Amazon and Porter's Diamond Model, Business Essay Example

Amazon.com Inc. is a multinational corporation that is based in Seattle, Washington, in the United States. The corporation deals in business activities such as online commerce, cloud computing, digital content, and artificial intelligence. The firm was initiated by Jeff Bezos in 1994 and is currently the leading internet-based firm in terms of revenue earned across the globe. Porter's Diamond model proposes that companies that establish new factor advantages for themselves (Porter, 1990). Amazon competes in the e-commerce industry where online giants like Alibaba are threating to take over. The paper examines Porter's Diamond Model in relation to Amazon.com Inc.

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Factor Endowments

Various factor conditions ensure that Amazon has a competitive edge against its competitors. The corporation is gifted with numerous fundamentals of production that have assisted it to increase its output substantially. Amazon has a competitive edge in the e-commerce industry because of capital, skilled labor, infrastructure and technological innovation (Meyer, 2019). Amazon has appeared to master the industry organization through labor by depending on rationality and common sense rather than formal rules which betters the outcomes and at a lower cost. Workers earn better salaries than in competitors like Walmart, Best Buy and Big Lots. Amazon capital structure continues to grow with 135.9 billion dollar revenue in 2016 (Hall, 2019). This is more than twice its competitors like Best Buy, Big Lots and digital content creators like Netflix. Technological innovation and infrastructure are other factor endowments that have helped the company to have a competitive edge against rivals. Use of Prime autonomous air delivery drone and machine vision has proved to be a successful technology not adopted by its rivals (Dudovskiy, 2018).

Demand Conditions

Amazon's products and services are linked to high demand globally. Amazon is the leader in e-retail business in the U.S. with about $232 billion as net sales in 2018 (Mohammed, 2018). This is the highest sales for an e-commerce company. The company surpasses companies like eBay, Home Depot, Best Buy, and Etsy. The competitors recorded fewer sales than Amazon in 2018 (Chaffey, 2018). In terms of digital content subscriptions, Amazon offers a $99 yearly plan which offers a basic HD plan with a wide range of digital content to choose from. However, competitors like Hulu do not have original content and compel the users to wait on the TV shows that are aired on regular cable networks thus taking away the binge experience (Jeff, 2017).

Related and Supporting Industries

Amazon has been working with various market players to support its development on the global level. Amazon produces electric items like Amazon Axela, firestick and kindle fire tablet in a bid to remain competitive in other industries (Pratap, 2018). The original products have proved to be profitable and provide a competitive edge over rivals like Walmart (Gershgorn, Griswold, Murphy, Coren & Kessler, 2017). In terms of digital content, Netflix, Hulu, and HBO are all direct rivals within this industry. Additionally, YouTube and iQiyi have flooded the industry with their content creating an adjacent content rivalry. Amazon has established Amazon Music Stream, Amazon Drive Cloud and Amazon Advertising Find to ensure that it has a competitive advantage over companies like Netflix, YouTube, and Hulu (Statista Research Department, 2019).

Strategy, Structure, and Rivalry

According to Emmer (2018), one of Amazon's plans is a physical growth to reach more clients. Amazon's wide market has increased sales and incomes unlike its rivals like Best Buy and Big Lots who experience a difficult time expanding internationally. Amazon's board of directors meets monthly and quarterly every year to decide the strategy of moving the company forward. Amazon maintains its best employees and compensates them well. Since Amazon is number one in the e-commerce industry, corporations like Best Buy, Hulu, Walmart are studying how to emulate the culture of Amazon while attempting to keep with them (Salinas, 2018).

Government and Chance

Government operates at numerous levels and through multiple divergent strategies which are likely to impact the organization in various ways. Various governments have different regulations regarding new companies joining the domestic market (Stampler, 2019). For instance, Amazon has been facing difficulties in joining the Chinese market. However, competitors like Alibaba have been having an upper hand in the Chinese market due to favoritism from the government. However, Amazon has decided that it will sell Western-tailored brands in the Chinese market to reach consumers. This has provided a competitive advantage over Alibaba which has focused on local Chinese products for its customers (Lee, 2018).

Conclusively, Michael Porter's Diamond Model proves why Amazon.com is competitive internationally compared to its competitors. The company's ability to compete internationally can be attributed to the; factor endowments; demand conditions; related and supporting industries; and strategy, structure, and rivalry. The competitive advantage has made Amazon remain the leading corporation in e-commerce with the largest market share. The firm runs on an enormous business, making it attain economies of scale that has led to increased incomes and continuous development at the international level.

References

Chaffey, D. (2018). Amazon's business strategy, revenue model, and culture of metrics: a history. Smart Insights. Retrieved from: https://www.smartinsights.com/digital-marketing-strategy/online-business-revenue-models/amazon-case-study/

Dudovskiy, J. (2018). Amazon Business Strategy and Competitive Advantage: cost leadership & customer-centricity. Retrieved from: https://research-methodology.net/amazon-business-strategy-competitive-advantage-benefiting-cost-leadership-diversification/

Emmer, M. (2018). With These 7 Strategies, Amazon Will Dominate Any Market. Inc.com. retrieved from: https://www.inc.com/marc-emmer/with-these-7-strategies-amazon-will-dominate-any-market.html

Gershgorn, D., Griswold, A., Murphy, M., Coren, M.J., and Kessler, S. (2017). What is Amazon? Really? Quartz. Retrieved from: https://qz.com/1051814/what-is-amazon-really/

Hall, M. (2019). Amazon.com/American Company. Britannica.com. Retrieved from: https://www.britannica.com/topic/Amazoncom.

Jeff, B. (2017). Amazon's Competitive Advantage Isn't Cost or Convenience; It's This. Forbes. Retrieved from: https://www.forbes.com/sites/jeffboss/2017/06/20/amazons-competitive-advantage-isnt-cost-or-convenience-its-this/#37ec3eb74958

Lee, A. (2018). A Case Study on International Expansion: When Amazon went to China. Retrieved from: https://medium.com/@alexlee611/a-case-study-on-international-expansion-when-amazon-went-to-china-3c5445b21fe7

Meyer, P. (2019). Amazon.com Inc.'s Organizational Structure Characteristics (An Analysis). Panmore Institute. Retrieved from: http://panmore.com/amazon-com-inc-organizational-structure-characteristics-analysis

Mohammed, S. (2018). How Did Amazon Build Its 'Sustainable Competitive Advantage'? -The Key Success Factors. Retrieved from: https://medium.com/@shahmm/how-did-amazon-build-its-sustainable-competitive-advantage-88cfee7fe2c8

Porter, M.E. (1990). The Competitive Advantage of Nations. Harvard Business Review.

Pratap, A. (2018). Amazon Sources of Competitive Advantage. Retrieved from: https://notesmatic.com/Amazon-Sources-of-Competitive-Advantage

Salinas, S. (2018). Amazon Reaches $1 Trillion Market Cap for the First Time. CNBC. Retrieved from: https://www.cnbc.com/2018/09/04/amazon-hits-1-trillion-in-market-value.html

Stampler, L. (2019). Amazon Will Pay a Whopping $0 in Federal Taxes on $11.2 Billion in Profits. Fortune.com. Retrieved from: http://fortune.com/2019/02/14/amazon-doesnt-pay-federal-taxes-2019/

Statista Research Department. (2019). Amazon - Statistics & Facts. Retrieved from: https://www.statista.com/topics/846/amazon/