Amazon Global Business Strategy: Model & Growth (2024)

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Amazon's global business strategy

Amazon has a diversified business model.

A diversified business model is a business model whereby a company develops new products and services while exploring new markets beyond its borders. Diversified models can jumpstart a highly successful business.

To learn more about this concept, check out our explanation on Diversification!

At its core, Amazon is an online store. The e-commerce business contributes to over 50% of the company's total revenue but a large portion of the revenue comes from supporting third-party businesses to sell on its platform.

Meanwhile, costs are minimised as Amazon has no need for physical stores. It is an exceptionally high-volume business that maximises efficiencies using the scalable web platform and uses leading-edge data analytics to optimise business performance.

Amazon also works hard to build customer loyalty through excellent customer service such as one-stop shops, speedy delivery, etc. Despite returning modest profit margins, this sector achieves significant cash flow thanks to a highly efficient system of collecting money from customers on the same day. On the other hand, payment terms with suppliers allow Amazon to pay suppliers some months later.

• Large-scale web presence,

• IT capacity and scalability,

• Data and analytic capability,

• Relentless focus on the customer including the value that customer's place on convenience,

• Overall technical capability and in particular the application of technology to achieve business efficiency,

• Cash generation from the online retail business.

These advantages have been gained largely through continuous innovation and development of the e-commerce part of its business model.

• Amazon's large-scale web presence has mainly come from Amazon's relentless expansion of the e-commerce business which, internally, has led to Amazon's massive IT capacity and scalability.

• Data and analytics are used for business efficiency, particularly in the supply chain and distribution centre operations.

• Customer loyalty is generated by capitalising on the appeal of convenience when purchasing using Amazon's service.

• This business provides significant cash flow which is used to fund other parts of the business.

Amazon Prime is a media platform that operates on a subscription basis but with many premium offerings requiring additional customer payments.

High-in-demand music on Prime Music requires an additional payment.

This provides a reliable revenue stream for Amazon.

• The Amazon Prime delivery service enhances customer convenience when purchasing from the e-commerce website. But its subscription model provides a more reliable revenue source and is more profitable than its e-commerce business.

• Third-party sellers are incentivised to achieve strict delivery timescales so that their products can be offered using Amazon Prime as the delivery method.

• Data and analytics capabilities are utilised in the delivery of streaming and physical delivery of goods.

• Customer loyalty is enhanced by the delivery convenience and the convenience of media streaming using one web platform.

Attention marketing makes use of non-invasive means like social media to capture the attention of the audience.

Amazon is one of the most popular and effective tools for attention marketing on the Internet. It connects consumers worldwide while providing sellers with better visibility for their products. Advertising on Amazon is non-invasive as the audience chooses to engage rather than be interrupted by intrusive ads.

• Amazon's advertising revenues are maximised due to the massive web presence of the e-commerce website.

• Data and analytics capabilities allow for the capturing of customer insights from the e-commerce website. This knowledge is used to focus advertising on specific customer segments, thus maximising advertising effectiveness.

• Amazon's existing IT capacity and scalability are used to offer IT services such as cloud computing, databases and storage to customers.

• Amazon's data and analytics capabilities built up from the other businesses are utilised within its service offerings.

Amazon's differentiation strategy

“ The most important single thing is to focus obsessively on the customer. Our goal is to be earth's most customer-centric company. " - Jeff Bezos

Amazon's main strategy is to differentiate itself by developing differentiated products and services that meet the needs of its customers.

A differentiation strategy is a business approach in which a company provides its customers with something unique and distinctive that only it can offer.

At Amazon, differentiation is done by using technology and human resources. The employees are trained to deliver the best possible service to its customers.

Amazon's employees can work efficiently using the technology that it has developed to serve its customers. This includes the algorithms and software tools that help the employees deliver and support their customers.

Amazon also differentiates itself through top-notch customer service.

Amazon has an easy-to-navigate help centre with thousands of self-help FAQs grouped by category. Even if you don't know how to describe your problem in words, you can quickly search for a similar issue and learn to resolve it yourself. If FAQs or community forums don't help, you can reach out to a real person. Amazon provides 24/7 call support. So no matter where you are or what time you call, you'll get the help you need.

Amazon Global Business Strategy - Key takeaways

• Amazon started in 1994 as an online bookstore. It is now the biggest online retailer in the world.

• Amazon has a diversified business model. At its core, it is an online store, and this contributes to over 50% of Amazon's revenue.

• Customer loyalty is achieved by its world-class delivery service.

• Amazon's main strategy is to differentiate itself by developing products and services that meet the needs of its customer segments.

• The four pillars of Amazon's growth strategy include customer-centricity, innovation, corporate agility, and optimisation.

Sources:

1. Brad Stone, The Everything Store: Jeff Bezos and the Age of Amazon, New York: Little Brown and Co., 2013.

2. Gennaro Cuofano, How Amazon Makes Money: Amazon Business Model in a Nutshell, FourWeekMBA, n.d.

3. Dave Chaffey, Amazon.com marketing strategy: A business case study, Smart Insights, 2021.

4. Lindsay Marder, Amazon Growth Strategy: How to Run a Multi-Billion Dollar Business Like Jeff Bezos, BigCommerce, n.d.

5. Meghna Sarkar, “All-Inclusive” business model of Amazon Prime, Business or Revenue Model, 2021.

6. Gennaro Cuofano, Amazon Case Study – Tearing Down The Whole Business, FourWeekMBA, n.d.

7. 8 Customer Service Strategies You Can Steal from Amazon, Mcorpcx, n.d.

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