Amazon Case Study: Operations Management Assignment on Effective Decision Making Models
Question
Assessment Description: Using the two quotations presented on the next page as an initial focus point, comprehensively answer each of these questions
- Amazon began as an on-line book retailer. How has it grown to be known as the "everything store"?
- What aspects of Amazon's operations management are based on the increased globalisation of world trade?
- Amazon’s marketplace focuses on smaller sellers and manufacturers by linking them with a huge customer base and fulfillment program. Can e-commerce ever truly replace the in-person shopping experience?
- What are (or could be) the real long-term implications of the increased presence of Amazon to the Australian Retail Industry?
You are expected to conduct sufficient research into the topics that will help you construct your answers, and the research is to be used to support your statements and assertions. As a guide, you are expected to use a minimum of 5 references per question. The use of contemporary (recent) publications will be valued in assessing the quality of research. The references must be authoritative and not sourced from Wikipedia, Slideshare, Businessballs or other non-academic sources.
The Harvard Referencing System must be used for the references and citations. The document must be submitted through Turnitin. Any evidence of academic misconduct (plagiarism) will attract the appropriate penalty as published in Kaplan’s policies and guidelines. These penalties include the possibility of being given a mark of zero for the assessment.
Any student who is not sure of how to meet the requirements of this assessment is encouraged to discuss the issue with their facilitator at the earliest opportunity.
How Amazon Is Changing Supply Chain Management
The rate of Amazon’s innovations in supply chain management has been mesmerizing. The rate of change has been incredible, making it difficult for lower volume competitors to keep up. Amazon is forcing its major competitors to invest more in supply chain automation, lessen the overall product delivery time, increase the number of warehouses, and even engage in product manufacturing. Amazon is already out of reach for most online e-commerce competitors. At the same time, its acquisition of Whole Foods is another bold declaration of its move into bricks and mortar, further emphasizing the convergence of traditional retail and e-commerce strategies.
Most importantly, Amazon’s unique supply chain strategies and continuous technological innovations have already changed the way supply chain management works. With impending advances in robotics, drones and other autonomous vehicles, one can only guess what the future holds for Amazon.
The secrets behind Amazon's success
"Patience, relentless investment and serial innovation have helped Jeff Bezos’s company 'shred the competition'
At some point in the near future, 85% of the world’s products will be available on Amazon. That was the startling view, privately expressed, by the head of consumer markets at a big global management consultancy to me two years ago. This was the goal, he said, towards which chief executive officer Jeff Bezos was marching Amazon. Once reached, this would be a strategic, operational and financial game changer for the business.
Answer
Introduction
This Operations Management Assignment is a Amazon Case Study that focuses on outlining E-commerce as an innovative business framework that enabled business organisations to enhance their global accessibility in a new dimension. It is fundamentally the smartest and cost effective virtuous stores to reach out to a greater clientele with effective and prompt business response. With the advent of the E-commerce technology, there has been a mixed commercial outcome. It has paved the path for future business growth from many organizations while for some small scale organizations it has been a competitive stroke to play. This below questions will address the key facets of Amazon and the attributes of its success story. The Amazon Case Study outlines the companies history from being a small online book retailer to an online leader is discussed in this report. Amazon's decision making capability and operational management are the two major areas of activity by Amazon that are focused with commitment.
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1. Amazon began as an online book retailer. How has it grown to be known as the "everything store"?
Success story of Amazon: the Operations Management Assignment explores the story of Amazon had been one of the biggest inspirations and an epitome of exemplary success in the online sector. Amazon had been an organization that has catered to all sorts customer needs and widened its area of coverage. The story of Amazon from being a mere online book retailer to an e-commerce icon had been indeed motivating. Amazon occupies the leading position in the ecommerce sector owing to its e-commerce facilities and cloud computing services that count a worth of $937.75 billion and employee number of 7,50,000 (Garden and Profiles,2018). This journey of success had not been an easy one to map rather it had been dependent on several critical success factors that fuelled the success of Amazon.
Vision of the CEO: The initial foundation was cleverly built on the intelligent decision of selling books online as it had a significant appeal and was easy to ship. The Amazon founder and CEO, Jeff Bezos made the right decision of starting his online business in books since he considered books as easy to ship products. This developed a considerable appeal among the users and convinced them to place their reliability on the brand (Rossman, 2016). Jeff Bezos initially named the company ‘Cadabra’ due to its magical appeal amongst the people. However, it was quickly dropped because it was being confused with the word ‘Cadaver’ and the name Amazon was chosen. As opined by Jeff Bezo, he envisioned on having an 85% product availability to be made available on Amazon. This was the startling vision that the CEO had that eventually was materialized with smart decision making and strategic operation. With time, this e-commerce giant has shifted services from being mere books to an array of varied products. The new discoveries included CDs, DVDs , online groceries and cloud computing.
