“Impact of Information Systems in Applying Generic

Strategies for Taking Competitive Advantages in

Organization: A Case on Amazon.com”

Amazon.com, Inc., an American multinational technology company based in Seattle, with

750,000 employees. It focuses on e-commerce, cloud computing, digital streaming, and
artificial intelligence. It is considered one of the Big Four tech companies, along with
Google, Apple, and Microsoft. Amazon is known for its disruption of well-established
industries through technological innovation and mass scale. It is the world's largest online
marketplace, AI assistant provider, and cloud computing platform as measured by revenue
and market capitalization.

Generic Strategy:

Generic strategy means basic approaches to strategic planning that can be adopted by any
firm in any market or industry to improve its competitive performance.

Michael Porter developed three generic strategies, that a company could use to gain
competitive advantage, back in 1980. These three are: cost leadership, differentiation, and
focus. These are also known as the Porter’s generic strategies.
 Amazon.com & Porter’s Generic Strategy

Amazon.com Inc.’s generic strategy for competitive advantage, based on Michael Porter’s
model, shows the approach that the organization uses to develop its business amid tough
competition in the online retail market. As the largest
online retailer in the world, Amazon proves to be highly
competitive, even against giants like Walmart. Amazon’s
intensive growth strategies are responsible for business growth and expansion. For instance,
the company’s provision of its e-commerce services outside the United States shows business
plans for international growth. Through effective implementation of its generic competitive
strategy and intensive strategies for growth, Amazon.com succeeds in the global e-commerce
market.

Michael Porter’s generic strategy has 3 main streams and they are used by Amazon.com

They are, (i) Cost Leadership, (ii) Differentiation & (iii) Focus Strategy

Cost Leadership:

Cost leadership strategy involves gaining a competitive advantage by lowering the cost. Cost
leadership is the main generic strategy that Amazon com uses in various consumer markets.

 How Amazon com uses a cost leadership strategy?

a. The primary objective of using this strategy is to preserve the market leadership position
through efficient value chain management. Using the IT, Amazon has successfully
created an efficient value chain management system.
b. This strategy allows Amazon to expand the market share by targeting the middle class,
which makes the largest proportion of overall consumer market mix in most of the
countries. Middle class consumers generally place high importance to the pricing factor
and cost leadership is the best strategy to cater the needs of this consumer segment.
Through IS, Amazon gets customer’s preference from different websites and by
collecting those they suggest the preferred things to the customer.
c. Amazon com focuses on affordability and easy accessibility of its produce across the
globe, which leads towards high brand awareness and high sales growth and provides a
strong competitive advantage basis.
d. Other than charging low prices by lowering production cost and maximizing supply chain
efficiency, Amazon com frequently offers discounts and coupons to achieve sales targets
and handle the competitive pressure by its closest rival through the internet. Due to IT
amazon can mail the coupons to the customer.

The discussion of Amazon com’s cost leadership strategy has outlined many benefits offered
by this generic strategy, such as- gaining quick brand recognition, expanding the customer
base, encouraging consumption, and achieving sales targets by emphasizing over product’s
affordability and accessibility. Minimization of operational costs is the objective in this
generic competitive strategy. For example, Amazon.com uses advanced computing and
networking technologies for maximum operational efficiency, which translates to minimized
costs. Considering the nature of e-commerce, the company benefits from process automation,
which is generally used in purchase processing, scheduling, and other operational processes.
These benefits enable Amazon.com Inc. to minimize the cost of its online retail and other
services. The company also uses the differentiation strategy along with cost leadership to set
the basis for sustainable competitive advantage in the intensely competitive global consumer
market.

A strategic objective linked to Amazon’s cost leadership generic strategy is to build e-

commerce competitive advantage through continuous improvement of ‘Information
Technology’ infrastructure. In relation, the company also has the strategic objective of
heavily investing in research and development (R&D) to optimize the performance of its IT
resources. Moreover, the cost leadership generic competitive strategy pushes Amazon.com
Inc. to minimize its price levels. This strategic objective impacts Amazon’s marketing mix.
The low prices are significant in attracting consumers. Thus, through the generic strategy of
cost leadership, competitive advantage is gained to support the fulfillment of Amazon.com
Inc.’s mission statement and vision statement, especially regarding online retail global
growth and leadership.
 Differentiation:
Differentiation is another most used generic strategy to build a competitive advantage.
Amazon.com uses differentiation in combination with the cost leadership strategy to achieve
growth objectives.

 How Amazon com uses differentiation strategy?

