|Type of paper:||Research paper|
|Categories:||Planning Amazon Strategic management Business plan Business strategy|
Amazon is an international technology company that is based in Seattle, Washington and deals with artificial intelligence, e-commerce and cloud computing. It is by so far the biggest world's cloud computing platform and e-commerce market place, in terms of revenue and market capitalization. It was born as an online bookstore, by Jeff Bezos in 1994 and later expanded its market of selling audiobook streaming/downloading, MP3 streaming/downloading, video streaming/downloading, video games, software, electronics, clothing, jewelry, food, and toys. Amazon has had its focus in publishing, it owns a publishing firm, Amazon Publishing, it also deals with filming and production, it owns the Amazon Studios, produces consumer electronics, such as the Kindle e-reader, Fire TV, Echo devices and Fire tablets. It is moreover, the largest provider of cloud infrastructure services, that is IaaS and PaaS in the world, through AWS subsidiary. It ships its products worldwide and has separate trade websites for some specific countries. As at today, it has 100 million subscribers in the Amazon Prime.
Amazon sells its products and services to its customers worldwide directly through its websites. In addition to these direct sales, Amazon gives a platform for its retailers to sell their products and services. Amazon's retailers sell less popular and fast moving items. They sell highly priced items, hence gives Amazon the opportunity to stop holding the slow-moving products that could lag their profits. Amazon upholds a subscription-based model of business, via the Amazon Prime service, and a small electronics product line as well (Annual Report 2016). In the subscription line, Amazon customers pay annually a fee that enables them to secure free shipping, either on the same day or a two day on the eligible items. The subscription also allows them to stream media online, like the e-reader, e-book, and Kindle. It also offers the Kindle owners mobile applications to purchase.
The business process is what defines the foundation of a business-wide digital change and enables a jump to digitalization. Amazon is a market stall that has everything for everyone. Amazon's success means a lot to its clients. It is one kind of a market stall that one logs in to and their minds change because of the varieties it offers in a single click. Amazon's success has been attributed to its innovation. It has modernized its processes with the aim of automating most of its processes. Amazon's management has always understood the need to get familiar with their customer's needs. Its type of competition is improving the customer experience
The Amazon Effect has had an adverse influence on consumer expectations and beyond. Amazon has changed the retail industry and forced businesses to revive their supply chain operations and keep at pace with Amazon's steps. Amazon is now a giant in the world of retailing. It has been able to break this record by expanding its product range far beyond the typical e-commerce companies and through use of an incredible commitment to supply chain innovation so as to improve on its customer experience. Amazon has achieved this through modern efficient inventory control.
In the Amazon warehouses, the conversations among the workers mainly focus on deliveries made by drones, innovations of robotics, and such scientific talks. The Amazon warehouses are characterized by extensive usage of barcode scanners, item picking, and dropping and a constant cycle of order processing. Making these processes digital helps Amazon gain more visibility into the disposition of assets and shipping requirements at any time. In accordance with the Supply Chain Digital, Amazon is in a continuous move to optimize its practices in shipping around its markets. A case study is with the China market, where the company is in partnership with the merchants, which allows Amazon to pick goods from the stores directly and ship them to the customers (Annual Report 2016). In all these transactions, mobile apps with integrated data all over various business lines are used.
Amazon is changing the supply chain through the use of digital technologies to familiarize its operations to the specific needs of its employees and partners in all the settings. It started with the use of barcode scanners to track its items and has now changed to a full digital warehouse, distribution and fulfillment network which moves the goods from one location to the other with unbelievable efficiency. Going digital has set the foundation for flexible and fast-moving operations, which has allowed Amazon to make more strategic changes that are changing the way the supply chain operates.
All this inventory control plan has come to change the notion of fulfillment. Instead of the organization having to make the order processing in a central warehouse then send it over to an extended shipping network, it pairs the warehouse with an order to identify which location is most efficient and inclines the order accordingly. The mobile data collection application and the real-time integration with backend system has enabled the information to be shared across the locations.
Amazon can take an order and start the shipping in a matter of minutes, enabled by the backend systems giving data integration between the processing of the order, warehouse, and the distribution workflows. The ability of Amazon to manage its supply chain through digital tools spreads from the customers starting the orders through to them receiving the goods at the leading prices in the market. The businesses that want to keep up with Amazon's pace may not be capable of coping all the Amazon's progress but can change along with the digital technologies like the mobile data collection to keep up with the changes in expectations from the consumers.
