Graduate School of Business

MBA – Oil & Gas Management

Contemporary Management

Value Chain and Competitive Strategy - Amazon

By: REDA Rashwan

ID: 18225389

Presented to:
Dr. Reham Adel
Table of Contents

1. Introduction....................................................................................................................2
2. Porter’s Value Chain Analysis of Amazon.com............................................................3
2.1 Primary Activities.......................................................................................................4
2.1.1 Inbound Logistics....................................................................................................4
2.1.2 Operations...............................................................................................................4
2.1.3 Outbound Logistics.................................................................................................4
2.1.4 Marketing and Sales...............................................................................................5
2.1.5 Services....................................................................................................................5
2.2 Secondary Activities...................................................................................................5
2.2.1 Infrastructure..........................................................................................................6
2.2.2 Human Resource Management..............................................................................6
2.2.3 Technology Development.......................................................................................6
2.2.4 Procurement............................................................................................................6
3. Amazon Sustainable Competitive Advantage...............................................................7
4. Cost Advantage of Amazon com....................................................................................8
4.1 Cost advantage through Value Chain Analysis........................................................8
4.2 Cost drivers of Amazon com Inc Value Chain Analysis..........................................8
5. Company Differentiation Advantage............................................................................9
5.1 Differentiation through Initial Value Chain Activities............................................9
5.2 Differentiation through secondary value chain activities.......................................10
6. Recommendations Based on Value Chain Analysis...................................................10
7. Amazon Growth strategies...........................................................................................12
7.1 Application of Michael Porters Generic/Intensive Growth Strategies to Amazon
com 12
7.1.1 Streams for Porter’s generic strategies...............................................................13
7.1.1.1 Cost Leadership....................................................................................................13
7.1.1.1.1 How does Amazon com use the cost leadership strategy?..............................13
7.1.1.2 Differentiation.......................................................................................................14
7.1.1.2.1 How does Amazon com use a differentiation strategy?..................................14
7.1.1.2.2 Focus Strategy...................................................................................................14
7.1.2 Intensive growth strategies...................................................................................15
7.1.2.1 What are Intensive Growth Strategies?..............................................................15
7.1.2.2 Amazon aims to use intense growth strategies....................................................15
7.1.2.3 Market penetration (basic strategy)....................................................................15

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7.1.2.4 Product development (secondary strategy).........................................................16
7.1.2.5 Market Development (Supportive Strategy).......................................................17
7.1.2.6 Diversification (supportive strategy)...................................................................18
8. References.....................................................................................................................19

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1. Introduction

A value chain is a set of activities that a firm operating in a specific industry

performs in order to deliver a valuable product (i.e., good and/or service) for the
market. The concept comes through business management and was first described
by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and
Sustaining Superior Performance. (Porter, 2004)

1.1 Advantages of conducting Value Chain Analysis

1.1.1 Identify sources of competitive advantage

By conducting a value chain analysis of Amazon com Inc during the

planning process, potential sources of competitive advantage can be
identified. The company is a group of different activities that are involved
in the relationship to some extent. Amazon.com Inc cannot trade all
activities on the external market. The value chain approach indicates that
the company can view these activities as economic rental sources. These
activities can act as barriers to new entrants or create cost disadvantages
for competitors.

1.1.2 Learn about complex relationships and interdependence

Amazon.com Inc can identify various internal and external links between
activities through the lens of the value chain. Internal links are the
interrelationships between activities within the same organizational units
and external links between the business units of the same or different
companies. Studying these mutual relationships can help the company
benefit from coordination and mutual improvement.

1.1.3 Improve the flow of materials, information and finance

Using value chain analysis can improve financing, products, and

information flows.

 An improved flow of information can help the company identify

and exploit new opportunities and reduce external threats. Constant
evaluation of the value chain can bridge important gaps in a timely
manner that may affect company productivity.
 The effective implementation of the Amazon com Inc value chain
analysis can improve the flow of materials and products due to
improved demand and sales expectations. Inventory management
also improves as Amazon com Inc can reduce delays by tracking
activities across the supply chain.
 Modern customers attach great importance to fast response and
convenient access to important product information. An

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 unexpected outage in the flow of information can affect the
relationship between a customer and a supplier. Amazon com Inc
can analyze the value chain and implement highlighting and
eliminating bottlenecks in the flow of information.

