MBA503 Management| Highlight the Potentials of Amazon

Amazon manages to deliver goods in time much lesser than its competitors due to the outsourcing of inventory management and not relying on the third party for logistics (Cips.org 2018). The strategy is indeed complicated mainly due to the involvement of third-party companies; however, Amazon manages it so well that it looks as if a very simpler process to execute. Surprisingly, third-party sellers hold the majority of sales for Amazon. In fact, products which are not sold on a regular basis are not kept in the Amazon’s warehouses. This is how Amazon easily manages its inventory and does not give place to overstocking. Nonetheless, overstocking is one of the means to wastage and also to an incremented costing (Ogbo and Ukpere 2014). Despite the fact, Amazon is able to manage one-hour or the same day shipping due to the dependence on its own logistics. Amazon understands the fact that a dependence on third-party logistics may certainly cause a number of complexities and can eventually cause the delivery to delay (Brandenburg et al. 2014).   

The distribution of warehouses has been done according to different products and customers’ preferences of delivery modes. Customers based on the delivery types can be categorized commonly as follows (Touboulic and Walker 2015):

• Delivery for prime customers
• One-day delivery
• Free and super saver delivery
• First class delivery

The continuous efforts to shorten the delivery time make Amazon a logistics giant. Warehouses are placed close to each other in the main areas of metropolitan cities. Consequently, Amazon is able to use a pure push strategy for its warehouses and pure pull for the third-party sellers. It means Amazon is able to make sells to happen from the third-party sellers when it is required. The company is also able to make an appropriate market forecast and a long-term projection of customers’ needs in its warehouses (Genovese et al. 2017).

2. Aspects of Amazon's operations management 

There is a number of aspects of Amazon's operations management which can be considered the influences of increased globalization of world trade. The globalization of world trade did promote the flow of goods & services, technologies, information, knowledge and much more. Amazon had wanted to master the supply chain operation as it knew that very few companies have only managed to do this. No other retailers than Amazon and Walmart have managed to do it their ways (Schoenherr and Speier?Pero 2015).

Relentless investments into and the acquisition of a number of businesses just suggest how Amazon reaches to major suppliers. Some of its notable investments and acquisition include Financial Technology Clique (US), Fashion site WhoWhatWear, Double Helix Games (US), Dragon Innovation (US), Yummy77 (China) and Zippr (India) (Cips.org 2018). It all means that Amazon has been able to identify the ways to introduce new services and experiences to its target audience. The company acquired Kiva Systems in 2012 that provides a robotic warehouse solution. It was rebranded as Amazon Robotics in 2015. Robots can pick and pack faster than humans. Hence, the acquisition has speeded up the activities in its warehouses (Pan et al. 2018). Strategic alliances are one of the elements of a globalized world trade and this was not less than a great utilization of the fact. Amazon is now continuously focussed on improving its robotic capabilities by enabling robots to pick up the orders as well. The packing is itself a reason for a significant cut out of jobs. Enabling robots to pick up the orders as well will further the Amazon’s capabilities in reducing its total operational costs and also positively impacting the delivery process. Hence, the marginal benefits will eventually increase and the time of delivery will decrease further (Daniel 2015). The acquisition was based on the increased utilization of the globalized world trade.

One of the elements of increased globalization of world trade is reaching to global suppliers and accessing to raw materials at competitive pricing. Amazon has followed exactly the same ways to reach to global suppliers and meet the unpredicted demands of its customers. The capability to work closely with manufacturers & sellers and working efficiently with global suppliers is a rare feat which Amazon has attained. It works with ‘Applied Optoelectronics’ which designs, builds up and manufactures optical components & devices, fiber optic transceivers and laser transmitters for Amazon. ‘Wellnet Corporation’ based in Tokyo, Japan is engaged in authentication works and electronic arrangement. ‘True Blue’ from Tacoma, Washington provides staffs for Amazon’s warehouses. GoPro in San Mateo, California, provides the media content to use it for advertisement. It also provides other accessories as well. Nautilus in Vancouver, Washington, is the other most important supplier for Amazon (Kim and Peterson 2017).

