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Global Strategy and Sustainability Assignment
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1. Introduction
The era of globalisation and the internet has been transforming the business world into a Global village that provides the organisations with an option to go higher and obtain the advantage given by the opportunities of global operation. Such large-scale operation is mainly profitable because of their economies of scale, opportunities and having abilities to cover various parts of the world efficiently, attaining more consumers, generating strategic supply chain relationships and revenues. This report will recognise the global business strategies of Amazon that the organisation must utilise to operate in the global market of e-commerce.
1.1 Overview of the Company
In Amazon’s vision, Bezos infused two comprehensive concepts into e-commerce that construct a global customer-centred business and create an atmosphere in which customers can simply buy almost anything. The following were the key success factors (KPIs) in Amazon.com’s business model (Sadq, Sabirand Saeed, 2018; Jamnani, 2018; Desai, 2021). These include a solid location for a brand name, providing customers with exceptional value and outstanding knowledge of purchasing, the significant capacity of sales, and the realisation of economic scopes and scales.The global marketing strategy of Amazon is to enhance the Amazon brand name, improve consumer traffic on Amazon.com websites, increase customer loyalty, stimulate repeated purchases, and develop incremental purchases for products and services.
2. External Analysis of Amazon’s Industry of Operation
2.1 PESTLE Framework
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Factors
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Analysis
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Political
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Political, as well as,economic pressures are the consequence of Amazon’s decision to increase the minimum wage for its employees in the UK and the USA. The e-commerce giant has been criticised by Donald Trump, the “GMB Union” (United Kingdom),Bernie Sanders and the Archbishop of Canterbury. However, political decisions could create prospects for continued development.
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Economic
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In particular, the UK and the USA have high labour costs and tax changes that might put their earnings at risk, with direct effects on the business’s long-term growth. E-Commerce remains profitable even during the pandemic, despite the economic slump caused by the COVID-19 pandemic, as purchasers are searching for an alternative to physical store shopping.
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Social
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Since the advent of the epidemic, online business has become more popular, yet others claim that Amazon makes several people unproductive and it may have social and health consequences. Since the start of the pandemic, buying online has become increasingly popular. In addition, staff were pressured into working extra time due to overwhelming work in the warehouse.
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Technological
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To enhance the efficiency and security of the Amazon delivery system, Amazon is developing a very rapid delivery method termed “Amazon Prime Air” to offer shipments of up to 5 pounds in 30 minutes by employing “unmanned aerial vehicles” like small drones. Nevertheless, the security of sensitive data, like credit cards and debit cards, and any identifying personal information held on the Amazon website concerns businesses and customers.
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Legal
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Amazon has to comply with each nation in which it operates norms and regulations. The “UK Competition and Markets Authority” fined the company £55,000.The CARES Act, which supports small businesses in reducing the economic burden from COVID-19, has been the sole important pandemic legislation. The influence, however, on Amazon or its major competitors would be minimal.Amazon, like any retailer, has been struggling, because of certain export/import constraints on products like medical equipment pushing increasing costs to customers but not the range of the product offerings.
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Ecological
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The main areas of criticism have been package volume, emissions associated with traffic and environmentally toxic materials. By 2030 and net zero-carbon in its companies by 2040, the company plans to make 50% of its shipments of zero-carbon.Notice of “2020 Amazon Annual Meeting of Shareholder” asserts that deliveries of online grocery products contribute 43% less CO2 per product than shopping in outlets. In 2019, Amazon invested more than $100 million in environmental and reforestation solutions and initiatives.
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(Source: Elliot, 2018; Patricof, 2018; Amazon.com, Inc., 2018; Amazon, 2020; Luo, 2020; US Department of the Treasury, 2020)
2.2 Porter’s Five Forces Analysis
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Forces
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Analysis
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Threat of New Entrants (Low)
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Though its market’s lower switching costs make it easier for entering and gaining clients in e-commerce, Amazon has a very high brand name in the e-commerce field. Through investing millions in consumer experiences including a consumer-friendly website, times for delivery and merchandise returns, Amazon distinguishes itself. Amazon has earned a reputation for offering the best market experience.
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Threat of Substitution (Moderate to High)
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The main substitute is the purchase of the product at a brick and mortar store if considering online sellers alone. Considering normal circumstances, physical merchants are somewhat too highly menacing the online industry. However, the epidemic has reduced the danger of substitution for Amazon and other retailers by consumers’ unwillingness to go shopping in physical shops.
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Bargaining Power of Suppliers (Low to Moderate)
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Particular medical supplies like masks, vitamins and sanitisers amidst the pandemic, nevertheless, are in short supply due to the increased demand. Amazon can affect the price of the suppliers for the majority of products due to the amount that they buy. Moreover, the well-developed consumer compliance system of Amazon would hinder vendor integration.
