instead of purchasing on Amazon’s
e-commerce website, a customer can easily go to one of Walmart’s stores,
which are strategically located throughout the United States. The external
factors in this aspect of the Five Forces Analysis show that Amazon must
consider the strong bargaining power of buyers as a major factor in
addressing business challenges in the online retail industry environment.
Bargaining Power of Amazon’s Suppliers (Moderate Force)
Suppliers control the availability of supplies or materials Amazon.com Inc.
needs for its e-commerce operations. The influence of suppliers on the online
retail industry environment is outlined in this aspect of Porter’s Five Forces
Analysis model. Amazon experiences the moderate intensity of the bargaining
power of suppliers based on the following external factors:
• Small population of suppliers (strong force)
• Moderate forward integration (moderate force)
• Moderate size of suppliers (moderate force)
The small population empowers suppliers to impose a strong force on
Amazon.com Inc.’s e-commerce business. For example, changes in prices of
equipment from a small number of large suppliers could directly impact the
company’s online retail operational costs. However, the moderate forward
integration limits suppliers’ actual effect on Amazon. Moderate forward
integration equates to a moderate degree of control that suppliers have in the

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sale of their products to firms like Amazon. Moreover, the moderate size of
most equipment manufacturers limits their influence on the company. Based
on this aspect of the Five Forces Analysis of Amazon, the external factors
emphasize the moderate significance of suppliers as a strategic determinant in
the online retail industry environment.
Threat of Substitutes or Substitution (Strong Force)
Amazon.com Inc. competes with substitutes in the online retail market. This
aspect of Porter’s Five Forces Analysis model identifies how substitutes affect
the industry environment. In the case of Amazon, the following external
factors support the strong intensity of the threat of substitution:
• Low switching costs (strong force)
• High availability of substitutes (strong force)
• Low cost of substitutes (strong force)
Amazon continually addresses the strong force of substitutes, which threaten
the e-commerce company’s performance. The low switching costs show that
customers can easily transfer from the company to other retailers. The high
availability of substitutes and the low costs of their product offerings further
increase the influence of substitutes against the company. Thus, the external
factors in this aspect of the Five Forces Analysis of Amazon.com Inc. show that
substitution is among the priorities in the company’s strategies for long-term
success in the online retail industry environment.
Threat of New Entrants or New Entry (Weak Force)
New firms potentially reduce Amazon’s market share in online retail. The
effects of new entrants are considered in this aspect of Porter’s Five Forces
Analysis model. Amazon.com Inc. experiences the weak intensity of the threat
of new entry based on the following external factors:
• Low switching costs (strong force)
• High cost of brand development (weak force)
• High economies of scale (weak force)
Amazon’s consumers can easily transfer to new firms, thereby empowering
new firms to impose a strong force against the company. This condition is due

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to low switching costs, or the low negative effects of transferring from one
provider to another. However, the high cost of brand development in online
retail weakens the influence of new entrants on the performance of Amazon.
For example, it would take years and billions of dollars to create a strong
brand that directly competes with the Amazon brand. In addition, Amazon
benefits from high economies of scale that make its e-commerce business
strong. As such, new entrants need to achieve similarly high economies of
scale to compete against the company. Based on the external factors in this
aspect of the Five Forces Analysis, new entrants are a minor strategic issue in
Amazon’s performance in the online retail industry environment.

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External Factors Evaluation (EFE) Matrix
An External factors evaluation model is based upon the external audit and
evaluates key external factors that affect a firm and also studies how well a
firm responds to these factors. In our evaluation of Amazon we found the
following factors that affect Amazon’s business and profitability.
External Audit of Amazon.com
Opportunities
1. Pressure to permanently ban the Internet Tax
2. State of the economy is improving
3. Customer spending increased
4. Currency fluctuation (weak dollar)
5. Increased number of Internet users in the US
6. Broadband access technology
7. Increased number of Internet users worldwide
8. Online sales predicted to increase
9. Low interest rate
10. One European currency - Euro
Threats
1. Taxes imposed for EU customers
2. Unemployment level highest since 1994
3. Currency fluctuation
4. Failure to permanently ban Internet taxes
5. Aggressive competition
6. Identity theft
7. Terrorist attack, war
8. State of the economy, high inflation
9. Volatile stock market
10. High interest rate
11. Ease of entry into market

