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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing commodity prices, geopolitical disruptions, there is backlash against globalization,
talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, 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 -
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.
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.
Effective Research and Development (R&D)
– Grocery Amazonfresh has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study AmazonFresh: Rekindling the Online Grocery Market - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Superior customer experience
– The customer experience strategy of Grocery Amazonfresh in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
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.
Highly skilled collaborators
– Grocery Amazonfresh has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in AmazonFresh: Rekindling the Online Grocery Market HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Sustainable margins compare to other players in Technology & Operations industry
– AmazonFresh: Rekindling the Online Grocery Market firm has clearly differentiated products in the market place. This has enabled Grocery Amazonfresh to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Grocery Amazonfresh to invest into research and development (R&D) and innovation.
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 -
High cash cycle compare to competitors
Grocery Amazonfresh has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– After analyzing the HBR case study AmazonFresh: Rekindling the Online Grocery Market, it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Grocery Amazonfresh has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of Grocery Amazonfresh products
– To increase the profitability and margins on the products, Grocery Amazonfresh needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study AmazonFresh: Rekindling the Online Grocery Market, is just above the industry average. Grocery Amazonfresh needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study AmazonFresh: Rekindling the Online Grocery Market, it seems that the employees of Grocery Amazonfresh don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
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 -
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Grocery Amazonfresh can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Developing new processes and practices
– Grocery Amazonfresh can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
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.
Manufacturing automation
– Grocery Amazonfresh can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Grocery Amazonfresh can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. AmazonFresh: Rekindling the Online Grocery Market suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Grocery Amazonfresh to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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 -
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 .
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Grocery Amazonfresh will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
Environmental challenges
– Grocery Amazonfresh needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Grocery Amazonfresh can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
High dependence on third party suppliers
– Grocery Amazonfresh high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Grocery Amazonfresh in the Technology & Operations sector and impact the bottomline of the organization.
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.
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.
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.