Amazon: Analytical Tools and Frameworks Group 5 Patricia Martinez, Shavena Smith, Bryan Arias 10am Class

Chapter Overview The Strategy Canvas The Four Actions Framework The Eliminate-Reduce-Raise-Create Grid Three Characteristics of a Good Strategy Reading the Value Curves

Introduction In order to create a Blue Ocean, one has to create a unique and exceptional value curve A blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant Amazon’s strategic profile focuses on keeping their customers happy and customizing products that would appeal to the customer. Market penetration is a secondary intensive growth strategy in Amazon's online retail business.

The Strategy Canvas The strategy canvas is a diagnostic and an action framework for building a compelling blue ocean strategy The horizontal axis captures the range of factors the industry competes on and invests in The vertical axis of the strategy canvas, captures the offering level that buyers receive across all these key competing factors To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategy focus from competitors to alternatives, and from customers to noncustomers of the industry

Strategy Canvas of Amazon as of 2018

Strategy Canvas benefits Shows the company’s strategic profile and how it invests in the competitive factors and possible future factors to create a BOS Industry profile by showing the factors that affect competition among the players Strategy Canvas benefits Shows the strategy profile for incumbents, identifying which factors they invest in

Conventional Strategic Logic Drives you to offer better solutions than your rivals to existing problems defined by your industry With Amazon, 2 day shipping/2 hour shipping Lower prices Prime membership benefits (convenience, simplicity, free music & video streaming, etc.)

The Four Actions Framework Eliminate Which of the factors that the industry takes for granted should be eliminated? Raise Which factors should be raised well above the industry’s standard? Reduce Which factors should be reduced well below the industry’s standard? Create Which factors should be created that the industry has never offered?

Amazon’s Eliminate-Reduce-Raise-Create Grid Fire phone Any products or ideas that are of liability and do not provide much benefit to customers Non-customer Centric ideals Raise More distribution centers Sense of urgency Product range Small business approach Reduce Ideas products that don’t lead to the highest efficiency Create Easy access Fast shipping Strategic alliances Effective fulfillment centers

Three Characteristics of a Good Strategy Focus Main attractions Ex: friendly service, fast shipping, non brick-and-mortar so ca be easily accessed Divergence Differentiate their profile from the industry’s average profile; how is their strategy different from everyone else Ex: Customer Centric Compelling Tagline Deliver a clear message and advertise an offering truthfully so customers will not lose trust and interest Ex: “Work Hard. Have Fun. Make History” Customer centric is a way of doing business with your customer in a way that provides a positive customer experience before and after a sale Amazon’s slogan, “Work Hard. Have Fun. Make History.”

Value Curve A graphic depiction of a company’s relative performance across its industry’s factors of competition. Enables companies to see the future in the present Companies may have to out beat competition by offering a little more for a little less

Blue Ocean vs. Red Ocean Strategy Compete in existing market Beat competition Capture more of existing demand Make the value/cost trade off Blue Ocean New market creation Make competition irrelevant Create new demand Disprove the value/cost trade off

Over delivery without payback... The strategy canvas signals that the company may be oversupplying its customers, offering too much of those elements that add incremental value to buyers The company must decide which factors to eliminate and reduce to construct a divergent value curve

Strategic Contradictions Where a company is offering a high level on one competing factor while ignoring others that support that factor Ex: investing heavily in making a company’s website easy to use but failing to correct the site’s slow speed Amazon promotes eating healthy with the Prime subscription; members are able to purchase food on Prime Now from their local Whole Foods Market and receive their groceries within 2 hours. This only works if there is a Whole Foods Market in reasonable distance. Strategic Contradictions is offering a high level on one competing factor while ignoring the rest that support one factor. For an example, a company can focus on improving their website so it’s easier for customers to use but ignore the website’s slow speed. With our company Amazon, they have a Prime Subscription which allows you purchase food from their local Whole Foods Market and you will receive it within 2hrs. However they ignore the facts of the customer having a Whole Foods Market in a reasonable distance

What is An Internally Driven Company? Is the company’s strategic vision built on an “outside-in” perspective, driven by the demand side or an “inside-out” perspective that is operationally driven. “Inside-out” “Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.” Amazon’s placement is built like an inside out perspective. They focus more on their customers then their profits. You can tell just by reading their vision which states, “Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”

Conclusion The Strategy Canvas and EERC Grid are valuable tools for for analysis, visualisation, and communication; they predict how the company will be profitable in the future compared to others in the industry. Blue Ocean Strategy is used to focus on divergence in the market rather than competing so Amazon focuses on how they will provide to their customers differently rather than how they can have higher profits.