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Key External Factors Weight Rating
Weighted
Score
Opportunities
1. Pressure to permanently ban the Internet Tax 0.07 2 0.14
2. State of the economy is improving 0.08 3 0.24
3. Customer spending increased 0.05 3 0.15
4. Currency fluctuation (weak dollar) 0.05 3 0.15
5. Increased number of Internet users in the US 0.03 3 0.09
6. Broadband access technology 0.03 4 0.12
7. Increased number of Internet users worldwide 0.03 3 0.09
8. Online sales predicted to increase 0.05 4 0.20
9. Low interest rate 0.03 3 0.09
10. One European currency - Euro 0.03 3 0.09
Threats
1. Taxes imposed for EU customers 0.05 3 0.15
2. Unemployment level highest since 1994 0.04 3 0.12
3. Currency fluctuation 0.04 3 0.12
4. Failure to permanently ban Internet taxes 0.06 2 0.12
5. Aggressive competition 0.07 4 0.28
6. Identity theft 0.05 4 0.20
7. Terrorist attack, war 0.02 2 0.04
8. State of the economy, high inflation 0.07 2 0.14
9. Volatile stock market 0.04 2 0.08
10. High interest rate 0.04 2 0.08
11. Ease of entry into market 0.01 2 0.02
Total 1.00 2.84

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Weight: 0.0 (Not Important) - 1.0 (Very Important)
Rating: 1- Response is poor,
2- Response is average,
3- Response is above average,
4- Response is superior
Analysis of EFE Matrix
Based on the weight assigned it can be concluded that the growth of internet
users, the heavy weight, stiff and the ever growing competition are perhaps
the most important factors in online retail industry, having a high effect on
Amazon’s business.
A weighted score of 2.84 (above average and midpoint 2.5) shows that the
Amazon.com has been able to manipulate the opportunities and have been
able to counter threats and is doing rather well but its business isn’t still great.
Amazon can still manipulate the opportunities and counter the threats that it
has failed to do i.e. Amazon has not been able to work well with the foreign
exchange market and it has not been able to expand its business activities in
Asia.

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Internal Factors Evaluation (IFE) Matrix
Internal factors evaluation matrix (IFE) is a tool that uses internal audit’s
report to analyze a firm’s internal strengths and weaknesses. An IFE matrix
gives important information and helps in strategy formulation.
Internal Audit of Amazon.com
Weakness
1. Accumulated deficit of $3 billion
2. Operating losses
3. Interest payments on debt issued
4. High inventory risk - seasonality
5. Small number of vendors (suppliers)
6. Breach of customer confidential information
Strengths
1. Strong management team
2. Strong customer service support
3. Up-to-date technology and software
4. High brand name recognition
5. Corporate culture
6. Distribution centers
7. Strategic alliances
8. Increased revenue from international segment
9. High inventory turnover

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Key Internal Factors Weight Rating
Weighted
Score
Strengths
1. Strong management team 0.10 4 0.40
2. Strong customer service support 0.07 4 0.28
3. Up-to-date technology and software 0.08 4 0.32
4. High brand name recognition 0.10 4 0.40
5. Corporate culture 0.07 3 0.21
6. Distribution centers 0.05 3 0.15
7. Strategic alliances 0.07 3 0.21
8. Increased revenue from international segment 0.03 3 0.09
9. High inventory turnover 0.03 3 0.09
Weakness
1. Accumulated deficit of $3 billion 0.10 1 0.10
2. Operating losses 0.05 1 0.05
3. Interest payments on debt issued 0.05 2 0.10
4. High inventory risk - seasonality 0.05 2 0.10
5. Small number of vendors (suppliers) 0.05 2 0.10
6. Breach of customer confidential information 0.10 2 0.20
Total 1.00 2.80
Weight: 0.0 (Not Important) - 1.0 (Very Important)
Rating: 1- Major Weakness,
2- Minor Weakness,
3- Minor Strength,
4- Major Strength

