Amazon's Business Strategy: Navigating Internal & External Challenges
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Introduction - Navigating Retail Challenges Through Online Transformation and Strategic Planning
The current pandemic has hit the retail sector hard and many companies have suffered huge losses as a result. However, the online retail industry has suffered less than the offline retail industry. In addition to the online platform, the internal and external business environment has also been greatly influenced by the retail industry. As mentioned in the case study, while all sectors have suffered losses in the pandemic, Amazon's growth margins have increased significantly. This study will discuss in detail Amazon's internal and external business management approach. This study will also discuss in detail what can be done to solve some of the special problems of Amazon.
Part 1: Industry trend analysis
1.0 Analysis and discussion
1.1 Introduction and identifying issues
Amazon is currently facing a lot more 'seller complexity', and as a result the company's brand is getting worse. As mentioned by Wu and Gereffi (2018), the seller's relationship with Amazon has a long history of gaps and the customer's trust in the company is declining. The problem is that there is a huge communication gap between Amazon and sellers, resulting in customers delivering the wrong products.
It is also known that there have been many complaints from Amazon about the wrong product when everyone seems to be relying too much on online rats due to the pandemic situation (Peprah et al., 2022). The problem has escalated so much that many customers have complained to Amazon many times about it, but there has been little response from Amazon.
1.2 An analysis of Amazon’s external environment
a. Determine the components of the industry sector
Amazon has become one of the (probably most popular) online retail companies of our time. As opined by Kodiyan (2019), one of the reasons for Amazon's current success is that the company's management system is much more diversified, and because of this the company has been able to easily expand the market business by targeting all aspects of the market. Moreover, the company has launched a number of products on the online platform, which is an advantage for the company to target all kinds of customers (Cattero and D’Onofrio, 2018).
This statistic shows that Amazon's sales growth is growing very fast every year. In 2021, the amount of sales revenue of Amazon was almost $470 billion (statista, 2021). It is clear from these statistics that this company has gained a lot of popularity in the market, and it has a direct impact on the company's profit margins. As mentioned in the case study, in a complex situation like Pandemic, Amazon's sales revenue increased by 47%, indicating the customer's reliance on the company. However, due to the problem of sellers with the company, the company has a supply chain, which is a much bigger problem, and as a result, many of the company's customers are hurt, which has a small negative impact on the company's brand value (González and Kröger, 2020).
b. Analyze the sector by applying relevant model (Business Cycle Analysis model)
This model gives a good idea of how the negative impact on the retail sector during a pandemic can be felt, such as
Expansion : This stage refers to the moment before the pandemic situation arrives, and the problem is that growth in Amazon and the online retail industry has been on the rise.
Peak: From an economic point of view, this peak stage is known as the last upward step, it means the company and the market have achieved their highest revenue, and the revenue of the company or the market will not increase at that moment (Carmenta et al., 2019). In that case, Amazon's revenue or profit morphine was at the top.
Recession: In this case the revenue growth of the company starts to slow down a bit and according to the experts this indicates the actual valuation of the company and the market (Hughes et al., 2019). As market growth plummeted, Amazon's revenue margins began to decline, and this time-line refers to the situation just before the pandemic.
Depression: This happened during the pandemic situation and the market valuation on the situation turned negative. Amazon's revenue has plummeted due to the fact that the supply chain was not fully operational during the Pandemic situation (annualreports, 2020). All these market valuations have decreased a lot, and its negative impact on the company's organizational structure.
Trough: In this situation the pandemic situation has become much more intense and as a result the market valuation has remained at a very low level. As suggested by Soni et al., (2019), this situation points to the worst situation in the market and does not lead to the worst situation in the market. Although Amazon's growth margin is slightly lower in this world, the company's business model has been able to increase its revenue easily due to its online presence.
Amazon's revenue and sales margins have been growing steadily since then as the market has recovered.
c. Formulate a suitable industry report
The above situation and statistics show that due to pandemic problems, the immediate condition of Amazon also worsened, but compared to the actual situation in the market, it is clear that Amazon's performance was much better. As stated by West (2019), the company's supply chain has become much stronger since Amazon relied entirely on online, and because the company's internal management structure is much tighter, external factors are better controlled.
One of the reasons for the worsening market situation due to the pandemic situation is the shutdown of the transportation system, and as a result, the supply chain of the retainer industry was completely shattered. This has had a devastating effect on Amazon's operational processes, and this made the situation of the company a little weaker. However, as the market conditions gradually improved due to the pandemic situation, so did Amazon's performance, and this pandemic situation proves that most of the customers in the market rely heavily on Amazon.
2.0An internal environmental competence analysis
a. Review the internal factors which determine Amazon’s competences
Amazon is currently one of the most valued companies in the market. Many experts believe that the company's internal environment is the most affected by Amazon's current success (Rangaswamy et al., 2020). Improving Amazon's work culture creates a lot of career opportunities for employees working here.
The company's internal environment has become much stronger due to the good support of the employees. Moreover, the company is moving very fast in the market due to the far-sighted management team (Delfanti, 2021). All of these approaches have made it possible for the company to better organize its internal environment.
b. Apply appropriate assessment tools (Mintzberg 5 P's)
Plan: In this case, the company's stakeholders develop a much more effective plan for improving the company's internal structure, and in this case the highest priority is given to the internal and structural improvement of the company (Upadhyay and Kundu, 2020). In order to improve Amazon's work culture, the company's CEOs and directors regularly strive for plan development, and in this case, feedback from internal stakeholders is a much higher priority (annualreports, 2020).
