Evaluating Resources and Sustainable Competitive Advantage at Amazon.com, Inc.
Miranda Stascak, Keith Hughes
University of Wisconsin - Platteville
Part I: Company Background
Amazon.com “is one of the largest global online retailers1”. They have created and/or purchased several well-known business such as “Zappos (shoes and clothing), Whole Foods Market (America’s healthiest grocery store), and Amazon Web Services (scalable cloud computing services)2”. Additionally, they have launched several well-known products such as ‘Alexa, Kindle and their very popular Amazon Prime delivery model.2’
Currently, Amazon.com is a dominate force in the retail industry and even though they have very little ‘brick-and-mortar’ presence, they compete heavily against traditional companies such as Target, Walmart and Best Buy but more directly against online retailers such as “eBay and Barnes and Noble1”. They were “ranked among top 100 of America's largest corporations by a business magazine in 20161”, in 2016, it was also “among the top 20 most valuable brands in the top 100 most valuable brands in the world1” by the same magazine, and also “featured among top 10 global brands in the top 500 global brands 2017 list released by an industry source specializing in brand valuation1.”
Amazon first started in 1994 by Jeff Bezos, publically launched its website on 1995, and started being publically traded in 1997 on the NASDAQ3. Through their acquisitions and internally developed projects and initiatives, in 2016 they became “the fastest company ever to reach $100 billion in annual sales.3” Driving this unprecedented growth is a deeply embedded culture with a focus and approach unlike other rivals and not seen in many years in American business.
The first traces of this culture became apparent when the company went public. ““In a letter to shareholders after the company went public in 1997, he [Bezos] wrote that he would prioritize “long-term market leadership considerations rather than short-term profitability.” Over the next six years, investors barely winced as Amazon lost $3 billion selling books and other items below cost.4”” This approach has set the tone for all pillars of the company. “They [Amazon retail and Amazon Web Services] share a distinctive organizational culture that cares deeply about and acts with conviction on a small number of principles. I’m talking about customer obsession rather than competitor obsession, eagerness to invent and pioneer, willingness to fail, the patience to think long-term, and the taking of professional pride in operational excellence. Through that lens, AWS and Amazon retail are very similar indeed.3”
Their size, power, and approach continue to be felt in the business world with every move they make. “After Amazon announced it would buy Whole Foods for $13.7 billion, grocery chains Kroger, Walmart, Costco, SuperValu, and Target collectively lost $26.7 billion in market value—in a single morning.5” Even if there are only rumors of a business move, the markets take notice. “Following reports that the company was hiring people with pharmacy backgrounds, signifying a possible health care play, shares of CVS Health and Walgreens fell over 3%.5”
Part II: The Competitive Advantage
Although it is a place where “only the driven and obsessed survive6,” it is the culture of Amazon.com is the definitive competitive advantage of the company. It is not the same type of culture or environment that most of us are used to or what we hear about with Google and Facebook (relaxing, collaborative areas where you can take a break and play some games). Amazon has a data-driven and focused culture. “Amazon uses a self-reinforcing set of management, data and psychological tools to spur its tens of thousands of white-collar employees to do more and more. ‘The company is running a continual performance improvement algorithm on its staff,’ said Amy Michaels, a former Kindle marketer7.”
The culture is at the crossroads of the “sometimes-punishing aspects of their workplace and what many called its thrilling power to create8.” It is a culture driven by “thinking big and knowing that we haven’t scratched the surface on what’s out there to invent8”. The company adheres to Jeff Bezos’s ‘14 key principles9’ on a daily basis – led by principle # 1 “Customer obsession9.” These 14 principles, individually and collectively, have allowed Amazon to gain the buy-in and support of its employees to continue to drive harder and farther than other companies for over 20 years. These principles have created “Ambots – those that are one with the system8” where employees “internalized Amazon’s priorities8” and often feel “how their work is never done or good enough8.”