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Analysis of IFE Matrix
The main strengths of online retail market in which Amazon operates is the
strong brand names and recognition also corporate culture and sales and post
sales services are of relative importance, too. The major weakness of this
industry is the risk associated with venturing into retailing of products that
are unrelated and high shipping cost related to some products.
The weighted score of 2.80 (which is greater than 2.5) shows a strong internal
position but there are still issues to be sorted out. As in case of Amazon due to
high product diversification and venturing into new product markets costs
have been high and though net sales have increased since 2004 the net
income has significantly decreased. Amazon’s website lacks an important
aspect of having different languages for different regions have also a
significant impact on their sales as well over the years.

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VRIN Framework
VRIN framework can determine if a resource is a source of sustainable
competitive advantage. To serve as a basis for sustainable competitive
advantage, resources must be:
• Valuable- meaning that they must be a source of greater value, in terms of
relative costs and benefits, than similar resources in competing firms. In
Amazon, there is logistic speed and innovation.
• Rare- It implies that the resource must be rare in the sense that it is scarce
relative to demand for its use or what it produces. In Amazon, there is
bundle of services.
• Inimitable- It is difficult to imitate but it can be imitable for startup.
• Non-substitutable- An ideal resource cannot be substituted by any other
resource. In Amazon, there is whispernet–3g.
Amazon have comparative advantage, producing services at lower cost than
its competitors, generating larger margin of sales. But no differential
advantage, because all the product are the same, not better than competition–
eBay, Google. Amazon also achieved its competitive advantage through the
use of information systems.
Amazon faces the challenge of providing excellent customer service, while
trying to grow and expand their business. Also faced challenges to find
innovative way to stay ahead of its competitors.

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Balance Scorecard
The Balanced Scorecard can be used to measure Amazon.com’s performance
in China to assess what improvements have been achieved. Performance is
judged against the outcomes of relevant success factors, which have been
identified below. Using the balanced scorecard is vital in performance
measurement, as Amazon.com are able to “track financial results, while
simultaneously monitoring progress in building their capabilities and
acquiring the intangible assets needed for future growth.”
Critical Success Factors Measures
Financial Perspective
Improved operating
profit
- Higher net profit
margins
- Increase in sales
volume
Shareholder Value
Increase share price &
dividends per share
Customer Perspective
Large product range
% of profits from
product categories
User friendly site
-Investment in CRM &
site maintenance
-Revenue from cross
selling/ upselling
Trustworthy brand
Secure orders & quality
products sold
Internal Perspective
Security & speed of
processing orders
-Positive feedback
-Fewer returns
Customer oriented
-Positive word of
mouth
-Increased volume of
sales
-Increase in site traffic

23. ~ 23 ~
Innovation & Learning
Perspective
Highly skilled staff Spending on training
Integration of US &
Chinese cultures
-Staff motivation
-Improvement in net
profit
Investment in
innovative services
Spending on R&D

