Abstract Science Construction’s business is in planning, developing and building road projects. The major of its clients are municipalities, city governments, and other public sector entities. While the bankruptcy rates for these clients is very low, when economic downturns happen, their ability to pay in a timely fashion also suffers. This leads to businesses such as Science Construction needing to take on additional debt and to find creative methods in order to stay afloat during times of recession. Methods such as selling accounts receivables at discounted rates and taking larger lines of credit through banks and other lending institutions are some of the ways organizations can remain viable when their cash inflows have turned into a trickle. Science Construction is asking the Turkish Courts to postpone their bankruptcy proceedings for a year while they attempt to restructure. Through this, suggestions such as forcing shareholders to pay their debt to the organization, gaining credi
Will Kenton (2019) defines strategic management as the management of an organization’s resources in order to achieve its goals and objectives. Included in strategic management are goal setting, analysis of the competitive environment, analysis of the internal organization, consistent evaluation of strategies, and proper roll out of strategies organization-wide by management. Ketchen & Short (2012) provide plenty of examples of strategic management which include various ancient, traditional, and modern organizations and situations. In addition, it is further explained that creativity is essential in strategic management, which ultimately is part art and part science and involves multiple conceptualizations of strategy based on recent on historical events and situations (Ketchen & Short, 2012). It can also be argued that flexibility and adaptation are essential as a part of strategic management, as strategies will evolve and new strategies will emerge for organizations based on the industry and organizations climate, events, and trends. In order to be successful long-term, an organization must be able to adapt to change. Ultimately, implementing strategic management is a means of survival for an organization, where actually putting strategic management into place is the most important aspect of the planning in this multi-step process (Kenton, 2019). Many organizations have successfully utilized strategic management en route to current success. One such company that exemplifies proper strategic management is Amazon.
Understanding Michael Porter’s five forces model, which indicates that there are five competitive forces that determine domain profitability: bargaining power of customers, threat of substitutions, bargaining power of suppliers, threat of new entrants, which all lead to rivalry (Kroenke, 2007), has allowed Amazon to respond to the competition and provide value to its customers. Because Amazon competes with a variety of companies that include well-established firms, such as Walmart, small brick and mortars stores, as well as other e-commerce businesses, Amazon must analyze Porter’s five forces and react, which will result in creating a competitive strategy. As it stands, it appears that Amazon faces and must address the significant forces of rivalry, the bargaining power of the consumer, the threat of substitution, and to a lesser degree, the bargaining power of the supplier (Greenspan, 2017a). Realistically, at this point in time, the threat of a new entrant isn’t a driving force for Amazon, as they are the industry behemoth. Because rivalry is so prominent in Amazon’s industry, Amazon must prioritize this force as a competitive strategy. The competition in retail is extremely aggressive, thus creating plenty of options for the customer (substitution). In addition, it is easy for the customer to switch brands, as there are low switching costs in the retail industry. On top of low switching costs and high availability of substitutes, there is a plethora of high-quality information for the consumer, giving the consumer plenty of bargaining power. To address these forces, Amazon must continue boosting its strong brand reputation and image, focus on service quality, and continue to enhance the usability of its website to improve and optimize customer experience (Greenspan, 2017a). Identifying where Amazon’s focus is in regards to the competitive forces of the industry allows for Amazon’s value chain to be analyzed to identify where and how Amazon offers value to the consumer.
Upon identifying a competitive strategy, a value chain is generated, which is a network of value-creating activities (Kroenke, 2007). Porter created a generic value chain which consists of five primary activities (In-bound Logistics, Operations, Out-Bound Logistics, Marketing and Sales, and Service), followed by four supporting activities (Firm Infrastructure, Human Resources, Technology Development, and Procurement). The primary activities amass costs while adding value to the product, where the net result is the total margin (the difference between total value added and total costs incurred). Meanwhile, the supporting activities indirectly contribute to the production, sale, and service of the product (Kroenke, 2007). Within the value chain, there are linkages, which are interactions across value activities.