1.1.4 Formulate specific effective strategies for the company

Amazon.com Inc can be used to analyze the value chain in competitive

strategic decision-making. However, choosing the right competitive
strategy (cost leadership, differentiation or focus) requires knowledge of
the particular cost structure and competitors.

1.2 Challenges associated with Value Chain Analysis of Amazon.com

 The company may lose its overall vision and strategy by dividing operations
into different activities.
 Operations may not be separated into core and support activities due to
increased complexity.
 The division process may take a long time and it may also be difficult to find
the requested information.
 Effective implementation of the value chain requires not only familiarity, but
detailed experience.
 Amazon com Inc may find it difficult to obtain the required information if its
business information system is not organized accordingly.

2. Porter’s Value Chain Analysis of Amazon.com

The Porter Value Chain Model is very popular in the business world.
However, Amazon.com must not take it as a rigid and independent framework
by giving equal importance to all activities. Effective value chain analysis
requires Amazon com Inc to be aware that not all activities or functions
require the same level of audit. Thus, the first step to adapting the Porter value
chain framework is to determine the relevance of activities according to their
role in the product / service delivery process.

Here is a list of Core Value Chain activities as suggested by Porter:

2.1 Primary Activities

Amazon.com core value chain activities are directly involved in the

production and sale of the product to target customers. Analysis of core
value chain activities can improve the performance of Amazon com Inc as
described below.

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2.1.1 Inbound Logistics
It is important to develop strong relationships with suppliers as
their support is necessary to receive, store and distribute the
product. Without analyzing internal logistics, Amazon com Inc
could face various challenges in the product development stages.
The internal logistics analysis requires the company to focus on
every aspect of the transition from raw materials to the final
product. Some examples of incoming logistics services are
recovery of raw materials, storage of inputs and distribution of raw
materials and components internally to start production.

2.1.2 Operations
Analysis of operational activities becomes more important when
raw materials arrive, and Amazon.com. is ready to process raw
materials in the final product and release it to the market. Some
examples of operational activities are machinery, packaging,
assembly, and testing. Equipment repair and maintenance also fall
into this category.
It includes both manufacturing and service operations. An analysis
of operational activities is important to improve productivity,
increase efficiency, and ensure competitive success for
Amazon.com. Increased productivity can help Amazon.com
achieve consistent economic growth, increase profitability, and
establish a strong foundation for competitive advantage.

2.1.3 Outbound Logistics

Outbound logistics include activities that provide the product to the
customer by going through different brokers. Some of the external
logistics activities are material handling, warehousing, scheduling,
order processing, transportation and delivery to the destination.
Amazon com Inc can analyze and improve outbound logistics to
explore sources of competitive advantages and achieve its business
growth goals.
Because when outdoor activities are managed in a timely manner
with optimal costs and product deliveries have a lower negative
impact on quality, they increase customer satisfaction and increase
company growth opportunities. Amazon com Inc must pay special
attention to value chain outbound activities when their offered
products are perishable and require prompt delivery to the end
customer

2.1.4 Marketing and Sales

At this point, Amazon com Inc will highlight the advantages and
differentiation points of the products offered to convince customers
that their offer is better than competitors. Only the production of a
high-quality product with reasonable costs and distinctive features
cannot create value until Amazon com Inc invests in marketing and

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 sales activities. Sales agents and marketers play an important role
here.
Some examples of Amazon com Inc marketing and sales activities
are - sales force, advertising, promotional activities, pricing,
channel selection, quotation, and building relationships with
channel members. The company can use the marketing suppression
approach to structure its marketing and sales activities. Marketing
strategies can be either push or pull in nature, depending on
Amazon com Inc business goals, brand image, competitive
dynamics, and current market position.
Effective and wisely integrated marketing activities can develop
Amazon com Inc brand ownership and help them differentiate from
competition. However, Amazon com Inc should avoid making false
commitments about product features that the production
department cannot achieve. Indicates the need to ensure
coordination between different value chain activities

2.1.5 Services
Amazon.com's pre-sale and aftersales services will play an
important role in developing customer loyalty. Modern customers
consider after-sales services as important as marketing and
promotional activities. The negative power of electronic women
cannot be undermined due to the weak support service of today's
technologically advanced era. The company should analyze its
support activities to avoid damaging the brand's reputation, and
instead use it as a tool for spreading positive word of mouth due to
the prompt, timely and effective support services.

