Amazon's Growth and Impact: A Case Study in Operations Management

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Operations Management & Decision-Making Modules

Contents
1. Amazon began as an on-line book retailer. How has it grown to be known as ‘everything store’.......3
2. What aspects of Amazon’s Operations Management are based on the increased globalisation of
world trade..................................................................................................................................................5
3. Amazon marketplace focuses on small sellers and manufacturers by linking them with a huge
customer base and fulfillment program. Can E-commerce ever truly replace the in-person shopping
experience?..................................................................................................................................................7
4. What are the real long term implications of the increased presence of Amazon to the Australian
Retail Industry?...........................................................................................................................................9
References.................................................................................................................................................11

1. Amazon began as an online book retailer. How has it grown to be known as
‘everything store’.
Amazon is a well-known name in the online retailing business. It has been the most popular and
successful accounts in the era of the digital world. Amazon started as an online book retailer
store in the year 1994, before expanding its business in other categories. The decision of
focusing on books was a very clever motive on an e-commerce platform. Before purchasing the
book, the customer does not feel the need to touch and try the product and in the initial era of e-
commerce; it was a clever decision to sell a product with universal appeal. It launched various
features in the site like searching keywords inside the book; which made it more appealing for
the customers to invest in the online bookstore. This not only gave Amazon a better experience
to understand customer behavior but also a better perspective to see the near future of online
retailing.
The company
Amazon is a hub of different companies now; took off with entering in the new market of
different categories such as web services and electronic devices. This step made Amazon
diversify on various platforms and made it realize about the stage that it holds as a company in
the tech market. It held hands with several companies in cloud computing, entertainment,
groceries, and pantry services, data science and what not. Its web services are one of the largest
cloud computing services across the globe. Its business focuses on consistent leadership and
value creation of customers has paved its way for success. The supply chain management of the
Amazon has been unique and incredible. This SCM strategy has increased the rate of customer
satisfaction by reducing the delivery time of products and increasing the warehouses for the
retailers. Along with its services, the future technological and advanced changes like drones and
robotics will decide what innovations will be due to come in the future to change the game of
supply chain automation (John, 2018)
The Business
Amazon’s steps towards various fields like electronics, groceries, hardware, entertainment, etc.
And its success does not appear to slow down anytime soon. Its own tech device, Kindle e-reader

gave the world a glimpse of what the future of millennial beholds. It is an AI voice command
device experienced moderate success in the market. Their subscription, in the field of
entertainment and music, has given a tough time to its competitors. At the moment, it is out of
the reach of its competitors (Wiggington, 2018)
Amazon has stepped upon the motives that attract huge customers towards itself with its
services. Low price, availability and a wide range of options to select the products from;
convenience in every stage of processing, high flexibility has played a major role in its
successful journey from a book store to an everything store. It is claimed that 85% of the world’s
product for retailing will be available on Amazon in the near future. When that goal is achieved,
it will change the game of all the levels of business management. With patience, investment and
innovation, the company have shredded the competition.

2. What aspects of Amazon’s Operations Management are based on the increased
globalisation of world trade.
Globalization is the spread of economic aspects like technology, information, products, and jobs
which are considered across multiple countries and cultures. In economic terms, it describes a
mutual relationship among nations around the globe which has been developed through free
trade. Globalization has the ability to raise the standard of poor living conditions in less
developed countries by empowering people with jobs and better regain to goods and services.
However, it reduces jobs in most first world countries significantly as the production of supplies
moves transversely all over the world (Hitt, et. al., 2016)
Amazon’s International Growth Challenge
Amazon has a primary strategy in its e-commerce trade, which has made them more accessible
for the customers, enabling them to put forward more spirited features. Amazon has a trade
which is highly diverse based on the geography as most of its recent services and features are
sometimes elite to particular sectors of living, even within countries. Due to this, Amazon's profit
is due to these few countries where it has laid its roots very strongly. Due to the various
restrictions in countries like India and China along with heavy local competition, Amazon might
favor increasing their density rather than becoming more global by becoming a thinner
competitor.
International Sales and Sales in the US
Amazon has recently seen a massive increase in sales in the USA which have soared in the past
couple of years. However, their international revenues have not grown as well as the US. They
plan on re-creating their sales strategy used in the US to improve revenue generation from other
countries as well. The company has been using the influence and features of Amazon Prime
video services in its international countries. The most recent inclusion of features such as a fast
prime delivery from many supermarket chains, for prime members. Milan and Belgium, and
video streaming in Japan. These strategies are supposed to help them spread over the globe a bit
more than before and increase international revenue.