The transport, storage, and delivery of goods coming into a business are referred to as inbound logistics (Ingram, 2018). The backbone of Amazon’s inbound logistics is “Fulfillment by Amazon,” which sellers can also use by storing their goods in Amazon fulfillment centers. In this case, Amazon is responsible for logistics, customer service, and returns. Amazon’s operations are divided into three segments: North America-focused Amazon websites, international-focused Amazon websites, and Amazon Web Services (AWS). AWS focuses on global sales of computing, storage, database, and other services that can be provided to start-ups, enterprises, government agencies, and academic institutions (Dudovskiy, 2018). Outbound logistics includes the same goods as inbound logistics, but refers to them going out of the business (Ingram, 2018). Amazon’s outbound logistics include its 109 fulfillment centers around the globe, where technology is used to manage the receipt, storing, and shipment of products. In addition, Amazon uses digital delivery for downloadable products, as well as physical stores, since it recently acquired Whole Foods. Amazon’s marketing expenses exceeded that of Walmart, Target, Kroger, Best Buy, and Home Depot combined in 2016. The marketing message illustrates the promise of the largest selection of products and services, attractive prices, fast delivery of products and overall superior customer services. Finally, Amazon’s unprecedented customer service consistently ranks #1 in the Customer Satisfaction Index for both the UK and America (Dudovskiy, 2018). As explained through the value chain analysis, Amazon provides significant value to its customers in each of the five primary activities. Amazon’s success isn’t an accident, it is a result of understanding the competitive forces, and its ability to evolve based on them.
Jeff Boss (2017) suggests that staying relevant in today’s landscape, to maintain a competitive advantage, a company must be able to adapt, and because of Amazon has displayed their value of adaptability, they have become the giant that they are. Amazon’s business strategy is the epitome of adaptability. Upon its inception in 1995, Amazon was a virtual bookseller, allowing them to sell books directly to the customer while giving the customer a significantly larger selection than any bookstore, at lower prices. The lower prices were a result of not possessing much of its own inventory, coupled with not having to maintain an actual storefront or a large retail staff. In 1998, Amazon began selling music and movies, adapting to the competitive forces that drove the company. Soon thereafter, Amazon altered its strategy to become the online version of Walmart, giving the consumer the “best place to buy, find, and discover any product or service online,” including electronics, toys, apparel, food, travel services, and jewelry, amongst others. At the same time, it rolled out an auction service similar to eBay. These new offerings forced the company to increase costs by expanding its warehouse and distribution centers, as well as hiring a significant amount of employees. Again adapting, in 2001 and 2002, Amazon cut prices, offered free shipping, and leveraged its technology infrastructure to supply e-commerce services to other companies. Further adapting and refining its business strategy to become more efficient in operations by consolidating orders prior to shipping, in order to reduce shipping costs (Laudon & Laudon, 2007). Yet again adapting, Amazon then introduced Amazon prime, a subscription service that offers perks to subscribers, entered the grocery business with the purchase of Whole Foods, and again adapted with AWS, and its ability to offer cloud services, compute resources, networking and computing services (Dudovskiy, 2017). Redundantly speaking, Amazon has become what it is and maintained its competitive advantage because of its ability to adapt.
Despite the various markets Amazon participates in, it maintains a competitive advantage in all of them. Regardless of what it is that the customer is looking for, Amazon provides the customer with a fast, reliable service at a lower price. Due to its wide array of products and services, Amazon has millions of customers. It maintains and keeps the millions of customers because of the aforementioned reasons, plus its ability to efficiently fulfill orders, on top of its excellent customer service. Finally, it has a knack of staying ahead of the competition, despite the competition quickly copying Amazon’s strategies. Amazon still controls 40% of the U.S. e-commerce book market, its Echo devices own roughly 75% of the smart speaker market, it operates a major Hollywood studio, and its AWS possesses about 40% of the cloud computing market (Cohan, 2018). To top it all off, which may be Amazon’s largest competitive advantage, 55% of Americans begin their product searches on Amazon.com, which most likely leads to the majority of those shoppers finishing their shopping at Amazon as well (Levy, 2016).