2.2 Secondary Activities

Support activities play an important role in coordinating and facilitating

the activities of the Initial Value Chain. Amazon com Inc can also benefit
from the analysis of support activities as shown below.

2.2.1 Infrastructure
The company's infrastructure refers to a set of activities, such as:
quality management, legal issues handling, accounting, financing,
planning and strategic management. Effective infrastructure
management can allow Amazon com Inc to improve the value of
the entire value chain. Amazon com Inc can control infrastructure
activities (or commonly called overhead costs) to enhance the
competitive position in the market.

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2.2.2 Human Resource Management
Amazon com Inc can analyze human resource management by
evaluating various aspects of human resources, including -
recruitment, selection, training, reward, performance management,
and other personnel management activities. Effective human
resource management can allow Amazon com Inc to reduce
competitive pressure based on motivation, commitment and
workforce skills. The company can also achieve cost-cutting
targets by analyzing recruitment and training costs with their
relative return. Amazon com Inc.'s heavy dependence on employee
talent will increase the importance of this activity to support the
value chain.

2.2.3 Technology Development

In the advanced technological modern age, almost all value chain
activities depend on technology support. Technology integration in
production, distribution, marketing and human resource activities
requires Amazon com Inc to realize the importance of technology
development. It can be divided into product activities and
technology development processes. Some examples are automation
software, technology-supported customer service, product design
research and data analytics. The Amazon com Inc R&D department
is in this category.

2.2.4 Procurement
Purchase in the value chain refers to the processes involved in
purchasing inputs that may range from equipment, machinery, raw
materials, supplies, raw materials, and other elements needed to
produce the final product. Linked to multiple value chain activities,
Amazon com Inc must carefully consider procurement activities to
improve incoming, operational, and outbound value chain
activities.
As mentioned above, the Porter Value Chain Model
implementation relies on an understanding of the importance of all
activities. After understanding the relative importance of specific
value chain activities, Amazon com Inc should highlight areas in
which value can be added, achieve cost efficiency, establish a basis
for differentiation, or improve operations.
Below is a graphic portrait of the Porter value chain model:

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3. Amazon Sustainable Competitive Advantage
It is important for Amazon com Inc to base its competitive advantage on
activities where it can access scarce or frightening resources. It may include -
intellectual capital, assets, skills or a distribution network. The value chain
analysis can help Amazon com Inc in identifying these activities and
developing those areas to obtain a strong competitive advantage over the
competitors. There are many examples (such as Toshiba and Sharp) that value
chain analysis is a tool to gain a competitive advantage and invest heavily in
research and development activities within their value chain network. Porter's
general strategies to achieve competitive advantage and the value chain model
can be used together to lay the foundation for a strong competitive advantage.
The following diagram illustrates Porter's competitive advantage model:

An analysis of the value chain activities can be undertaken to understand the

sources of competitive advantage. Amazon com Inc can use operations,
marketing, and other related value chain activities to take advantage of cost
benefits, or it can use human resources, technology, infrastructure, service, or
other related activities to define the basis for strong differentiation. In general,
sources of competitive advantage can be grouped into two types - cost and

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 differentiation. Amazon com Inc can get a competitive advantage from one or
both sources, depending on the depth and breadth of the value chain analysis.
The following parts of the article provide in detail how Amazon com Inc can
create core and / or secondary value chain activities to achieve the desired cost
and differentiation goals.

4. Cost Advantage of Amazon com

4.1 Cost advantage through Value Chain Analysis

Amazon.com can take advantage of cost benefits by reducing costs
associated with value chain activities. However, it requires the company
first to define activities and then link costs to make the necessary
adjustments. The relationship between the value chain and cost leadership
strategy reflects a parallel focus on low-cost operating activities. If
Amazon com Inc is aiming for a cost advantage, then each element in the
value chain that can be optimized must be selected to get the full effect
An example of a value chain analysis for Amazon com Inc is that it can
use the analysis as a tool to negotiate best rates and maximize internal and
external transfers.
Another example of value chain analysis is the use of value chain
information to create a modest advertising budget that can reduce
marketing costs and deliver the product at an affordable cost.
If Amazon com Inc aims to lower cost, value chain analysis can improve
profitability. If product differentiation is the goal of Amazon com Inc, then
the value chain analysis will help the company maximize efficiency and
improve product quality by improving operations.

