Amazon AFI Strategy Framework
In strategic management of an organization, the CEO or the department head of the strategy is responsible for the AFI Strategy framework. AFI connects three interdependent activities as part of strategic management.
It facilitates the implementation of a strategy to boost a company’s competitive advantage by improving its performance.
An overview of the three areas is as follows;
- Analysis of external environment involving macro level (PESTEL), industry environment (Porter’s five forces), and the firm’s competitive environment.
Internal environment entails identifying the resources, capabilities and competencies using VRIO analysis, and finding the value chain primary and support activities.
Analyzing the competitive advantage and firm performance using financial and market-based measures, compare the firm to peers and competitors, and assess achieving and sustaining competitive advantage.
- Formulation; business strategy – differentiation, cost leadership and integration, innovation and strategic entrepreneurship.
Corporate strategy – vertical integration, diversification, potential acquisitions, mergers, alliances and networks.
International strategy – worldwide competition.
- Implementation; Organizational design, structure, culture, and control.
- Functional, multidivisional and matrix structure
- Control and reward systems
- Strategy/structure relationship
- Corporate governance and business ethics – agency theory and shared value.
AFI Strategy Framework
The given chart outlines the various components of AFI Strategic Framework in summary. It provides the AFI Strategy Framework elements of analysis, formulation and implementation to gain and sustain the company’s competitive advantage.
Amazon Internal Analysis (VRIO)
VRIO- Value, Rarity, Imitability (the ease or difficulty in imitation), and Organization (exploitation of resources or capability) (Sastry, 2019).
The VRIO analysis helps organizations to determine and protect their internal resources and capabilities that offer a longstanding competitive advantage.
The analysis poses yes/no questions on each of the four areas.
Value – does the company avail resources that add value to customers and exploit opportunities to neutralize competitors due to the exceptional internal capabilities present?
Rarity – does the organization control scarce resources or scarce capabilities or own something in high demand yet difficult to find?
Imitability – how easy or cheap is it to duplicate the company’s available capability or resources?
Organization – Are there organized management systems, structures, processes and culture in the organization to utilize capabilities and resources?
If the answer to any question is no, the firm is at a competitive disadvantage and should reassess the available resources and capabilities and utilize them effectively.
External Analysis (Pestel)
Political; Government – internet tax threat and additional income tax liabilities.
Amazon relies heavily on political stability across the countries.
Taxation – In Seattle, employees pay a labor tax,
Economic – Changes in exchange currency rates across the world risks its international sales, hence raising the operating expenses (Onyusheva & Seenalasataporn, 2018)
Social – variety of products are delivered at one’s doorstep leading to shifting attitudes on obesity and change in lifestyle.
Technology – allows for new shipping methods, such as Prime Air and their drone delivery system.
External Analysis (Porter’s 5 Forces)
Amazon discourages new entrants since it is dynamic with exceptional logistics and computer analytics. Amazon Web Services introduces several new features and services annually with an aggressive pricing mechanism making it difficult for new entrants.
There is high competition since people can acquire the products from physical stores since they see the commodities first hand.
Amazon experiences rivalry from Walmart which has been in the industry longer and , hence, has more customers and a greater brand recognition. Alibaba has a new model and is well funded and, hence, may reduce Amazon’s sales and profits.
There is medium buyer power because the company focuses on customer satisfaction and product quality, and buyers are usually well-informed. Their bargaining power is high and the switching cost is low.
Amazon has medium supplier power as they follow the company’s set rules. Amazon also collaborates with third party online sellers.
Amazon SWOT matrix
Amazon is the leading online company in the world, it has a significant number of loyal customers, it avails several products, it has a rapid rate of sales growth and is highly innovative creating new services and products often.
The weaknesses include highly imitable, limited physical stores, low operating margins, failure of products, such as phones, and making profits that do not surpass the break-even point.
The company has various opportunities as provided by the weaknesses of the company. They include establishment of physical stores, launching new products, acquiring new businesses, preventing counterfeit sales, and focusing on boosting productivity.
The threats stem from lawsuits, well-financed competitors, such as Ali baba, depending highly on the North American market and government criticism.
Recommendations
Integrating artificial intelligence in Amazon’s brick and mortar ventures to make the products more attractive and to improve customer satisfaction.
Penetrating the emerging markets which would provide increased growth and development opportunities for the company.
Focusing on selling products under its brand is essential since the third-party online sellers make more profits compared to Amazon.
Establishing more physical stores is also important for faster growth and development and to bring the customers closer.
Communication to Amazon Stakeholders on the Recommendations
Scheduling physical face-to-face meetings with the stakeholders where the information is presented through PowerPoint presentations (Butt et al., 2016).
Sending out newsletters with the recommendations at given durations, such as quarterly basis. Email should only be used if immediate feedback is not required.
Having separate video calls so that all the concerns are addressed effectively.
Providing a conclusive project summary report on the recommendations sent weekly or monthly.
Scheduling conference calls with various categories of stakeholders if the issue is too urgent.
Having lunch meetings which is an informal option and offer honest feedback on the ideas shared.
References
Butt, A., Naaranoja, M., & Savolainen, J. (2016). Project change stakeholder communication. International Journal of Project Management, 34(8), 1579-1595. Web.
Onyusheva, I., & Seenalasataporn, T. (2018). Strategic analysis of global e-commerce and diversification technology: The case of Amazon. Com INC. The EUrASEANs: Journal on Global Socio-economic Dynamics, 1(8), 48-63. Web.
Sastry, V. V. L. N., Katvi, S., & Tourani, P. (2019). Amazon’s strategic analysis and it’s enterprise strategy for the cloud. Advance and Innovative Research, 6(2), 186-196.