How Amazon Can Improve its Corporate Strategy
Drivers of Corporate Strategy
Any choice of strategic options must necessarily be in tune with the drivers of corporate strategy. For the purposes of this article, six drivers of corporate strategy have been identified. They are the growth imperative or the need to grow, consistency with the firms internal strengths and resources, being geared towards leveraging and targeting the marketplace strategies, aligning the strategies with that of its sources of competitive advantage, and taking into account the longer term as well as the shorter term profitability aspects.
Identify Core Competencies and Refocus
As the preceding discussion makes it clear, Amazon has its task cut out in terms of the next five to ten years. It has established a market leadership position worldwide and hence, it must now turn its attention to the next evolutionary step. Indeed, its very success can be its undoing as in the quest for market dominance; it is diversifying too much and expanding without a clear and articulated strategy.
Therefore, it must now identify its core competencies and target them ruthlessly. For instance, its foray into the Tablet computer market with its Kindle Fire device has been a failure and hence, it must now move to eliminate this and other kinds of non-core diversifications.
The rule of thumb for any firm is whether its various strategies including market entry, product ranges, and services offered are complementing and supplementing its core competencies. In other words, firms must ensure that when they diversify or integrate, such forays complement and supplement their core business strengths. This means that Amazon must identify its raison dÍtre of existence and refocus its strategies accordingly.
Diversify into Cloud based Services
Perhaps there can be no better strategic option than expanding and diversifying into the cloud based business. As cloud, computing is set to emerge as the hottest trend of this decade and along with the other trend of the increasing usage of Big Data by marketers, Amazon can clearly establish itself in these segments and attain market leadership positions.
As mentioned earlier, any strategic alternative or option must satisfy the complementary and supplementary imperatives. Considering the fact that Amazon is built on the online platform, cloud based services would be an extension of its core competency and would be complementary to its existing business model.
Indeed, Amazon is following this strategy through its AWS or Amazon Web Services wherein it offers a suite and portfolio of services to the SMEs (Small and Medium Enterprises) that include data management, storage space, hosting services, and other cloud based services. The expansion of AWS would be in tune with the drivers of the corporate strategy as identified earlier including the growth imperative, expansion of the customer base through diversification, consistency with its internal resources, and entering a market segment that is recording shattering growth rates.
However, there are some drawbacks to this strategy as well and they include entering an untried and untested market, basing its strategy on technological trends that have a shorter life span, and sustaining returns from an initiative that is high on capital investments. Having said that, it must also be noted that Amazon can also develop a complementary Big Data service wherein it offers firms and companies access to its Big Data mining and analytical tools. This can be in addition to the expansion of AWS and these strategies can serve as buffers for each other in case either fails.
Therefore, following the points made in the preceding discussion, Amazon needs to diversify into areas that are higher margin ones. A possible strategy would be to ramp up the cloud-based offerings that it has with its AWS. Of course, as this article suggested earlier, such diversification must not result in strategic blunders such as its introduction of Kindle Fire. Therefore, it must diversify for growth and profitability and at the same time not lose focus over its core competencies.
Apart from this, Amazon can tap into the increasing sales from mobile commerce as well as focus more on its Kindle eBooks segment. Considering the fact that sales from its Kindle division were for the first time higher than that from its other divisions in the recent few quarters, this makes for sound business strategy. Complementing this with mobile commerce would drive its profitability in the future.
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