4.2 Cost drivers of Amazon com Inc Value Chain Analysis

Amazon com Inc can control the following drivers for adding value,
defining differentiation and enhancing efficiency.
 Regulatory policies
 Merge
 Timing
 Economic scale
 Links
 Mutual relationships
 Leveraging capabilities
 Learning and Extension

However, it is important to note that costs can only be reduced to some

extent. Amazon Com Inc Value Chain Analysis must also consider the
perceived value of customers which might justify the higher price the
company charges compared to competitors.

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5. Company Differentiation Advantage
Amazon com Inc can get the advantage of differentiation by analyzing
different value chain activities. For example, a company can purchase unique
and valuable inputs that are not readily available to competitors. Amazon com
Inc can either reconfigure the entire value chain or change individual entities
to set the basis for differentiation. Cost factors (such as timing, relationships,
links, scaling, and integration) can also be modified to develop uniqueness.
Some examples of differentiation through value chain analysis are:

 Forward integration or backward integration for better control of inputs

 Take advantage of new distribution channels
 Implementation of innovative IoT.

5.1 Differentiation through Initial Value Chain Activities

Amazon com Inc can analyze core activities from all aspects individually
and create the basis for differentiation by identifying the following
sources:

 Inbound Logistics: The basis for potential differentiation for Amazon

com Inc is:
o Obtaining high-quality inputs to deliver a high-quality end product
o Effective treatment of incoming inputs to reduce damage
 Operations: The basis for the potential differentiation of Amazon.com
is:
o Flexible manufacturing system
o Wide product range
o Improving the appearance of the product
o Preventing product failure before ripening
o Quick response to unique specifications
o Improve customer satisfaction through a lower defect rate
o Improving product performance due to compliance with technical
specifications

 Outbound Logistics: The basis for potential differentiation for Amazon

com Inc is:
o Effective handling and better charging to reduce product damage
o Delivery of the product in a timely manner
o Flexible connectivity
o Performing an effective treatment
o Marketing and Sales: The basis for the potential differentiation of
Amazon.com is:
o Improve relationships with suppliers and customers
o Enhancing communication with customers by providing high-
quality information.
o Brand awareness, reputation and image development due to
extensive and effective advertising.

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 o Effective coordination between product, research and marketing
departments.
o Broader coverage of the sales force.

 Services: the basis for the potential differentiation of Amazon com Inc
is:
o Excellent quality of service
o High-quality technical assistance
o Fast and reliable repair / maintenance service

5.2 Differentiation through secondary value chain activities

Amazon com Inc can also analyze secondary value chain activities to
determine the basis for differentiation:
 Fixed Infrastructure: Amazon com Inc can lay the groundwork for
differentiation by:
o Developing a comprehensive database for effective marketing
o An advanced information system to obtain deeper insights for
clients.
 Human Resources Management - Amazon com Inc can define the basis
for differentiation by:
o Attractive rewards to encourage creativity and increase
productivity
o Training workers in effective interaction and superior customer
service
 Technology development - Amazon com Inc can lay the groundwork
for differentiation by:
o Fast new product development
o Integration of innovation in product design
o Innovative product features with patented technology
 Procurement - Amazon com Inc can define the basis for differentiation
by:
o Reliable transportation to ensure fast delivery
o Obtaining high-quality raw materials and spare parts.

6. Recommendations Based on Value Chain Analysis

Some example recommendations based on value chain analysis for Amazon

are discussed hereinafter:
 Using value chain analysis, Amazon com Inc can identify and select
quality raw materials and develop customer loyalty based on them. He can
also use value chain analysis to develop brand identity.
Starbucks provides a good example of value chain analysis. The
organization has built a strong business identity and laid a strong
competitive foundation through strong marketing and strengthened
coordination between the Marketing and Product Development division.

