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 - – technology disruption, talent flight as more people leaving formal jobs, there is backlash against globalization, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies,
competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, 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 -
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.
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.
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.
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.
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.
Ability to recruit top talent
– Grocery Amazonfresh is one of the leading recruiters in the industry. Managers in the AmazonFresh: Rekindling the Online Grocery Market are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Grocery Amazonfresh has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in AmazonFresh: Rekindling the Online Grocery Market Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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.
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.
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.
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.
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 -
Slow decision making process
– As mentioned earlier in the report, Grocery Amazonfresh has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Grocery Amazonfresh even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Increasing silos among functional specialists
– The organizational structure of Grocery Amazonfresh is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Grocery Amazonfresh needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Grocery Amazonfresh to focus more on services rather than just following the product oriented approach.
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.
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.
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.
Need for greater diversity
– Grocery Amazonfresh has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the AmazonFresh: Rekindling the Online Grocery Market HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Grocery Amazonfresh has relatively successful track record of launching new products.
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.
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 -
Learning at scale
– Online learning technologies has now opened space for Grocery Amazonfresh to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
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.
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.
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.
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.
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.
Leveraging digital technologies
– Grocery Amazonfresh can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
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.
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.
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.
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 -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Grocery Amazonfresh.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Grocery Amazonfresh needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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.
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.
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.
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.
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.
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.
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.
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.
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 .
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 .
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.