– Amazon.com, Inc. (NASDAQ:AMZN) is not a disruptor anymore.
– It is pursuing diversification strategies as a means of continued growth.
– Related and unrelated diversification, as well as the flexibility of the resources obtained, will have an impact on firm’s performance.
Amazon.com, Inc. (NASDAQ:AMZN) was once a disruptor. Those days are long gone. I am surprised that many here don’t understand the concept of disruption. There are different degrees of disruption.
Disruption has to be looked at from the perspective of an established company, who’s business has been disrupted, to assess the degree to which capabilities and products or services are rendered obsolete. It is a process that, if proven revolutionary, can overhaul an industry. This is the only form of the concept I see being thrown around by the common folk. It is too simplistic and lacks a deep understanding.
Business model disruption is not a permanent classification for a business. When Amazon began, it was classified as a disruptive innovator because the model brought a new and unique value proposition which customers accepted. Currently, you cannot consider Amazon a disruptor. (Most cannot and will not be able to understand this concept.) The e-commerce business model it created has successfully been integrated into physical retailers. Now, the business model that Amazon created can be considered a capabilities building platform, which is the coexistence of both brick and mortar and e-commerce platforms.
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Although this might seem obvious, I highly doubt it will be acknowledged, given all the blind euphoria about Amazon killing department store (1) retail. Amazon is in a different phase in the industry life-cycle. The innovation is beginning to come from strategic alliances, and acquisitions to aid its online presence. Gone are the days when Amazon could implement the garbage can model. The garbage can model (2) is desirable in a rapidly changing environment. Management and employees basically toss ideas until something works. Recall the fire phone, the trucks, and the 1 click button.
Amazon Now Relies On Diversification
It seems that Amazon.com, Inc. (NASDAQ:AMZN) is pursuing the conglomerate route with unrelated and related diversification. There are three theories of diversification: the linear model, the inverted U model, and the curvilinear model. The linear model suggests that firms that diversify regardless of related and unrelated diversification will endless benefits. The inverted U model suggests that firms will see benefits with related diversification up to a point before it starts diversifying into unrelated segments due to external pressures by shareholders and analysts which result in poor firm performance. The curvilinear model suggests that firms will see benefits with related diversification but the benefits from unrelated diversification do not exist.
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