“Amazon Future Strategy 2022” by Michiaki Tanaka

The book “Amazon Future Strategy 2022” written by Michiaki Tanaka was published in June 2018. It describes the areas Amazon is focusing on and the future vision the company envisions based on its actions up to 2018.

Although South Korea is relatively less influenced by “Amazon,” the United States and Japan are significantly impacted. The U.S., being the headquarters of Amazon, naturally holds substantial influence, impacting various fields unimaginable without Amazon. In Asia, Japan seems to be a springboard for diverse attempts. While past literature mentions initiatives like “Amazon Go” and innovations in logistics such as drone delivery, subsequent developments might not be well-known yet.

“Impact of Amazon on South Korea”

Although less impactful compared to the U.S. or Japan, South Korea is not immune to Amazon’s influence. Amazon provides not only logistics but also services like AWS (Amazon Web Services), recording significant revenue and margins.

Moreover, South Koreans can directly purchase products from Amazon’s online store. Through contracts with platforms like “11th Street,” products sold on Amazon can be bought via these platforms. While not directly selling through sites like “Amazon Japan,” Amazon’s presence is gradually expanding in South Korea.

In addition, the flagship store “The Hyundai Seoul” in Yeouido operates unmanned stores similar to “Amazon Go.” Despite wanting to experience it, there’s irony in having crowd control staff in unmanned stores due to the long queues. Nonetheless, Amazon is making various attempts in South Korea.

“Amazon and Jeff Bezos”

Amazon, founded by Jeff Bezos, is headquartered in Seattle, known for its customer-centric approach. Known for its high employee turnover rate, it’s challenging to find someone working for the company for over a year.

The internal atmosphere of Amazon, as detailed in the book “I Lived the Future at Amazon” by Park Jung-jun, who worked at Amazon for 12 years, provides deeper insights. Bezos, sometimes referred to as “Martian,” seems distant from an ordinary individual. Leading a company ranked among the top by market capitalization inevitably sets him apart. Whether Bezos’ unconventional nature shaped Amazon or he adapted for Amazon’s current status remains uncertain.

“Analyzing Amazon’s Corporate Strategy”

The book elaborates on Amazon’s corporate and future strategies, forecasting future directions based on its journey until 2018.

The key concept addressed in the book is “segmentation.” Unlike mere marketing approaches, Amazon seems to perceive segmentation as dividing a large organization into smaller groups for efficient management. It emphasizes the importance of subdividing Amazon into “small organizations” for efficient management and highlights its significance.

“The Two Pizza Rule”

The “Two Pizza Rule” mentioned in the book, introduced as an innovation case in Clayton Christensen’s “The Innovator’s DNA,” describes the ideal team size. Just like how 6-10 people are enough to share two pizzas, smaller team sizes are deemed favorable.

Believing everyone can be creative, it’s advisable to keep departments as small as possible. This approach empowers each employee with autonomy and responsibility for innovation.

Interestingly, one might not interpret “two pizzas” as small in the context of Korean pizza sizes. It would likely equate to the large-sized pizzas commonly seen in the U.S., sufficient for 6-10 people.

“Amazon Strategy Analysis Based on the Sonjaebyeongbeop”

An impressive aspect of the book is analyzing Amazon’s strategy based on “Sonjaebyeongbeop.” It’s impressive to see how Amazon’s strategy is analyzed based on the five elements of “Sonjaebyeongbeop,” reflecting a book authored by a Japanese individual rooted in Eastern philosophy.

The analysis of Amazon’s strategy based on Sonjaebyeongbeop includes:

Do (Strategic Objectives)
- Mission and Vision: The most customer-centric company on Earth
- Financial Objective: Long-term maximization of surplus cash flow
Cheon (Time Value)
- Commercializing time value
- Long time vs. short time
- Economics of speed
- Enhancement of time speed
- Efficiency of time
- Synchronous vs. asynchronous
- Commercialization of unpopular products
Ji (Value of Space)
- Commercializing space value
- Real world vs. cyber world
- Amazon, Amazon Web Services
- Economies of scale, economies of scope
- Scalability
- Cybersecurity
- Sharing
- Expansion from retail, logistics, technology companies to universal business companies
Jang (Leadership)
- Bezos’ visionary leadership
- Employee self-leadership
- 14 Amazon leadership principles
- Using numbers and passion as weapons
Beop (Management)
- Platform and ecosystem
- Business model written on a napkin
- Day 1 management
- Low-profit management
- Ultra-long-term perspective, high-speed PDCA

“Five Key Frontiers in the Value of Time and Space”

The book also discusses “five key frontiers” within the context of time and space value:

Expansion of the real world
Expansion of the cyber world
Enhancement of time speed
Expansion of space value
Enhancement of the value of space

It’s interesting to ponder how Amazon navigates these frontiers and shapes its strategies accordingly.

“Jeff Bezos’ Six-Page Memo”

The six-page memo written by Bezos mentioned in the book is a crucial internal document for Amazon. It’s reminiscent of Warren Buffet’s Berkshire Hathaway shareholder letter, garnering attention from not only Amazon but the world.

In essence, the memo highlights Amazon’s core principles:

Customer obsession
Long-term thinking
Eagerness for innovation
Continuous self-improvement

This memo serves as a guideline for employees, shaping Amazon’s culture and direction.

“Amazon’s Flywheel”

The core of Amazon’s business strategy is the “flywheel,” which was famously scribbled on a napkin.

As more products attract more visitors and as good customer experiences accumulate, the number of sellers wanting to sell on Amazon also increases. Ultimately, these four elements continue to cycle, leading to a low-cost structure, lower selling prices, and ultimately, high customer satisfaction.

In essence, due to this virtuous cycle, the business inevitably grows and expands.

