Question

Please specify the strategic alternatives in terms of growth, stability and retrenchment and what is pros and coms for Amazon? It's general questions.

Answer 1

Strategic alternatives deal with the problem of continuance or change in the business enterprise or improvement of efficiency and effectiveness. The four strategic grand alternatives are growth, stability, retrenchment or any combination of the three.

Growth strategy:

A growth strategy aims at multiplying profits, shares and business locations of the company. This can be achieved through:

Cooperation: The company can grow externally by acquiring or merging with other companies. It could also participate in joint ventures and strategic alliances.

Internationalization: When a company’s domestic markets are saturated, it can grow its sales by moving to the international scene

Diversification: This is a growth strategy that involves introduction of a new product or seeking opportunities in new businesses.

Concentration: A company might try to achieve growth by expanding an existing product, technology or market.

Stability strategy:

A stability strategy aims for long term survival and consistent performance in a controlled manner by employing the following tactics:

The no change strategy: It is a conscious effort by the company to avoid any kind of innovation. It continues to provide the same services and products to a similar customer base.

A pause and proceed with caution strategy is followed by a company that wants to ensure that it is on firm ground before going ahead with a grand strategy.

In a profit strategy, a company strives to maintain its profitability throught artificial means, even during a crisis.

Retrenchment strategy:

The purpose of a retrenchment strategy is to reverse the poor performance of a company by bringing down the scope of the business. A streamlining of operations is effected by reducing costs and assets. This is done by effecting turnarounds, divestments and liquidation.

Advantages of A’s growth policy:

A’s markets were reaching saturation in the USA with approximately 65 percent of Americans being subscribers of A… Prime. Its marketplace in India provided it with excellent growth of up to 46 percent in the first quarter of 2017. The company extended its fulfillment capacity in India by 26 percent and its product offerings rose by 75 percent from the point of its launch.

Disadvantages of A’s strategies alternatives for growth and retrenchment:

The company A has of late employed a rather aggressive growth strategy. In an attempt to diversify its business, the company has moved to videos, advertizing and virtual assistants. While this promises rapid growth, investors in the company are apprehensive of an overinvestment in growth strategies.

   Due to stiff competition from its rival company W, A had to shrink its business in Seattle. This retrenchment strategy led to loss of employment for several hundred employees. This layoff was indirectly caused by A’s concentrative growth strategy which led to an indiscriminate rise in the number of employees from 5000 in 2010 to 40,000 in 2018.