Amazon Inc. E-Business Strategy Analysis Free Essay

1.0 Introduction

A business in the virtual world is undertaken in the same way as the physical marketplace. However, there are some differences and apart from the corporate business strategy, there is a need for a multinational organization to have a suitable e-business strategy. Essentially, an e-business strategy is crucial in describing an organization’s long-term plan for the organization to adopt the appropriate digital technology to manage effective communications and to promote or facilitate sales of their products (Laudon and Traver, 2016, p. 24). This report intends to carry out a critical analysis of Amazon’s E-Business strategy. It will begin by analyzing the impact of digital technology on Amazon by analyzing its e-business macro-environment using the PESTEL analysis model, e-business micro-environment using the McKinsey 7S Model, and finally its competitors using Porter’s Five Forces model. The report will then evaluate the concepts of reintermediation as well as disintermediation in the industry that Amazon operates in. To facilitate this evaluation, vertical and virtual integration as well as Porter’s Value Chain will be considered. Eventually, the report will present a discussion and recommendations to Amazon’ e-business strategy on the ways the use of social media and social commerce can help Amazon to attain its objectives using the Customer Life Cycle and RACE marketing value framework. 

1.1 Overview of Amazon

Amazon is a multinational American-based technology company that is headquartered in Seattle, United States. The company was established by Jeffrey P. Bezos in 1994, and it deals in cloud computing, e-commerce, digital streaming and also artificial intelligence. It is regarded to be one of the Big Four Tech companies which include Apple, Facebook and Google (Amazon, n.d.). Amazon is the largest e-commerce organization in the United States, owning various products thus enabling it to attend to different customers. This company is a multinational company, meaning that it has customers from distinct countries. It uses its e-business strategy to serve its diverse customers by providing them with a one-stop convenient shopping environment with various products that range from grocery to electronics to apparel. The organization owns a publishing department known as Amazon Kindle Direct Publishing, which is an online site whereby independent authors, as well as publishers, have the opportunity of selling their articles as well as books. To efficiently offer timely delivery and good customer service, its warehouses are spread out in all its regions of operations in such a way that shipment of goods is done fast and at an affordable cost (Amazon, n.d.). The organization has emphasized in maintaining its relationship with customers through setting up customer service centers in all parts that the company operates in. It also has an effective e-business strategy which has enabled the company to attain and satisfy the customers’ needs. One of the outstanding aspects of its e-business strategy is the free shipment option that the company offers globally. This free shipment option has helped the company to provide an incredible and convenient shopping experience resulting in customer loyalty. 

With regards to Amazon’s business model canvas, the company has an exceptionally strong business model. This company can be defined as a two-sided market place whereby buyers, as well as sellers, converge. Amazon’s focus has been used to target the mass-market consumer. It has placed more emphasis on low margins as well as cost in driving market share. Amazon is considered to be the everyman and everything store, and majority of the United States population as well as other populations in the other markets Amazon is operating in adore it. Amazon’s customers can thus be segmented based on consumer behavior (Amazon, n.d.). The demographic use of Amazon widely reflects the trend in the adoption of technology. In areas where people have internet access, they tend using Amazon more, especially in cities. In terms of behavior, Amazon has significantly targeted people who tend to be comfortable shopping online as well as those who are ready to replace their several traditional shopping habits with a one-click shopping and one-hour delivery convenience. It appears that Amazon targets people who are price-sensitive as well as time-poor (Sastry et al., 2019, p. 93). According to the value proposition, Amazon provides its customers with a robust value proposition centered on four key ideas: selection, price, fast, fulfillment, selection, and convenience.

2.0 Analysis of how digital technology has impacted Amazon

The McKinsey 7S model


The company follows the cost leadership business strategy whereby it has been capable of sustaining this strategy due to the economies of scale, consistent business diversification as well as innovating diverse business processes. For instance, this company utilizes advanced computing as well as networking technologies to ensure maximum operational proficiency translating to reduced costs (Sastry et al., 2019, p. 95). Furthermore, Amazon’s business strategy focuses on the encouragement of communication between different constituents of its ecosystem including publishers, merchants, analysts, journalists, reviewers, app developers, and market commentators  (Sastry et al., 2019, p. 97). To add to it, the customer obsession, as well as the emphasis on Amazon leadership, is the pillar of Amazon’s business strategy. 