Extensive research conducted by the Amazon R&D team: Another critical success factor that defines Amazon in an effective manner is the extensive research conducted by the R&D team . the Amazon Case Study outlines how in 2019, the R&D department of Amazon had spent as much as $35.931 billion which was the highest R&D investment ever made by a company. Amazon web services, Alexa, Prime Pantry, Amazon Fresh, Prime Now and Prime music are some of the greatest innovations that has marked the business growth(Welch, 2015). This organization has made effective use of the relevant resources to meet up the business needs. As shown in the statistics , every $1 being spent on online visit by American customers, constitutes of Amazon occupying 51 cents (The Balance Small Business.2018). Considering the statements by the Amazon management, this organisation believes in offering diverse products at cheaper rates that captured the commercial essence and magnified the opportunities for this organisation.
Two masterstrokes by Amazon: Every venture attracts a certain level of risk as well as opportunity and this does not exempt multinational corporations. In 2014 Amazon would witness heavy investment on two of its ventures one of which would report tremendous success while the other would failed miserably and be discontinued within a year. On June 18th 2014 Amazon would unveil its first ever smartphone (The Fire Phone). The Fire Phone was aimed at integrating various media streaming options but the venture would fail to secure consumer interest leading to serious failure (Mukhina, 2014). Amazon was forced to discontinue the Fire phones production after only one year resulting in a $180 million loss. In August of the same year, Amazon finalized the acquisition of Twitch for a staggering $970 million. The social video game streaming site would be integrated to the game production division at Amazon which would help further enhance Amazon Web Services.
Supply chain management: Amazon had been a pioneering architect of supply chain management by implementing extensive and bold technological innovations in the field. Due to the excellent supply chain management, Amazon has profited a $100 billion in the last 20 years(Supply Management. 2018). This organization had put forth continued efforts in delivering the products to the customer in quickest possible time and throwing an enormous pressure on the competitors. During the initial period of the company, employees worked tirelessly for months to meet the deadlines, because they were understaffed. This Amazon Case Study outlines how invention of the Amazon prime services, this organisation has offered an initial two-day delivery post the launch program (Ritala et al. 2014). This proved to be game changer in stimulating the Amazon success story on the most descriptive way. Amazon has occupied a significant position among the customers owing to the fact that this company possesses updated IT services, intact networking of warehouses, multifaceted inventory management and efficient transportation services (Tollefson, 2015). Amazon’s clever strategy of outsourcing the inventory management to third party service providers and insourcing logistics is yet another feather clever move.
Innovation of DRONE based delivery system: the drone based delivery system called the Amazon Prime Air , will facilitate the services to customers within a proximity of 10 miles and with a purchase of under 5 pounds within a stipulated time of 30 minutes. Hence, this Operations Management Assignment emphasis’s on the indicative of the excellent and strategic supply chain management of Amazon and its effort to reach to any extent to make service available to customers (De Massis et al. 2016).
2. What aspects of Amazon's operations management are based on the increased globalisation of world trade?
Core of Amazon Case Study: Amazon is a vast online service provider with diverse products and services , their basic style of business is e-commerce. This organisation has been an ideal portrayer of sustainability and business credibility as they have showed enough innovation in their business strategy and techniques (Chiu et al. 2017). This Amazon Case Study focuses on the impeccable performer in terms of supply chain management. Their supply chain team undergoes continuous monitoring and scrutiny to prevent any kind of customer disappointment.
Amazon’s international viability: post 2014, it has been evident that the international business percentage for Amazon had been on the descending tract compared to the other concerns that have a significant global presence. Considering the global sales with Amazon’s North American sales , Amazon shows a shocking rise of 25% and 12% respectively. Therefore it can be stated that this company is a fragile in conducting international sales concerning few areas(Salam, 2016). An insistence on the organizational infrastructure and fulfillment capability has significantly affected the company operations and henceforth has limited their scope (Services.amazon.com. 2018). China and India can be stated as the new emerging economies whereby Amazon can expect some considerable profit returns. Hence, the need of comprehending the international need and identifying the relative local elements with closer focus on the do’s and don'ts has been recognised (Ford, 2017).
Challenges faced by Amazon in regards to international growth: as it has been evident in the records that Amazon had generated higher profit percentages in North American sales and showed a losing curve in the international sales graph. There has been a surprising comparison in the global and North American sales. The global sales are less than the North American sales for Amazon. One of the key factors behind Amazon’s failed international business sales is there excessive emphasis placed on the topographical context (Bartneck et al. 2015). The core supply chain system in development of Amazon tends to cover up the closer geographical areas. With the necessity of extending the global access and covering up greater areas of international proximity, the need for reformed infrastructure is paramount. The above-mentioned services depend majorly on the retailers therefore marks the difficulty of moving beyond the local delivery areas. The land grab mentality and limited bracket of opportunities being focused on by Amazon are some of the deterrents in marking the company claustrophobia (Strauss and Frost,2016).
Figure 1: Amazon’s International presence
(Source: Bartneck et al.2015)
3. Amazon’s marketplace focuses on smaller sellers and manufacturers by linking them with a huge customer base and fulfillment program. Can e-commerce ever truly replace the in-person shopping experience?