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Strategic Factor Analysis Summary (SFAS)
Factors Strategic Factors Weights Rating
Weighted
scores
Duration Comments
S I L
O
The growth of demand (increasing
broadband access/ Internet user
worldwide), international market
(increasing market share) and
shopping habits by website also
growth, technology and computer
user is growth
0.15 4 0.60 * *
Main
opportunity
O
Expanded products offerings and sales
growth
0.05 3 0.15 * *
Focus on certain
products
T Competitors 0.08 4 0.32 * * * Main threat
T Decreasing customer confidence level 0.04 4 0.16 * * Serious threat
T Suppliers and partners 0.03 3 0.09 * *
Increasing
bargaining
power
T
Sales tax barrier (law), for
international market local law and
customs
0.05 4 0.20 * *
Carefully
increasing
S
Elevated level customer service,
quality of services, insurance,
distribution center, capacity of
company, customer service and
different programs, brand image,
competitive prices and delivery cost,
sipping option, free shipping ordered
over a minimum level
0.15 4 0.60 * * *
Key success
factor
S+O Market share 0.06 3.5 0.21 * *
Decrease due to
competition
S
Financial and capital position,
overhead cost
0.06 2.5 0.15 * *
Decrease
expenses
S
Variety of offering products and
quality
0.05 3 0.15 * *
Lead to profit
margin, quality
key to success
S
Technology (very easy to use/ 1 - click
ordering) and networking
0.18 4.5 0.81 *
Patents,
Innovation
T+W
Must operate in free sales tax
location, location had to be an area
with people who had necessary
programming talent to develop
software, closeness to a major book
wholesaler
0.10 2 0.20 * *
key to success
influence cost
1 3.64

25. ~ 25 ~
TOWS Matrix
Amazon used the TOWS matrix to help it look at options, and to ultimately
identify high leverage strategies. Strengths, weaknesses, opportunities and
threats are looked at in a more systematic way than in a typical SWOT
analysis. A TOWS analysis helps one to focus on: leveraging strengths,
avoiding weaknesses, make the most of opportunities, and manage threats.

26. ~ 26 ~
For each of the inner four portions of the table (e.g. SO, ST, WO, WT), Amazon
asked the following questions:
• Strengths and Opportunities (SO): How can we best employ our
strengths to take advantage of the opportunities in front of us?
• Strengths and Threats (ST): How can we use our strengths to avoid
threats?
• Weaknesses and Opportunities (WO): How can we use opportunities to
overcome the weaknesses?
• Weaknesses and Threats (WT) – How can we minimize our weaknesses
and manage the threats?

27. ~ 27 ~
Strategic Position & Action Evaluation (SPACE) Matrix
Analysis
The Strategic Position & ACtion Evaluation matrix (SPACE Matrix) is a
strategic management tool that focuses on strategy formulation especially as
related to the competitive position of an organization. It can be used as a basis
for other analyses, such as the SWOT analysis, BCG matrix model, industry
analysis, or assessing strategic alternatives (IE matrix).
It is a systematic appraisal of four key issues that balance the external and
internal factors that should determine the general theme of the strategy:
➢ External
• Industry Attractiveness
• Environmental Stability
➢ Internal
• Competitive Advantage
• Financial Strength
By combining ratings on each dimension on one SPACE matrix diagram, the
framework guides the strategic agenda.
SPACE Factors Score Average Co-ordinates
VerticalComponents
Financial Position (FP)
Cash Flow +4
+2.7
-1.0
Earnings per share +2
Return on Investment +2
Stability Position (SP)
Competitive pressure -6
-3.7Barriers to entry into market -4
Technological change -1
Horizontal
Components
Competitive Position (CP)
Market share -1
-1.3
+4.4
Customer loyalty -2
Technological know-how -1
Industry Position (IP)
Growth potential +6
+5.7Financial stability +5
Profit potential +6

