Reference no: EM132257398

Amazon’s External Analysis

Firms rely on a set of frameworks to analyze their external environment - that is, the industry in which they operate, and the competitive forces that surround them from the outside. Study the external environment of the firm you have selected for this project and how that environment might be affecting that firm’s quest for competitive advantage.

Clearly define the business unit and its geographic and product boundaries in your external analysis. If your company is diversified and/or an international firm, and is operating multiple businesses and/or geographic markets, choose one business unit in a geographic market that is considered the most important. It could be a business unit that generates the majority revenue or a fast growing business that deserves great attention.

Are there any changes taking place in the macro-environment (demographical, economic, socio-cultural, technological, political/legal, and global dimensions) that might have a positive environmental analysis to identify which factors may be the most important in your industry. What will be the effect on your industry?

Conduct a thorough five forces analysis plus complements.

Identify supplier’s groups, buyer’s groups, substitutes, competitors, and complementors. Analyze the major determinants of each force. Provide qualitative or quantitative evidence to support your arguments.

Summarize each force with high, medium, low level of threats. What does this model tell you about the attractiveness and profit potential of the industry?

Draw a strategic group map. A strategic group map is a powerful tool to show where the company is positioned relative to their competition. You need three variables to build a useful strategic group map: the measure of competitive advantage (the size of the circle), such as market share, revenues, etc., and two most important drivers of the competitive advantage, the horizontal (X) and vertical (Y) axis. The drivers of competitive advantage delineates how firms compete in this industry, such as marketing or R&D expenses, product quality, level of capacity, product line breadth, etc. Another key point is that the variables selected for the horizontal and vertical axis should be strongly related to the competitive advantage, but they should not strongly correlated to each other. For instance, price and product quality are highly correlate, and should not be chosen simultaneously as two main drivers. Weakly correlated variables represent relatively independent drivers of competitive advantage. The overall goal of creating a strategic group map is to find key variables that help explain why one company has a significantly different competitive position in the market.

Identify any strategic groups that might exist in the industry and the associated group members. Which companies are your focal firm’s closest competitors? Is the focal company well positioned? How does the intensity of competition differ across the strategic groups you have identified? How does the strategic group map evolve over time?

Competition analysis: Who are the closest competitors? What are their strengths, weaknesses, goals and strategies?

After you have analyzed the external environment, how do you conclude the biggest threats and the greatest opportunities to the company?