Mục tiêu của nghiên cứu là so sánh sự cạnh tranh giữa Amazon và eBay trong nền công nghiệp thương mại điện tử. Đánh giá những chiến lược hiện tại của họ và so sánh làm cách nào mỗi chiến lược của công ty sẽ bị ảnh hưởng bởi văn hóa, sơ đồ tổ chức và quản lý vận hành. Xác định những vấn đề chiến lược cái mà quản lý tại mỗi công ty cần phải giải quyết để có thể thành công và kiếm được lợi nhuận hơn. Cuối cùng đưa ra giải pháp cho các hành động chiến lược cũng như điều hành công ty. HO CHI MINH CITY NATIONAL UNIVERSITY BACH KHOA UNIVERSITY SCHOOL OF INDUSTRIAL MANAGEMENT BUSSINESS OF ADMINISTRATION o0o GROUP ASSIGNMENT Course Strategic Management Lecturer Contents OBJECTIVES OF T.
Trang 1HO CHI MINH CITY NATIONAL UNIVERSITY
BACH KHOA UNIVERSITY SCHOOL OF INDUSTRIAL MANAGEMENT
BUSSINESS OF ADMINISTRATION
-o0o -GROUP ASSIGNMENT Course: Strategic Management
Lecturer:
Trang 2OBJECTIVES OF THE STUDY 3
COMPARISONS OF COMPETITIVENESS 4
EVALUATION OF CURRENT STRATEGIES 10
IMPACT OF MANAGERIAL ACTIONS ON THE EXECUTION OF STRATEGIES 12 STRATEGIC ISSUES 13
RECOMMENDATION OF CHANGES TO STRATEGIES AND STRATEGIC ACTIONS 13
RECOMMENDATION OF CHANGES TO MANAGERIAL ACTIONS 15
CONCLUSION 15
APPENDICES 16
References 22
Trang 3OBJECTIVES OF THE STUDY
Trang 4The aim of the study is to investigate the comparison of competitiveness between
Amazon and eBay in e-commerce industry in 2019, evaluate their current strategies, compare how each company’s strategy execution was impacted by its organization
culture, organization structure and operations management, determine the strategic issuesthat the management at each company needs to address and resolve for their respective companies to be more financially and competitively successful in the short term and long term, and finally to give the recommendation of changes to strategies and strategic
actions as well as changes to managerial actions
Trang 5COMPARISONS OF COMPETITIVENESS
The competitive market positions that the two companies occupy in the ecommerce industry.
US ecommerce market share
Harris Poll Reputation Quotient
Weak
eBay
Walmart
Trang 6US ecommerce market share 2019
Market capitalization (billion USD) Oct 24, 2019
Profit Margin 2019
Map 1: The strategic groups located in least favorable markets are strong and weak brandawareness/reputation in narrow number of product categories The strategic group located
in most favorable market is strong brand awareness/reputation in a large number of product categories
Amazon
High
Apple
Walmart Costco Market capitalization
Best Buy Low
eBay
Trang 7Map 2: The strategic group located in least favorable market is high market capitalization
with high profit margin The strategic group located in most favorable market is high
market capitalization with low profit margin
As can be seen, Amazon gain a huge market share (nearly 50%), more than all other
e-commerce firms combined Amazon’s next-closest rival, eBay, a very distant gap at
6.6%, and Apple in third at 3.9% Clearly, Amazon is dominant in current US
e-commerce industry However, Amazon has to face threats from nearby group as eBay or
Walmart
The competitiveness of each company’s costs and prices
Value Chain Analysis of Amazon
Value Chain Analysis of Amazon
Step 1 - Firm's primary activities
inventory
quality control marketing sales distribution
completedorder fulfilment customer serviceStep 2 - Total cost and importance (in millions)
$17.34 $12* $13,814 $139,156 $27,7 $34,027 $14*
important
less important
less important
very important important important less importantStep 3 - Cost drivers
number of items
number of inspections
Size ofadvertisingbudget number
of ordersreceived
number ofdeliveryhours
number ofcompletedorder
Number of service calls attended
the hours ofinspection
Number of advertisements
number of staff
in service department
Trang 8of defects
Number of online sales personnel
number of warranties handledLevel of
qualitytargets
Strength of existing reputation
Hours spent on servicing
Step 4 - Links between activities
High-quality control reduces defects, warranty costs and dealer
support activities
Effective handling and better shipping to reduce product damage
Locating plants near the cluster of suppliers or dealers reduces purchasing and
distribution costs
Higher order sizes increase warehousing costs
Step 5 - Opportunities for reducing costs
increase discounts from suppliers, and reduce defects in our processes
investment in computer scientists, designers, software and hardware engineers, and merchandising
employees => expansion of new and existing product categories and service offerings, as well as in
technology infrastructure to enhance the customer experience and more improve process efficiencies=> larger benefits than the cost of investment
create intensive automation and robotic solutions such as robots to manage receipt, stowing, picking, and shipment of items => cut down on warehouse and staffing costs – freeing up funds for other logistics or supply chain needs => delivery speeds quickly
Value Chain Analysis of eBay
Trang 9Value Chain Analysis of Ebay
Step 1 - Firm's primary activities
product
development Sale & Marketing
distribution (acquired)
completed order fulfilment customer serviceStep 2 - Total cost and importance (millions of US $)
less important very important less important very important less important
Step 3 - Cost drivers
number ofdelivery hours
number ofcompleted order
Number of service calls attended
Number of advertisements
number of staff in service department
Number of online sales personnel
number of warranties handled
number of orders received
