Amazon. com, from a strategic approach, is dominating the world-wide-web. They have become the world leader in online sales of books, music, videos, movies and other products and services. Amazon knew that the Internet could be used as a distribution channel, thus reducing their supply chain relations. By making these strategic advances, Amazon was able to achieve and sustain their competitive advantage. After researching and reading the 2009 and 1997 Annual Reports, it was determined, that in order to achieve this recognition, they needed to acquire the United Kingdom and German online booksellers.
By these acquisitions, they increased book sales in the European markets. They have also formed the following strategic partnerships: 1) with AOL (to become the exclusive book retailer for the public website). 2) Borders (another book retailer with an online presence, to manage their web operations) and 3) with record labels, movie studios, and publishers to provide consumers the ability to download music, movies and books to electronic devices and Amazon’s Kindle. They also expanded their product offerings to include toys and electronics to add to their competitive advantage as technology grew.
The expansion also included partnerships with ToysRUs. com to co-brand toys and video games. A partnership with the largest Chinese online retailer, Joyco, that included music, books, and other related items increasing their online presence in the Asian markets. They also added 21 new product lines across Europe and Asia (adding automotive in Japan, shoes and apparel in China, and baby gear in France). It was also noted that Amazon uses mass customization to individualize the customer’s shopping experience and economies of scale, which decreases the cost of products as purchases increase with the help of technology.
By using technology, they were able to establish a business model which was based on Mintzberg’s basic design school model (n. d. Example of a Strategic). Strategic business decisions allowed them to manage their partnerships with a strong online presence. There were two key downfalls that faced Amazon- technology interruptions and unauthorized deletion of books from the Kindle. Amazon will face many challenges using technology as the method of doing business as evidenced by online articles from the Wall Street Journal, data knowledge centers and
Bloomberg Business Week. In 2010, Amazon faced a three hour interruption of service to their purchaser and seller websites. This cost Amazon over $1. 75 million per hour in lost revenue (2010, Miller). The problem was not communicated on the main page but instead, on the seller side, in a forum. Most of the customers had short-lived grief and remained faithful to the online retailer. Another challenge was a looming class action lawsuit that is claiming that Amazon did not have the right to remove George Orwells book, 1984, by remote means from customers Kindles.
Amazon’s only liability in this issue was distributing infringing works (2009, Bloomberg BusinessWeek). Amazon is now facing rival competition from Barnes and Noble who will be releasing their version of an e-reader available for portable and desktop applications. Google also announced a partnership with publishers, where they will be able to sell their books directly to the public through Google’s e-commerce platform (2009, Amazon. com’s 1984 Problems). Mattel, on the other hand, based their strategies on cross-capitalizing on the three core attributes, as evidenced by their 1999 Annual Report.
These three attributes are 1) Direct to Consumer through catalogs and the Internet. 2) Interactive – provides a relationship between brand and technology and 3) Mattel International – Applying the market to market strategy to adopt local tastes, economic conditions and prices in expanding international market growth (1999 Annual Report). In reviewing the 2009 Annual Report, Mattel’s goals were: 1) to re-invent existing product lines to capture the market trends in technology, fashions, careers, and imagination. ) Capitalize on opportunities to increase core brand awareness and maximize new ventures, while stabilizing cost and expense and 3) Increase the International market segment, offering most of the domestic brands sold in the US and selling to Europe, Latin America, Asia, Australia, and Canada, where there is no presence currently. (1999, Annual Report) In order to develop a strong supply chain, Mattel has outsourced their manufacturing to Asian and Mexican partners and also uses company-owned facilities.
By outsourcing, Mattel aim was to prevent disruption in distribution and provide sufficient inventory for future seasons. Competition is increasing due to increasing technology, shorter toy life cycles of, and co-branding is becoming prominent. Mattel is currently researching and developing and forming new alliances with partners all over the world to expand product development in the technology field. Mattel spends millions of dollars in legal fees to operate as an international toy company in protecting trademarks, copyrights and patents.
This must be done in order to protect the company from infringement of products developed exclusively by Mattel. They must also license third-party suppliers that “…allow Mattel to utilize the trademarks, characters or other inventions of the licensor in products that Mattel sells” (2009 Annual Report). Supplier agreement must be drawn up for purchases and goods and services for future manufacturing needs. These agreements ensure guaranteed payments and Mattel’s commitment to expand their partnerships in other related industries.
Mattel faced other legal issues, when the media exposed the lead paint issue. Millions of toys were recalled due to the Chinese factories using lead-based paint on many of Mattel’s products. This soon became a serious issue with lawsuits from parents whose children were harmed or died as a result of lead paint being ingested. It cost Mattel over $30 million to recover the recalled toys. Additional money was spent in advertising and marketing to allay the fears parents were had about the household name and their commitment to product safety.
Legal issues were not the only battle Mattel was facing. The economy began its downswing and forced many low to middle-income families to watch their discretionary spending. Toys sales during the height of the Christmas season in 2007 were down and revenues were affected. In an effort to increase sales, after a slight increase in toy prices, many of the large retailers were offering in-store coupons and Mattel offered rebates on many of the company’s product lines. This was an effort to offset the declining sales and increase revenues.