Despite its strengths, Amazon does have weaknesses and opportunities for improvements. Although it has a strong brand and extensive product mix, Amazon has a very imitable business model, have a very limited brick-and-mortar presence, and have yet to strongly penetrate developing markets (Greenspan, 2017b). In addition, in recent years Amazon has had counterfeit products sold on its site, plus elements of cybercrime, which has obviously led to discontent amongst its customers, as well as those who sell their products on Amazon. These weaknesses and threats lead to opportunities for Amazon. Amazon can dedicate efforts into using technology further to its advantage and tighten security plus address and eliminate counterfeit sales to protect itself, its vendors, and its customers. On top of that, Amazon can focus on penetrating developing markets prior to other companies emerging in these markets. Finally, Amazon has the opportunity to open more brick-and-mortar stores (Greenspan, 2017b).
Amazon is the industry giant for many reasons. It’s recognition of the competitive forces, using its value chain to bring value to the customer, maintaining its competitive advantage by consistently adapting. Amazon has a mass of products, various places of distribution, its promotion and marketing is second to none, it prices are value and market-oriented, and it has amassed millions of people as customers, not to mention the customer service. Richard Koch (as cited by Cannivet, 2018) elucidates that two types of businesses succeed over time: price simplifiers, such as Walmart (people shop to save money), and proposition simplifiers, such as Apple (people shop to engage in the experience). While most companies strive to compete in one area or the other, Amazon not only competes but dominates in both by simplifying the price and the proposition for its customers. As a result, Amazon has risen to the top of the chain and will continue for the foreseeable future. Thus, Amazon is the epitome of proper implementation of strategic management. From its inception, there were goals, constant evaluation both internally and externally, implementation and evaluation of strategies, and a significant amount of creativity and flexibility, which allowed Amazon to go from an idea to a multi-industry behemoth that shook and disrupted many industries.
Resources
Boss, J. (2017, June 20). Amazon's Competitive Advantage Isn't Cost Or Convenience, It's This. Retrieved June 22, 2019, from https://www.forbes.com/sites/jeffboss/2017/06/20/amazons-competitive-advantage-isnt-cost-or-convenience-its-this/#48e11bff4958
Cannivet, M. (2018, February 02). 3 Secrets Of Amazon's Success Anyone Can Emulate. Retrieved June 22, 2019, from https://www.forbes.com/sites/michaelcannivet/2018/02/02/3-secrets-of-amazons-success-anyone-can-emulate/#269ab1504826
Cohan, P. (2018, February 05). 3 Reasons Amazon Is The World's Best Business. Retrieved June 22, 2019, from https://www.forbes.com/sites/petercohan/2018/02/02/3-reasons-amazon-is-the-worlds-best-business/#73d135b46356
Dudovskiy, J. (2018, August 05). Amazon Value Chain Analysis. Retrieved June 22, 2019, from https://research-methodology.net/amazon-value-chain-analysis/
Ferguson, E. (2017, February 20). Amazon.com Inc.'s Marketing Mix (4Ps) Analysis. Retrieved June 22, 2019, from http://panmore.com/amazon-com-inc-marketing-mix-4ps-analysis
Greenspan, R. (2017a, February 20). Amazon.com Inc. Five Forces Analysis & Recommendations (Porter's Model). Retrieved June 22, 2019, from http://panmore.com/amazon-com-inc-five-forces-analysis-recommendations-porters-model
Greenspan, R. (2017b, February 20). Amazon.com Inc. SWOT Analysis & Recommendations. Retrieved June 22, 2019, from http://panmore.com/amazon-com-inc-swot-analysis-recommendations
Ingram, D. (2018, June 26). Outbound Vs. Inbound Logistics. Retrieved June 22, 2019, from https://smallbusiness.chron.com/outbound-vs-inbound-logistics-77016.html
Ketchen, D., & Short, J. (2012). Strategic Management Evaluation and Execution. Retrieved June 21, 2019, from https://my.uopeople.edu/pluginfile.php/515745/mod_page/content/6/strategic-management-evaluation-and-execution compressed.pdf
Kenton, W. (2019, June 09). How Strategic Management Works. Retrieved June 21, 2019, from https://www.investopedia.com/terms/s/strategic-management.asp
Kroenke, D. (2007). Organizational Strategy, Information Systems, and Competitive Advantage. Experiencing MIS. Upper Saddle River, NJ: Prentice Hall.
