Yahoo and Amazon: Building a Competitive Advantage

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  1. Describe, in brief, the histories of both of Amazon.com and Yahoo.com, and determine the core business of each.

Amazon Inc. is an international e-commerce firm that was founded by Jeff Bezos in 1995 with its headquarters in Seattle, United States.Amazon Inc. is an international e-commerce firm that was founded by Jeff Bezos in 1995 with its headquarters in Seattle, United States. Yahoo is an American corporation, which operates through the Internet, and its popularity can be attributed to its web engine. The company started as an online store that sold books, but later began investing in the ever-growing market of electronics. Its core business involves selling a wide variety of electronics, music, videos, video games, software, jewelry, foods, apparel, and toys. It has more than 35 categories of products. It is the largest online retailer in the world with a number of branches in different countries. It offers shipping to the rest of the countries, where it does not have branches. The company has its own production unit that makes consumer electronics and offers cloud computing services. The company has the ability to adapt and transform in accordance with the dynamic economy. It emerged as a winner in the dot.com era in the 1990’s, and its success during this era can be attributed to innovativeness. Additionally, its structured business model focuses on the inconsistent customer value proposition. The company dominates the online market, which continues increasing its revenue.

Yahoo is an American corporation, which operates through the Internet, and its popularity can be attributed to its web engine. More than 700 million individuals visit the website each month. David Filo and Jerry Yang established this company. They needed to create a website that would act as a directory for other websites. The company’s main channel of revenue generation is advertisements (Baer, 2014). The company’s mission is to be the only choice for the clients’ web research, which includes finance, shopping, email, and news among others. The company believes that its accomplishment can be attributed to the efforts of the workers. It invests in the training of the employees to improve their proficiency. When the employees have the necessary expertise, they will offer excellent services. Hence, the clients will be satisfied, which will improve revenue. The company has had several changes in its management, which have led to the loss of focus in the strategy and objectives. It may be the reason for the company’s indecisiveness concerning whether it should operate as a technology or media company. However, it has strived to remain significant in the industry.

  1. Determine the key strategic differences that have impacted the relative success of both Amazon.com and Yahoo.com. Provide two (2) specific examples of such strategic differences to support the response.

Amazon may have its strategic difference emanating from the clients’ ability to make comparison of the services and prices offered by different online retailing companies, including Staples and eBay. Amazon has greatly ventured in the transformative and innovative business that keeps on injecting new products into its business. It is what has ensured its continuous growth in sales as well as market share. The company’s growth was accelerated by its whitespace venture, which means shaping a business in a way that effectively minimizes the competition, especially in the crowded fields such as online marketing. It implemented an innovative business model, which had put in place the idea of improving the existing products, as well as the new ones, so as to create the customer value (Stone 2013). It also incorporated free shipping into its services, which gave it an edge over its competitors. The use of incentives, such as free shipping and low prices, has made it a success over its main rivals.

Yahoo turned out to be successful during the dot.com epoch. Nonetheless, as technology and advancement continued in the Internet technology, the bubble of success that it enjoyed had burst. In 2000, the company’s stock reached a record high of $118.75. In 2001, the stock price fell to less than $9 after the downturn in the dot.com period (Weston, 2007). It resulted from numerous Internet companies filing for bankruptcy and fall in their stocks. However, analysts still perceived Yahoo as a major player in the industry, and blamed the failure on the development approach taken as part of its business model. Another key difference that has impacted the company’s success is the improvement of the technology in digital and Internet sectors. It made it possible for new companies to join the industry and create competition. Consequently, Yahoo’s performance has declined. The frequent changes in the management have also led to the loss of strategic focus since 2010.

  1. Compare and contrast the approach to strategic planning that each company has pursued in order to achieve a competitive advantage. Focus specifically on both intended and emergent strategies.

