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Using the two quotations presented on the next page as an initial focus point, comprehensively answer each of these questions:


1. Amazon began as an on-line book retailer. How has it grown to be known as the "everything store"?

2. What aspects of Amazon's operations management are based on the increased globalisation of world trade?

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?

4. What are (or could be) the real long-term implications of the increased presence of Amazon to the Australian Retail Industry?

Amazon's Diversification Strategies

                               

The picture here shows an advertisement of Amazon.com way back in 1994, when Jeff Bezos started the company as an online book seller. Ever since, the company and its leadership has never looked back, and at present it is the world’s largest e-commerce company on planet earth. Jeff Bezos founded Amazon at the time when bookstore chains such as Barnes & Noble, Waldenbooks and Crown books were familiar name in American shopping malls. Amazon started its business operations in the year 1995 leveraging the technology to its disposal. Jeff Bezos, the CEO and Founder at Amazon involved major distributers and wholesalers to provide for its orders.  It however took a while for the company to took off, but by 1997 the company was holding more than 2.5 Million titles and its sales had already touched USD 148 Million. The company was earning a good name as the online book seller, until the year 1998, when Jeff Bezos started thinking of the future plans for its dream business (O’Reilly & Tushman, 2016).

It was the year 1998; the company started with its first diversification, and acquired IMDB in the month of April, that’s how the company forayed into the online music and video business. In the year 1999, the company further expanded by selling toys, electronics, tools, hardware and other category of products. For Jeff Bezos it was the success of the online book store which got him all excited, plus the times were rapidly changing and the tech revolution has just kicked in. Jeff Bezos was fast enough to imagine the future trend of the e-commerce industry, which was fuelled by the growth in technology and penetration of Internet. This pushed Jeff Bezos to expand far beyond the origins. The company got a solid growth and went on an upward trajectory after selling electronics; the electronics segment on the website of the company grew by leaps and bounds. This also put a lot of retail stores such as Circuit stores out of business, and the customers have gotten a taste of online shopping experience (Murrell, 2014).

The company realized in the year 2000 that was sitting on a technology Gold Mine. Jeff realized that the computer systems used by the organization could be easily used to expand the network of Amazon and also be the backbone for its online stores. This is when the company started investing heavily in technology and R&D activities. Amazon web services which was initially serving only as the backbone of the company, at present is one of the biggest contributors to the revenue of Amazon.

                                   

and R&D activities. Amazon web services which was initially serving only as the backbone of the company, at present is one of the biggest contributors to the revenue of Amazon.

This is the snapshot of Amazon website today. At present Amazon is the e-commerce behemoth which is presence in over 16 countries and ships its products across 160 countries. The company which has millions of product in its offering for its customers boasts an active 310 million customers who buy products at Amazon. The company has already expanded into all the possible markets and is minting solid growth and posting strong numbers for it. Thus, the company which started off its journey as an online book seller, at the very present is the seller of almost anything to everything. It is the vision, perseverance, growth in technology, taking the right decision at the right time which has made Amazon one of the biggest and the most successful companies in the entire world (Erisman, 2017).

Amazon's GLOCAL Strategy

Amazon which was founded in the year 1994 has taken the world by storm and is steadfast on the path to become one of the largest companies which the earth has ever witnessed. Amazon is one company which has caused disruption in the existing buying behaviour of the customers, the company was pivotal in pulling out customers from the mall by providing them an online store to meet their needs. The company has been able to successfully lead this change owing to its strategic policies, strong grip on its business operations, international market strategy and evolution of technology. The section here will focus on some of the aspect of Amazon operation which is based on increased globalization of world trade (Winn, 2016).

Amazon is the creator of the GLOCAL strategy, which is one of the strongest reasons for the success of the company in international markets, China being an exception. GLOCAL strategy which is also referred to as Go Global and Think Local has helped Amazon to push its efforts in promotion the local manufacturers and promoting their rights. The strategy helps Amazon to have a good acceptability in the host country whilst tackling the resistance of local supplier and domestic manufacturers (Rothaermel, 2015).

Unlike Wal-Mart, Amazon is yet to keep a strong foot in the offline space by opening up a retail store. Meanwhile, the company’s business operation and process are a manifestation of its technological know-how and evolution of technology. Amazon business solely rests on technology, and the company takes sufficient steps to ensure the safety of customer’s data while streamlining its business operation. It is technology, which has infused successfully with globalization to foray into a large number of international markets. This is one of the biggest reasons behind Amazon’s geographical presence in 13 countries (Sternquist & Goldsmith, 2018).