28. ~ 28 ~

29. ~ 29 ~
Quantitative Strategic Planning Matrix (QSPM)
The Quantitative Strategic Planning Matrix is a strategic tool which is used to evaluate alternative
set of strategies. The QSPM incorporate earlier stage details in an organize way to calculate the
score of multiple strategies in order to find the best match strategy for the organization.
The QSPM comes under the third stage of strategy formulation which is called “The Decision Stage”
and also the final stage of this process.
Key External Factors Weight
Create A Web
Search Engine
Start Gourmet
Food Wholesaler
Opportunities AS TAS AS TAS
1. Pressure to Permanently Ban the Internet Tax 0.07 1.00 0.07 1.00 0.07
2. State of The Economy Is Improving 0.08 1.00 0.08 3.00 0.24
3. Customer Spending Increased 0.05 1.00 0.05 3.00 0.15
5. Increased Number of Internet Users in The Us 0.03 3.00 0.09 4.00 0.12
6. Broadband Access Technology 0.03 4.00 0.12 3.00 0.09
8. Increased Number of Internet Users Worldwide 0.03 3.00 0.09 4.00 0.12
9. Online Sales Predicted to Increase 0.05 1.00 0.05 3.00 0.15
10. Low Interest Rate 0.03 1.00 0.03 2.00 0.06
Threats
2. Unemployment Level Highest Since 1994 0.04 1.00 0.04 2.00 0.08
4. Failure to Permanently Ban Internet Taxes 0.06 1.00 0.06 1.00 0.06
5. Aggressive Competition 0.07 4.00 0.28 3.00 0.21
6. Identity Theft 0.05 1.00 0.05 1.00 0.05
8. State of The Economy, High Inflation 0.07 1.00 0.07 2.00 0.14
11. Ease of Entry into Market 0.01 3.00 0.03 4.00 0.04
Strengths
1. Strong Management Team 0.10 2.00 0.20 4.00 0.40
2. Strong Customer Service Support 0.07 1.00 0.07 4.00 0.28
3. Up-To-Date Technology and Software 0.08 3.00 0.24 4.00 0.32
4. High Brand Name Recognition 0.10 1.00 0.10 4.00 0.40
5. Corporate Culture 0.07 1.00 0.07 3.00 0.21
Weaknesses
1. Accumulated Deficit Of $3 Billion 0.10 1.00 0.10 2.00 0.20
2. Operating Losses 0.05 2.00 0.10 1.00 0.05
Total Attractiveness Score 1.99 3.44

30. ~ 30 ~
BCG Matrix
The BCG Matrix is a planning tool that uses graphical representations of a
company’s products and services in an effort to help the company decide what
it should keep, sell or invest more in. It plots a company’s offerings in a four
square matrix, with the y-axis representing rate of market growth and the x-
axis representing market share.
Analysis of BCG Matrix
Cash Cows:
There are some product categories that bring in enough revenue for a
business entity to regulate its operations of different business units. These
products are labeled as a cash cow and the manager’s task is to take leverage
of these products and utilize their high market share for gaining high
revenues. Amazon has generated a great deal of cash through the sale of its
retail goods, prime subscription and e-books, making them a cash cow for the
company
Amazon Prime Air
(Drones)
Amazon Fresh
Amazon Retail Goods
Amazon Prime
Amazon Kindle
Amazon Auctions
Amazon Studios

31. ~ 31 ~
Stars:
The second category of products i.e. Amazon Prime Air, is a part of the star or
rising star, which holds a high market share. As the name reflects, these
products are emerging as the leading revenue generator for an organization.
They do not yield the same financial return as cash cows, but the future
growth of these business units is promising, thus encouraging the
management to continue with the investment in them. Even though these
products require high investment, they are in a growing phase which suggests
that these business units are likely to become cash cows once the industry has
reached maturity.
Question Marks:
The next quadrant included in BCG Matrix is question marks. Amazon Fresh
have the chances of growing into a profitable business, however the limited
market share makes it impossible to use these business units as prime
revenue generator. The industry is still in growth phase, which indicates that
question marks may emerge as a rising star if the business is able to set the
right direction for these products.
Dogs:
The last category in BCG Matrix includes Amazon Auction, Amazon Studios
which are not generating high sales and have not been able to establish a
notable market share.

32. ~ 32 ~
Internal-External (IE) Matrix
The Internal-External (IE) matrix is used to analyze working conditions and
strategic position of a business. It is based on an analysis of internal and
external business factors which are combined into one suggestive model.
It is a continuation of the EFE matrix and IFE matrix models. The IE matrix
positions an organization into a nine cell matrix which is based on the two
criteria:
1. Score from the EFE matrix - plotted on the y-axis
2. Score from the IFE matrix - plotted on the x-axis
Analysis of IE Matrix
This tells us that Amazon should hold and maintain its position and it should
pursue strategies focused on increasing market penetration and product
development.