Amazon's Focus on complying small sellers with big clientele: Amazon serves as the biggest online marketplace with an arsenal of services and products being offered to a huge clientele and the numbers are increasing in a rapid rate. Amazon shows places a major importance on the customers and sellers (iamwire. 2018). The sellers, especially small sellers who don't have much scope in the market can utilize the Amazon services to exhibit their products.(Shankar et al.2016). Hence, they can cleverly apply for an Amazon brand umbrella and acquire the authentication to ‘display their products on the concerned online portal. Amazon follows an intelligent business functionality based on their model of FBA and third party sellers in the same forum (Fang et al. 2016).
FBA: As per FBA, the aspiring online sellers are supplied to gather resources, manufacture their own products and place them to Amazon for further exhibition. In case an online business program already contains the business fulfillment program, the aspiring seller might as well opt out of the Amazon FBA program (Leeflang et al. 2014)
Third party sellers: contradicting the FBA practice, the third party seller related to the Amazon services often opts out of their fulfillment and warehousing services. However, there are definite uncertainties about third party sellers as they often have the tendency to drop out of the business deal (Yang, 2018). Their major aim is to encourage probable leads and orders. Hence, this section of the workforce deals in front-end marketing to attract leads and convert them into orders.
E-commerce and in-person shopping: it is indeed difficult to select between online and offline shopping. However of late it has been apparent that online shopping is taking the commercial market in waves and is capable in luring the customers in large numbers. To have a clear understanding of the online and offline shopping benefits and menaces, a paradoxical research needs to be conducted to derive a conclusion. An online shopping portal is cost effective and easy to address the customer on a bigger dimension (Babones, 2017). Online shopping enables customers to conduct shopping at their convenient time and place and can receive the products delivered at their preferred location (McEachern, 2018). However, the Operations Management Assignment also outlines the discourages of face to face interaction with the customer and also requires huge investment to setup. In addition to this, an in-person shopping experience enthuses a customer to get the product variety more that is not available online. Equally, offline shopping requires physical visits that might be at times, time taking and inconvenient (O'Connor, 2017).
Hence, considering the above points, it can be stated that it is a difficult selection to pinpoint on the right type of shopping experience. However, with highly busy schedules and lack of time, online shopping is becoming popular. Therefore, it is recommended that the retailer must look for an omni-channel strategy to address the changing expectations of the customers to address both the variables.
4. What are (or could be) the real long-term implications of the increased presence of Amazon to the Australian Retail Industry?
The ‘Amazon Effect’: Amazon has had a major impact on the traditional bricks and mortar stores of the retail industry. Due to the impressive services provided by Amazon such as fast shipping, free returns, low prices, discounts, ease of access, and other impressive services like Prime, etc., Amazon has increased customer expectations. This has made traditional bricks and mortar store difficult to keep up with such high customer expectations. Retail store owners need to come new and innovative solutions to increases their revenues and tackle the obstacles put forth by the competition. This implication has been termed as the ‘Amazon Effect’ in the retail and e-commerce industry.
Sears is an American departmental store chain, which suffered a great loss in revenues and had to close down several of their stores. This was mainly attributed to their inability to attract more customers and generate more profits. Sears didn’t employ effective changes in its operations to keep up with their competition and meet the customer expectations. This led to its downfall.
In contrast, one other America departmental store chain, Kroger recognized the changes in the customer expectations and the market trends, very early. This led to the implementation of new and innovative technological changes which allowed them to retain their profits and increase their revenue by offering customers something more and improved services such as adopting an Omni-channel presence which provided consumer with flexibility, reinforcement of their technological infrastructure to improve services and incorporating a new customer purchase history system to keep track of the items previously bought by a single customer. All of these services together provided he customers with a personalised shopping experience.
Amazon’s impact on Australian Retail Industry: With the idea of launching Amazon in the Australian Retail industry, there are anticipations regarding the possible influence of the online portal on the new location. Some opinions assert the impact to be aggressive and unique (Grimmer et al. 2017). An argumentative statement by critics state that the impact might hinder the local retailers in a considerable way. As mentioned in the Australian Financial Review, Amazon plans to implement their Spain strategy in case of their global expansion plans to Australia (Financial Review. 2018). With the support from third party sellers, Amazon decides to launch their inhouse retail and marketplace. This might pose a mixed reaction from other business concerns. In fact, small brands might as well lower down the product prices to cover up the competition. The optimistic approach affirms a positive outcome while the critics state that it might affect the leaders like JB HI-FI and MYER (Sciara et al. 2018). However, Amazon’s overseas 3 hour delivery service might not be able to cater to the vast region in Australia with scattered customers. Hence, the anticipation focusing on the Amazon’s feasibility in the Australian market is a blended opinion.
Conclusion
An acknowledgement of appreciation must be given to Amazon for their unique efforts of taking the E-commerce sector to the next level. This had been possible because of their innovative strategies and intelligent business decisions. The above report portrays an in depth mention of the critical success factors behind its long drawn success journey. Moreover, this organization is a pioneer in aligning small business sellers to huge customer base by utilizing two most imperative models. Finally the Operations Management Assignment of the Amazon Case Study outlines the organization is planning to expand in the Australian market to enhance their global sales.
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