This company’s organizational structure is hierarchical. It is hard for Amazon to adapt another structure like divisional or matrix because of its big size comprising of 560,000 employees who serve customers exceeding 300 million across the world. The company has two CEOs as well as four Senior Vice Presidents reporting directly to the CEO of Amazon, Jeff Bezos  (Sastry et al., 2019, p. 106). Moreover, its organization structure incorporates Digital Management as well as Global Corporate Affairs departments, whose heads are directly reporting to the Jeff Bezos, Amazon’s CEO. 


Several systems enhance the business of Amazon. These systems entail employee recruitment as well as the selection system, customer relationship management system, transaction processing systems, knowledge management systems, and business intelligence system (Sastry et al., 2019, p. 112). Critical evaluation of these systems is normally carried out regularly to increase their efficiency and therefore increase their competitive advantage. 


Amazon’s required skills to enhance competencies encompass resourcefulness, creativity, physical endurance as well as the ability to work under pressure. It is essential to understand that Amazon less considers interpersonal skills like other e-commerce companies such as Facebook do. This is because Amazon has a different and unique organizational culture (Chang and Allen, 2016, p. 34). Additionally, Amazon considers the ability to work under pressure to be the most essential skill needed by Amazon employees. 


Amazon has a total of 798,000 part-time and fulltime employees who are branded as Amazonian. However, their employment levels experiences fluctuate because of seasonal aspects impacting its business. Moreover, the organization uses independent contractors as well as temporary personnel in supplementing its workforce (Amazon, n.d.). The company is ranked number one in the LinkedIn Top Companies List whereby most of professionals in the United States would prefer going to work. Their staffs are happy and are treated well such that they enjoy working in Amazon.


According to Amazon, its management style entails focusing on the obsession with metrics at corporate, fast decision-making as well as focusing on long-term benefits instead of quarter-by-quarter insights according to Wall Street’s expectations. It also builds its style on things that do not change so as to avoid the need to change their style rapidly from time to time (Salam, 2016, p. 12). Moreover, it focuses more on opportunities rather than failures just as Bezos significantly insist on focusing on opportunities and making risky moves towards exploiting the opportunities.

Shared value

Amazon’s shared value is on reconceiving products as well as markets through seeking profit opportunities among neglected customers  (Sastry et al., 2019, p. 93). It focuses on customers who are underserved and their needs not met and on delivering results in form of quality delivery and timely fashion. The company also explores and research on its market so as to improve on its customer service. It highly upholds the highest standards by increasing the bar and also making sure the goal of high-quality of products is achieved.

PESTEL analysis


The problems from e-business are not the same as traditional businesses; factors that affect the e-retail are still present. Amazon Company faces political challenges especially in Asian countries. A Hindustan Times report disclosed that it is a problem in India for a foreign firm to engage in business due to red tape and controlling factors—it is a costly affair due to taxes and political issues (Hindustan Times, 2020). American tech firms were aimed at the European Union (AU) for questionable intentions (Salam, 2016, p. 12), and EU targeted Google because it has anti-trust linked factors. Such political issues are significantly hinders Amazon’s operations. The stability of politics stimulates the steadiness in an economy. Such political unsteadiness, alternatively, has an emotional impact on the movement and reduction of the product of sales if affected.


Economic issues are always an important inspiration for the market conditions and market. If there are conditions of the economy in the market, there will be an increase in sales and profits will be higher. The all-world has of late been out in economic turmoil, and retail firm performance was better even throughout the recession period. These are due to the buying of consistent digital technologies by individuals regardless of whether better economic performance exists or not (Jain et al., 2016, p. 4). To economically thrive in the market, Amazon has started to leverage cloud technologies as well as the economies of scale. This strategy helps it to maintain minimum costs while allowing them to promptly scale without the sacrifice of price and quality for customers (Jain et al., 2016, p. 6). Gradually, Amazon also shifted to tablets, mobile phones as well as other technologies, enabling users to utilize Amazon anytime they want so as to gain an economic advantage through increased profits.


