Amazon Strong points Strong and deep pockets – Started with early successes with

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Amazon Strong points

Strong and deep pockets – Started with early successes with books, Amazon now has categories that include games, toys, electronics, home and kitchen, white goods, brown goods, list is end less. Amazon has become a global E-commerce giant in the last 2 decades.

Customer centric approach: This is the key strength. Company’s robust CRM has created customer centric processes in order to carefully record data on customer’s buying behavior. This enables them to offer individual items, related items or bundle them as an offer, based upon preferences demonstrated through purchases or items visited. Also, the company claims that 55% of their customers are repeat buyers resulting in low cost of acquisition of new buyers.

Cost leadership: Strategic alliances with other companies to offer superior customer service, is what Amazon did right. The most important strategic tie ups are with logistics providers who control costs. This creates a strong Value chain. It lowers the inventory replenishment time for Amazon.

Efficient delivery network: Amazon has free of cost delivery charges in many geographies which is because of its strategic partners & due to its Amazon fulfilment centers, Amazon has created a structured distribution network to make the product available even at remote locations.

GLOBAL strategy: “Go global & act local”. Due to this, Amazon is able to fight with domestic E-commerce companies through absorbing & by forming / partnering with supply chain companies. The branding is done based on the taste. In India, Amazon is running “Aur Dikhao” (Show more) campaign to encourage users to browse more of their products.

Acquisitions: Amazon knows when and whom to acquire. Acquiring companies like woot, Zappos.com, Junglee.com, IMBD etc. has proven to be a successful and revenue generating step for the E commerce giant.

Amazon week points

Shrinking margins: Extensive delivery network & price wars reduced Amazons margins, which is resulting in even losses. In India, Amazon had a loss of $359 crs in the year 2013-14.

Tax Avoidance issue: Tax Avoidance is bad specially in countries like U.S & UK proved to be a huge loss to brand name. Most of its revenue is generated from these well established markets.

High Debt: Amazon is still struggling to make the business profitable in many developing countries thereby affecting the overall profitability of the group resulting into High debt.

Product flops – Fire phone in the US which was a big flop. Also, Kindle fire did not pick up as strongly as Kindle did. Thus, there were several product flops which caused a dent in Amazon’s deep pockets.

Opportunities

Backward Integration: Amazon can come up with its In-house brands in different product categories. They can also differentiate their offering. This will help them make profits in highly competitive E-commerce market.

Global Expansion: Many countries still unexplored by Amazon. Expansion mainly in Asian & developing economies will help Amazon because those are the markets with low competition in E-commerce industries & are not saturated like developed economies.

Acquisitions: By acquiring more E-commerce companies, Amazon can decrease the competition level & also can use the specialized capacity of the other company.

Opening physical stores outside U.S: It is needed as by doing this Amazon can help the customers to engage with the brand, resulting in increase in repeat purchases & increase in loyal customer base.

Threats

Low entry barriers of the industry: Low entry barriers affect the current player’s business as more & more company means tough competition, price wars, shrinking margins & losses resulting into questioning the sustainability of the players.

Local competition – India has snapdeal and Flipkart who are local E commerce retailers and are taking away majority of the market. Similarly, there are many local players who take bites from the market share thereby making it hard for a big player like Amazon to make profits.

Strengths in SWOT analysis of Alibaba

Scale of operations – China is the most populated country in the world and one of the leading economics. Strong hold in such a market is very beneficial for Alibaba.This kind of a success story is sure to go a long way in scripting Alibaba’s growth trajectory.

Market Share – As of 2016, Alibaba had a market share of 65% in China and its closest rival was far away at 22%. One of the major strengths of China is that this market share dominance comes because of the backing of solid manufacturers who are capable of manufacturing at mass levels and supplying across the world.

Visionary Leader – Another strength, though qualitative in nature, is the presence of a visionary like Jack Ma at the helm of the company.

Good relationship with partners – Alibaba provides a very productive environment to its partners. Merchants, Consumers, third party dealers etc. all get access to cloud storage, financial schemes and real time access to all information. This makes it very attractive for more and more partners to join hands with Alibaba.

Weaknesses

Way too many sellers – Alibaba is not putting a barrier on the increasing sellers who register to partner up with the company. A huge number of sellers competing in the online market place as a result of this strategy. While this is good for the buyers, it might not be so good to the buyers. Not being able to taste success because of the huge competition will eventully make the sellers withdraw from the contract. There were more than 8.5 million active sellers when Alibaba went public a couple of years ago and the number has only been going up ever since. It resulted in a few reputed brands have pulled out from selling their products on Taobao and Tmall, the two websites by Alibaba.

Heavy discounts – Not being able to allow sellers to sell at fair and profitable prices is another weakness that the company has. It makes most of its revenues by selling advertising spaces for the sellers. The sellers are being suppressed now and do not have the freedom or opportunity to sell at profitable rates.

Opportunities

Experience in China – The strong base in the Chinese market and an in-depth understanding of the e-commerce business, it has immense opportunities in term of tapping other markets.

Rising Investments and demand of E-commerce portals – Very few E-commerce portals accmulates the amount of trust which Alibaba has gained. It means when Alibaba expands to a new country, it comes with the years of trust on the brand giving tough competition to the local e-commerce players.

Threats

Flipkart & Amazon in India – India is a big challenge as Alibaba is looking to expand its operations to India and the biggest threat will be the presence of Flipkart & Amazon. The time that Alibaba will take to set up its full functionality will be long and the two major players of the Indian E-Commerce industry will start adopting new strategies to give a tough fight. Other entities like Tencent and JD.com are local competitors to Alibaba in China while Amazon and eBay are the global threats.

Stability of the economy – The unstability of the Chinese economy also plays a deciding role in the success of the business. But since almost all of Alibaba’s business comes from within China, the global markets will have an impact only in tense situations. With rise in demand in service levels from E-commerce portals, the profitability of most E-commerce firms is dropping and Alibaba is not different. They need to think on this.

Explanation / Answer

write an Essay considering two competing companies; Alibaba and Amazon. You are expected to conduct a research about the two subject companies including any published articles comparing them. Your research should enable you to answer the following two questions:

1- Conduct a SWOT analysis for both Alibaba and Amazon. What do you conclude from this analysis?

2- Analyze and Evaluate the two companies to learn which company has better global competitive advantage using Barney's (1991) resource-based view (VRIN)?

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