Hours spent on servicing
Strength of existing reputationStep 4 - Links between activities
lower defect rate better customer satisfaction
higher technology faster purchasing process
Effective incoming input handling to reduce damage
Trang 10Step 5 - Opportunities for reducing costs
Diversify, but unprofitable/unfit businesses should be closed
reduce the size of advertising budget
increase the bargaining power with distributors to minimize the fee ship
*estimated
Competitive strength assessment
A weighted competitive strength assessment of eBay and Amazon uses the key success factors of the industry and weights them to determine two companies’ standing within theE-commerce industry The key success factor was given a weight of 0.2 (cost-
effectiveness based on scale economies), the highest ranking, while image/reputation and product diversification were given the lowest weight of 0.1 eBay’s 1.8 weighted strengthrating on cost-effectiveness based on scale economies signals a competitive advantage over Amazon (with a 1 weighted score)
The higher a company’s overall weighted strength rating, the stronger its overall
competitiveness versus rivals Therefore, Amazon’s overall weighted score of 7.85
indicates a greater net competitive advantage over eBay (with a score of 7.2)
This analysis shows that a company does not have to be better than its rivals in every category, just as long as they are ahead in the most important ones
Competitive Strength Assessments [Rating scale: 1 = Very weak; 10 = very strong]
Key Success Factors and
Strength Measures Importance Weight Strength Rating Weighted Score Strength Rating WeightedScore Good customer service
Trang 11Sum of importance weights 1
Overall weighted competitive strength rating 7.85 7.2
EVALUATION OF CURRENT STRATEGIES
AMAZON’S EVALUATION OF CURRENT STRATEGIES
The fit test
Amazon’s QSPM matrix is shown below, more detail presented in Appendix part:
Strategy
COST LEADERSHIP MARKET DEVELOPMENT MARKET PENETRATION DIVERSIFICATION Sum Total
Attractiveness
We used the tool Quantitative Strategic Planning Matrix (QSPM) to measure how fit the external and internal factors of the company to Amazon’s strategy In Amazon’s case, according to QSPM matrix, the most attractive strategy is cost leadership strategy with the STAS is 6.8 and followed by market development 6.11 This means its strategies fit the company’s situation well The most critical success factor for e-commerce businesses like Amazon is the effective mobilization of large quantities of goods immediately and good inventory management An online shopping channel like Amazon does not own its own inventory, instead, it is dependent on the circulation business or manufacturing
business that provides the product This is what helps Amazon reduce huge costs for
physical store maintenance and inventory management, which is the secret to help
Amazon provide consumers with lower-cost products That in turn gives it cost
advantages
The Performance Test
According to Amazon’s Income Statement for the twelve months ending June 30, 2019[ CITATION Ama \l 1033 ]:
Revenue: 252.1B, a 21.11% increase year-over-year
Net income: $12.1B, a 92.76% increase year-over-year
Trang 12Amazon’s market share in US e-commerce industry in 2018: 49.1% [ CITATION Ing18 \
l 1033 ] (rise by 5.1% compared to 2017[ CITATION Lau18 \l 1033 ])
In 2019, Amazon uses cost leadership as its generic strategy for competitive advantage Minimization of operational costs is the objective in this generic competitive strategy There was an increase of 121.11% in Revenue, Net Income rose by $5.8B in the twelve months ending June 30, 2019 This shows that cost leadership is a winning strategy for Amazon Whereas, thanks to pursuing market development as its primary intensive growth strategy, Amazon managed to increase its market share in US e-commerce
industry in 2018, rising to nearly a half compared to 2017 In 2018 Amazon was present
in 16 countries like United States, United Kingdom, Ireland, France, Canada, Germany, Italy, Spain, Netherlands, Australia, Brazil, Japan, China, India, UAE and Mexico
EBAY’S EVALUATION OF CURRENT STRATEGIES
The fit test
eBay’s QSPM matrix is shown below, more detail presented in Appendix part:
Strategy
Market penetration
Cost leadership
Market development Broad differentiation
To the eBay case, we also use QSPM tool in order to evaluate whether its strategies match well with its external and internal conditions As can be seen, cost leadership and broad differentiation are the most attractive ones with 6.4 and 5.25 in turn These
strategies and their corresponding strategic objectives support eBay’s mission statement and vision statement, which aim for industry leadership against competitors like Amazon,Rakuten, Etsy, Bonanza, and Newegg According the eBay case, eBay chose cost
leadership and market penetration as its generic strategy and dominant intensive growth strategy respectively Its market penetration strategy did not fit well with the current company’s situation while cost leadership fit well
The Performance Test
According to eBay’s Income Statement for the twelve months ending June 30, 2019[ CITATION EBa \l 1033 ]:
Revenue: $10.9B, a 4.13% increase year-over-year
Net income: $2.5B, a 332.66% increase year-over-year
eBay’s market share in US e-commerce industry in 2018: 6.6% [ CITATION Ing18 \l
1033 ] (a 0.2% decrease by compared to 2017-6.8% [ CITATION Ran17 \l 1033 ])
