Yahoo and Amazon: Building a Competitive Advantage Essay
Yahoo and Amazon: Building a Competitive Advantage
Amazon and Yahoo are both internet based business that are customer service driven. The two companies were started based on an idea to make internet use easier by helping users find what they are looking for. Amazon started with helping users find books and Yahoo started with the purpose of helping users find information through assisting them to find websites easier. Jeff Bezos started Amazon out of his garage after growing weary of working for Wall Street in 1995. Bezos idea was to utilize his IT skills to sell books online and be able to offer millions of books to more customers than a typical brick and mortar store (Hill, 2013).
Yahoo on the other hand was a website directory created as a hobby by its two founders, David Filo and Jerry Yang. They created a list that was a quick and easy way to remember and revisit the websites that they thought were the best and most useful (Hill, 2013). In 1994, they published their Website directory online calling it “Jerry’s Guide to the WWW” for their friends to use. their Website went viral more changes were made as the internet grew and they renamed their directory “Yahoo!” supposedly short for “Yet Another Hierarchical Officious Oracle,” and the Yahoo! search engine was born (Hill, 2013).
Amazon and Yahoo started out providing a service that internet users found useful and became an the proverbial overnight success. Amazon’s vision was to create an online bookstore that was customer friendly, easy to navigate and offer the largest and most varied selection of books at low prices than found in tradition B&M bookstores (Hill, 2013). Yahoo’s vision was, well at first, Yahoo’s founders may not have even had a vision – it did start out as a hobby, but over time the vision became to make the user experience better (Harmon, 2012).
Over the years Amazon and Yahoo have experienced great growth as well as great disappointments and hard times, as well as the creation of innovated technologies and software such as Amazon’s creation of the 1-click Internet ordering and payment software, which provided Amazon with a competitive advantage (Hill, 2013). Amazon’s core business practices focuses around the customers and providing the best experience for them. Beza, by empowering his employees to find ways to meet customer needs quickly has been at the forefront of online retail marketing. With the empowerment small teams were implemented to motivate employees to be creative and reach outside the box for the needs of the customers.
Yahoo’s basic business is acting as an interactive Web portal into the World Wide Web, however to make a profit Yahoo needed to sale advertising space on their sites. In 1994, it became clear that they could make major money from their directory if they allowed companies to advertise their products on the site in order to gain more advertising sales dollars (Hill, 2013). Yahoo began using the Pay Per Click advertising on their sites which helped increase revenue, the company became public in 1996, which allowed for Yahoo to continue to develop a sophisticated IT infrastructure to support their portal’s growth (Hill, 2013). The growth of the IT infrastructure would allow Yahoo to continue to improve its search engines and content for users.
Amazon and Yahoo share one important goal, which is providing the best customer and user experience on the World Wide Web. According to Hill (2013) the core business is utilizing management energies and company resources that have the most potential to create value and competitive advantages. Amazon and Yahoo both see themselves as IT and software companies and utilize their IT and software competences to increase the users experience. Key strategic differences of both Amazon.com and Yahoo.com.
Strategies are a set of related actions that managers take to increase their company’s performance (Hill, 2013). Some of the areas that companies will address when looking at building strategies are product development which is the creation of a product that fit what their target customer needs (Hill B. , 2014). Amazon created a niche market that grew tremendously in a short period of time with the implementation of selling books online and offering a unparallel variety at a low price.
Amazon’s continued growth into other retail products has increased sales into a billion dollar company. Another key strategy that Amazon has implemented is the service end with short delivery times, this is known as distribution strategy. The distribution strategy is the process of creating opportunities for the customers to purchase from the company (Hill B. , 2014). Amazon.com has a easy to use, 1-Click system process that fulfills the customers need to easily purchase a product online from anywhere in the world and have it delivered within days.
Yahoo.com started with making finding information on the internet easier. Filo and Yang shortly discovered they had a successful information finding based business, which was getting hundreds of thousands of hits shortly after the website search engine went live. Yahoo was meeting its target market needs beyond Filo and Yang’s initial expectations. A key strategy Yahoo used in the beginning is the marketing strategy which involves devising a cost-effective means of reaching increasing numbers of customers. Yahoo did so by recruiting volunteers, human volunteers to help them improve, expand, and refine their directory and make it a more useful, laborsaving search device (Hill B. , 2014).
This strategy helped launch Yahoo to the point it was getting over 1 million hits a day. The other key strategic move that Yahoo made was in 1996 when it reached a decision that would increase their IT infrastructure to support the growth they were having. In 1996, Yahoo struck a deal with Sequoia Capital. As the venture added to the success of Yahoo, Sequoia Capital understood the problems facing many startups. This problem was Filo and Yang had no business experience and no skills that would enable them to be successful at developing business strategies.
Due to this understanding Yahoo hired a CEO by the name of Koogle, who began building a Yahoo business model (Hill C. &., 2013). The business strategy of Koogle included increasing marketing and advertising to driving more visitors to the website, now Filo and Yang took on improving the search engine through the hiring of software engineers to begin creating innovative technology for the Yahoo website. These new technologies enabled Yahoo to venture into other services such as new media and entertainment services (Hill C. &., 2013). Strategic planning by Amazon.com and Yahoo.com in achieve a competitive advantage.
