Amazon.Com When Jeff Bezos founded Amazon.com in 1995, the online retailer focused just on selling books. Music and videos were soon added to the mix. Today, you can purchase a wide range of media and general merchandise products from Amazon, which is now the world's largest online retailer, with over $8 bil lion in annual sales. According to Bezos, Amazon's success is based on three core factors: a relentless focus on delivering value to customers, operating efficiencies, and a willingness to innovate. Amazon offers customers a much wider selec- tion of merchandise than they can find in a physical store, and does so at a low price Online shopping and purchasing is made easy with a user-friendly in- terface, product recommendations, customer wish lists, and a one-click purchasing option for repeat customers. The percentage of traffic that Amazon gets from search engines such as Google has been falling for several years, whereas other online retail ers are becoming more dependent on third-party Chopar 4 Compellive Advantage Though Funcionalevel Srolege 141 arch engines. This indicates that Amazon is in and instead focus on automating Amazon's dis- creasingly becoming the starting point for online tribution centers Kiva robots pick products from nurchases. As a result, its active customer base is shelves and deliver them to packing stations. This now approaching 250 million reduces the stall needed per distribution center by To deliver products to customers quickly and 30 to 40%, and boosts productivity accordingly. curately, Amazon has been investing heavily in a On the innovation front, Amazon has been a network of distribution centers. In the United States leader in pushing the digitalization of media. Its in one there are now over 40 such centers. Sophisti vention of the Kindle digital reader, and the ability mated software analyzes customer purchasing pal- of customers to use that reader either on a dedicated erns and informs the company what to order, where Kindle device or on peneral-purpose device such to store it in the distribution network, what to charge as an iPad, turbocharged the digital distribution of for it, and when to mark it down to shift it. The goal books-a market segment where Amazon is the clear is to reduce inventory-holding costs while always hay leader. Digitalization of books is disrupting the es ing product in stock. The increasingly dense network tablished book-retailing industry and strengthening of distribution centers enables Amazon to reduce the Amazon's advantage in this segment. To store digital time it takes to deliver products to consumers and to media, from books to films and music, and to enable cut down on delivery costs. As Amazon grows it can rapid customer download, Amazon has built huge support a denser distribution network, which it tum server farms. Its early investment in cloud-based in enables it to fulfill customer orders more rapidly and frastructure has turned Amazon into a leader in this at a lower cost, thereby solidifying its competitive ad field. It is now leveraging its expertise and infrastrue vantage over smaller rivals ture to build another business, Amazon Web Services To make its distribution centers even more (AWS), which will host websites, data, and associated efficient, Amazon is embracing automation. Until software for other companies In 2014, this new busi- recently, most picking and packing of products atness generated over $25 billion in revenues, making Amazon distribution centers was done by hand, Amazon one of the early leaders in the emerging field with employees walking as much as 20 miles per of cloud computing. Jeff Bezos is on record as stating shift to pick merchandise off shelves and bring it to that he believes AWS will ultimately match Amazon's packing stations. Although walking 20 miles a day online retail business in sales volume. may be good for the physical health of employees, Sources: Am Add 18 New Distribution Center Supply it represents much wasted time and hurts produc- Chain Digit, August 7, 2012. A. Latinsky Tell Beaos: The Ultimate tivity. In 2012, Amazon purchased Kiva, a leading Disrupter Fort , December 2012. p. 9-41: Banker, The manufacturer of robots that service warehouses New Amazon Drution Model Logistics Viewpoint, August Post the acquisition, Kiva announced that, for the 2012: G. A Fowler, day Hiring Call People Vs Robot The next 2 to 3 years, it would take no external orders Street December 10, 2016. p. 1 CASE DISCUSSION QUESTIONS 1. What functional level strategies has Amazon pursued to boost its officiency? 2. What functional level strategies has Amazon pursued to boost its customer responsiveness 3. What does product quality mean for Amazon? What functional-level strategies has Amazon pursued to boost its product quality 4. How has innovation helped Amazon Improve its efficiency, customer responsiveness, and product quality 5. Do you think that Amazon has any rare and valuable resources in what volue creation activities are these resources located? 