Globalization has most definitely increased the competition in almost all the industry. E-commerce is one such industry which has seen maximum impact of globalization, and every player is struggling hard to increase its market share. Amazon in order to achieve a competitive advantage over other player ensures a faster delivery of product in the minimum possible time. With this intention in mind, the company has increased its efforts in creating high –tech fulfilment centres which reduce the time of product delivery to the bare minimum. The company has been opening up Fulfilment centres and warehouse as a part of its strategy to leverage the impact of Globalization (Luthans & Doh, 2018).

The total population of the world is over 7 billion, and the internet penetration stands at 54%, which in turn means that over 3.54 Billion people are on the internet. Thus, there is a huge responsibility in the hands of e-commerce companies to safeguard the data of customers and also ensure optimum utilization of the data for customer benefits. Amazon web services is a cloud platform which is used by the company to store and safeguard the data of the consumers, whilst data mining to provide maximum benefits to the consumers. The company uses various data analytics tool and identifying the purchasing behaviour of its customers across the globe. Based on this behaviour, the company creates personalized shopping lists for its large customer base (Ozturk, Joiner & Cavusgil, 2015).

Technology's Role in Amazon's Operations Management

The business model of Amazon is not only progressive in nature, but it also allows for sufficient development over the time. Jeff Bezos the CEO of Amazon believes that innovation in business process and practices is the best way to achieve sustainability in the business model. The organization has a tough choice to make here, either to focus on the Omni channel (Online) for sales or to focus on the click and mortar model for its customers. However, the possibility of e-commerce taking over the in person shopping experience is very bleak, and a near impossible task for the industry (Chakraborty et. al., 2016).

Amazon understands it very well; that earlier the future of retail was online, but now the future of retail is dependent on the careful integration of offline and online channels. This is one of the major reasons the company is coming up with one of its kind retail store by the name of Amazon Go, to integrate its offline and online business model. Along with this, the company has opened its first offline book store in Seattle. Amazon can however be seen as a late adopter to this model, as in the last couple of years more than 20 US based companies have transformed from just having an online model to a click and mortar model(Peltola, Vainio & Nieminen, 2015).

It is impossible to replace the offline or the in store shopping experience because customers have a tendency to try the product before making a purchase. No matter how much ever the efforts of the company to contain the user on the website by providing the best user experience, the customer always wants more. If statistics are to be believed then only 54% of the world population is present online. This accounts for almost half of the world population which is shopping exclusively offline. At the very same time, the online model has become crowded and expensive; this has led to shrinking margins for the company, despite making sizable revenue. This makes the offline presence to be imperative in nature. Cost incurred in acquiring a new customer on the online channel has increased considerably due to increasing cost on keyword bidding and money spent towards marketing and promotion. This would also make the companies put on its thinking cap and decide on its future business strategy (Ong & Teh, 2016).

The aim of the physical store is to increase the awareness and give a personal feel to the customers. By all measures, the online channel will act as an influencer to drive the customers to the offline stores, where they can easily have a look and feel of the product before actually making a purchase. However, the offline model will not be something which the world has already seen; it would deploy technology at its helm to create a sustainable competitive advantage (Becker et. al., 2018). For instance, the bookstore of Amazon is linked with its website, and over 500 book titles are selected on the basis of customer rating and pre-order on the website. Each book placed on the shelf is displayed face –out and the users have to scan the bar code on the book to check the pricing. The store also provides an option to the customers to test use its Amazon kindle and Fire stick device. Thus, it can be said that there is not even one bit possibility that e-commerce would replace the in store shopping experience. However, there would definitely be a seamless integration between both the offline and online sales channel(Parise, Guinan & Kafka, 2016).

Fulfillment Centers and Globalization

Amazon is creating a wave of disruption in the international markets by staying true to its values such as customer centric culture, patience, relentless investment and serial innovation. It has been said that at a given point in time, Amazon will enlist over 85% of the product in the world on its website.

