YAHOO AND AMAZON: BUILDING A COMPETITIVE ADVANTAGE 10
Yahooand Amazon: Building a Competitive Advantage
Describe, in brief, the histories of both of Amazon.com and Yahoo.com, and determine the core business of each.
Briefhistory of Amazon.com
TheAmazon is a famous online retail supercenter that focuses on sellinga variety of products ranging from foods, books, toys, and electronicproducts among others. Jeffrey Bezos established the online retailoutlet in 1994. Bezos was a Princeton University graduate inelectrical engineering and computer science respectively. He wasworking in a Wall Street Investment bank when he realized that theinternet users were growing in millions. Bezos’ original idea wasestablishing an online retail store that could supply bigger volumesof books than regular brick and mortar stores. His ambition wassupplying millions of books to millions of extra customers across theworld. Upon his quitting his job with the Wall Street Bank, he headedto the West Coast. He stopped by Seattle where he could find thefinest software developers who could help him in establishing theretail outlet. He intended to create an easy to navigate, as well ascustomer-friendly website with a capacity for offering advice topersons buying books, and provideing a wide range of books at anaffordable price. In addition, Bezos intended to sell books thatwould “educate,inspire, and inform the customer (Kalpanik,2010)”. Bezos intended to make the website unique through offeringonline shoppers ability to search for books using online catalogs.Finally, he established the website in 1995 as an exclusivebookstore. However, the company diversified afterwards into sellingother products such as MP3 streaming/ downloads, DVDs, Video, VHSs,CDs, electronics, video games, software, jewelry, furniture, food,apparel, and toys. In addition, the company currently does offerconsumer electronics such as the Kindle Fire tablet computer, AmazonKindle e-book reader, the Fire Phone, and the Kindle Fire tabletcomputer. In addition, the company is a key provider of cloudcomputing services (Hajdini, 2010). However, retail trading hasremained the core business of the Amazon.com.
Briefhistory of Yahoo.com
TheYahoo! is a portal that originated from a website directory thatJerry Yang and David Filo established in 1994 as a hobby to help themidentify and revisit valuable websites quickly. However, the Yang andFilo soon realized that the URLs list was losing meaning as thenumber of websites kept increasing. This made it essential to arrangethe groups into smaller groups based on other smaller topics thatwere more manageable such as sports, culture, politics, and business.After some time, Filo and Yang discovered that the list of websiteswas still growing so fast such that it was losing meaning once more.This inspired them to rearrange the URLs in hierarchy, as opposed toa searchable index, and renamed the portal as “YetAnother Hierarchical Officious Oracle”(Yahoo), that later developed into the Yahoo search engines. In 1994,hundreds of thousands of web surfers were visiting the site everyday, as it was the main directory for helping people in accessingvaluable, entertaining, and interesting content from the internet.David and Filo deferred their studies and borrowed bandwidth fromNetscape. As the visitors to the portal kept increasing, the foundersbegan selling advertising space to businesses that were looking forexposure. They used the returns to fund human labor in charge ofcreating the hierarchical URLs. However, the visitors to the portalincreased at an extremely high rate forcing the company to create anautomated mathematical algorithm to facilitate quick searches. Thecompany sought $2 million investment from Sequoia Capital that wasused in developing IT infrastructure. In 1996, the company’s fastdevelopment motivated the founders to announce the Initial PublicStock Offering that raised $338 million (Hock, 2005). The Companyhired Tim Koogle to head the company. Koogle’s success in thecompany inspired him to diversify the mission of the company that wasoperating as a search engine only. The company began offeringservices such as entertainment and new media services that enabled itto become the leading media entertainment, retail outlet, and globalcommunication company (Hajdini, 2010). However, the core business ofthe Yahoo! is search engine operation.
2.Determine the key strategic differences that have impacted therelative success of both Amazon.com and Yahoo.com. Provide two (2)specific examples of such strategic differences to support theresponse.
