Volatility in the business environment
Section 1: Introduction
The volatility in the business environment impacts the business strategies employed by companies. A company must be flexible in its business strategy to avoid suffering losses from changes in the business environment. Developing a business strategy is procedural, and a company puts together the analysis of the strategic position, deciding on appropriate strategic choices, and appropriate means of implementing the choices made in the strategy. The research presents an analysis of the contemporary issues faced by Amazon UK, its macro and industry environment, and its impact on the company’s strategic choices.
Amazon UK is a site that offers services in the UK on behalf of the mother company whose headquarters are in Seattle, Washington in the US. The company specializes in online sales and has grown to become one of the world’s largest companies. Amazon UK has seen an increase in profitability over the years, owing to the growth in technology. Initially, Amazon concentrated on the sale of books, and the need to expand saw them incorporate diversification, and business has been booming since then. The company has been in the UK since 1998 and has seen faced several challenges as well as employing a series of strategies to remain operational in the highly competitive field.
Section 2: Literature Review
Business strategies have captured the attention of several researchers due to the volatility of the business field. Research has been done on various models that companies have used to overcome the challenges posed by volatility. Amazon UK has been in operation for a long time, and intense research has been done on its operations. Also, the company undertakes activities that can easily be related to research done on other aspects of business strategies.
Amazon UK is a success story that has remained in the market for over twenty years. The research was done by Majed, Nuraddin, and Hama (2018), to assess the success of Amazon in the implementation of strategies. The study was based on its objective to “become the best place to buy, find and discover any product or service available online.” Since its inception in 1995, Jeff Bezos has led the online company into becoming a giant in the market and has faced all sets of challenges but has not given in to failure. According to the researchers, Amazon has established itself as one of the toughest competitors to beat in the market.
The research done by Nguyen (2019), showed that Amazon UK has been offering a chance to sellers to overcome the challenges associated with marketing and shipment of goods. Some of the major contributors to a company’s expansion are acquisitions and partnerships. The relationship described by the research is a partnership between Amazon UK and small-scale sellers. The company uses the Fulfillment by Amazon (FBA) to save sellers from challenges such as the complexity and hassle from shipping and fulfillment process. The proceeds from the service fee contribute to the company’s ever-growing profit base. However, the researcher points out the concern from sellers on the high service fee, but that has done little to affect the profitability of Amazon UK.
The Amazon company is a multinational company and is therefore not strange to international growth strategies. Any online company will pay attention to technology changes as they play a crucial role in determining the company’s competitiveness in the market. Buzatu (2020) researched on the international growth strategies for digital entrepreneurial companies in developing countries from the EU region. According to the researcher, new business models based on a digital framework play a crucial role in improving global development. The research is relevant to the analysis of Amazon UK because it specializes in digital marketing and is prone to the changes associated with business models.
Profitability is prioritized over other aspects of the business field. One of the common models used to assess the maximization of profitability is Porter’s Five Forces Model. The model is based on the idea of competitiveness and the effectiveness of any chosen model on improving profitability. Mhlanga (2018) analyzed the microenvironment’s impact on airline performances in South Africa using Porters’ five forces model. According to the researcher, the South African Airlines’ profitability depended on the extent of rivalry from competitors and the bargaining power of suppliers. The study focuses on the role played by the competitiveness of a company to beat the challenges posed by rivalry and bargaining power. Moreover, Porter’s Generic Strategies are crucial in determining the path that a company chooses in making decisions on strategies.
The choice of a strategy plays a crucial role in determining whether an organization will achieve its objectives. Porter’s Generic Strategies provide organizations with a chance to choose from when making strategic decisions. The research by Islami, Mustafa, and Latkovikj (2020), showed that the Porters generic strategies model improves firms’ performance. The researchers analyzed three strategies from Porter’s model; differentiation strategy, low-cost strategy, and focus strategy. According to the researchers, “differentiation strategy provides higher firm performance than two other Porter’s generic strategies (low-cost strategy or focus strategy) that have a positive impact.” Generally, the strategies show an improvement in the performance of firms.
Young (2016), researched the Amazon UK transshipment stow process analysis through discrete event simulation. The research was founded on the efforts employed by Amazon UK to cut on operational costs, facilitate order fulfillment, and inventory rebalancing. A profit-making company will look for ways through which the costs are reduced without affecting the profitability. Also, the level of the operational costs determines the strategies that a company has to employ to avoid incurring unnecessary losses.
Section 3: Analysis
Subsection 3.0: Description of the Business
Amazon UK is an online company specializing in online sales and has grown to become one of the world’s largest companies. The company has been in business in the UK since 1998, approximately three years after the inception of the mother company in the US in 1995. The company’s website provides various products ranging from media, baby products, beauty products, toys and games, gourmet food, electronics, groceries, scientific supplies, kitchen items, jewelry, musical instruments, lawn and garden tools, to automotive items. Competition is faced by Tesco, Asda, Morrison, and Sainsbury, the UK’s main retailers. The company dominates approximately thirty percent of the UK market share, with its turnover hitting over 2.35 billion British pounds.
Subsection 3.1: Analysis of the business’ strategic positions
The macro-environment analysis in the case of Amazon UK shows how the company has been forced to beat huge challenges to maintain its position at the top. The political environment in the UK has not been the best in recent years. Brexit has come with several challenges to companies, and Amazon UK has been left to deal with challenges such as the weakening of the Pound in comparison to the US Dollar. The economic environment has also made it difficult for Amazon to achieve most of its goals. For example, the objective of expanding the employee network might be a difficult one to achieve owing to the economic difficulties associated with Brexit. Social factors have, however, been working to the advantage of Amazon UK. A large portion of the UK population has embraced technology, making the marketing strategies used b Amazon more effectively. Technological factors have also boosted the operations of Amazon UK since it can reach more customers. However, the impacts of climatic change have not spared Amazon with some of its products becoming obsolete. Also, Amazon has not faced negative legal factors like other large companies in the world.