Social and cultural trends are also important factors behind e-retail growth. Trends in online shopping have been improved in the past few years, and more digital technology growth and mobile technology usage have led to the growth of sales online. Many people nowadays possess smartphones with an internet connection and they accomplish much from their mobile phones such as social media and online shopping. The introduction of 4G expanded the digital technology and retail sales such as Amazon and E-bay boosted. Demographic changes in customers may cause a positive concern on the retail part (Jain et al., 2016, p. 5), and there is a preference by most millenniums to buy their items online. They need better prices and quality goods to be brought up to their doorstep, an accessibility that is only achievable by the traders. Amazon benefits from the changes in customers shopping culture and also the demographic trends. In remote areas where market penetration is low, the brand should take into consideration cultural factors in marketing its brand so as to establish a better client connection.


Technological factors have increased more significantly from the 21st era. Both traditional and online business depend on IT technology and other forms to create better services. Achievement from this modern century requires a better-innovated technology which is important. Artificial intelligence, the internet, and cognitive intelligence have to be exploited in order to offer excellent services to customers (Jain et al., 2016, p. 7). Customer service is critical and therefore the use of technology is important in ensuring excellent customer service is offered. Development may not be attained minus marketing, client’s relationship and selling using the technology. Social media should be considered for a better association with clients by the retail business.


The important issues for businesses globally are concentrating on a few areas like packaging, wastes reduction, and energy consumption by retailers for sustainability in business. Sustainability and CRS have been financed further by Amazon, for instance, sustainable energy, waste reduction and renewable energy (Saleem et al., 2019, p. 22). Furthermore, it has financed in assisting their community create sustainable developments. The important focus of Amazon is renewable energy. It has achieved many investments for this sector thus gaining freedom fully from energy dependency which is non-renewable.


Legal submission is important for business globally. From the aspects of business, large brands like Amazon need to sustain submission with law. Amazon has many legal groups responsible for checking and addressing legal issues and problems. Some areas of operation needs an organization to obtain a legal agreement to operate in that area. Conflicts with the law might be costly for big firms such as Amazon, and any mistake may result in loss of reputation and public image of a firm. (Chang and Allen, 2016, p. 42). Most countries have diverse laws, which companies must to follow without giving an excuse. Law comes up with pressure on firms working globally, and Amazon needs to be guarded against this.

Porter’s 5 Forces

Amazon suppliers bargaining power:

The suppliers of Amazon have low to medium bargaining power because Amazon possesses an upper hand from its chain of supply. While there are many Amazon suppliers, all of these suppliers are required to perform business according to the regulations set by Amazon. The suppliers are required to adhere to the code of conduct that is set by Amazon. Core areas focused by Amazon in terms of associations of the supplier are;

  • The right to legal benefits and wages
  • Safety and health in living quarters and production locations
  • Suitable performing hours and extra-time pay
  • Prevention of forced labor and child labor (Chang and Allen, 2016, p. 44)

Suppliers are supposed to adhere to supply chain regulations set by Amazon which can be incompatible with some suppliers. Amazon may, however, change or bargain with new suppliers. It has several options for any product, and based on all these issues, the bargaining power for Amazon suppliers is small to medium.

Buyers bargaining power:

Buyers at Amazon have the bargaining power that is of medium to high. Product quality and customer fulfillment are more focused on by Amazon. The competitor’s number has grown in Amazon this year, and changing costs for its consumers are low. Physical retail likewise creates pressures (Jain et al., 2016, p. 7), and each customer has adequate facts when looking for items online and can choose a product based on the offered facts.

The threat of substitute products:

Amazon substitute’s product threats are high. Although other products have joined online retail, people may still purchase from retailers physically. One most important competitive benefits of Amazon is the better customer service it provides apart from the brand designation. Customers may change products for their satisfaction.