Strategic planning at Amazon has involved a functional organizational structure, which has been the source of its competitive advantage. When an organization has a structure and it is well-followed, it is expected to succeed. Since its inception, the company has always planned ahead, which has enabled it to deal with competition. For instance, the company started as a book retailer through the Internet. However, as the competitors joined and strived to get a share of the market, Amazon was already strategizing how to pursue new opportunities. Consequently, they endured the economic changes with the help of adequate strategic planning. They have kept the same spirit and incorporated innovativeness in their undertakings to ensure relevance and maintain their market share. Another approach to strategic planning taken by the corporation is its associate program. It was developed in 1996 so as to appeal to new consumers. Any person or business with a website could be affiliated to Amazon by having an Amazon hyperlink on their website. If the link culminated in the sale, the affiliate received a commission. The program was successful and by 2000, about 40% the company’s sales emanated from it (Schepp & Schepp, 2009). In order to remain relevant, the corporation has started the Prime Air delivery system, which aims at delivering products to the clients within 30 minutes or less using unmanned aerial vehicles. The program’s success will revolutionize the industry and boost the company’s position (Keck & Choi, 2014).

Although Yahoo has remained in the industry this far, the lack of proper strategic planning has led to the failure of not gaining a wider market share. It has lost its share to new companies, such as Google. The company should have a clear ownership and accountability strategy. It does not seem to have a plan for the future, which is adversarial, as it operates in a dynamic industry. For instance, due to its lack of pursuing new opportunities, Microsoft has shown interest in acquiring Yahoo, but the bids have been rejected (Baer, 2014). With time it will become clear whether the new management will implement strategic management and planning.

  1. Analyze the manner in which each company’s distinctive competencies help to shape the strategies that each company pursues. Provide a rationale to support the response.

Amazon’s competencies have enabled it to strategize and become a pioneer in the industry. As earlier discussed, the company keeps researching and taking up new opportunities so as to be diverse. In addition, it aims at ensuring client satisfaction. It uses competencies to develop a new system of delivering products to the clients within 30 minutes. It shows that the company will continue using its competencies to maintain industry leadership and increase sales. The company’s innovativeness will ensure that it becomes successful in the industry.

Yahoo’s main source of income is advertisements (Baer, 2014). Its concentration on the satisfaction of employees shows that it is focused on increasing the flow of visitors to their website. However, it is not utilizing available competencies optimally. It should focus on linking up with the social networks as well as other websites so as to increase its online traffic. As such, additional visitors will translate into the increased bargaining power on the advertisements.

  1. Recommend one (1) functional level strategy for each company which prescribes the essential ways in which each may achieve superior efficiency, quality, innovation, and customer responsiveness. Provide a rationale to support the response.

Functional level strategies aim at the improvement of the effectiveness of the company’s operations and its capability to attain superior innovativeness, client receptiveness and efficiency (Lynch, 2011). Such strategies ensure that a company improves its position in the industry and attracts new buyers as well as retains its existent client base. One functional level strategy that will assist Amazon is to continue with its innovative and transformational development. The current competition that the company faces is not only stemming from other online stores, but also from the brick and mortar outlets, such as Wal-Mart. Such outlets have shops close to the clients and offer a wide selection of products and services. Therefore, some Amazon’s clients may opt to visit these shops, since they can purchase most of the needed products there. Therefore, Amazon may lose some clients to these competitors. However, if it could establish some physical outlets, it would improve its presence and competitive advantage. It would be accessible to potential clients physically as well as online. Therefore, it would have a wide range of clients, as some people do understand or enjoy the idea of online shopping. Such strategy would increase the company’s revenue in the long-run.

The functional level strategy that will benefit Yahoo is the incorporation of other social media platforms in its information sharing system. Currently, the company concentrates on using Facebook only to share information and news. In order to attract new clients, the company should increase the number of people visiting its website. The social media platforms have numerous users. Therefore, when Yahoo channels its news feed to the major social media platforms, it will attract new visitors to its website, which will increase its revenue from advertisements.