The application of Porter Five Forces shows that Amazon has maintained its position in the UK market. One of the forces used in the Porter model is that of the force of new entrants. The force is, however, weak because Amazon is an already-established entity, and the probability that a new entrant will beat it in the competition is low. Secondly, the bargaining power of customers has continued to become stronger with the growth in competition. Online companies are emerging daily, and Amazon faces a challenge in that customers have several options to choose if their bargain is not considered. The bargaining power of suppliers is the third force, although it is moderate in the case of Amazon UK. Amazon has a large network of suppliers and thus holds a stronger bargaining power against its suppliers. The threat of substitute products and services offers a strong force against Amazon since the market is flooded with new online companies. Customers easily move from the Amazon base to competitors. Finally, competitive rivalry is strong in the case of Amazon. The nature of online markets is that competitors come with aggressiveness, and Amazon has to stay on toes to avoid being overpowered.
Amazon UK has shown strong strategic capabilities against its competitors. Amazon is an already-established entity and does not give in to the pressure exerted by its competitors in the online market. The advancement in technology has ensured that the company taps any available opportunity and continues to expand in the middle of challenges. Also, the company has ensured the maximum use of data science and machine learning to reach as many customers as possible. The company has exploited the advantage that comes with global technological advancements.
Subsection 3.2: Analysis of the Strategic Choices
Amazon UK operates under stiff competition from Tesco, Asda, Morrison, and Sainbury. The company has resorted to Ansoff Matrix to assess its competitiveness and come up with unique product and market strategies. The Amazon Ansoff matrix considers all the four marketing options available for an organization. Generally, the company has managed to utilize the market penetration, product development, market development, and diversification strategies to enjoy a competitive advantage in the market.
Market penetration, product development, market development, and diversification are essential parts of the Amazon UK Ansoff matrix. Amazon UK is known for its aggressive use of market penetration by utilizing existing markets to sell existing products. The successful combination of data science and machine learning plays a crucial role in making the company stand out over its competitors. Product development has also been employed in Amazon’s journey to success. The company started by specializing in the sale of books but has resorted to selling anything that can be sold online. The products sold through Amazon include the ones sold by third parties in partnership with the company. The market development strategy involves the search for new markets for existing products. Amazon UK keeps expanding across the UK in line with the mother company’s expansion across the world. Finally, Amazon UK invests in diversification, although it comes with a considerable amount of risk. The risk associated with diversification forces Amazon UK to only apply the strategy to a certain level. Moreover, Amazon UK has shown great adherence to Porter’s generic strategies.
Amazon has, over the years, showing a great bit of adherence to Porter’s generic strategies. First, the company has gone for the reduction of costs to increase profits. The company also charges industry average fees for services such as FBA to improve profitability. Amazon UK is also known for charging lower prices on goods while making profits due to its access to a wide market. The low prices have helped the company to develop a loyal customer base, which has eventually improved the company’s market share. The differentiation strategy has also been used in Amazon UK as it has invested in building a unique image from its competitors. The company’s strong revenue base helps it to strengthen its brand name and image as well as maintaining customer loyalty. Amazon UK has also shown a unique application of the focus strategy. The company only operates in the online market and has, therefore, mastered the possible changes and risks involved in the industry. The Focus strategy is used in combination with the other two strategies to give Amazon UK an unmatched advantage over its competitors.
Subsection 3.3: Key Issues in the Implementation of Strategies at Amazon UK
The establishment of Amazon in the UK was in line with the company’s International Growth Strategy. Amazon has been spreading across the world since its inception. The main motivation behind the international growth strategy is to dominate new markets and make more revenues. Amazon UK continues to open doors for customers worldwide since its services and products are accessible online. The only challenge facing Amazon’s efforts to spread overseas is shipping products to customers outside the UK. Generally, the company has invested heavily in foreign expansion since it promises new markets and opportunities.
Product innovation offers Amazon UK an advantage over its competitors. With the changes in the business industry, innovation pays handsomely, and any company that is determined to succeed focuses on new strategies and products. Amazon UK has been innovative in using technology to make its customer-centric and reliant on generic strategies. Some of the technological innovations associated with Amazon are Fulfillment and Alexa voice assistance. The innovations have handed the company a boost in its market penetration attempts. Generally, innovations provide an efficient method of adapting to changes that have proved unavoidable, especially in the online business industry.
Amazon UK has not stopped expanding and has been employing various strategies to win dominance in new markets. The most common approach used by the company is market penetration, where the company identifies an existing market and looks for ways of beating the existing competition. Market penetration saves the company from the risk of entering a market that does not give hope for profitability. Also, Amazon UK invests in third-party vendors who play a crucial role in providing products and winning new customers. The strategies used by Amazon UK have proved to pay off since the company has not fallen short of new markets and opportunities.
Section 4: Conclusion
Amazon UK has seen an increase in profitability over the years, owing to the growth in technology. The analysis of the macro-environment in the case of Amazon UK shows how the company has been forced to beat huge challenges to maintain its position at the top. Generally, Amazon UK has shown aggressive use of market penetration by utilizing existing markets to sell existing products. The company’s strong revenue base helps it to strengthen its brand name and image as well as maintaining customer loyalty. Also, Amazon UK continues to open doors for customers worldwide since its services and products are accessible online. With the changes in the business industry, innovation pays handsomely, and any company that is determined to succeed focuses on new strategies and products. Amazon UK has been innovative in using technology to make its customer-centric and reliant on generic strategies. Generally, the dominance of Amazon borrows from its strong strategies that have given the company an unmatched competitive advantage over its competitors.