In reality, Amazon sets very low margins for its Amazon shopping mall. By employing this method, competitors are discouraged from challenging Amazon recklessly, allowing them to maintain a monopolistic market share. Surplus cash flow from the Amazon shopping mall is used to venture into other businesses and adopt strategies that generate higher profits in other businesses.

In particular, in the case of AWS, which provides cloud servers, Amazon shopping malls have very low margins and are not very profitable, whereas AWS records high profit margins, occupying a significant portion of Amazon’s performance.

“Amazon’s Challenge from Online to Offline”

Starting as an online bookstore, Amazon shopping malls expanded their range of products as the number of visitors increased and became more active. Eventually, this method laid the foundation for building the Amazon empire.

Based on this online success, Amazon aims to dominate not only online platforms but also offline platforms, as mentioned in the book.

“Amazon’s Space Business: Blue Origin”

Furthermore, Jeff Bezos has confirmed his space business through a company called “Blue Origin.” Although relatively less attention is given to Blue Origin compared to Elon Musk’s SpaceX, Jeff Bezos plans to dominate not only the ground but also space through Blue Origin.

Ultimately, Jeff Bezos’ Amazon focuses on building a “platform,” which is based on providing products and services that are indispensable in our lives.

“Comparison between Alibaba and Amazon”

The book also pays attention to Alibaba, which received attention due to its founder, Jack Ma. Jeff Bezos’ Amazon, along with Coupang in South Korea and Alibaba in China, share many similarities. They are fundamentally based on logistics and online platforms and also share basic core strategies.

In particular, in 2018 when the book was published, Alibaba had a much greater influence than it does now in 2024. Currently, Alibaba’s subsidiary “TEMU” under the “Pinduoduo” group is gaining attention for aggressively increasing its market share through aggressive marketing and implementing a deficit management strategy. However, at that time, TEMU did not exist, and the attention that TEMU is receiving now was being received by “Alibaba” and “AliExpress.”

The book also explains Alibaba’s strategy based on “Sonjaebyeongbeop,” and the contents are as follows:

Do (Strategic Objectives)
- Mission: Solve social problems through the construction of social infrastructure. Support small and medium-sized enterprises and consumers.
- Vision: Build the world’s fifth-largest Alibaba economic zone following the United States, China, Europe, and Japan.
- Core Values: Customer-centricity, teamwork, adaptability, integrity, passion, commitment.
  - Store Infrastructure Development
  - E-commerce stores, offline stores, media & entertainment, others
  - Finance
  - Logistics
  - Marketing services & data management
  - Cloud computing
Cheon (Time Value) – Economic Value of Time
- Seven unicorn companies within the group based on the economic value of time in business development speed.
  - Synchronization – Asynchronization
  - 50,000 parcel lockers
  - Rural Taobao centers (e-commerce, parcel hubs)
  - Unmanned convenience store outlets
  - Expansion of next-generation retail company Hema Fresh Food Supermarkets
  - Robot warehouses
  - Smart logistics network
Ji (Land’s Profit) – Spatial Value
- Businessization of spatial value
- Real world – Cyber world
- China – Asia – Advanced countries
- Alibaba’s economic zone construction
- Zhongchongkunzhen (China’s entrepreneurial support platform organically integrating university and corporate entrepreneurship facilities)
- Construction of social infrastructure
- Cashless project in Hong Kong
- Smart city project in Macau
Chang (Leadership)
- Ma Yun’s mission and leadership
  - Leadership as a team leader
  - Clear sharing of common goals
  - Clarity of authority and information sharing according to authority
  - Simple and easy-to-understand rules where possible
Beop (Management)
- Network orchestration
- Flexible shareholding agreement capital structure
- Business model supporting small and medium-sized enterprises
- Blockchain distribution system
- Smart logistics network
- Top 5 economic zone in the world

“Marketing 4.0: From 4P Strategy to 4C Strategy…”

Philip Kotler, known as the father of modern marketing, argues in his book “Philip Kotler’s Market 4.0” that in the digital economy, there is a need to transition from 4P sales to 4C productization.

Instead of the traditional 4Ps, the focus should be on the 4Cs, which are as follows:

“4P Strategy”

Product
Price
Promotion
Place

“4C Productization”

Co-Creation
Currency
Communal Activation
Conversation

This means transitioning from a company-centric approach to a customer-centric approach, creating new products and services together with customers, and maintaining conversations in equal relationships between customers and customers, and even as individuals.

Professor Kotler notes that the most powerful sales concept in the sharing economy is P2P, or the connection between individuals.

“Amazon Future Strategy 2022”

In fact, it is unknown to what extent the Amazon 2022 future strategies introduced in the book have been achieved by 2024. However, regardless of the timing, it can be seen that Amazon is precisely pursuing the direction it seeks.

Based on platform services such as Amazon shopping malls and web services, Jeff Bezos’ ambition to expand platforms beyond online to offline spaces seems certain.

Furthermore, one can also find a goal to expand beyond the earth and dominate the platform even in space. Of course, in terms of space strategy, Amazon competes with Elon Musk’s SpaceX and is progressing, but it is.

Moreover, recently, the subsidiary “TEMU” of the Chinese “Pinduoduo” group has been challenging Amazon in the U.S. market by securing market share through aggressive marketing. At this point in 2024, when the online market share war between Amazon and TEMU is just beginning, it remains to be seen whether TEMU can continue to push Amazon with its capital strength or whether it will collapse like a storm in a teacup.

If you want to learn about Amazon and its future strategies from the perspective of someone living in Japan, which is under the influence of Amazon more than South Korea, and about the strategy of the platform war beyond online retail business, this book is worth reading.

“Amazon Future Strategy 2022”