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Bargaining Power of Buyers (High)
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Amidst the epidemic, the economic downturn reduces demand for consumer products and increases competition in global market. The consumer-focused approach of Amazon builds its reputation and offers a broad range of products on one website. To get reasonably good quality minimal prices in the market, consumers can view prices and not visit the retail stores.
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Competitive Rivalry (High)
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Over the past few years, with several small retail businesses, the number of competing companies entering the industry expanded. Within the impact of the pandemic, the number of participants may not increase as rapidly as in previous years. Meanwhile, the concentration on the online enterprise because of the low foot traffic of physical companies resides in competitors like Walmart, Flipkart and Alibaba.
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(Source: Luo, N., 2020; The Associated Press, 2020; Sadq, Sabir and Saeed, 2018; Onyusheva and Seenalasataporn, 2018)
![Porter’s Five Forces Analysis of Amazon]()
Fig 1: Porter’s Five Forces Analysis of Amazon
(Sources: As created by author)
3. Internal Analysis of Amazon.com
3.1 VRIO Analysis
Brand Name: Amazon, the largest international e-commerce brand, has several variables driving its development and one is its trustworthiness (Sastry, Katvi and Tourani, 2019). In addition to being a trustworthy online retail brand, its focus on customer service is a well-known factor that has increased its brand reputation.
Customer Experience: Consumer experience is not only a major e-commerce differentiator but a foundation of reputation and a motivator of demand for digital major retailers (Sastry, Katvi and Tourani, 2019). Amazon has achieved considerable development in both domestic and international markets during these last years, with a strong stress on customer experience as one of the driving factors of its increasing brand awareness and appeal.
Research and Development:The research and development (R&D) approaches of Amazon are both a generator of reputation and growth in the market. Amazon has the highest spending for R&D in the sector (Nkwo and Orji, 2018). Amazon also devotes substantial R&D resources to the online marketplace.
Distribution Network: Amazon’s distribution system is among some of the biggest. No other company has the same distributing systems with adequate tools and expertise in the retail sector, combining physical and online retail (Nkwo and Orji, 2018). This great attribute is one of the main reasons behind Amazon’s competitiveness.
Product Range: A significant driving force for the company is the wide product variety supplied on the e-commerce portal of Amazon. This precious asset, together with the distribution capacity of Amazon, offers the brand a sustained strategic advantage (Sastry, Katvi and Tourani, 2019).
Customer Base: Another source of competitive advantage is Amazon’s huge base of loyal customers, which comprises millions of people of the United States and several worldwide leading marketplaces.
Human Resource Management: Human resources management for digital firms such as Amazon also holds a fundamental competitive advantage. Improvement at Amazon is partly a result of research and development investment. The firm employs many experienced computer engineers and programmers to continually increase its online market adequacy and effectiveness.
Marketing: Branding provides a strategic advantage for nearly every major brand, especially to technology brands and retail firms (Nkwo and Orji, 2018). Although the firm has become a well-known brand and yet still it employs a broad range of marketing and promotional channels like direct marketing, associate commercialization and other media content such as e-mail marketing.
3.2 Value Chain Analysis
Inbound logistics:Inbound logistics specify the actions of a firm concerned with raw materials acquisition (Berg and Knights, 2019). Typically, Amazon has no items of its own. It offers a platform to other firms of the market to sell its products and services. In general, Amazon has no long-term commitments with these companies or suppliers. It gives its suppliers inbound logistics using Fulfilment by Amazon (FBA) service.
Operations: In three categories, Amazon arranges its activities. The firm has a unique and distinctive problem-solving strategy. (Berg and Knights, 2019). One of the main competitive advantages generates from the operations of the corporation.
Outbound logistics: Outbound logistics comprises actions in which manufactured items are stored, transferred and distributed. In its outbound logistics, Amazon includes several operations (Rodrigue, 2020). Amazon has its centre of fulfilment using robotic inventory technologies. It covers the management, storage, collection and delivery of goods. The firm has about 175 units of fulfilment worldwide.
Marketing and Sales: Amazon has huge marketing costs globally. Likewise, their investment in this sector has been gradually rising in recent times. Over $13 billion of advertising costs was borne by the corporation in 2018 (Rodrigue, 2020). The firm raised its advertising spending by 5 billion dollars in 2019 and invested more than 18 billion dollars annually. It was about 37 per cent higher.