How is globalization helpful for Amazon?
Globalization has resulted in greater and better relationships among markets over the globe.
Increased communication and awareness of business opportunities have been more easily and
effectively established. Hence, allowing more investors to access new opportunities and study
new markets more ease than before. It has reduced potential risks and improved profit
opportunities due to better communications and networking technology.
This is why Amazon is looking to expand to every corner of the world and base their operations
in such a manner that they are able to generate equal if not more revenue from all over the world.
Their strategies to put a strong foot into the markets of India and China using unique features
available for prime members have an impact that most other businesses are trying to achieve.
Hence, it can be seen that the globalization of world trade is a primary aspect of Amazon’s
organizations and product management (Krugman, 2017)

3. Amazon marketplace focuses on small sellers and manufacturers by linking them
with a huge customer base and fulfillment program. Can E-commerce ever truly
replace the in-person shopping experience?
Everyone has heard the name of the e-commerce giant, Amazon. Founded by Jess Bezos in 1994,
the company has transformed from immensely from its start. From selling books to selling
everything your mind imagines. Amazon is nothing less of a game changer. Amazon is a crowd
favorite because of its commendable customer service, inventory and multiple shipping
strategies. They sell everything from little knick knacks like erasers and pencils to digital content
like movies and apps. The success of Amazon can be credited to the Bezos philosophy of
customer loyalty and business acquisition. Amazon marketplace is the side of the website that
usually remains hidden to the purchasers. Marketplace enables third-party vendors to make sales
of either new or used goods on the website. Goods sold through the marketplace have fixed
pricing. The advantages of this strategy are multifaceted, Sellers can get their hands on Amazon's
customer base. On the other hand, Amazon offers more options to its clients without spending a
dime on additional inventory (Kontopantelis et al. 2015)
Sale
Amazon demands its third-party sellers with a referral price for every sale they make. This price
is set according to the sales price of the manufacturers. The sellers also have to pay a pick, pack
and weight charge. More than thirty-one percent of sales made by Amazon in a year can be
credited to third-party merchants. In the last few years or so, 1 billion dollars were earned
because of the yearly sales. According to official reports, approximately 1,000,000 third-party
merchants joined the e-commerce giant in the year 2017. Amazon characterizes these merchants
into 3 options: Wholesale, private label and retail arbitrage.
Sellers
Smaller sellers and manufacturers get access to Amazon warehouse, shipping grid, and financial
structure. The invariable increase in the number of customers leads to better chances of
earnings. The sellers have to pay taxes in the form of market place fees. The rules and
regulations of the marketplace are deemed to be lopsided by the sellers as the edict undergoes

continuous change and is callously enforced. If the Amazon marketplace turns against the seller
they have a viable chance of ending up bankrupt, when a small business is struck down they do
not have many options to appeal. Not one of Amazon's competitors are anywhere close to the
equal holding and influence it has on the market. The expansion of Amazonian hegemony from
books and goods to bricks and mortar is seen by the customers due to its purchase of the grocery
store chain, Whole foods. This amalgamation of traditional means of shopping and e-course
strategy only hints at the bright future Amazon and the Amazon marketplace hold.
The change
In today’s world everyone has their eyes set on a screen, having an In person, individual
shopping experience has its one set of advantages and disadvantages, but one can't deny that the
mantra to be successful and profitable is optimization of online stores.. Having an online store
provides the merchants, big or small alike with more customers, you have no physical barriers
and new customer due to an online presence. The diversification allows more sales and more net
income

