General Description
Amazon, Inc. was incorporated in 1996 and provides various products and services using its websites. The organization operates using three major segments: Amazon Web Services, International Web Services and North America. The products include content and merchandise that it buys for resale from the vendors and the ones offered by the third-party sellers. Amazon also conducts manufacturing and the sale of electronic devices. Through Whole Foods Market, a subsidiary, the company provides organic and healthy foods as well as staples across the stores that it operates (Amazon.com, 2018). It also provides various products including whole trade bananas, organic brown eggs, organic baby kale, baby lettuce, salmon, avocados and organic gala. The business also provides Amazon Lockers that can be found in specific Whole Foods Market stores. It also ships products from its www.Amazon.com to other local Whole Foods Market store. The North American segment is mainly made up of retail sales from consumer products and subscriptions through websites in the region.
The International segment includes the exportation of sales that are made from the internationally-focused websites to clients found in Canada, Mexico and United States. On the other hand, the AWS segment is made up of sales of storage, database, compute as well as other service offerings for enterprises, start-ups, academic institutions as well as government agencies. Amazon further offers services, including fulfilment, database offerings, advertising, publishing, digital content subscriptions and co-branded credit cards. Using the retail Websites, the company also serves consumers and focuses on convenience, selection and price. Amazon also manufactures and sells high-quality electronic devices, including fire tablets, echo, fire televisions and Kindle e-readers. It provides programs to allow sellers expand their businesses and sell products. Independent publishers and authors are served through the Kindle Direct Publishing online service (Amazon.com, 2018). Finally, it provides programs that enable other filmmakers, app developers, authors as well as other to sell and publish their content.
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Vision and Mission Statements
The company’s vision and mission statements have contributed to its status as among the largest online retailers globally. The success is attributed to the robust measures put in place to fast-track the fulfilment of the mission and vision statements. Theoretically, the corporate vision statement offers direction for the future. Contrastingly, the mission statement presents business objectives and guides its strategic management. The mission statement mainly focuses on the delivery of high-quality and effective service (Amazon.com, 2018). For instance, the organization places emphasis on the convenience of target customers in accessing the best products within the electronic commerce market. The statements are critical for the development of strategies for supporting the competitive advantages of the company against businesses such as Walmart, Costco Wholesale, Apple, and Google. These competitors develop a strong force of rivalry as the Porters’ Five Forces suggests (Pace, 2017). The statements also influence subsidiaries’ operations including Whole Foods Market. Considering the array of products that the company provides, it aligns the mission and vision statement in order to unify the diverse operations.
The mission statement states, “ We strive to offer our customers the lowest possible prices, the best available selection, and the utmost convenience ” (Amazon.com, 2018). This promises lucrative electronic commerce services for satisfying the needs of target customers. The organization also focuses on variables of convenience, selection and price (Amazon.com, 2018). Consequently, there are various characteristics that could be identified in the mission statement, including best selection, lowest prices and utmost convenience. The vision statement is “ to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online ” (Amazon.com, 2018). The vision statement acknowledges the main aim of the organization to become the best e-commerce business in the world. Towards this end, various characteristics can be identified in the corporate vision statement in Amazon, including wider product selection, global reach and customer-centric approach. The vision statement emphasizes on international leadership, global expansion, customers and product mix.
Role of Ethics, Social Responsibility, and Environmental Sustainability in Strategy Implementation
Amazon Inc. is committed to sustainability and a review of its corporate responsibility leads to the conclusion that it has made substantial progress within two key areas: renewable energy commitments as well as packaging improvements. These are material issues for the organization and crucial from an environmental perspective. The company’s “frustration-free” packaging is an example of a sustainability initiative that emanates from customer-focus or prioritization. Amazon describes this packaging as one made from 100% recyclable materials that are easy to open and that do away with the need for extra shipping box (Amazon.com, 2018). The change appears modest but actually entails numerous supply chain engagement layers that include working with engineers and manufacturers. Because products sold on Amazon rarely see retail stores, packaging should not incorporate many of the security measures that keep a commodity pristine. Through the elimination of these elements, the company saves materials, minimizes costs and pleases its clients. According to the Sustainability expert at Amazon, Kara Hartnett Hurst, packaging accounts for substantial sales globally and by December 2017, its sustainable packaging innovations did away with 215000 packaging material tons (Amazon.com, 2018). Continued advances in processing and materials used for packaging are critical for enabling the business to continue innovation and reduce costs and wastes.
The company has also made substantial progress in renewable energy. It is committed to attain 100% renewable energy use for its global infrastructure footprint (Amazon.com, 2018). By the end of 2017, the company also indicated that it is powered by 50% renewable energy. These are substantial achievements despite being amorphous (Amazon.com, 2018). The company does not reveal its cumulative energy footprint or the plan it has for achieving the other half of the renewable energy footprint (Postrel, 2017). It could be assumed that this information is available within the company and used for planning for the other half (Amazon.com, 2018). However, the lack of detailed information about its progress and objectives may suggest that the sustainability measures are not as impactful as they could have been. This suggests that the company is not transparent enough in disclosing its sustainability and corporate responsibility information (Postrel, 2017). Despite this, it is worth noting that the company has made significant progress in aligning ethics, social responsibility and environmental sustainability into its strategy implementation. The company understands that ethics is critical for its reputation whereas environmental sustainability and social responsibility are crucial for meeting its environmental aims.