6. How sustainable is Amazon's competitive po sition in the online retail business Read the case study on Amazon.com (see Appendix_Week_5_Tutorial_Amazon.com_Case) and answer question 5.3. Question 5.3. Do you think that Amazon has any rare and valuable resources? In what value creation activities are these resources located? How sustainable is Amazon's competitive position in the online retail business? (Selected for Assessment) THE END. Amazon.Com When Jeff Bezos founded Amazon.com in 1995, the online retailer focused just on selling books. Music and videos were soon added to the mix. Today, you can purchase a wide range of media and general merchandise products from Amazon, which is now the world's largest online retailer, with over $8 bil lion in annual sales. According to Bezos, Amazon's success is based on three core factors: a relentless focus on delivering value to customers, operating efficiencies, and a willingness to innovate. Amazon offers customers a much wider selec- tion of merchandise than they can find in a physical store, and does so at a low price Online shopping and purchasing is made easy with a user-friendly in- terface, product recommendations, customer wish lists, and a one-click purchasing option for repeat customers. The percentage of traffic that Amazon gets from search engines such as Google has been falling for several years, whereas other online retail ers are becoming more dependent on third-party Chopar 4 Compellive Advantage Though Funcionalevel Srolege 141 arch engines. This indicates that Amazon is in and instead focus on automating Amazon's dis- creasingly becoming the starting point for online tribution centers Kiva robots pick products from nurchases. As a result, its active customer base is shelves and deliver them to packing stations. This now approaching 250 million reduces the stall needed per distribution center by To deliver products to customers quickly and 30 to 40%, and boosts productivity accordingly. curately, Amazon has been investing heavily in a On the innovation front, Amazon has been a network of distribution centers. In the United States leader in pushing the digitalization of media. Its in one there are now over 40 such centers. Sophisti vention of the Kindle digital reader, and the ability mated software analyzes customer purchasing pal- of customers to use that reader either on a dedicated erns and informs the company what to order, where Kindle device or on peneral-purpose device such to store it in the distribution network, what to charge as an iPad, turbocharged the digital distribution of for it, and when to mark it down to shift it. The goal books-a market segment where Amazon is the clear is to reduce inventory-holding costs while always hay leader. Digitalization of books is disrupting the es ing product in stock. The increasingly dense network tablished book-retailing industry and strengthening of distribution centers enables Amazon to reduce the Amazon's advantage in this segment. To store digital time it takes to deliver products to consumers and to media, from books to films and music, and to enable cut down on delivery costs. As Amazon grows it can rapid customer download, Amazon has built huge support a denser distribution network, which it tum server farms. Its early investment in cloud-based in enables it to fulfill customer orders more rapidly and frastructure has turned Amazon into a leader in this at a lower cost, thereby solidifying its competitive ad field. It is now leveraging its expertise and infrastrue vantage over smaller rivals ture to build another business, Amazon Web Services To make its distribution centers even more (AWS), which will host websites, data, and associated efficient, Amazon is embracing automation. Until software for other companies In 2014, this new busi- recently, most picking and packing of products atness generated over $25 billion in revenues, making Amazon distribution centers was done by hand, Amazon one of the early leaders in the emerging field with employees walking as much as 20 miles per of cloud computing. Jeff Bezos is on record as stating shift to pick merchandise off shelves and bring it to that he believes AWS will ultimately match Amazon's packing stations. Although walking 20 miles a day online retail business in sales volume. may be good for the physical health of employees, Sources: Am Add 18 New Distribution Center Supply it represents much wasted time and hurts produc- Chain Digit, August 7, 2012. A. Latinsky Tell Beaos: The Ultimate tivity. In 2012, Amazon purchased Kiva, a leading Disrupter Fort , December 2012. p. 9-41: Banker, The manufacturer of robots that service warehouses New Amazon Drution Model Logistics Viewpoint, August Post the acquisition, Kiva announced that, for the 2012: G. A Fowler, day Hiring Call People Vs Robot The next 2 to 3 years, it would take no external orders Street December 10, 2016. p. 1 CASE DISCUSSION QUESTIONS 1. What functional level strategies has Amazon pursued to boost its officiency? 2. What functional level strategies has Amazon pursued to boost its customer responsiveness 3. What does product quality mean for Amazon? What functional-level strategies has Amazon pursued to boost its product quality 4. How has innovation helped Amazon Improve its efficiency, customer responsiveness, and product quality 5. Do you think that Amazon has any rare and valuable resources in what volue creation activities are these resources located? 6. How sustainable is Amazon's competitive po sition in the online retail business Read the case study on Amazon.com (see Appendix_Week_5_Tutorial_Amazon.com_Case) and answer question 5.3. Question 5.3. Do you think that Amazon has any rare and valuable resources? In what value creation activities are these resources located? How sustainable is Amazon's competitive position in the online retail business? (Selected for Assessment) THE END