4. What are the real long term implications of the increased presence of Amazon to the
Australian Retail Industry?
The e-commerce platform Amazon was founded by Jeff Bezos. No one can deny the imperative
success the company has seen can be credited to the philosophy of focusing on the long term
rather than short term profits. The presence of third-party merchants in the form of Amazon
marketplace and a loyal set of customers ensures that the Amazonian hegemony continues. It can
be counted as one of three global companies that are leading the growth. Forbes magazine
crowned Bezos as the rich man, dethroning Bill Gates and Microsoft. The influence and power
of Jeff know no bounds. Amazon is continuously pouring in investments in the form of
fulfillment centers that include storage spaces and faster shipping facilities that before.
Customer service
Amazon has forever transformed the customer experience, the increase in choices of goods
available makes sure that customer satisfaction is their number one priority. Shopping has
become a hassle-free experience. The long term impact of Amazon on the market include a
change in the shopping dynamics with disruptions to the manufacturer's supply chain followed
by margin pressure and the exorbitant prices of food. A survey conducted indicates that most
individuals prefer searching for products on Amazon before moving onto other websites.
Impact all over the world
Amazon affects Australian Retail Industry in a multitude of ways. Since 1994, we can track the
relentless growth of Amazon. The introduction of the website into the Australian market was
shaky to the say the least and it left quite a lot of people disappointed. It decided to block all
access of Australian customers to the international site. Despite everything, Amazon’s Australian
website is on track to become the dominant powerhouse in the retail market within the next few
years. According to the Australian Securities and Investments Commission (ASIC), Amazon
faced an $8.9 million loss in the year 2017. Initially, it was believed that Amazon will not have
much effect on the local business. Amazons continue investment in the Australian market's
infrastructure and population. We don't know the secret strategy being followed by Bezos
(Dolata, 2017)

Reach
Reports released by various analysts showcase more than 4 billion-plus deliveries being made to
11.5 million addresses in 2016. Numbers don't lie, but the retail industry in Australia still stands
strong with the population spending adding up to $261 billion in traditional retail stores. Amazon
is working and building it to have a long term implication in the market. The company is zeroing
in one long term profit and is ready to face losses in the present. Amazon has strategies and
launched its online entertainment portal, Prime in a much cheaper rate that's what it was made
available globally. The company is struggling right now and trying to increase its popularity by
offering the consumers a two-day delivery.
One can assume that small companies and manufacturers will be hit the hardest. Big names like
Harvey Norman, JB hifi, and even Myer will also face issues. It is estimated that the customers
will prefer to buy electronics and other entertainment media goods from Amazon. A 20%
decrease in profits is in the foreseeable future. The future of Amazon in Australia has the whole
world on edge.

References
 Dolata, U., 2017. Apple, Amazon, Google, Facebook, Microsoft: Market concentration-
competition-innovation strategies (No. 2017-01). Stuttgarter Beiträge zur Organisations-und
Innovationsforschung, SOI Discussion Paper.
 Hitt, M.A., Xu, K. And Carnes, C.M., 2016. Resource based theory in operations management
research. Journal of Operations Management, 41, pp.77-94.
 John, R.R., 2018. Move Fast and Break Things: How Facebook, Google, and Amazon Cornered
Culture and Undermined Democracy. By Jonathan Taplin. New York: Little, Brown, and
Company, 2017. 321 pp. Figures, notes, index. Cloth, $19.72. ISBN: 978-0-316-27577-4.
Business History Review, 92(1), pp.191-193.
 Kontopantelis, E., Doran, T., Springate, D.A., Buchan, I. And Reeves, D., 2015. Regression
based quasi-experimental approach when randomisation is not an option: interrupted time series
analysis. Bmj, 350, p.h2750.
 Krugman, P., 2017. Crises: The price of globalisation?. In Economics of Globalisation (pp. 31-
50). Routledge.
 Wiggington, D.K., 2018. Amazon: David Becomes Goliath.