Amazon's Operations Management: Innovations and Strategies

This article discusses Amazon's unique business structure, logistics, and innovative policies that have made it the largest e-commerce giant in the world. It also explores Amazon's presence in the global market, its focus on omni-channel retailing, and its impact on the Australian retail industry.

Running head: SHORT ANSWER QUESTIONS
OPERATIONS MANAGEMENT OF AMAZON
Name of Student
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Author note

1SHORT ANSWER QUESTIONS
Question 1:
Amazon has set a new example in the e-commerce market by defining its market
structure not according to any existing framework but on a league of its own. The company
which started off primarily as a book seller has developed itself into a juggernaut of the e-
commerce sector by diversifying into different sectors from CD and DVD’s to everyday use
grocery items (Leeflang, Verhoef, Dahlström and Freundt 2014). Amazon has also expanded
into film and TV production. The main business policy of Amazon seems not to be
competing with other firms but to develop a unique business structure which would shred any
type of competition (Bharadwaj, El Sawy, Pavlou and Venkatraman 2013). By the time, the
other firms try to catch up with Amazon’s business policy, Amazon is already leagues away.
The advancement of Amazon into an “everything store” has been on the basis of
Amazon’s planning to reach out to every homes with its products. Amazon was focused on
the speedy delivery of its products and substantially expanded its logistics to meet the target
(Mithas, Tafti and Mitchell 2013). In order to meet this target, Amazon developed lots of
warehouses in different locations. It has more than 100 warehouses in USA itself, from where
it targets to deliver the items within 48 hours. Special features of one day delivery or one-
hour delivery for Amazon Prime customers. This policies has helped Amazon achieve a
customer base of 25% Americans. Statistical reports have shown that for every $1 that is
spent by the Americans on e-commerce, Amazon has a 51 cents share in it. The most famous
policy that Jeff Bezos adopted was to stock a large number of products and sell them at a
cheaper rate. This made the internet the playground of Jeff Bezos where he attracted every
customer to purchase from them. Moreover, high discounts and less revenues at the initial
point of time helped Amazon gain a huge market base which has helped Bezos earn a large
revenue in the consecutive years. This policies have made Amazon the largest e-commerce
giant in the present day (Laudon and Traver 2013).

2SHORT ANSWER QUESTIONS
The other innovative business policies that Amazon adopted to retain its customers
was to offer them innovative products. Besides selling products of third party vendors,
Amazon has constantly developed its own products, such the e-book reader Kindle. It has
attracted a lot of customers and has kept them tied to the company for a longer period of time.
Moreover, the films and web series that Amazon produces has also led to the increase in the
Amazon Prime customers and has helped Amazon generate a huge revenue on a yearly basis.
Secondly, Amazon has constantly developed its logistics by investing huge amounts to
develop its services (Bharadwaj, El Sawy, Pavlou and Venkatraman 2013). Amazon, though
sells products from third-party vendors has always relied on its own logistics to deliver it on
time. This has led to the growth of trust among the Amazon’s customers and has led them to
turn to Amazon for the purchase of different products and services.
These innovative business policies and advanced ideas along with the use of modern
technology has helped Amazon to become the largest e-commerce supermarket in the world.

3SHORT ANSWER QUESTIONS
Question 2:
Amazon’s presence in the global market is measured by huge presence in the global
market. In spite of facing competition in several local markets in China and India, Amazon
has developed business policies that has not only helped it to survive but has made it one of
the prime market leaders in the global market (Brenner, Zarnekow and Wittig 2012).
Firstly, Amazon focuses on its world class logistics department. Amazon has a large
number of warehouses all over the world at strategic locations to enhance its delivery and
service. Moreover, Amazon also has a large number of employees which helps in the speedy
delivery of the products. Amazon’s success in the supply chain management in the globalized
world trade is dependent on the location, size and the huge number of warehouses (Yu,
Wang, Zhong and Huang 2016).
Secondly, Amazon uses an automated system for some its operations to enhance the
services. The Amazon Robotics is focused on the developed of automatic robots which can
do tasks like picking and packaging the products without human assistance (Li and Liu
2016). This has let Amazon enhance its ware-house activities to a significantly faster pace.
Amazon has seen the increase in the use of robots in the past couple of years reduce the time
of operations and also increase of work in the larger facilities.
Thirdly, Amazon maintains a significantly lower supply chain cost compared to the
other e-commerce companies. Amazon does this as a part of their business policy which has
been one of the prime strategies of Jeff Bezos to be the leader of the e-commerce industry.
Amazon has always maintained a world class logistics system. This has led them to build
large warehouses where they can stock a considerably larger number of products than the
other companies (Wuulfraat 2014). The company sells these products at a cheaper rate than
the other companies which gives them an edge in being the market leaders. Moreover, having

4SHORT ANSWER QUESTIONS
their own delivery system, the cost of hiring a third party delivery partner is cut down to a
bare minimum which also enables Amazon to maintain a low supply chain cost (Lopez
2017).
Amazon has made its mark in the global sector not only by its dominance in the retail
sector but also significantly diversifying its market and attracting a whole new customer base.
Amazon has made huge investments to develop its own manufacturing sector in order to
provide customers with items at a cheaper price. Amazon had realized that selling certain
products from third party vendors increases their costs. Instead if the products are
manufactured by Amazon itself then the cost would come down and the products can be
provided to the customers at a significantly lower price. Moreover, as Amazon deals with a
huge number of products, production cost would also become significantly lower. This idea
let them create their own manufacturing units for a wide range of products. This has let
Amazon grab a significantly larger market share and has made it even financially stronger to
retain its position as the leader of the global e-commerce market.

