Zappos Case Analysis - Ethical Climate, Core Values, Challenges and Solutions

This case analysis explores Zappos, an online clothing and shoe retailer, and its ethical climate, core values, challenges faced, and proposed solutions. It covers the company's history, challenges, and alternatives. The challenges faced by Zappos include cyber threats, economic distress, confusion due to a merger with Amazon, and globalization. The proposed solutions include promoting online security, employing the right people, and designing a new application process. The recommendations include using a super-flat structure known as 'Holacracy' and penetrating as many markets as possible.

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Zappos Case Analysis
Names
Institution

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Zappos Case Analysis
Introduction
According to Yu-chen (2012), Zappos is one of the best online clothing and shoe retailer.
The study review Zappos as one of the retailer shop which have a strong ethical climate as well
as striving on their code of conduct and ethics. The retail also embraces its strong core value
which keep it thriving to meet its customer expectations. Its management has been focusing to
ensuring it remains competitive through offering high quality services. Over the years, it has been
embracing and driving Change to operate based on the changing customer needs. Some of the
primary aims of Zappos is to create Fun, Adventure, and creativity, open minded, and also pursue
growth and learning.
The company focuses on building openness and honesty through their channel of
communication, and building team work (Tanu, 2017). They also aim at achieving more with
less as well as spirit of being passionate and humble to the stakeholders and its customers. This
core values have helped the retail in providing the customers with customer service to enhance
their level of satisfaction. It also aims at decreasing unethical workstation behavior which may
affects day to day operations.
Background
According to Lili (2016), Zappo was initiated in the early 1999 by Nick Swinmurn. The
idea to come up with the company by Nick was reached after his attempts to find a pair of his
favorite footwear at his local mall. Later, he approached his two friends Tony Hsieh and Alfred
Lin who supported his idea of coming up with the online retail shop which would primary deal
with high quality shoes. The company was launched in 1999 by Hsier and Lien by the name

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Shoe Sites which later changed to Zappos (Oss & Hek, 2011). The primary aim of changing the
name was to make the company to diversify in other products other than shoes.
Late on Venture Frog invested additional capital to Zappo which made it to be shifted
into their office space thus Tony Hsieh becoming board as co-CEO with Nick Swinmurn. The
Company was in a position to realize $1.6 million in revenue in 2000 which marked an increase
as compared to the previous year (Danny, 2016). With proper management and continuous
market research, the company continued to report positive performance, and in 2004 it was in a
position to receive its first round of venture capital. Later, and due to best performance and
growth it moved its headquarters from San Francisco to Henderson, Nevada.
Regardless of the challenges which the company has been facing over the last years, such
as 2012 hacking incident, the management has been focusing on better performance through
using unique operational strategies. The retail also expanded its line of production to dealing
with various products such as handbags, eyewear, clothing, watches, and kids’ merchandise. This
decision made it to expand its market share and to become an internationally competitive
company.
Over the years, the retail has been contributing largely in promoting social interaction and
also their interaction between the stakeholders and employees through engaging in various
charity events. It also encourages team building as one of the ways of promoting relationships
among its staff members. Additionally, its management trust that its customers are of essence
because they are the reason why the company has been in operation and therefore focuses on
ensuring they are fully satisfied with its products. This has to attain reputation and customer
loyalty which in turn has made it to realize substantial revenues. It focus on doing what is right
has also made it to be termed as one of the most ethical companies.