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  Amazon com Inc can also achieve competitive differentiation by speeding
up the delivery process for the products offered to end customers.
Pizza Hut provides another successful example of value chain analysis as
the organization outperforms competitors by reconfiguring value chain
activities to ensure rapid delivery.
 Value Chain Analysis by Amazon com Inc can also be used to improve
HR practices.
FedEx is a good example of a value chain analysis to understand how
Amazon com Inc can achieve a competitive advantage by analyzing HR
activities.
FedEx emphasized value chain support activities, invested heavily in
employee development, took excellent HR initiatives, and made visible
infrastructure improvements, resulting in a marked increase in brand
loyalty and market share.
 Amazon com Inc can analyze value chain activities to reduce costs, create
better deals with suppliers, and provide quality products at reasonable
prices.
An example provided for the relevant value chain analysis is provided by
Walmart who continuously analyzes value chain activities to stay
innovative, reduce operating costs and provide low-cost and reliable
services.
 Amazon com Inc can analyze support value chain activities to provide
superior customer support. It can also analyze operational activities to
expand its presence in geographically dispersed areas.
It can be understood with the help of another example of value chain
analysis. Starbucks attaches great importance to the analysis of value chain
activities and has succeeded in opening direct stores in more than 50
countries.
 Amazon com Inc can also use value chain analysis as a tool for reverse
integration. This can be done by merging or purchasing suppliers to ensure
that raw materials are available in a timely manner.
Apple provides a relevant example of value chain analysis in this regard.
The company is known for its effective value chain and successful control
of product and parts.
 Amazon com Inc can also analyze the value chain to maximize operational
efficiency, reduce waste and integrate sustainability into business
operations.
Intel is a good example of value chain analysis that reduced waste and
negative impact on the environment by analyzing value chain operational
activities. The company received recognition for its waste reduction
efforts.
 Amazon com Inc can learn from value chain practices in Dow
AgroSciences. Dow used value chain analysis to explore unique marketing
opportunities and extract value from the general commodity market. The
company also used the value chain to manage risks in the different product
life phases.

The examples above demonstrate how Amazon com Inc can benefit from carrying out
a detailed value chain analysis. However, it is also important to note that the
implementation of the Porter value chain model depends on the unique contextual

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variables that must be taken into account when assigning weight to primary and
secondary value chain activities

7. Amazon Growth strategies

Porter, General Strategies Framework, was introduced by Michael Porter in
1980. The model describes how companies can pursue a competitive
advantage by choosing the right strategies. The framework focuses on three
main strategies - cost leadership, differentiation and focus. Companies can
take advantage of the competitive advantage by either reducing costs or
differentiating their offerings from competitors along the most valuable
dimensions to justify the premium price. Companies may also gain a
competitive advantage either by choosing a narrow focus strategy through
specialized marketing or a broad focus strategy (by offering products to
selected market segments) or an industry-wide strategy (by delivering
products to the most market segments). The overall strategic options available
vary depending on the type and scope of the competitive advantage.

7.1 Application of Michael Porters Generic/Intensive Growth Strategies

to Amazon com

Amazon.com is a multinational company that is well-regarded in the target

market sectors. Intense industry competition has made it difficult for
Amazon.com to maintain its leadership position in the market and increase
its market share without making major efforts. The prevailing business
environment forces Amazon.com to gain a decisive advantage over others
to stay ahead of the competition. Being a global brand with a strong
presence throughout the world, Amazon com has positioned its
competitive position based on some critical factors that provide a strong
advantage over competitors including competitor in most consumer
markets. Amazon com's competitive advantage strategies can be
understood in light of Michael Porter's overall and intensive growth model.
The company has adopted a mixture of cost leadership, differentiation and
focus strategies to deal with competitive pressures. The goals of expanding
the customer base and sales growth are achieved by focusing on the most
appropriate strategies for intensive growth based on three general strategic
tracks (cost, differentiation and focus). Amazon's extensive growth
strategies to achieve its growth goals include market penetration, product
development, market development and diversification. In this article, a
detailed discussion is held of how Amazon com has a competitive
advantage by adopting general and intensive growth strategies.

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7.1.1 Streams for Porter’s generic strategies

There are three main tracks to the generic Porter strategies that
multinationals like Amazon com use to achieve their growth
goals.

