Amazon Case Study Inventory Management

Amazon.Com Case Study The case provides an overview of Amazon.Com's inventory management. Jeff Bezos the founder of Amazon.com launched the company when he realized that Internet provided immense scope for online trading. Originally, the company started as an online bookstore but soon converted to a top online retailer selling almost everything from A to Z just like its logo says. SWOT Analysis:  Strength  Customer Relationship Management (CRM) and Information Technology  Huge global brand  Differentiation & Innovation  Product diversification from books and CD/DVD  Strong distribution channel  Largest merchandise selection  Negative cash cycle  Low prices  Involved into 3 Key business-Amazon Marketplace, Amazon Web Services(AWS) & Amazon Prime  Weakness  Easily imitable business model  Losing Margins in few areas  Declining consumer safety  Unfair use of third party data  Overdependence on distributors  No region based sites  Opportunities  Online retailing is still not matured in India, it can tap the market  By expanding physical stores  Growth of internet users in the next five years, predominantly in the international market  Backward integration by expanding its production of in-house brands  More acquisitions of e-commerce companies  Self Driving Technology  Threats  Increasing transportation costs will directly impact delivery charges to customers.  Competition will increase due to the low barriers to entry in the market offline companies are coming online.  Fake products & Fake reviews  Increasing cybercrime. Recommendations:  Consolidate the market dominance by boosting its marketing efforts, promotional activities and competitive advantages  Strategically deal with global controversies.  Enhance its strategic entry in developing countries where many growth opportunities are available.  Address the issues of counterfeit sales and cybercrimes by upgrading technology measures  Enhance network security systems for the protection of consumer’s rights. Case Discussion Question & Answers: 1. What functional-level strategies has Amazon pursued to boost its efficiency? To make its distribution centers work more efficiently, Amazon is embracing automation. In 2012 Amazon purchased Kiva, a manufacturer of robots that service warehouses. Amazon used Kiva robots to automate the picking and packing processes in its distribution centers to boost efficiency. This allowed Amazon to reduce the number of employees needed per distribution center by 30 to 40%, and boosts productivity. 2. What functional-level strategies has Amazon pursued to boost its customer responsiveness? Amazon has always focused on customer responsiveness. Amazon intends to reduce inventory -holding cost while having product in stock by investing in network and distribution centers that count on a software that analyzes customer purchasing habits and informs what to order, where to store it, and what to charge for it and when to mark it down. In this way Amazon achieves delivery at a more rapid pase at a lower cost. 3. What does product quality mean for Amazon? What functional-level strategies has Amazon pursued to boost its product quality? Quality for Amazon would mean how well the services or products meet customers’ expectations. To boost product quality, Amazon would need to control or oversee the quality of products sold by 3rd parties vendors /sellers/merchants/retailers 4. How has innovation helped Amazon improve its efficiency, customer responsiveness, and product quality? Innovation has allowed Amazon to offer its customers a wide array of digital media. Digital media increases efficiency, customer responsiveness, and product quality. Amazon offers customers a much wider selection of merchandise than they can find in a physical store, and does so at a low price. The current innovation strategy of automating much of the work at its distribution centers promises to further boost employee productivity. All of this helps Amazon to achieve a low-cost position. The company is also innovative, developing new products (the Kindle reader, digital downloads of books) and services (Amazon Web Services) that are helping it to solidify its competitive advantage. Innovation through expansion of its network of distribution centers, embracing automation, and investing early in “cloud-based” infrastructure has helped Amazon improve its efficiency, customer responsiveness, and product quality 5. Do you think Amazon has any rare and valuable resources? In what value creation activities are these resources located? Amazon’s “cloud-based” infrastructure, including server farms and Amazon Web services (AWS), can be considered rare and valuable resources and value creation activity. Investing early in “cloudbased” infrastructure has helped Amazon improve its efficiency, customer responsiveness, and product quality. Amazon’s early investment in digitalization allowed them to become leader in cloud computing industry. Amazon’ cloud-based infrastructure has created novelty value. The server farms and AWS would both locate under the cloud-based infrastructure. This infrastructure has allowed them to be a leader in the cloud computing industry and has produced tremendous profits. 6. How sustainable is Amazon’s competitive position in the online retail business? Amazon has proved that it can use its perpetual innovation to respond to what customers want. The company went from selling books to selling just about anything a shopper could want at low costs through an easy to user-interface. Amazon has implemented several strategies to increase its efficacy and customer responsiveness to increase its overall product quality. On top of these things, Amazon offers customers just about everything they could need in one place at low prices. These things combined with product innovation can increase Amazon’s perceived quality to the customers. Investing early in “cloud-based” infrastructure has helped Amazon improve its efficiency, customer responsiveness, and product quality. The company is also innovative, developing new products (the Kindle reader, digital downloads of books) and services (Amazon Web Services) that are helping it to solidify its competitive position in the online retail.