3. E-commerce as replacing the in-person shopping experience 

This is indeed a very difficult question to answer not due to the lack of information on the topic but entirely due to the complexity it has. The answer depends entirely on how customers react to both formats of shopping. Both e-commerce and brick & mortar format of shops have their customers. Customer base may keep on changing and finally leading to a conclusion about which format will get the last laugh. However, if that is true then there should not be enough backups to both formats of shopping. Yes, online giants are entering the physical markets whereas the offline retail giants are entering the online platform. Amazon has been the most successful e-commerce company not just in the United States but also in other parts of the world. The only exception is in China where it lost to Alibaba in a direct confrontation. Amazon has already invested in to introduce its own physical stores (Jung, Ugboma and Liow 2015). On the other hand, Walmart which is the offline retail giant & holds the similar reputation in most other regions of the world and is also into the online format (Rice, Ostrander and Tiwari 2016). Walmart is spending hugely to challenge the online presence of Amazon whereas Amazon is also doing the similar kind of thing to rival the dominion of Walmart (Verhoef, Kannan and Inman 2015). No matter who wins the competition and earns the success, the fact will remain the same. Customers will have both the online and offline option to shop (Díaz, Gómez and Molina 2017).

It appears as if the existence of either of the shopping format will not die in the near future. The biggest argument for this fact is the consumer behavior which is different in the different parts of the world. Actually, there are differences also in the shopping habits of people living in the same region. The difference in shopping behavior can be due to various reasons such as the follows (Riquelme, Román and Iacobucci 2016):

Physical shopping is about happiness: Some people really care for the minute of things which may sound as unimportant to others. One of such things is having trials before making the purchase. This is the moment when one can ask for the feedback from their near and dear ones. This is never possible while shopping online.

Experience: One can test the quality and size of the product by doing the trials. However, this is rarely possible with online shopping.

Buyers are treated: Shoppers are treated while being in stores whereas online shoppers do not get such a privilege.

Instant delivery: Shoppers can have their purchased good instantly being delivered to them. However, online retailers such as Amazon will at least need a day to deliver the product.

Return process: This is much simpler and just follows a few easier steps in physical stores. However, the return process on e-commerce sites is time-consuming.

However, the option to compare the similar products of different brands is a bit difficult in physical stores. It is easy to shop on e-commerce as one just need to follow a few simpler processes. People nowadays have the busy schedules and therefore, online shopping is much more favorable to them (Herhausen et al. 2015).

It is understandable that customers have options to select the either of the shopping formats. Some have reasons to like the online shopping whereas others have for the off-line. Therefore, the possibility of e-commerce for ever truly replacing the in-person shopping does not look feasible at least in the near future.

4. Long-term implications of the increased presence of Amazon to the Australian Retail Industry 

The long-term implication of the increased presence of Amazon could be severe on major retailers. Price wars have always been a key part of the Australian retail industry. Woolworths and Coles have ruled the market for long by offering everyday discounted scheme. However, the dominion was rivaled from Aldi which effectively changed the concept from everyday discounted to occasional discounted. In this way, Aldi was able to offer quality products at affordable prices. Hence, the pendulum of growth had shifted from a duopoly of Coles & Woolworths to Aldi (NewsComAu 2018). Amazon is popularly known for keeping the prices down for a longer period of time. They can do it as they have very long pockets (Yu et al. 2016). Now, in a long-term, things will become challenging for existing giants Woolworths, Coles and Aldi.  

On the other hand, Amazon can also fail to make an impact. Australia is very similar to Canada in terms of population and geography. Canada has the small population but a very large geography. Amazon had failed to dominate the rivals in Canada as it did in the United States. The company did not also have the market shares that it has in the United States (Yu et al. 2016). Amazon can be wary of its failure in Canada.

Amazon has introduced its Prime subscription service to customers. With ‘Prime’ service, Amazon promises to deliver products in two days. The subscriber of ‘Prime’ will be able to avail a free delivery. The annual subscription charge is kept low at A$59 (Business Insider Australia 2018). It just indicates Amazon's intention to drive the household penetration in the near future. Amazon looks set to invest heavily to get the long-term benefits. Nonetheless, ‘Prime’ has been extremely successful in the United States (Business Insider Australia 2018).  

Conclusion & Recommendation

Conclusion 

In summary, Amazon has established its reputation effectively by applying useful strategies. The biggest potential of the company is its supreme control of the supply chain operation. The company has recently introduced the ‘Prime’ subscription for the Australian customers. It is all set for a long-term business; however, it is certain to face potential counters from retail giants Woolworths, Coles and Aldi.

