Vrio analysis framework of amazon

Signature Assignment: Environmental Scanning

Signature Assignment: Environmental Scanning

Typically, the internal environment refers to elements within the company that can impact its performance as well as success (Khan, 2015). They generally include the strengths and weaknesses of an enterprise. The external environment comprises the elements outside the firm that can influence the organization’s performance and success. They constitute the opportunities and threats of the firm. As such, Amazon’s internal and external environment can be evaluated using the SWOT analysis model.

The strengths of Amazon include the strong brand: Currently, Amazon’s brand is the strongest in the online shopping sector commanding a significant customer base which has been the greatest contributor to its success. Extensive product mix: Amazon also has a broad product mix that enables its clients to obtain the products that they need from the company’s website. Customers do not have to struggle to get their needs. Highest revenues in the industry: Amazon is the leading firm regarding revenues in the online retail sector, and the enterprise has used this strength to meet its customers’ needs through improved innovation adequately. Effective customer care: Customer service at Amazon stores as well as fulfillment centers is very effective which ensure maximum satisfaction to customers. The company hires qualified employees who understand the needs of clients.

The weaknesses of Amazon include the ability to easily imitate the business model: The business model that Amazon uses is easily imitable by rivals; for example, an enterprise can develop a website that sells almost everything (Greenspan, 2017). It is for this reason that Amazon is facing significant rivalry from new market entrants. Limited penetration in developing nations: Currently, Amazon has its main operations in developed countries, thus when other firms establish online retail websites in developing nations, Amazon would find it tough to penetrate. Limited Brick-and-Mortar presence: Amazon has no brick-and-mortar presence which limits its ability to meet the needs of clients of particular products that are more purchasable in physical stores compared to online ones.

The opportunities of Amazon include the emerging developing markets: The emerging markets in growing regions in Africa and Asia presents Amazon with considerable market opportunities to establish online shopping websites as well as fulfillment centers (Greenspan, 2017). The firm can gain a competitive edge by maximizing these markets early before the establishment of other rivals. Expand brick-and-mortar business: To increase its competitiveness as well as effectively compete with brick-and-mortar companies like Wal-Mart, Amazon can establish various brick-and-mortar stores across the globe. Advancing technology: Technology advancements provide Amazon with an opportunity to improve its website to meet consumer needs efficiently. It also allows them to reach many consumers; for instance, the growth of Android phones enables the firm to reach many consumers through their handsets.

The threats of Amazon include the stiff competition: Amazon faces aggressive competition from large retail firms such as Wal-Mart, Alibaba.com, Tesco, and Target, Inc. among others which reduces its revenues and profitability. Cybercrime: Cybercrime is a big problem for virtually all online retail businesses, and Amazon needs to set up stringent measures to prevent any cyber-attacks on its operations. Imitation: Amazon also faces imitation threat from other players as well as entrants into the online shopping market because of its simple and imitable business model.

The competitive advantage of Amazon can be well assessed using the value, rarity, imitability, organization (VRIO) framework. VRIO analysis refers to an analytical tool used by organizations to evaluate their internal resources as well as capabilities to establish if they can be a source of sustained competitive advantage (Rothaermel, 2015). Regarding physical resources, Amazon has physical resources including technology and fulfillment centers, financial resources, and technological resources such as Amazon websites and currency converters. The intangible resources include human (talented workforce, training, and culture), reputation (brand name, partnerships), and innovation and creativity (Amazon Prime, Kindle among others). Moreover, the core competencies of Amazon include continuous innovation, efficient customer service, and highly trained staff.

From the above-identified resources, the brand name enables Amazon to sustain a competitive advantage in the industry. Besides, regarding value, Amazon’s brand name is the most valuable one in the online retail market. Concerning parity, the competitors of Amazon are relatively small, and their brand names are not recognized globally which enables the company to attain a significant market share. Therefore, the firm’s brand name is a rare resource. Moreover, regarding inimitability, the brand name of Amazon is one of its most reliable resources. The reputation of the company speaks for itself; thus, it is tough for rivals to position themselves near Amazon’s brand name because of the cost disadvantage that they would incur in substituting the resource. As such, Amazon’s brand name is inimitable. Lastly, concerning the organization, Amazon has the organizational capability to utilize their brand name maximally. The firm realized that this resource is a competitive edge and employs it to attract buyers, suppliers, and partners.

Amazon employs various strategies to create value as well as obtain a competitive edge in the market. Firstly, the firm uses an effective pricing strategy where most of its products are offered at lower prices than competitors which have helped to create a broader customer base and loyalty. Secondly, Amazon offers a wide variety of products ranging from digital media to grocery which allows it to meet the needs of many consumers, thus gaining a competitive advantage against its rivals (Roger, 2015). Furthermore, the company ensures convenience shopping from home where clients can use their mobile phones to order for goods. They also have the “Same day delivery option” which allows customers to receive their orders on the same day. Such a strategy has allowed Amazon to create value and establish customer loyalty, therefore gaining a competitive edge. Finally, since Amazon does not have physical stores to manage, it has a cost advantage over brick-and-mortar firms.

Amazon uses various key performance indicators (KPIs) to measure as well as verify its strategic effectiveness. Some of these measurement variables include profitability, sales, and market share percentage among others. Typically, the firm continuously tracks these performance indicators to establish whether the strategies are meeting the set goals and objectives. Each department has its own performance measurement indicators that are linked to the overall organizational objectives. Moreover, Amazon also uses performance dashboards to track its KPIs.

Using KPIs to track and verify the effectiveness and performance of a strategic plan is easy and efficient. It allows employees to understand what the organization requires from them and try to increase their efforts to meet such targets (Rothaermel, 2015). Having various measurement variables allows Amazon to remain on course to attaining its organizational objectives.

References

Greenspan, R. (2017). Amazon.com Inc. SWOT Analysis & Recommendations. Retrieved from http://panmore.com/amazon-com-inc-swot-analysis-recommendations

Khan, U. A., Alam, M. N., & Alam, S. (2015). A critical analysis of internal and external environment of Apple Inc. International Journal of Economics, Commerce and Management, 3(6), 955-961.

Roger-Monzó, V., Martí-Sánchez, M., & Guijarro-García, M. (2015). Using online consumer loyalty to gain competitive advantage in travel agencies. Journal of Business Research, 68(7), 1638-1640.

Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.