Diversification of Amazon’s Products: A Strategic Analysis

Posted By Airah Lynn Balingit on سبتمبر 2023

Diversification of Amazon’s Products: A Strategic Analysis

Amazon is one of the most successful and influential companies in the world, with a market value of over $1.7 trillion as of August 2023. The company started as an online bookstore in 1994, but has since expanded into a variety of products and services, such as e-commerce, cloud computing, digital streaming, artificial intelligence, and more. Amazon’s diversification strategy has enabled it to enter new markets, increase its customer base, leverage its core competencies, and create synergies across its businesses. In this blog post, we will examine some of the key aspects of Amazon’s diversification strategy and how it has contributed to its competitive advantage and growth.

One of the main drivers of Amazon’s diversification strategy is its customer-centric approach. Amazon’s mission is to be “Earth’s most customer-centric company”, and it strives to offer its customers the best possible value, convenience, selection, and experience. By diversifying into different product categories and segments, Amazon can cater to the diverse needs and preferences of its customers and provide them with more options and benefits. For example, Amazon Prime is a subscription service that offers customers free shipping, access to digital content, discounts, and other perks. Amazon Prime has over 200 million members worldwide and generates significant revenue and loyalty for the company.

Another driver of Amazon’s diversification strategy is its innovation culture. Amazon is constantly experimenting with new ideas and technologies to improve its products and services and create new value propositions for its customers. Amazon invests heavily in research and development (R&D) and has several initiatives that foster innovation, such as Amazon Web Services (AWS), Amazon Lab126, Amazon Studios, and more. AWS is the leading provider of cloud computing services in the world, offering a range of solutions for businesses, governments, and individuals. AWS enables Amazon to leverage its expertise in data management, scalability, security, and reliability, as well as generate new revenue streams and cross-selling opportunities. Lab126 is Amazon’s hardware development center that produces devices such as Kindle, Fire TV, Echo, and more. Lab126 allows Amazon to integrate its software and content with its own hardware and offer customers a seamless and differentiated experience. Amazon Studios is Amazon’s film and television production arm that creates original content for its streaming platform, Prime Video. Amazon Studios gives Amazon a competitive edge in the entertainment industry and enhances its brand image and customer loyalty.

A third driver of Amazon’s diversification strategy is its acquisition strategy. Amazon has acquired several companies over the years that have complemented or enhanced its existing businesses or enabled it to enter new markets or domains. Some of the notable acquisitions that Amazon has made include Whole Foods Market, Zappos, Twitch, Audible, Ring, PillPack, Zoox, MGM Studios, and more. These acquisitions have helped Amazon to expand its product portfolio, customer base, distribution network, technological capabilities, intellectual property, and market share. For instance, the acquisition of Whole Foods Market in 2017 gave Amazon access to the grocery retail market and allowed it to offer fresh food delivery to its customers. The acquisition of Zappos in 2009 boosted Amazon’s presence in the online footwear and apparel market and added a strong customer service culture to its organization. The acquisition of Twitch in 2014 strengthened Amazon’s position in the online gaming and live streaming market and created synergies with its Prime Video service.

In conclusion, Amazon’s diversification strategy has been a key factor in its success and growth over the years. By diversifying into different products and services, Amazon has been able to satisfy its customers’ needs and wants, innovate and create new value propositions, acquire new capabilities and resources, and gain a competitive advantage in various markets. However, diversification also comes with some challenges and risks for Amazon, such as increased complexity, competition, regulation, and potential conflicts of interest. Therefore, Amazon needs to carefully manage its diversified portfolio and ensure that it maintains its focus on its core values and vision.