Amazon Value Chain Analysis 2023
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The value chain refers to a set of activities within an organization, which together help it create or produce a product or service. First developed by Michael Porter, the purpose of the value chain is to help firms identify value-adding activities they are undertaking, that either add (or don’t add) value to their product or service. Once disaggregated, such activities can help provide a more precise understanding of all firm activities and the capabilities corresponding to each activity so as to understand where competitive advantage is being derived. This case study uses Porter's value chain analysis to assess and understand sources of value for Amazon.
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AMAZON VALUE CHAIN Case Study
Key Learning Outcomes
By the end of the case, students should be able to:
- Apply the value chain to a real-world company using the example of Amazon.
- Understand how to use Amazon’s value chain framework to examine the sources of competitive advantage for the e-commerce giant.
- Understand which value chain activities have helped Amazon become a leader in the global ecommerce/online marketplace industry. You will discover what these are and much more…
1.0 INTRODUCTION
The value chain refers to a set of activities within an organization, which together help it create or produce a product or service (Grant 2016; Johnson et al. 2017). First developed by Michael Porter, the purpose of the value chain is to help firms identify value-adding activities they are undertaking, that either add (or don’t add) value to their product or service. Once disaggregated, such activities can help provide a more precise understanding of all firm activities and the capabilities corresponding to each activity so as to understand where competitive advantage is being derived (Grant 2016).
According to Porter’s value chain, organizations can only gain a competitive advantage by adding value to their customers. This makes it essential for managers to analyze all the activities undertaken by their organizations and understand the ones that add value and those that do not. According to Johnson et al (2017), organizations can use a value chain to understand their strategic position as well as their resources and capabilities. It can also help them evaluate the relative importance of internal activity costs as well as identify how costs can be reduced (Grant 2016).
In the following sections, the author will use the value chain analysis to assess and understand the sources of value for Amazon.
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