Laudon, K. C., & Laudon, J. P. (2007). Information Systems, Organizations, and Strategy. Management Information Systems: Managing the Digital Firm 10th ed. Upper Saddle River, NJ: Prentice Hall.
Levy, A. (2016, November 29). Nobody talks about Amazon's true competitive advantage. Retrieved June 22, 2019, from https://www.businessinsider.com/amazons-competitive-advantage-over-walmart-and-target-2016-11
Understanding Michael Porter’s five forces model, which indicates that there are five competitive forces that determine domain profitability: bargaining power of customers, threat of substitutions, bargaining power of suppliers, threat of new entrants, which all lead to rivalry (Kroenke, 2007), has allowed Amazon to respond to the competition and provide value to its customers. Because Amazon competes with a variety of companies that include well-established firms, such as Walmart, small brick and mortars stores, as well as other e-commerce businesses, Amazon must analyze Porter’s five forces and react, which will result in creating a competitive strategy. As it stands, it appears that Amazon faces and must address the significant forces of rivalry, the bargaining power of the consumer, the threat of substitution, and to a lesser degree, the bargaining power of the supplier (Greenspan, 2017a). Realistically, at this point in time, the threat of a new entrant isn’t a driving force for Amazon, as they are the industry behemoth. Because rivalry is so prominent in Amazon’s industry, Amazon must prioritize this force as a competitive strategy. The competition in retail is extremely aggressive, thus creating plenty of options for the customer (substitution). In addition, it is easy for the customer to switch brands, as there are low switching costs in the retail industry. On top of low switching costs and high availability of substitutes, there is a plethora of high-quality information for the consumer, giving the consumer plenty of bargaining power. To address these forces, Amazon must continue boosting its strong brand reputation and image, focus on service quality, and continue to enhance the usability of its website to improve and optimize customer experience (Greenspan, 2017a). Identifying where Amazon’s focus is in regards to the competitive forces of the industry allows for Amazon’s value chain to be analyzed to identify where and how Amazon offers value to the consumer.
Upon identifying a competitive strategy, a value chain is generated, which is a network of value-creating activities (Kroenke, 2007). Porter created a generic value chain which consists of five primary activities (In-bound Logistics, Operations, Out-Bound Logistics, Marketing and Sales, and Service), followed by four supporting activities (Firm Infrastructure, Human Resources, Technology Development, and Procurement). The primary activities amass costs while adding value to the product, where the net result is the total margin (the difference between total value added and total costs incurred). Meanwhile, the supporting activities indirectly contribute to the production, sale, and service of the product (Kroenke, 2007). Within the value chain, there are linkages, which are interactions across value activities.
The transport, storage, and delivery of goods coming into a business are referred to as inbound logistics (Ingram, 2018). The backbone of Amazon’s inbound logistics is “Fulfillment by Amazon,” which sellers can also use by storing their goods in Amazon fulfillment centers. In this case, Amazon is responsible for logistics, customer service, and returns. Amazon’s operations are divided into three segments: North America-focused Amazon websites, international-focused Amazon websites, and Amazon Web Services (AWS). AWS focuses on global sales of computing, storage, database, and other services that can be provided to start-ups, enterprises, government agencies, and academic institutions (Dudovskiy, 2018). Outbound logistics includes the same goods as inbound logistics, but refers to them going out of the business (Ingram, 2018). Amazon’s outbound logistics include its 109 fulfillment centers around the globe, where technology is used to manage the receipt, storing, and shipment of products. In addition, Amazon uses digital delivery for downloadable products, as well as physical stores, since it recently acquired Whole Foods. Amazon’s marketing expenses exceeded that of Walmart, Target, Kroger, Best Buy, and Home Depot combined in 2016. The marketing message illustrates the promise of the largest selection of products and services, attractive prices, fast delivery of products and overall superior customer services. Finally, Amazon’s unprecedented customer service consistently ranks #1 in the Customer Satisfaction Index for both the UK and America (Dudovskiy, 2018). As explained through the value chain analysis, Amazon provides significant value to its customers in each of the five primary activities. Amazon’s success isn’t an accident, it is a result of understanding the competitive forces, and its ability to evolve based on them.