7.1.1.1 Cost Leadership

The cost leadership strategy includes gaining a competitive advantage by

lowering the cost. Cost leadership is the main general strategy that
Amazon com uses in various consumer markets.

7.1.1.1.1 How does Amazon com use the cost leadership strategy?
The primary objective of using this strategy is to maintain a
leading position in the market by efficiently managing the
value chain.
This strategy allows Amazon.com to expand its market share
by targeting the middle class, making the largest proportion of
the total consumer market mix in most countries. Middle-class
consumers generally place great importance on the pricing
factor and cost leadership is the best strategy to meet the needs
of this consumer segment.
 Amazon com focuses on affordability and ease of access to
its products worldwide, which increases brand awareness,
high sales growth and provides a solid competitive
foundation.
 Unlike charging lower prices by lowering production costs
and increasing supply chain efficiency, Amazon com
frequently offers discounts and coupons to achieve sales
targets and deal with competitive pressure from its closest
competitors. The intended result of these promotional and
promotional campaigns is to increase the brand’s popularity
and encourage consumption.
Discussion of Amazon com's cost leadership strategy outlines
the many advantages that this generic strategy offers, such as
obtaining rapid brand recognition, expanding the customer
base, encouraging consumption and achieving sales targets by
emphasizing affordability and accessibility. Although
analyzing the competitive advantage strategies of Amazon
com Amazon com highlights cost leadership as a key strategy,
the company also uses a differentiation strategy along with
cost leadership to lay the groundwork for sustainable
competitive advantage in the highly competitive global
consumer market.

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 7.1.1.2 Differentiation
Differentiation is another common strategy used to build a
competitive advantage. Amazon com uses differentiation along
with a cost leadership strategy to achieve growth goals.

7.1.1.2.1 How does Amazon com use a differentiation strategy?

 The adoption of differentiation as a secondary general
strategy allows Amazon com to expand the customer base
by emphasizing unique product features.
 Amazon.com's strategic goal is to use this strategy to
differentiate by incorporating innovation and addressing
consumers' growing health concerns. For example, Amazon
com expanded its product line after studying changing
consumer interests to differentiate itself from competitors
and expand opportunities within the industry. The
combination of differentiation and cost leadership has
helped Amazon com build a strong and loyal customer
base.
 Through the general strategy for differentiation,
Amazon.com offers its products in a way that stands out
and is different from the available alternatives. Being an
experienced brand with a strong foothold, the company uses
differentiation as a lever to reduce pressure from other
brands. Huge investment in marketing, advertising and
celebrity endorsement is only made to distinguish Amazon
com from other brands.
 Extensive experience, older brand and strong presence
around the world are some of the differentiation factors that
have been highlighted in the company's marketing and
communication strategies.
 Apart from these, the brand logo is also used to define the
basis for differentiation. The unique and distinctive brand
logo created a strong image of the brand in the minds of
consumers. Although the brand has undergone many
reviews, the core remains the same, which also acts as a
strong distinction.

Moreover, the company offers a variety of flavors to suit the unique taste
needs of consumers. Innovation is used as a tool to provide differentiated
additional services that may delight customers and increase their preference
for Amazon com over other brands.

7.1.1.2.2 Focus Strategy

Focus is the third general competitive strategy that encourages companies to

focus their resources on accurately expanding targeted sectors. When

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companies adopt a focus strategy, they serve specific sectors of the market and
base their competitive advantage on specialized marketing.
How does Amazon.com use the focus strategy?
Amazon.com adopts low cost focus strategy and best value. The low-cost
focus strategy is adopted by serving the needs of a specialized market segment
at the lowest possible price. While adopting a strategy to focus on the best
value by emphasizing the taste, size and design of the product, which can best
suit the needs and requirements of customers.
By focusing on product attributes, Amazon com reviews its branding
strategies and brings continuous changes to product design and packaging to
meet customers' psychological expectations and maximize value for money.

