Operations Management and Decision Making Models

This article discusses how Amazon grew from an online book retailer to the 'Everything Store', the aspects of Amazon's operations based on increased globalization of world trade, whether e-commerce can replace in-person shopping experience, and the long-term implications of Amazon's presence on the Australian retail industry.

Running Head: Operations Management and Decision Making Models
Operations Management and
Decision Making Models
Amazon-Questions

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Table of Content
Question 1: Amazon started its journey as an on-line book retailer. How has it grown to
be known as the “Everything Store”?....................................................................................................... 2
Question 2: What aspect of Amazon operations are based on the increased globalization
of world trade?.................................................................................................................................................. 4
GLOCAL Strategy.......................................................................................................................................... 4
Technological Revolution......................................................................................................................... 4
Fulfilment Centres....................................................................................................................................... 5
Cloud Services............................................................................................................................................... 5
Question 3: Amazon’s marketplace focuses on smaller sellers and manufacturers by
linking them with a huge customer base and fulfilment program. Can e-commerce ever
truly replace the in-person shopping experience?............................................................................. 5
Question 4: What are the real long-term implications of the increased presence of
Amazon to the Australian retail industry?............................................................................................. 7
References........................................................................................................................................................... 9

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Question 1: Amazon started its journey as an on-line book retailer. How has it
grown to be known as the “Everything Store”?
(Source: Galloway, 2017)
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,

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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.
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

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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).
Question 2: What aspect of Amazon operations are based on the increased
globalization of world trade?
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).
GLOCAL Strategy
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).
Technological Revolution
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

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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).
Fulfilment Centres
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).
Cloud Services
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).

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Question 3: Amazon’s marketplace focuses on smaller sellers and manufacturers
by linking them with a huge customer base and fulfilment program. Can e-
commerce ever truly replace the in-person shopping experience?
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

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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).
Question 4: What are the real long-term implications of the increased presence of
Amazon to the Australian retail industry?
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

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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).

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References
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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
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Erisman, P., 2017. Six Billion Shoppers: The Companies Winning the Global E-commerce
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Ong, C.E. and Teh, D., 2016. Redress procedures expected by consumers during a
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Ozturk, A., Joiner, E. and Cavusgil, S.T., 2015. Delineating foreign market potential: A tool
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