Yahoo vs. Amazon: Strategy, Competencies, and Growth

Introduction

This report presents a compare-and-contrast analysis of Yahoo and Amazon. The core businesses and histories of both companies are discussed, followed by a description of the key strategic differences between them and how those respective strategies have affected each company's relative success. Two specific examples of these strategies are examined. The way each company's core competencies shape its strategy is described, and one functional-level strategy recommendation is offered for each firm. While Yahoo and Amazon operate in the same general online space, the ways in which they address that space — and the directions in which they tend to branch out — are entirely different.

Company Backgrounds and Market Positions

Most Internet-reliant information technology companies have been around for about a generation or less. The major online and social media giants of today — Google, Amazon, Yahoo, and others — are generally twenty years old or fewer. Amazon was founded in 1995 and has grown to more than 117,000 employees, with annual revenues of $74 billion as of 2013, increasing at a rate of approximately $13–14 billion per year. By comparison, Yahoo has roughly 12,200 employees and was founded one year before Amazon, in 1994. While both firms operate online and have extended their reach into many different arenas, Amazon is primarily a sales portal whereas Yahoo is primarily an informational portal — Amazon functions as an online retailer and Yahoo functions mainly as a web portal (Yahoo Finance, 2015).

Key Strategic Differences

Amazon and Yahoo differ significantly in their key strategic choices. One notable area of divergence is workforce policy: Amazon embraces remote and home-based workers, while Yahoo has effectively banned the practice. Amazon CEO Jeff Bezos is not inclined to publicly announce his plans or explain his rationale at length; rather, he focuses on giving customers what they want without fanfare. Yahoo CEO Marissa Mayer, by contrast, has had to address the media repeatedly over some of her recent decisions. Her decision to end remote work may reflect genuine concerns about productivity and organizational cohesion, but critics argue it is short-sighted — particularly given that she herself had a nursery installed in her executive office as a personal flexible-work accommodation.

Amazon is also differentiated by its commanding lead in the online retail space and its continued rapid growth. Yahoo, on the other hand, lags far behind Google in the search and web portal market — and the gap is substantial. Google has grown so dominant that the European Union has discussed breaking up the company, much as regulators attempted with Microsoft in both the United States and Europe years earlier. That effort likely ended in an expensive fine without much structural change, and a similar outcome seems probable for any future action against Google (Yahoo Finance, 2015; Google Finance, 2015).

The revenue gap between Yahoo and Google underscores Yahoo's strategic challenge. Google earned approximately $16.5 billion in a single quarter (Q3 2014), while Yahoo generated only $4.5 billion for the entire year of 2013. Moreover, Yahoo's revenues have been declining — falling roughly $300 million between 2012 and 2013 after being flat the year before. Continuing to compete head-to-head in a market that Google clearly dominates is one illustration of Yahoo's strategic positioning problem. Yahoo's ban on remote work is another example of the company moving against prevailing trends in workforce management.

It is worth acknowledging, however, that Mayer may have legitimate concerns. Remote work introduces real risks, including reduced managerial oversight, potential equipment loss, and compromised information security. Online conferencing and chat tools can partially offset these risks, but they cannot eliminate them entirely. As for Amazon, the company actively recruits home-based workers and markets these positions across both traditional job boards — such as Monster.com and CareerBuilder.com — and flexible-work-focused platforms like Flexjobs.com, as well as regional employment sites (Yahoo Finance, 2015; Google Finance, 2015).

Conclusion

In the end, Yahoo largely just exists and survives while Amazon has become the dominant force in online retail. Yahoo may not remain independent — it may be acquired or significantly restructured — within the next decade. Amazon, meanwhile, will likely face the same antitrust scrutiny that Microsoft once faced and that Google is beginning to encounter now. In many ways, Yahoo resembles the JC Penney or Kmart/Sears of online web portals and search engines, while Amazon resembles the Walmart of physical retail — but operating in the online world. As the fates of Circuit City and Blockbuster illustrate, the ability to evolve and adapt can either sustain a company or destroy it. Yahoo would do well to heed that lesson before it runs out of time to act.

References

FoxNews. (2015, January 12). Easter ruined? Creme Egg recipe redo has chocolate lovers hopping mad. Retrieved January 13, 2015, from

Google Finance. (2015, January 13). Google Finance: Stock market quotes, news, currency conversions & more. Retrieved January 13, 2015, from http://finance.google.com/

Kleinman, A. (2013, April 9). Marissa Mayer finally addresses work from home ban. Retrieved January 13, 2015, from http://www.huffingtonpost.com/2013/04/19/marissa-mayer-work-from-home_n_3117352.html

Prahalad, C. K., & Hamel, G. (1990, May 1). The core competence of the corporation. Harvard Business Review. Retrieved January 13, 2015, from https://hbr.org/1990/05/the-core-competence-of-the-corporation

Yahoo Finance. (2015, January 13). Yahoo Finance — Business finance, stock market, quotes, news. Retrieved January 13, 2015, from http://finance.yahoo.com/