7.1.2 Intensive growth strategies

7.1.2.1 What are Intensive Growth Strategies?

Intensive growth strategies deal with developing new products or
markets to achieve the company's growth goals. Multinationals like
Amazon com consider these strategies to understand how to further
penetrate existing markets is possible and how the customer base can be
expanded through the market and / or product development. Intensive
growth strategies help companies to grow quickly by actively searching
for opportunities to expand the product / market. The unique mixture of
the three major general strategy flows - cost, differentiation and focus
lays the foundation for Amazon.com's aggressive growth strategies.
These growth strategies are depicted in the Ansoff network to expand
into the product market, which includes four dimensions - market
penetration, product development, market development and
diversification.
The choice of each growth strategy depends on the level of competition,
target market characteristics and unique organizational growth goals.

7.1.2.2 Amazon aims to use intense growth strategies

Amazon com's overall goal when considering these strategies is to
increase profitability and expand market share to maintain suitability
and ensure business growth in the long run. Effective implementation of
these strategies requires the company to make intense efforts, especially
when management considers it a source of competitive advantage. This
article discusses Amazon.com's four intensive growth strategies to
understand the contribution of each growth strategy to achieving sales
growth goals internationally:

7.1.2.3 Market penetration (basic strategy)

What is the market penetration strategy?
Market penetration encourages sales growth within the existing customer
base. Activities involved in increasing market share include focusing on
a product that is present in the current market. Market penetration is the
primary intensive growth strategy adopted by Amazoncom to achieve
growth targets.
How does Amazoncom implement market penetration strategy?

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  The adoption of this strategy requires Amazon.com to reduce prices
and to use different marketing and promotion strategies to drive sales
in the current customer market. The organization offers various
discounts and quotations, often runs promotional campaigns and
presents the product in attractive new packages to achieve the goal of
sales growth while remaining in the same market. Aggressive
marketing tactics are required when using this strategy in a
competitive consumer market.
 Amazon com's strategic goal linked to the market penetration
strategy is to increase sales by lowering prices by driving cost.
Assuming an association between low cost and low price leadership
in this case. Another way to achieve this growth goal is to integrate
innovation to lay a clear foundation for differentiation. It helps
Amazon.com to expand its customer base even though the market is
becoming saturated. However, it is also important to note that market
penetration becomes more expensive when the market reaches its
saturation point. In this case, investing in various marketing and
promotional activities yields a low return, which encourages the
company to consider other intense growth strategies.

Adopting market penetration as a primary intensive growth strategy linked to

Amazon.com's ability to differentiate its offerings and achieve cost-leading. The
combination of cost and differentiation of generic strategies underpins this intensive
growth strategy. During the initial period of growth, the market penetration strategy
played an important role in Amazon com's success in its domestic market. Later,
national recognition was used to target new markets around the world. Awareness of
the brand acquired through penetration of the higher market was also used as a tool to
introduce new products to the existing and new consumer markets.
Although Amazon com is among the largest players in the global industry, market
penetration is still the primary intensive growth strategy as the company is currently
present in many consumer markets with additional growth potential

7.1.2.4 Product development (secondary strategy)

What is a product development strategy?
Product development is the second intensive growth strategy for the Ansoff growth
matrix. Amazon.com is used as a secondary strategy to achieve growth goals. This
strategy includes developing new products or modifying existing production lines to
make them new to the existing customer base. Growth-seeking companies such as
Amazon com adopt this strategy when they find limited growth opportunities in the
current market with the current product line. Over the past few years, intense
competition has stimulated Amazon.com to introduce new products to target market
sectors. Targeting existing customers with new products requires relatively less time,
resources and efforts, as the company promotes already developed brand awareness
and customer loyalty.
How does Amazon com implement product development strategy?
 Since its introduction, Amazon com has expanded its product line
dramatically, and its product range has become very wide. It allows the
company to hedge the risk as it can offset losses from one production line with
gains received from others. The organization currently owns more than brands

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 of competing products offered worldwide. Product development is an
important tool to attract more customers.
The strategic objective associated with the use of this intensive growth
strategy is to increase R&D investment for innovation and new product
development. Amazon com's ability to use the general growth strategy to
differentiate supports product development and enhances the organization's
ability to deliver new or new products for growth in existing consumer
markets.
 Amazon com's cost leadership strategy also supports this intensive growth
strategy because it allows the organization to reduce costs and use existing
infrastructure to launch new products. Although the company can use the same
resources to expand product lines, developing a successful new product
requires Amazon com to focus on research and development and use the new
technologies required to pursue this strategy.
 Regarding new product development, three major ways are available for
Amazon com.
First, it is to introduce new products that are closely associated with existing
production lines.
Second, introducing new products that resonate with existing customers.
The third strategy is to develop new products that update or reinvent existing
products. Amazon com managed to successfully introduce new products
through continuous evaluation of customer needs.

