Amazon is one of the leading multinational technology-based company in Seattle, America. The company focuses on the cloud computing, e-commerce, artificial intelligence and digital streaming. It is widely considered as one of the Big four technological companies, three are, Apple, Facebook, and Google. The company is been referred as one of the influential cultural and economic forces across the globe (Amazon, 2020).
VRIO Analysis is the business framework which helps in forming the company’s strategic scheme. The fundamental strategic process which company begins with is the vision statement, and then continued to objectives, external and internal analysis, strategic decisions, and then implementation. VRIO is the acronym of Value, Rarity, Imitability, and Organization. It is the analytical technique used for evaluating the resources of the company and analyze the competitive advantage through that. Here is the VRIO analysis of Amazon.
Value
VRIO Analysis starts with its first component, i.e. Value. This component answers the question of “Does Amazon has resources and capabilities which enable the company in responding to environmental opportunities and threats?” Well, the answer to this is yes. As Amazon has strategically built its capabilities and resources intelligently so that it can contribute in the competitive landscape for determining and minimizing the external threats.
Moreover, the company is successful in using these capabilities and resources to identify the opportunities and avail that to increase the customer benefits which is the value addition. For example, when the customer responds positively to two day offer of prime shipping, Amazon provide the best logistical expertise and efficiently use the shipping capability to provide the sustained competitive advantage (Irwin, 2019).
Rarity
The second component of the VRIO analysis is Rarity. This answers the question of “How can Amazon consider itself different from the other competitors in the industry?” This question is technical as Amazon has many competitors in the industry. However, slight differences are present within detailed capabilities and resources. The basic capabilities and operations of Amazon are very much same as rivals.
From the general perspective, it offers the broad range of products and categories to consumers in very economical price. However, other competitors like eBay, Overstock, Walmart and many others are offering the same. Amazon services are not rare, but its logistics adds the value in the competitive advantage (Pratap, 2018).
Imitability
The third component of VRIO analysis if Imitability. This answers the question “Do competitors have to face cost disadvantage while attempting to have the capabilities and resources like Amazon?”. Well, the answer to this question is Yes. As Amazon itself struggles a lot financially and faced many difficulties while developing the operations, particularly on the two days free shipping offer.
This gives the true evidence that competitors have faced the competitive disadvantage when intimating the services. Free shipping, along with two days shipping option would bring lots of disadvantages to businesses. However, as Amazon is the first mover of this strategy, it is able to have the sustained competitive advantage and made it difficult to imitate (Irwin, 2019).
Organization
The fourth and last component of VRIO analysis is Organization. This answer the question “Are the policies and procedures of the company is able to exploit the competitive potential of capabilities and resources?” The answer to this is Yes as the Amazon’s operations and offerings are not rare, but the system, setup, and the way it organized everything is rare. Amazon is successful in providing the best customer services, logistical expertise, creative marketing, and innovation. This all add up and positively have impacted on the competitive advantage. The company is successful in managing the resources according to the procedures and regulations which strengthens its competitive advantage (White, 2019).
Conclusion
VRIO analysis of Amazon shows the how valuable, rare, imitable, and organized the company is. The product range and offerings are not rare, but ow the company has organized itself and make it imitable is rare. Its not necessary to bring the idea out of the box, but to develop it and manage it will make the idea rare and valuable. Amazon is the best example for this.
Resources/Capabilities | V | R | I | O | |
Supply Chain | ✓ | ✓ | ✓ | ✓ | Sustainable advantage |
Bargaining power | ✓ | ✓ | ✓ | ✓ | Sustainable advantage |
Inventory management | ✓ | ✓ | ✓ | ✓ | Sustainable advantage |
Brand Equity | ✓ | ✓ | ✓ | ✓ | Sustainable advantage |
E-Commerce | ✓ | ✓ | ✓ | Sustainable advantage | |
Artificial Intelligence | ✓ | ✓ | ✓ | ✓ | Sustainable advantage |
Product range | ✓ | ✓ | ✓ | Competitive parity | |
Policies and Procedures | ✓ | ✓ | ✓ | ✓ | Competitive parity |
References
Amazon, 2020. About Amazon. [Online], Available at: https://www.aboutamazon.com/?utm_source=gateway&utm_medium=footer, [Accessed on: 1st March, 2020].
Irwin, A. 2019. Applying the VRIO framework to Amazon. [Online], Available at: https://abbyirwin.blogspot.com/2019/02/applying-vrio-framework-to-amazon.html, [Accessed on: 1st March, 2020].
Pratap, A. 2018. Strategic analysis of Amazon. [Online], Available at: https://notesmatic.com/strategic-analysis-of-amazon/, [Accessed on: 1st March, 2020].
White. L. 2019. Amazon VRIO Analysis – Competitive Advantages, Core Competencies. [Online], Available at: https://www.rancord.org/amazon-vrio-analysis-competitive-advantages-core-competencies, [Accessed on: 1st March, 2020].