33. ~ 33 ~
Grand Strategy Matrix
The Grand Strategy Matrix has 4 quadrants, each quadrant contains different
sets of strategies and the entire firms along with their respective divisions
must fall in one of the quadrant. This matrix has two dimensions i.e.
competitive position & market growth. Suitable set of strategies for each
quadrant are as follows:
Quadrant I
• Product & Market Development
• Market Penetration
• Backward Integration
• Forward Integration
• Concentric Diversification
Quadrant II
• Product Development
• Market Development
• Market Penetration
• Horizontal/ Vertical Integration
• Liquidation/ Divestiture
Quadrant III
• Retrenchment
• Related/ unrelated
Diversification
• Conglomerate Diversification
• Liquidation/ Divestiture
Quadrant III
• Related/ unrelated
Diversification
• Horizontal/ Vertical Integration
• Conglomerate Diversification
• Joint Ventures
Rapid Market Growth
Quadrant II Quadrant I
Weak Competitive
Position
Strong
Competitive
Position
Quadrant III
Quadrant IV
Slow Market Growth

34. ~ 34 ~
Analysis of Grand Strategy Matrix
Potential Strategies for Amazon:
• Product & Market Development
• Market Penetration
• Backward Integration
• Forward Integration
• Concentric Diversification

35. ~ 35 ~
3-Year Strategic Plan
1. Market Development
Acquire a growing, profitable e-retailing company in India to take
advantage of the growing market.
➢ Suitability:
• The PESTEL analysis reveals consumer spending is rising in India
(Times Online, 2007)
• From the analysis of global internet trends India ranked as the fifth
highest in Internet usage (Internet World Stats, 2007)
• Government policy has targeted three million broadband users,
therefore increasing consumers’ likeliness to shop online (Euro
monitor, 2007)
• From the strategic group’s analysis competitors such as Wal-Mart
and Tesco aim to increase their geographic scope and thus may enter
the Indian market (Research and Markets, 2005). Therefore it is vital
for Amazon.com to gain from first mover advantage to establish its
presence
➢ Feasibility:
• The SWOT reveals that one of the strengths of Amazon.com is the
experience and knowledge in successful acquisition and integration
such asbooksurge.com and dpreview.com and Brilliance Audio
• Amazon.com need to borrow to finance the acquisition, which may
be problematic as they are already highly geared at 68%
• By acquiring an Indian e-commerce company they will also be
acquiring the local knowledge
➢ Acceptability:
• Internet users are forecasted to increase 254% from 2006 to 2015,
presenting a growing market and, therefore reducing risk and
increasing the potential of high returns (Euro monitor, 2007).

36. ~ 36 ~
• Shareholders are more favorable towards long- term investments,
such as this strategy therefore there is a higher chance of
acceptability (CEO Letter to Shareholders, Amazon.com 2006
Annual Report.
• By acquiring a company there is the risk of cultural conflict
2. Service Development
Providing a ‘greener’ delivery option. Consumers will be given the choice of
selecting the standard delivery option or the ‘greener’ delivery option. The
‘green’ option means that the items will be delivered in a biodegradable
plastic container. The consumer will be encouraged to return the box after
use in return for a ‘green point’. After collecting a certain amount of points,
the consumer will be sent an e-voucher to be spent at Amazon.com. Boxes
will be re-used by Amazon.com in future deliveries, which in the long-term
will reduce cost of packaging and ensure less wastage.
➢ Suitability:
• This strategy will address the issue of increased environmental
awareness, as highlighted in the PESTLE analysis.
• This is an important issue for the e-retailing industry as all products
need to be sent to customers.
• This strategy builds on Amazon.com’s past efforts to maintain
environmental awareness as highlighted in the Resource Based View
analysis.
➢ Feasibility:
• Biodegradable plastic containers, whilst currently available, will
require extensive research by Amazon.com to ensure that all
products can be transferred safely to consumers. Amazon.com has
an active research and development department which can be
utilized for this purpose.
• Amazon.com has highly experienced workers (as shown in the Value
Chain) who should be able to create and manage the new ‘green
points’ system and e-vouchers.