Core and Non-Core Business
A core business is an engagement perceived to be within the business activities or operations that act as the major sources of revenue for the business. On the other hand, a non-core business is the engagement perceived to be outside the business operations or activities (Pace, 2017). Non-core business is also perceived to be from the incidental or peripheral activities whereas core business is central to operations. Businesses tend to outsource non-core items to organizations specializing in such activities. Many businesses have non-core items and they are the activities that drive the business despite not being directly related to production of the services or products sold by the business to generate revenue (Teece, 2010). Some of the non-core items include human resources, supply chain management, logistics and data processing (Teece, 2010). Despite non-core items being considered as separate from the business operations that generate revenue, they still represent a significant part of the health of a business and represent a substantial part of the expenses of the business (Pace, 2017). In case non-core items are not transparently reported, stakeholders do not have the whole picture.
The core business of Amazon is superior e-commerce stores. However, the company has also opened six brick and mortar stores across the United States. Titled Amazon Books, they appear to be a twist to its traditional book store. It is using these locations for pushing Amazon Prime and promoting discoverability of new commodities which cannot be done by their website in an efficient way. They are non-core activities because the company is predominantly famous for making book stores to close shop by operating online. Amazon is also using alliances for radically revamping its value proposition (Amazon.com, 2018). This is a thoughtful strategic redirection that enhances its odds of survival and leads to true prosperity. The partnerships go beyond its core of books, music and video line into non-core business lines of other categories of consumer products. Arguably, the core and non-core businesses of the company have been critical in driving its growth, and it appears that its recent attempts are geared towards increasing its global presence and reach.
Global Strategies
The company’s Fulfilment By Amazon, FBA, service is a key component to the success it has had within the foreign markets. It has witnessed robust global growth in fulfilling services for sellers, thus suggesting that its FBA global strategy could be a crucial advantage to attract sellers into its marketplace. This could be true in nations that have less-developed infrastructure including Mexico and India. In case Amazon establishes an image for reliable and fast delivery within these regions, it could easily become a market leader. In addition, Amazon Prime is approaching its saturation within the US, with about 65% of the households having Prime memberships (Ritala et al., 2014). Despite the company still having room to expand its domestic markets, there is likelihood of growth significantly slowing down as more people join this membership program. It is in this realization that the company has decided to begin expanding internationally, and it still has significant potential of expanding within other markets. In other words, Fulfillment by Amazon and Amazon Prime are the major global strategies that the company is currently using. Whereas these strategies have not made more impact on the global front, they have been instrumental in guiding the expansion of the company worldwide.
Strategies for Diversified Companies
Acquisition is one of the strategies used by Amazon to diversity its offerings. Its rapid expansion and diversification, including Meal Kits and Whole Foods and the optimization of its prime membership package appears to send the signal that there is increased interest within industries that operate outside retail. The company uses market development as its core intensive growth strategy with an aim of entering and growing in the new markets. Its generic strategy enables it to develop competitive advantage that enables it to implement the market development intensive strategy (Merchant, 2014). Market penetration is the other intensive diversification strategy in its online retail business. Product development is used for supporting the intensive strategy for growth of business. Diversification is considered as the least important intensive expansion strategy. For instance, the company grew by acquiring Audible; a producer of audiobooks as well as related products. Consequently, the organization partly utilizes acquisition for implementation of intensive growth. The cost leadership generic strategy is also critical for enabling the company to expand in diversification through the application of similar approaches for reduction of operating costs as well as selling prices (Merchant, 2014). One of the strategic objectives related to this strategy is the growth of the e-commerce business using the aggressive acquisition strategy.
Amazon’s Sources of Revenue
An analysis of the way Amazon makes money could be summarized in the table below: according to the 2016 report.
Table 1: Amazon’s Revenue Sources in 2016
| Source of Revenue | Net Sales | Percentage of total revenues |
| Retail products | $91.4 billion | 67.2% |
| Retail 3 rd party sellers | $23 billion | 16.9% |
| American Web Services | $12.2 billion | 9% |
| Subscriptions | $6.4 billion | 4.7% |
| Others (credit cards and advertisements) | $3 billion | 2.2% |
| Total revenue | $136 billion | 100% |
Source : Amazon, Inc. Annual Report 2016
The size of its advertising business has already surpassed that of Twitter and Snapchat. Despite Amazon being a long way from affecting the Facebook and Google advertisement oligopoly, the two leaders should be wary of the emerging threat. Its ads work well because of the vast database of user information to facilitate effective targeting and high margins. The company also generates significant revenue from Prime Video through the creation of original content (Desjardins, 2017). It allocates lesser amount of money to content compared to Netflix, but still reaps in double. Amazon Prime Video is currently live in 200 nations. With about 65% of the United States households accessing Amazon Prime subscriptions, focusing on global sales is among the major lever that the company pulls on for future growth (Desjardins, 2017). Its B2B strategy also enables it to leverage its strong logistics to offer products for small businesses instead of consumers. Finally, Fulfillment by Amazon could also be critical for enhancing the experience of Amazon. However, the five sources of revenue identified in the table remain the 5 major sources used by the company for generating its money.