Keystrategic differences that have impacted the relative success ofAmazon.com
Differentfactors have influenced the success of both Amazon.com and Yahoo! Oneof the main strategies that Amazon.com uses to achieve fasterdevelopment includes selling products at a low cost. Most of thecustomers in the website are repeat customers as the company aims atproviding high-quality services at a low cost. The profit margin forper product sold through the website is small, but the aim of thecompany is selling several units that would in turn help inincreasing the returns of the organization. Bezos, the founder andCEO of Amazon.com, has also decentralized the management such thatthe employees can make critical decisions independently (Kalpanik,2010). Besides, he ensures that the staff is responsible andmotivated to develop the company as he has allocated a share of thecompany to every employee working in the organization. In addition,Amazon.com allows the customers to review the products they purchase.Previous customers at the Amazon.com can rate the quality service andtheir experience in the website using five stars. In addition, thecustomers can submit detailed reviews of the products they hadacquired from the website. The information is crucial as it guidesand educates potential customers searching for quality products(Kalpanik, 2010). On the contrary, Yahoo Company depends on effectivepromotion of its products and services in order to impress thecustomers. They do not offer a platform where the former customerscan review and recommend the products to prospective customers.
Keystrategic differences that have impacted the relative success ofYahoo.com
Onthe contrary, the main strategy for Yahoo’s success is theacquisition of established companies. The Yahoo Company has acquiredover 100-start-up and established businesses since its establishmentin 1994. The Tumblr, Broadcast.com, GeoCities, and Overture Services,Inc. are some of the most expensive companies that the company hasacquired. Unlike the Amazon.com, that motivates its staff throughdelegating responsibilities and decision-making responsibility, andthe Yahoo Company hires people based on their experience and talent.For example, Filo and jerry hired Tim Koogle as the first CEO in thecompany since he had the relevant skills for hiring an experiencedstaff required for accelerating development of the company. However,Bezos has remained the chairperson, the president, and the CEO of theAmazon.com since its establishment (Kalpanik, 2010).
3.)Compare and contrast the approach to strategic planning that eachcompany has pursued in order to achieve a competitive advantage.Focus specifically on both intended and emergent strategies.
Comparisonof Strategic planning that Amazon.com and Yahoo.com companies havepursued in order to achieve a competitive advantage
TheAmazon.com and Yahoo! businesses have some related strategies thathave significantly contributed to their success. One of the commonstrategies includes hiring experienced IT professionals for designingan easy to navigate the system. Second, the founders traded thecompanies to the public to raise the capital required for developingthe investments. In 1996, Jerry and Filo offered the initial publicoffering stock of the company. The venture raised $338 million thatthe entrepreneurs used in hiring experienced developers for assistingin the creation of IT infrastructure. Third, both Yahoo andAmazon.com do expand their enterprises through acquisition of smallstartup and established businesses. However, Amazon.com sparinglydepends on acquisition technique for expansion of its businesscompared to the Yahoo. Yahoo had acquired 102 companies by March 2014since its establishment in 1995. However, Amazon.com has acquiredjust a few companies such as IMDB.com, audible.com, Alexa,Fabric.com, Woot! and Lovefil.com among others. Fourth, bothAmazon.com and Yahoo have introduced a variety of services that areintended to make the companies megabrands. For example, Yahoo offersmedia, news, entertainment, and shopping services that increase thecost of switching portals expensive for registered customers.Similarly, Amazon.com has transformed from an online bookseller to aleading internet service provider, consumer electronics manufacturer,a renowned source of cloud technology, and entertainment among otherpremium services (Kalpanik, 2010).