Trang 13eBay Inc.’s generic strategy is cost leadership The company develops and maintains competitive advantage based on cost minimization, which translates to low prices or high profit margins In this case, for example, eBay’s generic competitive strategy involves technologies that minimize fixed and variable costs in multinational e-commerce
operations, which leading to a significant increase in its net income Moreover, eBay’s dominant intensive growth strategy is market penetration As a cost leader, one of eBay’s strategic objectives based on market penetration is to meet competition with the biggest rival as Amazon by enhancing technological efficiency However, eBay’s market-share in
US e-commerce industry in 2018 experienced a decrease of 0.2% Those figures show that cost-leadership is a winning strategy for eBay while market penetration is not
IMPACT OF MANAGERIAL ACTIONS ON THE EXECUTION OF STRATEGIES
AMAZON: (not fit at all=0, moderately fit=1, fit=2)
Organization culture Organization structure Operations management
Trang 14STRATEGIC ISSUES
Amazon
For the cost-effectiveness based on scale economies factor - the highest weight,
Amazon’s strength rating (5) was ranked lower than eBay (9) Expanding market of Amazon can lead to an increase in cost of operation process, which leads to lower cost-effectiveness (cost is too high compared to benefits) To increase cost-effectiveness, Amazon needs to have strategy action
Solution: To minimize costs, the cost leadership generic competitive strategy is suitable
As the nature of ecommerce, the company benefits from process automation, which is generally used in purchase processing, scheduling, and other operational processes Thesebenefits enable Amazon to minimize the cost of its online retail and other services
eBay
Based on the results of Competitive Strength Assessments, eBay’s new product
innovation capability is lower than Amazon As a result, eBay is hard to strong
bargaining power of customers which addresses the threats of substitutions and new entry
Solution: eBay should have strategy action for product development Cost leadership in production development is suitable for the problem The company develops and
introduces new products to consumers and sellers, who are the target users of the
e-commerce platform For example, trading through mobile devices is a trend that warrants the continual development of new products/services for mobile users
RECOMMENDATION OF CHANGES TO STRATEGIES AND STRATEGIC ACTIONS
Amazon – Continuing to use cost leadership and use horizontal merge to improve the profit margin and strengthen the market position
Towards Amazon case, we estimated various threats (high bargaining power of suppliers and customers), strengths (high market capitalization, high awareness) and weaknesses (high common costs) which Amazon is currently facing After analyzing the QSPM matrix, we got the new scores below:
Trang 15Strategy
Cost leadership
Market development
Market penetration
Diversificatio n
Horizontal integration
eBay – Keeping on pursuing cost leadership strategy and using fast follower
Strategy
Market penetration
Cost leadership
Market development Broad differentiation Fast followe
follower is costs of pioneering are high in e-commerce industry, so if eBay imitate its rivals, eBay will achieve similar benefits with far lower costs, even avoiding making same costly mistakes as its rivals did For example, Amazon has found tremendous
success with its Amazon’s Fulfillment by Amazon (FBA) program The company has built up a small army of resellers who deal in retail arbitrage, which essentially involves the sellers buying clearance items from brick-and-mortar retail outlets and shipping them directly to Amazon for resale From there, Amazon handles storage, fulfillment, and shipping In July 2109, eBay has announced plans to get into the game with its own Managed Delivery fulfillment service in 2020
Trang 16RECOMMENDATION OF CHANGES TO MANAGERIAL
ACTIONS
AMAZON
A disadvantage of Amazon’s organization culture is that it imposes a strain on human resources, especially in pushing employees to take a bold and peculiar nonconventional approach in doing their jobs We think Amazon should design compensation motivations and award to individuals who work hard and efficiently For example, Amazon can give employees bonuses based on attainment of performance-based goals, or stocks since if the business does well and the company’s stock rises, the holders of the options share in the financial benefits, thus, employees are willing to work more innovatively
EBAY
A disadvantage or weakness of eBay Inc.’s organization culture is the lack of emphasis
on continuous learning Another disadvantage of the company’s corporate culture is the limited cultural emphasis on speed and efficiency Those negatively impact on its
strategic action – fast follower To become a fast follower, eBay has to be more
innovative, and fast enough to chasing its bigger rivals We suggest that eBay should encourage its employees to learn continuously because of the rapid pace of technology advancements through regularly open training courses, intensive classes
CONCLUSION
Sales from e-commerce are proving that this is a business area with long-term global growth prospects As a result, more and more e-commerce companies jump into this industry, making it become more competitive ever than before Our study show that Amazon is still a leader in US e-commerce, and its far distant rival as eBay We also gaveevaluations about their current strategies as well as their strategy execution Moreover,
we found out strategic issues of two companies and suggest solutions And finally, we gave some recommendations to strengthen two companies’ competitive positions and profitability