- Identify whether your assigned corporation appears to follow a cost leadership or product differentiation strategy. What leads you to that conclusion? You can ignore the question of focus for now. (*Note: if your assigned corporation operates in multiple industries, picks its most prominent business unit and focus there.) 2. Has this strategy been successful? Rely on analysis here - not unsupported opinions! What performance data over time supports your conclusion? 3. If successful, what are the sources/bases of this advantage (use the specific sources/bases outlined in the lecture video for this module)? Is this success likely to be sustainable based on the nature of the sources/bases of their strategy? If unsuccessful, what can they realistically do to increase their likelihood of success?
Amazon
Full Answer Section
Sources and bases of advantage: Amazon's cost leadership strategy is based on a number of sources and bases of advantage, including:
Economies of scale: Amazon's large scale and scope of operations give it economies of scale, which means that it can produce and distribute goods more efficiently and at a lower cost than smaller competitors.
Efficient operations: Amazon has invested heavily in automation and efficiency measures, such as its fulfillment centers and delivery network. This allows Amazon to keep its costs low and offer competitive prices to its customers.
Supplier relationships: Amazon has strong relationships with its suppliers, which allows it to negotiate favorable prices.
Low-cost culture: Amazon has a culture of frugality and cost-consciousness. This helps Amazon to keep its costs low and pass on the savings to its customers.
Sustainability: Amazon's cost leadership strategy is likely to be sustainable because it is based on a number of sources and bases of advantage that are difficult for competitors to replicate. For example, Amazon's scale and scope of operations, its efficient operations, and its supplier relationships are all difficult to replicate.
Recommendations: Amazon should continue to invest in automation and efficiency measures to keep its costs low. Amazon should also continue to negotiate favorable prices with its suppliers. In addition, Amazon could consider expanding into new markets, such as the healthcare market. Amazon could also consider acquiring other companies that have complementary products or services.
Overall, Amazon's cost leadership strategy has been successful. Amazon has been able to offer its products at competitive prices, which has helped it to grow its business and become one of the most successful companies in the world.
Sample Answer
Assigned corporation: Amazon
Strategy: Cost leadership
Conclusion: Amazon follows a cost leadership strategy. This is evident in the following ways:
- Amazon offers its products at competitive prices, often lower than those of its competitors.
- Amazon invests heavily in automation and efficiency measures to keep its costs low.
- Amazon has a large scale and scope of operations, which gives it economies of scale.
- Amazon negotiates favorable prices with its suppliers.
Performance data: Amazon's financial performance over time supports the conclusion that its cost leadership strategy has been successful. For example, Amazon's revenue has increased from $10.7 billion in 2003 to $469.8 billion in 2022. Amazon's net income has also increased significantly over the same period, from $402 million in 2003 to $33.3 billion in 2022.