7.1.2.5 Market Development (Supportive Strategy)

What is the market development strategy?
Market development is the third intensive growth strategy for the Ansoff
growth matrix. The main objective of this strategy is to explore and enter new
markets.

How does Amazon.com implement the market development strategy?

Amazon.com uses market development as a growth strategy that supports
market penetration and product development. The strategy has been widely
applied by the organization and, as a result, it is presently present in more than
one competition country. Successful entry into new consumer markets played
a major role in making Amazon.com a global brand. The main reasons behind
being around the world are - reasonable prices, strong brand name and flavor.
Along with these factors, successful marketing and celebrity promotions have
helped Amazon.com attract new customers and become a market leader in
many countries.
 Through continuous investment in research and development, the company is
constantly expanding its distribution network to reach every corner of the
world, especially in developing countries where its presence is currently weak.
However, the company has already entered most markets around the world;
market development now only works as a supportive strategy and has
secondary importance.
 Amazon.com's strategic goal in implementing this strategy is to expand the
value chain so that it can support the growth of the distribution network.
Amazon com's ability to reduce costs and achieve a leading position in cost
allows the organization to successfully implement this intensive growth

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 strategy. Cost reduction supports the additional investment that Amazon com
has made to enter new consumer markets.
 Multinationals like Amazon com have four ways available to implement this
intensive growth strategy - developing new distribution channels, creating new
market segments by imposing varying prices, developing new product
dimensions or thinking about new geographic areas. Geographical expansion
requires a significant commitment of resources, and it is also necessary for the
organization to assess whether the existing distribution network and other
resources support the decision to enter into that specific geographical area.
Access to culturally distant markets is more dangerous because it requires the
organization to be culturally smart and to build effective knowledge
management mechanisms.
Amazon.com recognizes the importance of understanding culture and
integrating local standards and values into marketing campaigns when
entering new geographic regions. The high cultural intelligence has helped
Amazon.com gain acceptance in the culturally diverse consumer markets.
Effective implementation of this strategy also requires companies to conduct
detailed competitor and market intelligence. Well-thought out operational,
financial and market data are needed to make the right market entry decisions.
However, implementing this strategy runs the risk of isolating existing
customers.

7.1.2.6 Diversification (supportive strategy)

What is the diversification strategy?
Diversification is the fourth intensive growth strategy for the Ansuf Matrix.
This strategy involves entering new markets with new products. The
diversification strategy is further divided into related diversification and
irrelevant diversification.
As the name implies, unrelated diversification is more dangerous than related
diversification as the company decides to launch completely new products in
new markets without previous experience.
 While in the case of related diversification, the company's existing
knowledge, resources and infrastructure support the decision to diversify
its product portfolio. Amazon.com places a secondary importance on this
strategy because it only supports growth through market penetration and
product development.

How does Amazon.com use diversification strategy?

 Amazon.com portfolio diversification is supported by the overall cost-
growth strategy of reducing cost, and the existing infrastructure makes it
possible for the organization to explore new product opportunities in new
markets.
The strategic objective associated with the diversification intensive growth
strategy is to expand the portfolio through effective acquisition strategies.
Because of the risk factors, the company focuses on related diversification
and avoids dangerous experiences in unknown areas. Instead, the company
uses brand awareness and its power to launch related products in the global
beverage industry. However, some examples of diversification unrelated to
Amazon com offer products from refrigerators, shirts, and glasses to pens.

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  The relevant diversification strategy is applied by obtaining profitable
business after analyzing market trends and changing customer
expectations. For example, in response to the growing criticism from
environmental protection groups, the company attempted to offset the loss
from lower sales by investing in green business practices and making
business partners with a positive brand image.
 The strategically wise implementation of the relevant diversification
growth strategy enhances business sustainability and helps the
organization achieve long-term growth goals despite high market turmoil.
A well-managed product group with related diversification also provides
the ability to hedge risk as decreasing trends in some product areas can be
balanced by emerging trends in related product areas.

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