37. ~ 37 ~
➢ Acceptability:
• There is a risk that the consumers will not return the boxes for re-
use. The cost-benefit mentioned above will therefore not be
obtained.
• As society becomes more socially aware, consumers will want to
make a difference through their packaging choice.
• Governments may take an interest in the greener initiative and may
supportAmazon.com in some capacity.
• Value creation and the possibility of reduced costs should lead to
increased returns for shareholders.
3. Market Penetration in China
Amazon.com entered the Chinese e-commerce market in 2004 by taking
over Joyo.com. However, as the GE matrix indicates, Amazon.com is
underperforming and has lost its position as market leader. In order to
address this underperformance, the options below attempt to build a
stronger brand image and increase market share.
Implementation Market Goal
Option 1
Extensive marketing through
various medium e.g. TV, outdoor,
Press and Radio
Raising awareness and
brand building
Option 2
Increase product range and
suitability through introducing
the Merchant Programme
Increasing market
share and sales
➢ Suitability:
• The PESTLE analysis reveals a high economic growth in China and
high consumers pending
• Global internet trends shows that China has the second highest
internet usage in the world
• In the GE matrix, China is the most attractive market for
Amazon.com

38. ~ 38 ~
➢ Feasibility:
• Amazon.com has the resources in skills, experience and knowledge
to undertake global operations successfully as demonstrated in the
UK, German and Japanese markets
• Market penetration into China will be less capital intensive than
entering a new market
• Amazon.com has successfully implemented the Merchant Program
in the U.S.
➢ Acceptability:
• Amazon.com’s investments in China must be fully harnessed to
exploit the market potentials thus reduces financial risks
• The Merchant Program will create value for the Chinese consumers
since it increases the chances of local merchants to sell specialized
or local products
• Penetrating the Chinese market will have long term benefits which
increases shareholder value

39. ~ 39 ~
Conclusions & Recommendations
Vision & Mission Statement Analysis
Amazon.com’s vision statement possesses strong characteristics, such as the
specification of the company’s target market and an aspect of its marketing
mix approach. However, a recommendation to improve this vision statement
is to broaden the scope of the business. This is so because the company
already has a physical bookstore, known as Amazon Books, located in Seattle,
Washington, U.S.A.
Amazon.com’s mission statement is also satisfactory, based on best practices
in developing mission statements. For example, the inclusion of pricing,
product selection and service quality helps define the strategic direction of the
e-commerce business. However, it is recommended that a characterization of
the nature of the business, such as its e-commerce nature, must be included in
Amazon.com Inc.’s mission statement. Such characterization helps in
specifications of strategies for the online retail business.
Based on the analysis done on Amazon.com, it is highly recommended that
they should adopt the following strategy:
“Establish new operations internationally to provide products
& services in South America, North Africa and Middle East. In addition to
expanding current operations in Europe and Asia.”

40. ~ 40 ~
Appendix- I
SWOT ANALYSIS
Strengths Weaknesses
Global brand
Focus on research and development
Strategic location
Customer-centric vision
Diverse products
Applied advanced technology
Amazon.com’s Merchant Program
Skilled workforce
Strong logistics
No physical presence
Low profit margins
Low cash flows
Weak performance in China
Opportunities Threats
Growth in movie downloads
Social networking
Growth of online shopping in China
Beijing Olympics 2008
Expansion through acquisitions
Growing e-commerce sales
Growth in digital media
Increased consumer spending in India
Dependent on vendors
Strong competition
Patent infringement