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Amazon business level strategy

Discuss Amazon's business level strategy including identification of the industry, development of the value creation frontier, identification and justification of the company's generic business level strategy, market segment, strategic group, and rivals, and tactics used to manage those rivals.

Business Level Strategy
I. How does a company make a profit?
a. Be customers' "best" option
b. But not all customers value the same features
c. Unique
i. Either monopoly
ii. Or more likely, differentiate on some characteristic / price

II. Market Analysis
a. Generic business-level strategies
i. Cost leadership vs. differentiators
ii. Broad vs. focused strategies
iii. Four generic business-level strategies:

Broad Cost Leadership Broad Differentiation
Focused Cost Leadership Focused Differentiation

b. Value Creation Frontier
i. Curve represents customers trade-offs between low price and features
1. Location of firm represents low price vs. features
2. Size of firm represents broad vs. focused
ii. What can be learned from the curve?
1. Market segments, strategic groups, rivals
2. What customers are unsatisfied
3. Which direction can our firm move to reduce rivalry

III. Tactics for Managing Industries
a. Fragmented industries can be focused using:
i. Chaining
ii. Franchising
iii. Horizontal mergers
iv. eBusiness
b. Tactics for managing rivalries
i. Price signaling / tit-for-tat
ii. Price leadership
iii. Nonprice competition
iv. Market penetration / entrenchment
v. Product proliferation
vi. Capacity control

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Business Level Strategy
I. How does a company make a profit?
Amazon.com became the customer?s best option when it allowed customers to shop online for a wide variety of products at the same place. This was in direct competition to brick-and-mortar stores where people had to physically go shopping. The company Amazon.com made profit by taking a small percentage of the sale price of each item that is sold through its website. Amazon.com also makes profits by allowing companies to place advertisements on its website (1). The main characteristic that has allowed Amazon.com to make profits is the large customer base of 30 million customers. Its value frontier is that it allows its customers to shop online at one site. Amazon.com has broadened the base of products over time. It has offered retail goods, consumer electronics, digital content, and private labels. Its broad product base helps develop the value creating frontier of Amazon.com.

II. Market Analysis
a. Generic business-level strategies
Amazon.com?s business level strategy is cost leadership. It has been able to provide low cost pricing and efficient distribution capabilities. It has been able to provide world class service to its ...

Solution Summary

The response provides you a structured explanation of how Amazon makes profits . It also gives you the relevant references.

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