Play: After knowing all the internal issues of the company from the internal stakeholders, an attempt is made to understand all the aspects of the company and fulfill the proper responsibilities (Pearson et al., 2019). In this case all the internal affairs of the company are well understood and proper plan development is tried, and in this case, the development of the company's audit report is given much importance (annualreports, 2020).
Pattern: In this case an attempt is made to develop a proper plan and strategy by understanding the actual situation of the internal culture and structure of the company (Kwilinski et al., 2019). When it comes to planning and strategy development, Amazon's human resource management and feedback from senior employees are highly valued.
Position: Attempts are also made to understand the actual situation of the company through appropriate strategy development based on internal culture and structure. Many experts think that the internal structure of the company can be innovated by making decisions based on the external position of the company (Wu and Gereffi, 2018). The company has been able to position itself well in the competitive market for the betterment of all situations.
Perspectives: In this case, the company's stakeholders talk to the company's employees in an effort to improve the company's culture. Amazon's management team executives are increasingly aware of improvements in the company's work culture, and in this case the employees of the company are surveyed and all the problems of the employees are tried to be identified (Kodiyan, 2019).
c. Combine findings with of the external scan
Several external secondary researches have shown that the performance of Amazon's work culture is much more advanced. As stated by Peprah et al., (2022), employees are considered by the management team of Amazon as the assets of the company rather than as liabilities, and that's why Amazon management team members are so much more aware of employees' career development.
It is also learned from several secondary external sources that there is no communication gap between the management team and the employees of the company (Carmenta et al., 2019). As there is no communication gap between the employees and the management team, the problems of the employees are being solved quickly.
3.0. The impact and influence of change and culture
a. Assess the impact of implementing of change on Amazon (Lewin’s change management model)
Lewin’s change management model suggests that a company needs to have a proper backup plan in order to change its policy or culture, and at the same time there is a need to follow the appropriate steps to change the management of the company (Hughes et al., 2019). Developing a new plan as well as implementing it makes the company's structure much more flexible which increases the risk factor.
Amazon's management team has been very vigilant about this change model, so much so that the company's risk factor has been brought under control.
b. Explain the influence of culture on management decisions (Scholes and Edgar’s cultural theory)
This cultural theory states that in order to improve the culture of a company, one needs to know the actual value of the company as well as the value of the company. This issue is very well maintained by Amazon, so the company's cultural risk can be controlled a lot.
c. Illustrate the effectiveness of operational functions (Six sigma theory)
The Six Sigma Theory implies that a company's work culture needs to be understood before any decision can be made on cultural improvement because understanding the alliance in the company culture will help to understand the problem of the company and it will help in the development of effective strategy (West, 2019).
That's why Amazon's management team values stakeholder feedback when making any major decisions on cultural improvement, and strategic plan development is sought only when the company understands all the issues from the stakeholders (West, 2019).
d. Stakeholder landscape
Amazon's management team prioritizes certain stakeholders to improve the company's culture, such as line manager, human resource manager, and employees (González and Kröger, 2020). In addition to taking feedback from all these employees, a proper plan is developed by understanding the importance of the position of these employees.
The company emphasizes some important approaches to the importance of stakeholder mapping processes, such as “Meet their needs”, “Key player”, “Least important”, “Show consideration” (González and Kröger, 2020). Amazon's internal structure has become much more stable due to the importance of these factors when it comes to stakeholder mapping.
e. Summarize relevant information
From this above discussion, it can be summarized that attempts are being made to balance the internal and external factors of Amazon, and because of this balance, the company is now able to secure much of its internal culture. Employees working in the company are getting a lot of opportunities as the internal culture of the company is getting improved a lot, and as a result the company is easily getting the support of the employees which is a very important issue. Moreover, the external market of the company is helping the company a lot, which is why it is convenient for the company to get competitive advantage.
Part 2: Client report
A. Strategic planning
i. Explain the benefits of planning
The first benefit of using a strategy formula is to get to know the company's work culture very well, and as it is possible to know a lot of information about the company, it is possible to develop a proper strategy for improvement in the work culture of the company (Rangaswamy et al., 2020). When they develop the right plan, it helps a lot to control the risk of the company, and this helps to increase the competitive advantage for the company. Moreover, many experts believe that proper organizational planning helps to balance the internal and external factors of a company (Delfanti, 2021).
ii. Apply relevant model to produce plan, objective, and future strategy (PDCA model)
Plan: The biggest problem for Amazon right now is the supply chain issue, and in this case the company's current plan is to try to improve the supply chain with sellers.
Do: In this case appropriate strategy can be developed by understanding the company's plan, and in this case, following the customer relationship model can be one of the reasons for success.
Check :In order to understand how effective the strategy is, it needs to be well-discussed with all the stakeholders of the company.
Act :At the latest stage, every effort will be made to implement a strategy and plan that can greatly reduce the problem of Amazon.
iii. Recommendation
For Amazon’s issue, it can be recommended that The Amazon management team should try to reduce its communication gap with sellers. Technology can be implemented to reduce the communication gap and will be much more effective in this regard. At the same time an Inquiry Committee may be formed for sellers' mistakes or for supply chain problems.
Conclusion
After discussing the above entire study, it can be concluded that in a complex situation like Pandemic, Amazon's sales revenue increased by 47%, indicating the customer's reliance on the company. The above situation and statistics show that due to pandemic problems, the immediate condition of Amazon also worsened, but compared to the actual situation in the market, it is clear that Amazon's performance was much better. Amazon's management team executives are increasingly aware of improvements in the company's work culture, and in this case the employees of the company are surveyed and all the problems of the employees are tried to be identified.
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