Jeff Boss (2017) suggests that staying relevant in today’s landscape, to maintain a competitive advantage, a company must be able to adapt, and because of Amazon has displayed their value of adaptability, they have become the giant that they are. Amazon’s business strategy is the epitome of adaptability. Upon its inception in 1995, Amazon was a virtual bookseller, allowing them to sell books directly to the customer while giving the customer a significantly larger selection than any bookstore, at lower prices. The lower prices were a result of not possessing much of its own inventory, coupled with not having to maintain an actual storefront or a large retail staff. In 1998, Amazon began selling music and movies, adapting to the competitive forces that drove the company. Soon thereafter, Amazon altered its strategy to become the online version of Walmart, giving the consumer the “best place to buy, find, and discover any product or service online,” including electronics, toys, apparel, food, travel services, and jewelry, amongst others. At the same time, it rolled out an auction service similar to eBay. These new offerings forced the company to increase costs by expanding its warehouse and distribution centers, as well as hiring a significant amount of employees. Again adapting, in 2001 and 2002, Amazon cut prices, offered free shipping, and leveraged its technology infrastructure to supply e-commerce services to other companies. Further adapting and refining its business strategy to become more efficient in operations by consolidating orders prior to shipping, in order to reduce shipping costs (Laudon & Laudon, 2007). Yet again adapting, Amazon then introduced Amazon prime, a subscription service that offers perks to subscribers, entered the grocery business with the purchase of Whole Foods, and again adapted with AWS, and its ability to offer cloud services, compute resources, networking and computing services (Dudovskiy, 2017). Redundantly speaking, Amazon has become what it is and maintained its competitive advantage because of its ability to adapt.
Despite the various markets Amazon participates in, it maintains a competitive advantage in all of them. Regardless of what it is that the customer is looking for, Amazon provides the customer with a fast, reliable service at a lower price. Due to its wide array of products and services, Amazon has millions of customers. It maintains and keeps the millions of customers because of the aforementioned reasons, plus its ability to efficiently fulfill orders, on top of its excellent customer service. Finally, it has a knack of staying ahead of the competition, despite the competition quickly copying Amazon’s strategies. Amazon still controls 40% of the U.S. e-commerce book market, its Echo devices own roughly 75% of the smart speaker market, it operates a major Hollywood studio, and its AWS possesses about 40% of the cloud computing market (Cohan, 2018). To top it all off, which may be Amazon’s largest competitive advantage, 55% of Americans begin their product searches on Amazon.com, which most likely leads to the majority of those shoppers finishing their shopping at Amazon as well (Levy, 2016).
Despite its strengths, Amazon does have weaknesses and opportunities for improvements. Although it has a strong brand and extensive product mix, Amazon has a very imitable business model, have a very limited brick-and-mortar presence, and have yet to strongly penetrate developing markets (Greenspan, 2017b). In addition, in recent years Amazon has had counterfeit products sold on its site, plus elements of cybercrime, which has obviously led to discontent amongst its customers, as well as those who sell their products on Amazon. These weaknesses and threats lead to opportunities for Amazon. Amazon can dedicate efforts into using technology further to its advantage and tighten security plus address and eliminate counterfeit sales to protect itself, its vendors, and its customers. On top of that, Amazon can focus on penetrating developing markets prior to other companies emerging in these markets. Finally, Amazon has the opportunity to open more brick-and-mortar stores (Greenspan, 2017b).