ContrastingStrategic planning that Amazon.com and Yahoo.com companies havepursued in order to achieve a competitive advantag
Onthe contrary, the Yahoo Company pursues different strategies forachieving competitive advantage. For example, amazon.com hasdecentralized significant decision making so that the employees canserve the customers quickly. In addition, the staff members areempowered to recruit and train new staff members in the company, aswell as allow every staff member to own shares in the organization.This motivates the employees to develop the company as they also owna share of the business. On the contrary, Yahoo has a hierarchicalmanagement. The CEO and the board of directors make major decisionsand then communicate them to junior employees through the supervisors(Hock, 2005). In addition, Amazon has enhanced its market shareonline through the Amazon Associates Program. The company establishedthe strategy in 1996, and it enables third-party sites to marketAmazon products in their websites for a commission. By 2007, 40% ofAmazon’s returns came from the millions of its associates.Additionally, the company offers various incentives to the customerssuch as free shipping and gift shop that send customized presents forgiven functions such as weddings and birthdays. On the contrary,Yahoo aims at gaining competitive advantage through increasingcustomer value and switching costs for subscribed customers. Thisexplains the reason the company offers a big variety of services toits potential customers (Hock, 2005).
4.Analyze the manner in which each company’s distinctive competencieshelp to shape the strategies that each company pursues. Provide arationale to support the response.
Amazon.compursues the strategy of decentralizing key decision-making in orderto expedite the provision of services to the customers. Aservice-oriented company often requires constant communication withthe customers. The company serves millions of customers every daythroughout the world, thereby making it impossible for the executivesto provide on time services to the customers. Second, the company hasdiversified its products to include electronics, consumer goods, giftshops, entertainment, media, and computer applications. The companyhas been increasing the variety of products it offers in order toenhance service value each customer receives. Besides, the Amazon.comCEO has established over eighteen websites in different countries.The significance of the new websites is providing customized servicesto customers outside the USA. The localized languages increasescustomer value to the clients since some of them are written in locallanguages while others contain trendy products in a given region(Hajdini, 2010).
Similarly,Yahoo company has acquired several start-ups and establishedbusinesses in order to expand its customer reach and the value itoffers individual customers . Since the establishment of the company,it has amalgamated over a hundred businesses so that it can diversifythe services the customers receive. Besides, Yahoo Company offers asubscription service as a way of enhancing customer loyalty.Registered customers receive higher incentives than the unregisteredvisitors do thereby, making them to gain higher loyalty than thecustomers with no active subscription (Hock, 2005).
5.Recommend one (1) functional level strategy for each company, whichprescribes the essential ways in which each may achieve superiorefficiency, quality, innovation, and customer responsiveness. Providea rationale to support the response.
Functionallevel strategy for Yahoo.com
YahooCompany can achieve superior quality, customer responsiveness,innovation, and efficiency through investing in a team of highlyexperienced research and development team. Since the establishment ofthe company, its major affiliated businesses have been acquired asestablished or start-up businesses. As a result, the company focuseson purchasing established businesses, but does not invest in thedevelopment programs for enhancing the quality of the products itpurchases. Similarly, Jerry and Filo established a competent searchengine and business models in 90s, but the company lacks anaggressive research and development team that can help in updatingthe technology Yahoo search engine and other affiliated programsuses. The leading technology companies such as Google, Facebook, andApple have invested a significant amount of its capital in developinginnovative technology that can deliver higher, customer satisfaction,responsiveness, and efficiency. Customers are always looking for anew experience, and the leading technology companies ensure toprovide their clients with new products and with enhanced performanceregularly in order to retain their allegiance.
Functionallevel strategy for Amazon.com
Onthe other hand, the Amazon.com can attain higher customerresponsiveness, quality, efficiency, innovation, and quality throughinvestigating the customer requirements. Since Amazon.com is acustomer-oriented service, the clients can guide the companymanagement in developing customized services that would suit theirrequirements. In addition, the company should establish hire a teamof highly experienced and versatile professionals in various filed,including customer support, research and development, as well asmarket consultants for investigating trendy products that can helpthe company to offer a big variety of products on high demand.
Hajdini,I. (2010). InnovationManagement: The Leadership Role of the CEO: Case studies: Yahoo andGoogle.München: GRIN Verlag GmbH.
Hock,R. (2005). Yahoo!to the max: An extreme searcher guide.Medford, N.J: Information Today, Inc./CyberAge Books.
Kalpanik,S. (2010). Insidethe giant machine: An Amazon-dot-com story.United State: Center of Artificial Imagination.