5SHORT ANSWER QUESTIONS
Question 3:
Amazon has been one of the first e-commerce operators in the world which had been
the threat to the independent store owners all over the world. In today’s modern world it is
seen a large number of third party vendors or independent store owners find it comfortable to
sell their products online through Amazon. This allows them to reach out to a large number
of customers and at the same time also generate profits.
However, this does not diminish the importance of the in-person shopping experience.
A large number of customers might have been drawn towards the world class facilities of the
e-commerce industry which allows products to be dropped at their door-step, but still there
remains a significant number of customers who like in-person shopping. This has even been
the concern of the e-commerce leaders who have also focused on the opening of flagship
stores to draw offline customers towards the brand (Chu, Guo and Lai 2012).
Moreover, a large number of companies have also emerged in the e-commerce sector
and it has created a significantly larger amount of traffic in the internet. Generation of
keywords and internet traffic has created competition for e-commerce leaders like Amazon.
Though Amazon remains leagues ahead of other online retailers it has developed new
business policies to stay ahead of time. Besides its online dominance, Amazon seems to be
focused on an “onmi-channel” retailing where it wants to draw customers both online and
offline (Ruddick 2015). The physical stores are focal points of increasing awareness and
drawing a larger number of customers.
The biggest benefit of the stores is that it promotes the brand in the classical manner
where the physical presence of the stores is considered to be a radical marketing tool (James
and de Kock 2013). These stores besides selling to a large number of customers promote the
online sales by generating lots of traffic towards the brand. The offline stores also encouraged

6SHORT ANSWER QUESTIONS
the customers into more actively participating in the customer reviews and this helped the
company to understand the issues that they are facing and at the same time address them
(Greene 2015).
Amazon’s bookstores are offline shops but it has not cut the relation with its online
counterpart. The customers are required to check the price of the books by scanning the
barcode with the mobile app. This again helps Amazon generate the interest of the online
store in the public and promote their presence online where the prices are comparatively
lower. This draws more customer towards the company and increases their customer base.

7SHORT ANSWER QUESTIONS
Question 4:
The launch of Amazon in the Australian retail industry created a stir in the retail
sector. The Australian giants were moved by the huge presence of the Amazon and its brand
value (Zhou 2018). The arrival of Amazon had a devastating effect on the share values of the
Australian retailers who panicked by the presence of Amazon. The primary reason for this
was Amazon’s huge popularity and its global brand value.
Moreover, the business policy of Amazon is to offer popular products to the
customers at a considerably discounted price. This can be done by Amazon as they have a
huge purchasing power and purchases a huge number of items at a discounted price.
Competition with Amazon in a price war posed a major threat for the Australian retailers who
had never faced such a price competition earlier (Jacobs 2017). In order to deal with this the
Australian retail giants had to drop their prices too but Amazon’s financial strength posed a
greater threat to them as the question arose that for how long would the Australian retailers
would be able to compete in the price war given Amazon’s huge financial structure
(Mitchelson 2018). This led the retailers to focus on other customer policies in order to retain
customers.
Prices are no more the primary weapon in the Australian retail industry as Amazon’s
dominance has already captured the market. The other customer policies such as quality,
service and uniqueness of the products are the some other sectors that the Australian sector
has to focus on. Moreover, the presence of Amazon in the Australian retail industry can be
favourable to the smaller local retailers. It is easier for them to merge with Amazon and sell
their products through Amazon (Opray, 2017). These not only helps them to sustain their own
stores but also create an online presence through Amazon and also reach to a larger number

8SHORT ANSWER QUESTIONS
of customers. This could help the local retailers generate better revenues than they had done
in the past.
The one advantage that the Australian retail giants like Myer and David Jones have
over Amazon is that they are Australian retailers and are well accustomed to the Australian
demographics and geographical benefits. Amazon, which is primarily a logistics based
company has to be well aware of the Australian demographics. Australia is a large country
with a comparatively small population, settled in scattered locations (Randall 2017). Catering
to such a population requires a well-managed logistics with a proper strategic plan to provide
the best services and at the same time cut down the costs in order to provide the customers
with an affordable price. Failing to this, Amazon can generate huge losses and fail to
maintain its brand value of fast and cheap delivery. This can lead Amazon to have a relatively
lower market share in the Australian retail sector considering the American counterparts.
However, a big company like Amazon always has the proper planning to deal with
such disadvantages. Amazon’s investment in new technologies such as advanced robotics for
packaging and maintaining warehouses, drone-delivery system, and voice-activated virtual
assistant are focused on taking up new challenges and dealing with them successfully.
Moreover, Amazon’s presence outside the retail industry such as Amazon Prime also helps
Amazon in gaining a greater number of customers and securing its presence in Australia.

9SHORT ANSWER QUESTIONS
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10SHORT ANSWER QUESTIONS
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