Operations Management and Decision-Making Models [Amazon]

This study highlights the potentials of Amazon and its long-term implication on the Australian retail industry. It discusses Amazon's journey, its operations management, and the long-term implications of its strategic moves. The study identifies that the company has entered positively in Australia. The introduction of ‘Prime’ membership at a cheaper annual cost and a huge investment for long-term just show all the possibilities for Amazon in the Australian retail market.

Running head: AMAZON
Operations Management and Decision-Making Models
[Amazon]
Name of the student:
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Executive summary
The main purpose of this study is to highlight the potentials of Amazon and its long-term
implication on the Australian retail industry. The company has moved from just a small
bookstore to ‘store everything' for its master-class supply chain management and its ability to
keep the prices lower for a longer period of time. It had failures in Canada and China. In China,
it lost to Alibaba in a direct confrontation. In Canada also, Amazon could not make an impact
and failed to dominate the market. However, the study identifies that the company has entered
positively in Australia. The introduction of ‘Prime’ membership at a cheaper annual cost and a
huge investment for long-term just show all the possibilities for Amazon in the Australian retail
market.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
1. Amazon's Journey....................................................................................................................3
2. Aspects of Amazon's operations management........................................................................5
3. E-commerce as replacing the in-person shopping experience.................................................6
4. Long-term implications of the increased presence of Amazon to the Australian Retail
Industry........................................................................................................................................8
Conclusion & Recommendation......................................................................................................9
References......................................................................................................................................11

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Introduction
The secrets behind Amazon’s success are its patience, continuous innovation and
relentless investment to cut up the competition. Innovation has been one of the success factors
for Amazon and the impact is evident in the form of drones, robotics and the other kind of
autonomous vehicles being used to improve the supply operation. Acquisition of Whole Foods is
another strategic move which Amazon will use to enter the bricks and mortar segment of the
market (Milano, Chatterjee and Fedigan 2016). Amazon is not allowing others to dominate the
company on the e-commerce platform. Now, an entrance to the bricks and mortar may cause a
bigger destruction to major retailers in particular. This study is aimed at answering a few
questions related to Amazon’s journey so far and the long-term implications of its strategic
moves.
Discussion
1. Amazon's Journey
There can be ample amount of reasons behind Amazon’s dominant position in the retail
industry as every single strategy is important in moving towards the vision and goals. From the
skilled workforce to efficient human resource management and to the effective marketing
communication strategies all contribute to making an impact on the marketplace. However, there
are some specialties which remain specific to a firm and are called its core competencies (Kabue
and Kilika 2016). In a likewise manner, an effective management of the supply chain is specific
to Amazon. Supply chain management is one of its core competencies which have positioned the
company from just an online book retailer to ‘everything store’. The way Amazon had traveled
in to become a dominant and formidable force is significantly due to its highly efficient and

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innovative supply chain. The continuous efforts being given to deliver products to customers in
most competitive time is putting pressure on other giant retailers in both local and the
international retail industry.
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

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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

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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

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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.

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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

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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

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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.

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