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According to Vijay (2014), Zappo is listed as one of the most independent workplace
internationally by the WorldBlu because of its ethical behavior and commitments to excel in its
work. Focusing on satisfaction to its shareholders, employees and also to its customers has led to
multitude of transparency between top management and all employees as well being in a position
to address the needs of its customers without major challenges.
Key problems
Although this company has been realizing success over the years, it also faces various
challenges that make it hard to attain some of its goals. One of the challenges faced by this
organization is cyber threat. According to Pettinger (2010), companies that conduct online
businesses face the threat of cyber-attacks. Being one of the online companies, Zappos
experience the challenge of dealing with hackers and other intruders who can interfere with its
operations.
Zappos has faced economic discomfort which led to the lay off its employees. According
to Meera (2016), economic distress has a significant impact on businesses because it can not only
make them incur reduced revenues but also threat of collapsing. Despite the fact that its
management was able to handle the challenge with agility, strength, and also precision, seeing
the staff members quite was not pleasing because the management valued every employee
(Mitushi, 2014). Furthermore, they were entirely precise concerning the financial situation which
led to some of employees to lose their jobs.
Another ethical challenge encountered by Zappo was a merger with Amazon in 2009.
This brought about confusion especially to its Customers because they could not understand the
reason that made the company to bond with Amazon. Though the management confidently
expressed the situation to the customers in order to maintain their loyalty, it was challenging

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especially those who had negative experience with amazon. This made the company to
experience a significant decrease in its market share.
The reluctance of the board of directors also came as a challenge since they did not want
the company to concentrate more on their clients but rather aim at shifting the entire focus
exclusively to product sales which was also a challenge to the company. Although the research
review that Tony Hsieh did not support the decision of doing away with the customer-centric
model that Zappos because it was the one which the company had used for some years, his
attempts to object the decisions did not succeed because it was challenging to convince some of
the people who formed the top management
Another challenge that Zappos faces is globalization and core sustainability. This has
brought up the question on how Zippos can continue using aggressive pricing strategy in the
international markets that have similar harvest and with cheaper price tags. The study reviews
the online retail sector environment being highly competitive and also very volatile. In this case,
the entrance of the new innovative business venture is more likely to cause disruption in the
entire industry based on the competition thus become a problem in operation of this company.
Alternatives
The best alternative for Zappos to be able to achieve its target as one of the best online
shop is to abandon their policy of free shipping. Instead, it should charge relatively low cost for
shipping and also brand their product to meet the customer standards since the human resource
practices will be will be essential in addressing these challenges.
Zappos also needs to make attempts of recruiting the right staff members, by considering
those who can promote some of the essential things in the company such as its core values. It
should also encourage keeping innovative employees and ones who strive to find solutions for

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the business to a sustainable growth. Additionally, it should come up with best ways of
promoting customer trust even when the company decide to merge with other firms.
Proposed solution
One of the solutions that Zappos can use to address its challenges is coming up with
proper measures of promoting the security of its online platforms. Some of the measures which it
can take is undertaking extensive research to identify the reasons that makes its websites to be
prone to hackers. It can also solve this issue through investing in innovation to ensure unique
measures are put in place to challenge the hackers.
Another possible solution available for Zappos is employing the right people. According
to Donovan (2012), employing qualified people enables a company to realize solutions to some
of the things that seem to prevent them from attaining their goals. For example, employing
skilled people can make the company to remain productive even during the times of economic
distress. Employing the right people can also help Zappos to avoid the significances of changing
to a self-regulating business.
To solve the challenge of lack of knowledge in dealing with some of its systems, the
company can design a new application process, which will help to omitting individuals who may
not understand how to use Holarctic system. Taking this decision can be crucial because it can
improve productivity and also to retain employees.
Recommendations
While trying to boost transparency and enhance operation processes, Zappos should
trying using a super-flat structure known as ‘Holacracy’. Taking this decision is crucial because
it can assist the management in replacing the top-down predict-and-control paradigm, and hence

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achieve control through allocating power (Prerna, 2014). This strategy can also enable the
management to work based on the expectations of the customers and the society at large.
The company should also strive to penetrate to as many markets as possible in order to
minimize the risk of realizing significant impact when there is a realization of economic distress.
According to Clayton (2011), operating in different countries is crucial because it makes
businesses to remain productive when some of the nations are affected by economic depression.
This means that Zappos should target as many countries as possible and use proper operational
strategies to make the company competitive.

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