Down the Dandenong way, on the outskirts of Melbourne, Amazon is stalking out a beachhead for invasion. The recent warehouse of Amazon in Australia is strategically located near its busiest cargo seaport, and the company is gearing up to store thousands of products for the 24 Million population of the country. The real long term implication of increased presence of Amazon on the Australian retail industry can be ascertained as:

  • The incoming arrival of Amazon in Australia has spurred a sense of fear in the retailers, they have started panicking and some of the retail chains have already started feeling the heat because of the presence of Amazon (Ritala, Golnam & Hammond, 2017).
  • The general perception is that Amazon will destroy the local retailers and the stores by bringing the costs down, which it can manage effectively by procuring well in vast numbers.
  • Amazon will hold back the customers who earlier used to visit many stores to fulfil their needs. Amazon by housing millions of products in its inventory will definitely give retailers a run for their money.
  • In one of the surveys conducted by the Commonwealth bank on 600 retailers, 41% of the retailers believe that Amazon will destroy their business (O’Connor, 2017).
  • In June, Amazon has committed to brick and mortar supermarket world with the purchase of organic food chain Whole foods for a whooping sum of US $ 13.7 Billion. This is definitely a harbinger of tough times to break the regime of Coles, Woolworths and Aldi. Price wars will become the focal point of the industry and there will be lesser differentiation in the product offering (Xu, GAO & Hammond, 2017).
  • As of now, it has been pointed that Amazon has eliminated over 150,000 more employees than it has created in the warehouse. This gap will further get widened as Amazon plans to go with cashier free physical stores where the customers can easily walk out of the stores and the payment will be automatically be deducted from the Amazon account(Reed, Buckmaster & Reed, 2018).

Thus, it can be said that Amazon will definitely put a lot of retail stores out of business and reduce the profit margins of the stores by initiating the price wars. However, in the longer run, the retailers will be converted into sellers for Amazon and be a part of Amazon supplier ecosystem. Just to add, the consumers will be the biggest beneficiary of this future war, whilst the retailers will have to struggle and have to look out for strategies to sustain their business by innovation and differentiation (Cavallo, 2017).

References:

Becker, J., Betzing, J.H., von Hoffen, M. and Niemann, M., 2018. A Tale of Two Cities: How High Streets Can Prevail in the Digital Age. In Collaboration in the Digital Age (pp. 291-307). Springer, Cham.

Bell, D.R., 2014. Location is (still) everything: The surprising influence of the real world on how we search, shop, and sell in the virtual one. Houghton Mifflin Harcourt.

Cavallo, A., 2017. Are online and offline prices similar? evidence from large multi-channel retailers. American Economic Review, 107(1), pp.283-303.

Chakraborty, R., Lee, J., Bagchi-Sen, S., Upadhyaya, S. and Rao, H.R., 2016. Online shopping intention in the context of data breach in online retail stores: An examination of older and younger adults. Decision Support Systems, 83, pp.47-56.

Erisman, P., 2017. Six Billion Shoppers: The Companies Winning the Global E-commerce Boom. St. Martin's Press.

Galloway, S., 2017. The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google. Penguin.

Luthans, F. and Doh, J.P., 2018. International management: Culture, strategy, and behavior. McGraw-Hill.

Murrell, M., 2014. Book Review: Brad Stone. The Everything Store: Jeff Bezos and the Age of Amazon. Journal of Electronic Publishing, 17(2).

O’Reilly III, C.A. and Tushman, M.L., 2016. Lead and disrupt: How to solve the innovator's dilemma. Stanford University Press.

O'Connor, T., 2017. Retail response. MHD Supply Chain Solutions, 47(4), p.38.

Ong, C.E. and Teh, D., 2016. Redress procedures expected by consumers during a business-to-consumer e-commerce dispute. Electronic Commerce Research and Applications, 17, pp.150-160.

Ozturk, A., Joiner, E. and Cavusgil, S.T., 2015. Delineating foreign market potential: A tool for international market selection. Thunderbird International Business Review, 57(2), pp.119-141.

Parise, S., Guinan, P.J. and Kafka, R., 2016. Solving the crisis of immediacy: How digital technology can transform the customer experience. Business Horizons, 59(4), pp.411-420.

Peltola, S., Vainio, H. and Nieminen, M., 2015, August. Key factors in developing omnichannel customer experience with finnish retailers. In International Conference on HCI in Business (pp. 335-346). Springer, Cham.

Reed, M., Buckmaster, R. and Reed, R., 2018. The contribution of GIS to understanding retail property. In Real Estate and GIS (pp. 65-79). Routledge.

Ritala, P., Golnam, A. and Wegmann, A., 2014. Coopetition-based business models: The case of Amazon. com. Industrial Marketing Management, 43(2), pp.236-249.

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

Sternquist, B. and Goldsmith, E.B., 2018. International retailing. Bloomsbury Publishing USA.

Winn, J.K., 2016. The secession of the successful: The rise of Amazon as private global consumer protection regulator. Ariz. L. Rev., 58.

Xu, J., Gao, X. and Hammond, J., 2017. E-tailing in Australia: A preliminary analysis of David Jones. International Technology Management Review, 6(4), p.149.

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