Recommendation  

It is recommended to make the regular ‘market audits’ as this will keep up informing the consumer behavior. A regular acquaintance with consumer behavior will enable to make appropriate strategies and offer the relevant products. Moreover, new products could also be added depending on the demand factor.

References 

Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), pp.299-312.

Business Insider Australia. 2018. Amazon's Prime launch in Australia is more aggressive than anyone expected. Retrieved from https://www.businessinsider.com.au/amazon-australia-prime-launch-2018-6

Cips.org. 2018. The secrets behind Amazon's success. Retrieved from https://www.cips.org/supply-management/analysis/2016/february/the-secrets-behind-amazons-success/

Daniel, R.M., 2015. Revisiting the strategic management process through the levels of strategy analysis. Asian Journal of Management Research, 6, pp.29-34.

Díaz, A., Gómez, M. and Molina, A., 2017. A comparison of online and offline consumer behaviour: An empirical study on a cinema shopping context. Journal of Retailing and Consumer Services, 38, pp.44-50.

Genovese, A., Acquaye, A.A., Figueroa, A. and Koh, S.L., 2017. Sustainable supply chain management and the transition towards a circular economy: Evidence and some applications. Omega, 66, pp.344-357.

Herhausen, D., Binder, J., Schoegel, M. and Herrmann, A., 2015. Integrating bricks with clicks: retailer-level and channel-level outcomes of online–offline channel integration. Journal of retailing, 91(2), pp.309-325.

Jung, J.C., Ugboma, M.A. and Liow, A.K., 2015. Does Alibaba's Magic Work Outside China?. Thunderbird International Business Review, 57(6), pp.505-518.

Kabue, L.W. and Kilika, J.M., 2016. Firm resources, core competencies and sustainable competitive advantage: An integrative theoretical framework. Journal of management and strategy, 7(1), p.98.

Kim, Y. and Peterson, R.A., 2017. A Meta-analysis of Online Trust Relationships in E-commerce. Journal of Interactive Marketing, 38, pp.44-54.

Milano, G.V., Chatterjee, A. and Fedigan, D., 2016. Drivers of Shareholder Returns in Tech Industries (or How to Make Sense of Amazon's Market Value). Journal of Applied Corporate Finance, 28(3), pp.48-55.

NewsComAu. 2018. Why do Aussies love Aldi?. Retrieved from https://www.news.com.au/lifestyle/food/why-do-australians-love-aldi-the-secrets-to-the-supermarkets-phenomenal-success/news-story/fb4c5e30228f5f23b720f7b0caee3018

Ogbo, A.I. and Ukpere, W.I., 2014. The impact of effective inventory control management on organisational performance: A study of 7up bottling company nile mile enugu, nigeria. Mediterranean Journal of Social Sciences, 5(10), p.109.

Pan, M., Linner, T., Pan, W., Cheng, H. and Bock, T., 2018. A framework of indicators for assessing construction automation and robotics in the sustainability context. Journal of Cleaner Production, 182, pp.82-95.

Rice, M.D., Ostrander, A. and Tiwari, C., 2016. Decoding the development strategy of a major retailer: Wal-Mart's expansion in the United States. The Professional Geographer, 68(4), pp.640-649.

Riquelme, I.P., Román, S. and Iacobucci, D., 2016. Consumers' perceptions of online and offline retailer deception: a moderated mediation analysis. Journal of Interactive Marketing, 35, pp.16-26.

Schoenherr, T. and Speier?Pero, C., 2015. Data science, predictive analytics, and big data in supply chain management: Current state and future potential. Journal of Business Logistics, 36(1), pp.120-132.

Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a structured literature review. International Journal of Physical Distribution & Logistics Management, 45(1/2), pp.16-42.

Verhoef, P.C., Kannan, P.K. and Inman, J.J., 2015. From multi-channel retailing to omni-channel retailing: introduction to the special issue on multi-channel retailing. Journal of retailing, 91(2), pp.174-181.

Yu, Y., Wang, X., Zhong, R.Y. and Huang, G.Q., 2016. E-commerce logistics in supply chain management: Practice perspective. Procedia Cirp, 52, pp.179-185.