Amazon’s generic competitive strategy (Michael Porter’s model) helps drive business development amid tough competition. Amazon is highly competitive against e-commerce and retail firms, like Walmart, Costco, Home Depot, Aldi, and eBay, as well as IT and consumer electronics firms, such as Google (Alphabet), Apple, Microsoft, and Samsung. Amazon also competes with Netflix, Disney, Sony, and Facebook (Meta Platforms) in the entertainment content production and distribution market. Amazon’s competitive strategy and intensive growth strategies are responsible for business growth and expansion in the international market. The company benefits from IT and e-commerce business opportunities through its generic competitive strategy and intensive growth strategies.
Amazon’s generic competitive strategy enables the e-commerce business to offer goods and services at affordable rates. The resulting competitive advantage boosts the company’s brand popularity. Thus, this generic strategy strengthens the brand, which is one of the competencies and business strengths noted in the SWOT analysis of Amazon. On the other hand, the intensive strategies support the e-commerce company’s ability to take advantage of growth opportunities around the world.
Amazon’s Generic Competitive Strategy (Porter’s Model)
Amazon uses cost leadership as its generic strategy for competitive advantage. Minimization of operational costs is the objective in this generic competitive strategy. For example, Amazon uses advanced computing and networking technologies for maximum operational efficiency, which translates to minimized costs. Considering the nature of e-commerce, the company benefits from process automation, which is used in purchase processing, scheduling, and other areas of the business with support from Amazon’s operations management. The benefits of this competitive strategy enable the company to minimize the cost of its online retail and other services.
A strategic objective linked to Amazon’s cost leadership generic strategy is to build e-commerce competitive advantage through the continuous improvement of information technology infrastructure. The company also has the strategic objective of heavily investing in research and development (R&D) to optimize the performance of its IT resources. In addition, the cost leadership generic competitive strategy pushes the technology company to minimize its price levels. This strategic objective impacts Amazon’s marketing mix (4P), which involves low prices to attract buyers. Thus, through the generic strategy of cost leadership, competitive advantage is gained to support the fulfillment of Amazon’s mission statement and vision statement, especially regarding growth and leadership in the online retail and e-commerce services market.
Amazon’s Intensive Growth Strategies
Market Development. Amazon uses market development as its current primary intensive growth strategy. Entry and growth in new markets is the main objective in this intensive strategy. The e-commerce company enters new countries where it offers its services. For example, the company initially provided its online retail services to consumers in the United States. Amazon now operates e-commerce websites and services in more countries, including Canada, the United Kingdom, and India. Each new country is considered a new market that creates growth opportunities for the firm. Amazon’s generic strategy builds competitive advantage that allows the business to implement this intensive strategy of market development. A strategic objective related to this intensive growth strategy is to establish new online retail websites and operations that correspond to new countries added to Amazon’s global market reach.
Market Penetration. Market penetration is a secondary intensive growth strategy in Amazon’s e-commerce business. The objective of this intensive strategy is to generate more revenue from the markets where the company currently operates. Amazon grows with increasing consumerism. For example, as consumers develop increasing interest in online retail, the company benefits from higher sales revenues, especially when considering the popularity of the Amazon brand. Market penetration is responsible for the initial rapid growth of the e-commerce business in the United States. The company’s generic strategy creates the competitive advantage necessary to penetrate markets based on low costs and prices that address the tough competitive rivalry shown in the Five Forces analysis of Amazon. A strategic objective based on this intensive growth strategy is to implement an aggressive marketing campaign to attract more consumers to Amazon’s e-commerce platform.
Product Development. Amazon applies product development as a supporting intensive strategy for business growth. Developing and offering new products to gain higher revenues is the goal of this intensive growth strategy. Amazon grows partly by developing new products over time. For example, the company now offers AmazonBasics products and Amazon Web Services (AWS). The company’s cost leadership generic competitive strategy supports this intensive strategy by providing the company with low-cost business processes for introducing new products. A strategic objective related to this intensive growth strategy is to increase research and development (R&D) investment for rapid product development and release to the market while satisfying current and emerging trends, such as the economic and technological factors shown in the PESTLE/PESTEL analysis of Amazon.
Diversification. Diversification is the least significant among Amazon’s intensive growth strategies. Growth based on new business is the objective in applying this intensive strategy. For example, Amazon grew through its acquisition of Audible, which produces audiobooks and related products, and its acquisition of Whole Foods Market, which offers health food and related groceries. In this regard, the company partly uses acquisition to implement this intensive growth strategy. Amazon’s cost leadership generic competitive strategy enables the organization to grow in diversification by minimizing operating costs and selling prices. A strategic objective associated with this intensive growth strategy is to grow the e-commerce business through an aggressive acquisition strategy.
References
- Adama, H. E., Popoola, O. A., Okeke, C. D., & Akinoso, A. E. (2024). Theoretical frameworks supporting IT and business strategy alignment for sustained competitive advantage. International Journal of Management & Entrepreneurship Research, 6(4), 1273-1287.
- Amazon.com, Inc. – Form 10-K.
- Amazon.com, Inc. – What We Do.
- Amazon.com, Inc. – Who We Are.
- López, D., & Oliver, M. (2023). Integrating innovation into business strategy: Perspectives from innovation managers. Sustainability, 15(8), 6503.
- U.S. Department of Commerce – International Trade Administration – Retail Trade Industry.
- U.S. Department of Commerce – International Trade Administration – Software and Information Technology Industry.