Amazon's Strategy Problem

Title: "Amazon's Strategy Problem"
Source: Seeking Alpha
Date: November 11, 2012
Link: http://seekingalpha.com/article/998201-amazon-s-strategy-problem

I was reading a little about Amazon and came across this investor perspective on the company's venture from a simple e-commerce site to a more complex company focused on a number of consumer offerings. As the author points out, the initial strategy of the company when it first launched was to provide consumer's with an easier, and more affordable way, to purchase everything from clothes to big-screen televisions. The rise of Amazon in the last two decades certainly has played a big part in the decline of the big-box retailers (see Best Buy), but nowadays it seems they are moving away from their strategy of offering or facilitating the purchase of goods for a cheaper price. With the launch of the Kindle - and then the Kindle Fire - and now even online banking, it seems Amazon is starting to venture into areas that are not considered their bread and butter.

One thing we've learned in school, and as the author points out, is that companies need to develop a strategy first and then make all business decisions based on that strategy. Veering too far from that strategy - which companies' often call "diversifying" - can have major impacts on the areas they had originally focused on. In the most general sense, they can stretch themselves too thin and potentially lose profitability in the areas they traditionally have done well in. In addition, taking on these new business endeavors can make them vulnerable as they enter markets where they may no longer have the technological or business advantage over their competitors. So why is Amazon doing this?