a. The adoption of differentiation as a secondary generic strategy allows Amazon com to
expand the customer base by emphasizing over the unique product features. Using
Information System, they can show their unique product feature via online. Thus, Any
customer can easily come to know about the product availabilities and variations of
products.
b. Amazon com's strategic objective of using this strategy is to differentiate by embedding
the innovation and address the consumers’ growing health concerns. For example,
Amazon com has extended its product line after studying the consumers’ changing
interests to differentiate itself from competitors and expand the scope of opportunities
within the industry. The combination of the differentiation and cost leadership has
helped Amazon com build a strong and loyal customer base. Without the assistance of
Information System, it is quite impossible to study the consumers’ changing interests.
Amazon.com is recognized as an online leader in creating sales through customer
intimacy and customer relationship management (CRM), which are cultivated by
informative marketing front-ends and one-to-one advertising. In addition, sales are
supported by highly automated efficient back-end systems. When a customer makes a
return visit to Amazon.com, a cookie file identifies the user and says, for example,
“Welcome back, Horida Shopper,” and then proceeds to recommend new books from the
same genre of previous customer purchases. The company tracks customer purchase
histories and sends purchase recommendations via e-mail to cultivate repeat buyers.
These efforts usually result in satisfactory shopping experiences and encourage
customers to return. The site has an efficient search engine and other shopping aids.
c. Through differentiation generic strategy, Amazon.com positions its product offerings in a
way to stand out and be different from the available alternatives. Being the experienced
brand with strong foothold, the company uses differentiation as a tool to reduce the
pressure by other brands. Heavy investment in marketing, advertisement and celebrity
endorsement is made just to differentiate the Amazon.com from other brands.
d. Extensive experience, the oldest brand and strong presence in all over the world are
some differentiation factors that are highlighted in the company's marketing and
communication strategies. Amazon.com is one the largest organization which has a large
number of customer, it is possible only for their IT infrastructure. the company had more
than 500,000 partners that refer customers to Amazon.com. Amazon pays a 3 to 5
percent commission on any resulting sale. Without IS, they cannot reach a huge market.
It is much easier to reach customer through online.
e. Other than these, the brand logo is also used to set the differentiation basis. The unique
and distinctive brand logo has established a strong brand image in consumers’ mind.
Although the brand has undergone many revisions, the essence has remained the same,
which also serves as a strong differentiating factor. The logo has an arrow form the letter
A to Z which indicates that they have every items that a customer needs which creates a
good impression on customers. It also tells that customer just need to select items of their
interest, they just need to click.
f. Amazon.com frequently uses Alliance Strategy to gain for profitability which also
increases complexity to know about their strategy for its competitors. For example,
Amazon.com and Toysrus.com launched a co-branded website to sell toys, capitalizing on
each others’ strengths, they also created a similar baby products venture. Of special
interest are alliances with suppliers, some of whom monitor inventory levels
electronically and replenish inventory when it falls below a certain level. This strategy is
supported by their Information System.
g. Amazon.com is selling products in over 200 countries all by direct mail. Without the
support of Information System, it is unthinkable. Because an organization must have very
complex business model to conduct transactions over this number of countries.IS made it
happen.
h. Amazon has complex Information System and has paten there IS to gain competitive
advantage. It’s Information system is keeping them one step ahead from competitors.
i. Amazon uses IS in transactions with customer. In example, it uses People and Machine to
Machine Mode to communicate with customer. When a customer provides his credit card
number to a merchant, the authorization process is done automatically by several
application residing on several servers, all in a few seconds.
j. Amazon also sells other’s products through online as dealer using their own Information
System. For example, in 2002, it became an authorized dealer pf Sony Corporation for
selling Sony products online.
k. Amazon.com is excellent in Customer Relationship Management (CRM) which is
supported by Information System. If a customer orders books from Amazon, he can find
the anticipated arrival date. Amazon even goes one step further; it notifies him by e-mail
of the acceptance of his order, the anticipated delivery date, and later, the actual delivery
date. As we know, to attract customers and to do business with them frequently,
organization must emphasize on Customer Relationship Management. Amazon.com
remains one step further than its competitors for this IT supported CRM.
l. Amazon.com uses Web Mining to attain competitive advantage. Web mining is the
application of data mining techniques to discover actionable and meaningful patterns,
profiles, and trends from Web resources .For example, when a customer looks for a
certain book on Amazon.com, the site will also provide him with a lot of books
purchased by the customers who have purchased the specific book he is looking for. By
providing such mined information, the Amazon.com site minimizes the need for
additional search by providing customers with valuable service.

Moreover, the company offers a wide variety of flavors to match the unique taste needs of
consumers. It uses innovation as a tool to offer differentiated augmented services that may
delight the customers and increase their preference of Amazon com over other brands.
 Focus Strategy:

Focus is the third generic competitive strategy that encourages companies to concentrate their
resources on expanding the narrowly targeted segments. When companies adopt the focus
strategy, they serve particular market segments and base their competitive advantage on niche
marketing.

 How Amazon com uses focus strategy?

a. Amazon com adopts the focus strategy both in terms of low cost and offering the best
value. The low-cost focus strategy is adopted by serving the needs of a niche market
segment at the lowest possible price. While, best value focus strategy is adopted by
emphasizing over the taste, size and design of the product that could best match the
customers’ needs and requirements. It uses ‘e-spionage’ firms to track prices at rival firms
so that it can offer competitive prices without giving away profit margins when it does
not need to.
b. By focusing on product attributes, Amazon com revises its branding strategies and brings
continuous changes in the product designing and packaging to satisfy the customers’
psychological expectations and maximize value for money.
Amazon uses ‘Cost Leadership’ as its generic strategy for competitive advantage.
Minimization of operational costs is the objective in this generic competitive strategy. For
example, Amazon.com uses advanced computing and networking technologies for maximum
operational efficiency, which translates to minimized costs. Considering the nature of e-
commerce, the company benefits from process automation, which is generally used in
purchase processing, scheduling, and other operational processes. These benefits enable
Amazon.com Inc. to minimize the cost of its online retail and other services.

A strategic objective linked to Amazon’s cost leadership generic strategy is to build e-

commerce competitive advantage through continuous improvement of ‘Information
Technology’ infrastructure. In relation, the company also has the strategic objective of
heavily investing in research and development (R&D) to optimize the performance of its IT
resources. Moreover, the cost leadership generic competitive strategy pushes Amazon.com
Inc. to minimize its price levels. This strategic objective impacts Amazon’s marketing mix.
The low prices are significant in attracting consumers. Thus, through the generic strategy of
cost leadership, competitive advantage is gained to support the fulfillment of Amazon.com
Inc.’s mission statement and vision statement, especially regarding online retail global
growth and leadership.