Amazon.com and Yahoo.com utilizes strategic business models which provide the roadmap for daily operations. Amazon and Yahoo have utilized both intended and emergent strategies. Defined by Hill (2013) emergent strategies are the unplanned responses to unforeseen circumstances and intended strategies are those planned. The fact that Amazon sales pretty much anything one can think of is a definite competitive advantage over other retail stores online or B&M. Amazon although an internet based business still found it had a need for B&M facilities to house all the products it was offering for sale. Amazon found that it required a vast amounts of warehouse space. Amazon moved several times in the first years to accommodate its growth.
Amazon also realized early on that the cost of the warehouses and the employees needed would have to be financed somehow. Therefore, in 1997 Amazon Amazon.com’s stock began trading on the NASDAQ stock exchange (Hill C. &., 2013). Amazon also found over time as it increased its product lines that to compete with B&M retail stores it had to make its service more convenient, Amazon began to forge alliances with B&M companies like Toys“R”Us, Office Depot, Circuit City, Target, and many others. Now, customers could buy products online at Amazon’s Website, but if they wanted their purchases immediately, they could pick them up from these retailers’ local B&M stores (Hill C. &., 2013). Amazon has had several successful intended strategies as well, Bezos one business strategy that doesn’t seem to make sense to many is his “Stop Talking So Much” strategy.
Bezos believes that cross-team communication limits team independence and leads to people agreeing too much, which stands in the way of creative conflict (Baer, 2014). Bezos belief in small team innovation is kept competitive due to this intended strategy. Yahoo on the other hand no initial intentions of their small website directory being used for anything other than their own use and that of their friends. Therefore the decision to offer advertising space shortly after their website went viral was an emergent strategy that took them to new heights and the new business plan of generating revenues by renting advertising space on the rapidly expanding Web pages of their search engine was implemented (Hill C. &., 2013). The decision to begin ecommerce services was not in the plans when Filo and Yang first launched their site as well.
However, with the financial needs growing with the growth of the company another revenue stream needed to be developed and ecommerce was it. The ecommerce plan was to facilitate buying and selling between internet users (Hill C. &., 2013). Today, Yahoo is going through a redesign under the direction of Marissa Mayer, CEO. Mayer has developed a new intended business strategy which will involve the use of behavioral science to determine the habit of its users and taking that information and using it to make Yahoo a habit for its users (Business Editor, 2014). Amazon.com and Yahoo.com distinctive competencies
Distinctive competencies are firm-specific strengths that allow a company to differentiate its products from those offered by rivals, and/or achieve substantially lower costs than its rivals (Hill C. &., 2013). Bezos idea for his online bookselling business was Amazon’s distinctive competency at its inception. Over the years Amazon’s distinctive competency has evolved to include not only books but an ever growing product line offered on a user friendly website that provides quick delivery services.
Amazon offers low prices and the convenience of shopping from anywhere and almost any electronic media device. Amazon’s distinctive competencies is its diverse product line, ease of use and quick delivery process. Yahoo began as a simple list of favorite websites and over the years it has grown to the point now as one of the top search engines used on the internet and also offers news, entertainment, ecommerce services, email services. Yahoo’s distinctive competencies it that it is a one stop for information, one can find almost any service or news on Yahoo.com A functional level strategy for Amazon.com and Yahoo.com
Functional level strategy as defined by Hill (2013) is directed at improving the effectiveness of operations within a company, such as manufacturing, marketing, materials management, product development, and customer service. Amazon.com is a successful business that continues to grow. Its ongoing development of innovative technology and its ability to create new market shares based on acquisitions and research and development is in and of itself a functional level strategy.
To continue to grow and improve Amazon could venture into developing more interactive ways for users to find what they are looking for online via voice commands or offer videos to help consumers learn more about the products before purchasing them. Yahoo.com would improve on a functional level if it created more of a social media community that users would feel they needed to visit daily to find out what is going on in their online communities. Similar to a Facebook or Twitter account, beyond what is offered from Flickr.
Baer, D. (2014, March 17). 5 Brilliant Strategies Jeff Bezos Used to Build the Amazon Impire. Retrieved from www.businessinsider.com: http://www.businessinsider.com/the-strategies-jeff-bezos-used-to-build-the-amazon-empire-2014-3 Business Editor. (2014, March 31). 7 Brilliant Strategies Marissa Mayer Used to Shake Up Yahoo. Retrieved from investorplace.com: http://investorplace.com/2014/03/marissa-mayer-yahoo-yhoo/#.U8xUA_nMSSo Harmon, S. (2012, February 04). Jerry Yang and Yahoo’s Humble Beginnings. Retrieved from www.ecommercetimes.com: http://www.ecommercetimes.com/story/74351.html Hill, B. (2014). Key Business Strategies. Retrieved from smallbusiness.chron.com: http://smallbusiness.chron.com/key-business-strategies-4632.html Hill, C. &. (2013). Strategic management: An intergrated approach (10th ed.). Independence, KY: Cengage.