Internal Organizational Components that impact Strategy Implementation
The company seeks to be the most customer-focused organization. It is guided by four major principles: customer obsession, passion for invention, long-term thinking and commitment towards operational excellence. In each of its organizational components, its serves its primary customer sets, developers, content creators and enterprises. Its serves the consumers through the physical stores as well as retail websites while focusing on price, convenience and selection. The design of its website is in such a way that it allows numerous unique products to be sold by third parties and the company across many product categories (Ritala et al., 2014). The other internal component is the easy-to-use functionality that is heralded as reliable and fast. Amazon Prime also influences strategy implementation as it increases access to instant streaming of numerous movies. The other competitive forces are speed, reliability and quality of its tools and services as well as the ability of customers and willingness of changing business practices. By selling online, the company employs a low cost structure that incurs minimal costs. Online marketplaces also enable for selling higher number of units without any substantial increase in marginal costs. Furthermore, the other component is the consistent investment in more fulfilment centers and existing centers to reduce shipping costs and fulfilment periods (Ritala et al., 2014). Finally, its business model also incorporates third party sellers who can offer their merchandise on its sites. Ideally, third party sellers are usually attracted due to the high traffic volume on its sites.
Summary, Action Plan for Business Integration, and Strategic Planning Suggestions
This paper has provided a detailed description of Amazon Company, the role played by ethics, environmental sustainability and social responsibility in strategy implementation, vision and mission statements, global strategies and strategies for diversified companies. It has also explored the five major sources of revenue, and the internal organizational components affecting strategy implementation. From the discussions presented, this section seeks to provide an action plan for business integration and strategic planning recommendations.
The mission statement of the organization addresses many of the necessary characteristics of any ideal mission statement. Despite incorporating many of these elements, it does not include the business’ nature, its operations and technology. Consequently, Amazon should add more information within its organizational mission to provide employees and investors with a better idea about what the organization is all about. The recommendation should make the mission statement to become more comprehensive, particularly in addressing its businesses that include cloud-based computing services, e-commerce, hardware and software as well as brick and mortar. Similarly, the vision statement is strong but does not satisfy all the characteristics of an ideal vision statement. For instance, its corporate vision is clear and concise but not sufficient in ensuring its suitability in the future. For example, its current business currently has cloud services as well as brick-and-mortar bookstores. However, the vision statement of the organization still focuses on e-commerce. Consequently, Amazon needs to improve the vision statement by adding information about its current offerings to ensure that it is comprehensive enough and reflective of the nature of its business.
The other weaknesses that the company should improve on are a business model that can be easily imitated, limited penetration within the developing markets as well as a limited brick-and-mortar presence. It should increase its presence within the developing markets and strategically maintain offline and online competitive edge to overcome these impacts. The technological measures should be improved to reduce or eliminate the counterfeit sales. This could be achieved through the establishment of an automated process for all the consumer reports as well as product evaluation. Finally, the company should embrace a global approach within the global markets to develop a globalized business value chain. Overall, the future appears to be bright for the company and in case it continues focusing on its core competencies as well as expanding its global value chain, it will continue maintaining its market leadership.
References
Amazon, Inc. Annual Report (2016). http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_AMZN_2017.PDF
Amazon.com (2018). Sustainability . Accessed on October 15, 2018 from https://www.aboutamazon.com/sustainability
Desjardins, J. (December 20, 2017). Here's how Amazon makes its money . Accessed on October 15, 2018 from <https://www.businessinsider.com/how-amazon-makes-money-2017-12?IR=T>
Merchant, H. (2014). Configurations of governance structure, generic strategy, and firm size. Global Strategy Journal , 4 (4), 292-309.
Pace, S. (2017). Shaping Corporate Brands: From Product Features to Corporate Mission. International Studies of Management & Organization , 47 (2), 197-205.
Postrel, V. (October 17, 2017). Amazon Has a Chance to Redefine Corporate Responsibility . Bloomberg. https://www.bloomberg.com/view/articles/2017-10-17/amazon-has-a-chance-to-redefine-corporate-responsibility
Ritala, P., Golnam, A., & Wegmann, A. (2014). Coopetition-based business models: The case of Amazon. com. Industrial Marketing Management , 43 (2), 236-249.
Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning , 43 (2-3), 172-194.