The threat of new entrants:

In Amazon, the new entrant’s threat is low due to several retail industry changes brought by digital technology proliferation. Many new products have gone into e-retail, so it is now easier to create an e-retail business exemplary with technological accessible resources. Many international and national brands such as E-bay, flip kart and Alibaba, have been created and they compete with Amazon (Jain et al., 2016, p. 7). Obstacles to entry have been reduced due to the growth of digital technology. However, it is challenging to build a brand such as Amazon due to expenses and marketing. Apart from this, other strategic issues need the kind of high level of commitment in order to build a brand effectively.

Rivalry in the industry:

The rivalry level from the industry is high due to the e-retail number of companies that have grown and massive competition from old retail brands. Costco and Walmart are essential rivals of the e-retail giant. There are several factors that create rivalry from the retail industry, and the large and small brands also contest for market portion and generating competitive pressure (Jain et al., 2016, p. 7). The rivalry has made significant impact in this industry as well as on digital technologies. This has driven significant technological innovation and improvement. For instance, to remain competitive amid the high rivalry in the industry, Amazon leverage cloud technologies as well as the economies of scale which helps it in maintaining minimum costs (Jain et al., 2016, p. 6). Gradually, Amazon has shifted to tablets, mobile phones as well as other technologies, enabling users to utilize Amazon anytime they want so as to gain an economic advantage through increased profits.

3.0 Evaluation of disintermediation and reintermediation concepts

Reintermediation refers to the shift of investment capital from non-back investments, and back to financial intermediaries. With regards to reintermediation, e-business has brought more opportunities for new intermediaries. Essentially, services websites tend to be attractive to customers so firms whose products are excluded from such sites or on popular online retailers like Amazon tend to be disadvantaged (Jain et al., 2016, p. 8). As per e-commerce, disintermediation is practiced whereby middlemen are eradicated due to the high competition in e-commerce companies such as Amazon to minimize payments to intermediaries. 

Porter’s Value Chain

Inbound logistics

In general, there are no preparations or long term agreements with dealers in Amazon to surety payment agreements or credit limit extension. The foundation of coming in logistics of Amazon is the Fulfilment by Amazon (FBA) (Amazon, n.d.). Amazon makes use of logistics in analyzing its market.

Outbound logistics

Amazon has been influenced by the services of the immediate provision business. When beginning its own supply air business, it exposed plans to hire at least 20 people (Laudon and Traver, 2016, p. 45). The willingness of Amazon to invest in such big financial investments shows that it is trying to achieve individuality from other companies while easing its logistics. This online retail firm has furthermore declared a drone distribution system and Amazon flex. Besides this, it also makes widespread usage of treasure trucks.

Marketing and sales

Amazons worldwide marketing expenditures yearly have been growing consistently for the last seven years. This includes promotional costs and advertisings. Sales and marketing are the main foundations of value in the Amazon operational chain, and this is created due to moderate marketing investments (Sastry et al., 2019, p. 112). The marketing message for Amazon bears the assurance of major product variety and services. 


Excellent customer service is the main foundation of generating value for the cloud and e-commerce computing firm. Amazon prime and market place has two customer types: buyers and sellers from Amazon’s platform. Amazon only accepts online payments (Sastry et al., 2019, p. 124). When an issue that may require a client to talk to customer care through the phone comes up, all they are required to do is to access the customer’s account and raise the issue. The problem shall then be dealt with professionally and swiftly.

4.0 Recommendations & Discussion

Usage of social media and commerce has assisted Amazon in generating a large audience, helping them to reach and sell to its targeted customers. This has increased traffic on their websites, swaying their ranks on search engines as they allow customers to engage with them for clarifications. The growing audience on social media for Amazon has helped in making conversions. One advantage of social commerce is the activities Amazon gets when its content are shared. Besides this, Amazon has been able to build the loyalty of customers and retain them. This, in turn, has created satisfaction to the customers. Amazon needs to adopt appropriate technologies to address issues pertaining to their goods and services so as to effectively address the issues and consequentially increase of its operations. Another recommendation is the management of quality to improve customer satisfaction and meet their expectations. It should also make use of its culture to improve innovation creation ideas from its workers.