"Amazon's Big Box store represents one of the main disruptions in the retail model, that has thrived in size and has a well-planned supply chain meant to drive away from the competition. Its online big-box concept is an example of the unique supply chains. The shipment from the distribution centers is done directly to their homes without passing through the retail store. Amazon has innovated in its supplier and the final supply chain, that is its delivery. Anyone can sell things on Amazon because it is a platform and not a shop. This means that Amazon has more things in store than any other online store hence when people think of shopping they always think about Amazon. Amazon's goods are cheap and they chose their suppliers through the lowest bidder. Their warehouses make use of automation, where they store items being delivered together, ready for being transported immediately. Amazon has invested in staff who do delivery and technology that makes it an expectation for 2-day shipping and a possibility for one-day shipping" (Hallam, 2017). Amazon channels the 3PL (third party logistics) and accomplishes the order by its self.
Amazon's business strategy is one of a kind and it is described best as cost leadership taken to the extreme. Its success is related to both the economies of scale, constant business diversification and innovation of various business processes. Its retail operations are based on very thin profit margins (Shaughnessy, 2012). There are four main strategies that guide Amazon's business strategy, that is a passion to invent, customer needs focus rather than competitors, long-term thoughts and is committed to operational excellence.
The business strategy of Amazon is constituted by four main points:
The regularity of entering in new ventures. Amazon started as online physical bookselling the store in 1997, and to date, it sells anything that can be sold online on a global scale. The cultured worldwide logistics represents a solid base for Amazon's competitive advantage. This giant in technology has used this advantage to engage extensively in business diversification. In recent times, the company has launched the Amazon Home Services which has made it possible to buy and schedule the local professional services as a way to continue its broadening strategy.
Amazon's strengthened ecosystem. The ecosystem of Amazon comprises of publishers, writers, merchants, reviewers, and app developers. The senior management in Amazon takes part in deriving the maximum benefits from every component of the ecosystem of the company and strengthening the relationship between the components. Due to its expansion in the range of products in the Amazon ecosystem, its business operation cannot be classified within a single business.
Its focus on the customers. Amazon is customer obsessed. This is at the core of its business strategy. Being the world's largest e-retailer by the revenue it makes, it focuses on the long-term growth instead of the short-term profits. Amazon does not concern itself with the competition as much, rather on its customers. This has been a practice in an attempt to become the world's most customer-centered company. According to Mardar (2018), Amazon puts an empty chair in every meeting which they believe represent the customer as a reminder that they are innovating on the customer's behalf.
Amazon has focused on the values of its leaders. Amazon has gained maximum support from the human resources this has been another source of Amazon's competitive advantage. It is very challenging to work for Amazon, and the workers are always expected to absorb the heavy workload up to even sacrificing their work-life balance.
Through these four main strategies, Amazon has been able to keep its pace higher than the competing businesses such as Walmart, by a far margin. Comparing its margin and the competitors, it is by far incomparable because of its daily innovative structure, the business planning it has set up, its business model and the business process it poses. Amazon cannot learn from any company since the strategies it takes are always an example to the other e-retailers on how they can make their own strategies (Annual Report 2016). For instance, before Netflix announced its offline streaming, Amazon responded to this competition a year before Netflix launched the feature. It did so to reduce the costs for their customers while increasing the ease of use.
Hallam, S. (2017) "Amazon's Business Strategy: 6 examples of the latest trends in e-commerce" Hallam, Retrieved from: https://www.hallaminternet.com/amazons-business-strategy-new-developments/
Shaughnessy, H. (2012) "Why Amazon Succeeds" Forbes, Retrieved from: https://www.forbes.com/sites/haydnshaughnessy/2012/04/29/why-amazon-succeeds/#79a89a00385a
Marder, L. (2018) "Amazon Growth Strategy: How to Run a Multi-Billion Dollar Business Like Jeff Bezos" BIG COMMERCE, Retrieved from: https://www.bigcommerce.com/blog/amazon-growth-strategy/
Annual Report (2016) Amazon.com Inc.
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