Amazon is the industry giant for many reasons. It’s recognition of the competitive forces, using its value chain to bring value to the customer, maintaining its competitive advantage by consistently adapting. Amazon has a mass of products, various places of distribution, its promotion and marketing is second to none, it prices are value and market-oriented, and it has amassed millions of people as customers, not to mention the customer service. Richard Koch (as cited by Cannivet, 2018) elucidates that two types of businesses succeed over time: price simplifiers, such as Walmart (people shop to save money), and proposition simplifiers, such as Apple (people shop to engage in the experience). While most companies strive to compete in one area or the other, Amazon not only competes but dominates in both by simplifying the price and the proposition for its customers. As a result, Amazon has risen to the top of the chain and will continue for the foreseeable future. Thus, Amazon is the epitome of proper implementation of strategic management. From its inception, there were goals, constant evaluation both internally and externally, implementation and evaluation of strategies, and a significant amount of creativity and flexibility, which allowed Amazon to go from an idea to a multi-industry behemoth that shook and disrupted many industries.
Resources
Boss, J. (2017, June 20). Amazon's Competitive Advantage Isn't Cost Or Convenience, It's This. Retrieved June 22, 2019, from https://www.forbes.com/sites/jeffboss/2017/06/20/amazons-competitive-advantage-isnt-cost-or-convenience-its-this/#48e11bff4958
Cannivet, M. (2018, February 02). 3 Secrets Of Amazon's Success Anyone Can Emulate. Retrieved June 22, 2019, from https://www.forbes.com/sites/michaelcannivet/2018/02/02/3-secrets-of-amazons-success-anyone-can-emulate/#269ab1504826
Cohan, P. (2018, February 05). 3 Reasons Amazon Is The World's Best Business. Retrieved June 22, 2019, from https://www.forbes.com/sites/petercohan/2018/02/02/3-reasons-amazon-is-the-worlds-best-business/#73d135b46356
Dudovskiy, J. (2018, August 05). Amazon Value Chain Analysis. Retrieved June 22, 2019, from https://research-methodology.net/amazon-value-chain-analysis/
Ferguson, E. (2017, February 20). Amazon.com Inc.'s Marketing Mix (4Ps) Analysis. Retrieved June 22, 2019, from http://panmore.com/amazon-com-inc-marketing-mix-4ps-analysis
Greenspan, R. (2017a, February 20). Amazon.com Inc. Five Forces Analysis & Recommendations (Porter's Model). Retrieved June 22, 2019, from http://panmore.com/amazon-com-inc-five-forces-analysis-recommendations-porters-model
Greenspan, R. (2017b, February 20). Amazon.com Inc. SWOT Analysis & Recommendations. Retrieved June 22, 2019, from http://panmore.com/amazon-com-inc-swot-analysis-recommendations
Ingram, D. (2018, June 26). Outbound Vs. Inbound Logistics. Retrieved June 22, 2019, from https://smallbusiness.chron.com/outbound-vs-inbound-logistics-77016.html
Ketchen, D., & Short, J. (2012). Strategic Management Evaluation and Execution. Retrieved June 21, 2019, from https://my.uopeople.edu/pluginfile.php/515745/mod_page/content/6/strategic-management-evaluation-and-execution compressed.pdf
Kenton, W. (2019, June 09). How Strategic Management Works. Retrieved June 21, 2019, from https://www.investopedia.com/terms/s/strategic-management.asp
Kroenke, D. (2007). Organizational Strategy, Information Systems, and Competitive Advantage. Experiencing MIS. Upper Saddle River, NJ: Prentice Hall.
Laudon, K. C., & Laudon, J. P. (2007). Information Systems, Organizations, and Strategy. Management Information Systems: Managing the Digital Firm 10th ed. Upper Saddle River, NJ: Prentice Hall.
Levy, A. (2016, November 29). Nobody talks about Amazon's true competitive advantage. Retrieved June 22, 2019, from https://www.businessinsider.com/amazons-competitive-advantage-over-walmart-and-target-2016-11
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