Case Study Description of AmazonFresh: Rekindling the Online Grocery Market
More than a decade after the high-profile failures of several early online grocers, grocery remains the largest single U.S. retail category and one of the few that has not yet migrated online. Amazon began testing its grocery-delivery service, AmazonFresh, in Seattle, in 2007; five years later, the company has made significant progress. The case traces the evolution of AmazonFresh's business model and describes the operating capabilities necessary to compete with brick-and-mortar supermarkets like Wal-Mart and Safeway and with new digital grocery startups. Now Amazon needs to decide on AmazonFresh's next step. Should the company continue refining its business model in Seattle or expand to another city? What factors should it take into account when planning its next move?
Authors :: Rory McDonald, Clayton M. Christensen, Robin Yang, Ty Hollingsworth
Swot Analysis of "AmazonFresh: Rekindling the Online Grocery Market" written by Rory McDonald, Clayton M. Christensen, Robin Yang, Ty Hollingsworth includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Grocery Amazonfresh facing as an external strategic factors. Some of the topics covered in AmazonFresh: Rekindling the Online Grocery Market case study are - Strategic Management Strategies, Emerging markets, Innovation, Internet, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the AmazonFresh: Rekindling the Online Grocery Market casestudy better are - – there is backlash against globalization, increasing energy prices, wage bills are increasing, geopolitical disruptions, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, etc
Introduction to SWOT Analysis of AmazonFresh: Rekindling the Online Grocery Market
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AmazonFresh: Rekindling the Online Grocery Market case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Grocery Amazonfresh, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Grocery Amazonfresh operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of AmazonFresh: Rekindling the Online Grocery Market can be done for the following purposes –
1. Strategic planning using facts provided in AmazonFresh: Rekindling the Online Grocery Market case study
2. Improving business portfolio management of Grocery Amazonfresh
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Grocery Amazonfresh
Strengths AmazonFresh: Rekindling the Online Grocery Market | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Grocery Amazonfresh in AmazonFresh: Rekindling the Online Grocery Market Harvard Business Review case study are -
High switching costs
– The high switching costs that Grocery Amazonfresh has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Grocery Amazonfresh in the sector have low bargaining power. AmazonFresh: Rekindling the Online Grocery Market has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Grocery Amazonfresh to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Grocery Amazonfresh is present in almost all the verticals within the industry. This has provided firm in AmazonFresh: Rekindling the Online Grocery Market case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management
– Grocery Amazonfresh is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Grocery Amazonfresh is one of the most innovative firm in sector. Manager in AmazonFresh: Rekindling the Online Grocery Market Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Grocery Amazonfresh are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Grocery Amazonfresh digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Grocery Amazonfresh has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Operational resilience
– The operational resilience strategy in the AmazonFresh: Rekindling the Online Grocery Market Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Grocery Amazonfresh has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Grocery Amazonfresh to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Technology & Operations field
– Grocery Amazonfresh is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Grocery Amazonfresh in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Grocery Amazonfresh is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Rory McDonald, Clayton M. Christensen, Robin Yang, Ty Hollingsworth can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Organizational Resilience of Grocery Amazonfresh
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Grocery Amazonfresh does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses AmazonFresh: Rekindling the Online Grocery Market | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AmazonFresh: Rekindling the Online Grocery Market are -
Skills based hiring
– The stress on hiring functional specialists at Grocery Amazonfresh has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to strategic competitive environment developments
– As AmazonFresh: Rekindling the Online Grocery Market HBR case study mentions - Grocery Amazonfresh takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Low market penetration in new markets
– Outside its home market of Grocery Amazonfresh, firm in the HBR case study AmazonFresh: Rekindling the Online Grocery Market needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study AmazonFresh: Rekindling the Online Grocery Market that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case AmazonFresh: Rekindling the Online Grocery Market can leverage the sales team experience to cultivate customer relationships as Grocery Amazonfresh is planning to shift buying processes online.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Grocery Amazonfresh supply chain. Even after few cautionary changes mentioned in the HBR case study - AmazonFresh: Rekindling the Online Grocery Market, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Grocery Amazonfresh vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Grocery Amazonfresh is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study AmazonFresh: Rekindling the Online Grocery Market can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study AmazonFresh: Rekindling the Online Grocery Market, in the dynamic environment Grocery Amazonfresh has struggled to respond to the nimble upstart competition. Grocery Amazonfresh has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Grocery Amazonfresh has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - AmazonFresh: Rekindling the Online Grocery Market should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, Rory McDonald, Clayton M. Christensen, Robin Yang, Ty Hollingsworth suggests that, Grocery Amazonfresh is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study AmazonFresh: Rekindling the Online Grocery Market has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Grocery Amazonfresh 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Grocery Amazonfresh has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities AmazonFresh: Rekindling the Online Grocery Market | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study AmazonFresh: Rekindling the Online Grocery Market are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Grocery Amazonfresh to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Grocery Amazonfresh to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Grocery Amazonfresh can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Grocery Amazonfresh has opened avenues for new revenue streams for the organization in the industry. This can help Grocery Amazonfresh to build a more holistic ecosystem as suggested in the AmazonFresh: Rekindling the Online Grocery Market case study. Grocery Amazonfresh can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Grocery Amazonfresh can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Grocery Amazonfresh can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Grocery Amazonfresh can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Using analytics as competitive advantage
– Grocery Amazonfresh has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study AmazonFresh: Rekindling the Online Grocery Market - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Grocery Amazonfresh to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Grocery Amazonfresh in the consumer business. Now Grocery Amazonfresh can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Grocery Amazonfresh in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Grocery Amazonfresh is facing challenges because of the dominance of functional experts in the organization. AmazonFresh: Rekindling the Online Grocery Market case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Grocery Amazonfresh can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Grocery Amazonfresh can use these opportunities to build new business models that can help the communities that Grocery Amazonfresh operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Loyalty marketing
– Grocery Amazonfresh has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Grocery Amazonfresh can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats AmazonFresh: Rekindling the Online Grocery Market External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AmazonFresh: Rekindling the Online Grocery Market are -
Regulatory challenges
– Grocery Amazonfresh needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
Increasing wage structure of Grocery Amazonfresh
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Grocery Amazonfresh.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Grocery Amazonfresh can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Grocery Amazonfresh can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study AmazonFresh: Rekindling the Online Grocery Market .
Shortening product life cycle
– it is one of the major threat that Grocery Amazonfresh is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study AmazonFresh: Rekindling the Online Grocery Market, Grocery Amazonfresh may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Technology acceleration in Forth Industrial Revolution
– Grocery Amazonfresh has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Grocery Amazonfresh needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Grocery Amazonfresh business can come under increasing regulations regarding data privacy, data security, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Grocery Amazonfresh with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Grocery Amazonfresh can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Grocery Amazonfresh in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on Grocery Amazonfresh demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Weighted SWOT Analysis of AmazonFresh: Rekindling the Online Grocery Market Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study AmazonFresh: Rekindling the Online Grocery Market needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study AmazonFresh: Rekindling the Online Grocery Market is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study AmazonFresh: Rekindling the Online Grocery Market is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of AmazonFresh: Rekindling the Online Grocery Market is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Grocery Amazonfresh needs to make to build a sustainable competitive advantage.