Services: Another competitive edge is Amazon’s outstanding customer service. For all its offerings, the firm gives the consumers diverse alternatives. Including buyers and sellers from the Amazon marketplace and Prime clients on the site (Rodrigue, 2020). The system provides merchants with many tutorials, tools and applications for improved selling.
4. Evaluation of CSR and Sustainability
4.1 Triple Bottom Line Theory (TBL)
TBL can be seen as a CSR framework that incorporates three dimensions of performance measures, like economic, social and environmental that need to be sustainable. The basic objective of TBL is sustainability.
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Dimensions
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Analysis
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Economic
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Customers of Amazon desire correct-sized recyclable packaging, which minimises waste and enables free shipping. Amazon reduces waste, increases recycling and offers its consumers alternatives for their items for reusing, repairing and recycling. They try to send less material to the site and more into the circular economy. Support from Amazon creates local economic potential through the creation of a new source of income for forestry and rural owners. The company harnesses forests’ carbon storage capacity.
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Social
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The supply chain policies of Amazon have been extended to cover broader and stricter restrictions. The objectives of these measures are to guarantee pay equity, supplier transparency, and safety for employees and equality between women and men and sustainability in the environment. Amazon is actively seeking people from institutions and schools representing diverse ethnic groups. It is dedicated to developing a globally transparent and fair supply chain, which will give priority to individuals and the environment. In 2020, Amazon began initial measures to reveal important supply chain partners and stakeholders and to openly investigate and resolve any possible abuses. The Amazon community outreach programmes, comprising housing, food security, support for education and COVID 19 aid, aim to resolve the most pressing problems today. Despite Amazon invested heavily in CSR programmes, challenges and objections appeared in Amazon warehouses in the COVID-19 situation, including some allegations of adverse work conditions.
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Environmental
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The e-commerce retail giant has joined Climate Pledge, a group of leading companies committed to transforming the global economy against climate change-related risks. Initial funding of $2 billion would invest in businesses whose goods and services will make the move to a low carbon economy easily. Amazon’s sustainable investment also reflects several ongoing projects like the adoption of a 100% renewable energy programme by 2025 and then taking 100,000 electric vehicles on road within 2030. Nevertheless, Amazon continues to face intense criticism of its environmental sustainability practices and employees and special interest entities make demands for a more aggressive method.
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(Source: Brin and Nehme, 2019; Greene, 2020; Stackl, 2020; Amazon Sustainability Report | 2020. 2021; Dean, 2021)
5. Implication of Analysis for Competitive Advantage and Global Options
To identify the strengths and weaknesses of Amazon from the internal analysis conducted above, the SWOT framework will be employed in this section.
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Strengths
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Weaknesses
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· Amazon provides superior customer service, as well as improved brand awareness and appeal.
· Amazon’s research and development activities benefit both the company’s reputation and market growth.
· Amazon has one of the largest distribution networks in the world.
· The large selection of items available on the Amazon e-commerce platform is a significant source of revenue for the company.
· Amazon has a massive following of loyal customers.
· Amazon markets and promotes its products using several channels, including direct marketing, marketing partners, and other media materials, such as e-mail marketing.
· The company’s approach to problem resolution is unique and distinctive.
· Amazon uses robotic inventory technology to handle, store, collect and deliver items (Sharma, 2020).
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· Competitors may easily imitate Amazon’s business model. “Barnes & Noble”, “eBay”, “Netflix”, “Hulu” and “Oyster” are among them (Sadq, Sabir and Saeed, 2018).
· Amazon incurred losses in select places like India. Free delivery to clients might be one reason why the dangers of losing profits in particular industries are exposed.
· Amazon’s debut of “Fire Phone” in the United States was a major failure while its “Kindle” project was not even properly developed.
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Opportunities
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Threats
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· Amazon has the power to penetrate or grow its business in developing markets.
· Amazon can increase competition against large retailers by establishing physical locations and engage people with the brand (Alshmrani, 2021).
· It may choose to reverse integration by expanding its in-house brand items, such as Amazon Basics, in order to distinguish its offering and boost profitability.
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· Amazon can face aggressive rivalry in the future with large retail companies like “Walmart” and “eBay”. Moreover, Amazon currently competes with organizations like- “Apple TV+”, “Netflix”, “Disney+ Video” (Streaming Service), “FexEx” (In Logistics) etc.
· Imitation is easy, as several new competitors with the same Amazon business approach enter the market on a regular basis (Sadq, Sabir and Saeed, 2018).
· If economic uncertainty intensifies, Amazon’s sales may be affected.
· Amazon has an enormous number of false reviews and the situation has recently intensified because of the epidemic.
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6. Recommendations for Strategic Development
To address the issues identified from the external environmental analyses conducted in the preceding sections, it is suggestible that Amazon should implement certain steps for carrying out its strategic development.
To combat the “threat of substitution,” Amazon should invest in improving the appeal of its service. For instance, the business must continue to improve the usability of its website in order to maximise the user experience (Alshmrani, 2021).
To address the “threat of competitive rivalry” Amazon should first correctly identify the products/services offered by the chief market competitors; if it determines that there is a risk of simple switching between a business’s product and the alternative, the company may act preemptively and attempt to win people over to their product. It should follow the following procedure to address this issue:
- Identification of Consumers with the capability to “Switch Over”
The first thing that a firm may do is identify those individuals of the potential audience that will most likely migrate to a replacement. This group might collectively have a lack of satisfaction or a weak area (Alshmrani, 2021). An example may be discontent with a firm or an industry’s business methods.
- Communicating with them to build a relationship
Once a target audience is established, a firm may identify ways to connect and build a relationship with these individuals. This might take place via customised information sessions, sales interactions or targeted mail or advertising.
- Informing them about the Company’s Product Line
Once a communication channel is created, information on the product being offered and the advantages and features it may offer can be conveyed (Solanki et al., 2020).
- Offering Special Packages or Trial Purchases
To promote these customers, it is a good idea to provide them with special offers, package deals, or test purchases to take the first step towards change. This can facilitate the transition process and provide value for the user (Alshmrani, 2021).
- Constantly interacting with the customers
For strengthening the new connection, customers would need to be certain that their requirements are satisfied and potentially better than previously. The existing communication line must be strengthened and communications and sales services must be continued.
- Working towards Improving Customer Loyalty
Over time, customer loyalty may be developed via continuous outstanding relationships, exceptional service and sustained value for money (Han and Lee, 2021).
- Investing towards maintaining the customer loyalty
Customer loyalty guarantees that customers do not return to their previous product. Discount offers and incentives will only go so far. Long-term relationships must ensure that the product remains at an outstanding value for money, at the appropriate quality level and satisfies consumer demand (Wood et al., 2021).
7. Recommendations for CSR and Sustainability
The following set of recommendations can help Amazon to deal with its CSR related issues:
- Recognizing issues that truly matter to the customers.
According to a “Cone Communications” CSR study, 87% of customers would purchase a product if the firm supported a social or environmental cause they care about (Kurpierz and Smith, 2020). Consumers are rewarding socially responsible businesses through brand loyalty, donations to organisations supported by the businesses, and purchases of items that help the community. As recent corporate scandals indicate, customers are also not hesitant to use their purchasing power to penalise firms for irresponsible or destructive behaviour via boycotts and unfavourable social media campaigns. Amazon should thus bear these points in mind as it develops its CSR activities.
- Measuring the ROI of the CSR efforts for the C-suite and the investors.
The evaluation of CSR programmes may be intimidating, especially in various areas, such as “human resources”, “marketing”, “sustainability” and “compliance”. However, creating a structured framework for reporting that connects CSR activities to the business’s strategic goals will inform the C-suite and investors about the impact of organisational CSR initiatives on the company’s success (Fahad and Rahman, 2020). Amazon should thus attempt to measure socially responsible actions that directly benefit the company’s bottom line—for example, “cost savings”, “new customer acquisition”, and “brand recognition”.
- Expansion of the range and scope of CSR
Conventionally, yearly giving programmes have defined CSR, because of marketing initiatives, and attempts to conserve natural resources. In addition, while such efforts are commendable, Amazon’s CSR activities need to be more inventive to meet the expectations of its diverse stakeholder groups.
According to the “Cone Communications” CSR study, consumers value the following business actions: being a “good employer”, developing products and services that promote individual well-being, protecting and benefiting society and the environment, and investing on issues in local communities and around the world and advocating critical social justice issues. (Kim and Afzali 2021). As a result, these considerations should be addressed by the business to improve its operations.
- Avoiding the practice of “Greenwashing”
Amazon must guarantee that it employs only fair and honest marketing methods that represent the company’s ethics. It should abstain from any advertising or communication that may be construed as manipulative or detrimental to the public interest (Ting, 2021). Additionally, it should ensure that it talks the walk and delivers on its promises; otherwise, the firm risks a significant consumer reaction.
8. Conclusion
The global strategy of Amazon has been analysed in this report, using PESTLE and Porter’s Five Forces frameworks for external environment analysis, as well as VRIO and value chain for internal environment analysis. CSR and sustainability have been evaluated through the triple bottom line theory. The analysis implication of these discussions through SWOT analysis for competitive advantage and global options has led to recommending approaches to take for strategic development and CSR and sustainability in the areas of the gap identified in the report.
References
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