Case Study Description of Amazon.com: Supply Chain Management
By early 2018, Seattle-based Amazon.com Inc. (Amazon), one of the world's most valuable companies and the largest online retailer in the world, had grown dramatically since its beginnings in 1994. The company that had started as an online bookseller now sold merchandise and digital content in more than 30 categories, including electronics, clothing, books, furniture, and streaming music and video. It sold its own products and listed products for sale by over two million third-party sellers. It provided on-demand cloud-computing services and offered fulfillment and shipping services to businesses, and it had recently entered grocery retailing through its purchase of Whole Foods Market. With 2017 shipping costs that exceeded $21 billion, the company was working to establish greater control over its supply chain network and capabilities. Amazon was selling a huge variety of products in many formats, and the chief executive officer needed to determine how to structure the company's supply chain in order to support its strategy and growth objectives. What supply chain capabilities would Amazon need as its business model continued to evolve?
Swot Analysis of "Amazon.com: Supply Chain Management" written by P. Fraser Johnson, Ken Mark includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Amazon Supply facing as an external strategic factors. Some of the topics covered in Amazon.com: Supply Chain Management case study are - Strategic Management Strategies, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Amazon.com: Supply Chain Management casestudy better are - – increasing commodity prices, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy,
there is backlash against globalization, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Amazon.com: Supply Chain Management
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Amazon.com: Supply Chain Management case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Amazon Supply, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Amazon Supply 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 Amazon.com: Supply Chain Management can be done for the following purposes –
1. Strategic planning using facts provided in Amazon.com: Supply Chain Management case study
2. Improving business portfolio management of Amazon Supply
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 Amazon Supply
Strengths Amazon.com: Supply Chain Management | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Amazon Supply in Amazon.com: Supply Chain Management Harvard Business Review case study are -
Highly skilled collaborators
– Amazon Supply 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 Amazon.com: Supply Chain Management HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Amazon Supply 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 P. Fraser Johnson, Ken Mark 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.
Training and development
– Amazon Supply has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Amazon.com: Supply Chain Management 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.
Operational resilience
– The operational resilience strategy in the Amazon.com: Supply Chain Management 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.
Learning organization
- Amazon Supply is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Amazon Supply is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Amazon.com: Supply Chain Management Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Technology & Operations industry
– Amazon.com: Supply Chain Management firm has clearly differentiated products in the market place. This has enabled Amazon Supply to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Amazon Supply to invest into research and development (R&D) and innovation.
High brand equity
– Amazon Supply has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Amazon Supply to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Amazon Supply is one of the leading recruiters in the industry. Managers in the Amazon.com: Supply Chain Management are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Amazon Supply in the sector have low bargaining power. Amazon.com: Supply Chain Management has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Amazon Supply to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Amazon Supply 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 Amazon Supply 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.
Successful track record of launching new products
– Amazon Supply has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Amazon Supply has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Amazon.com: Supply Chain Management | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amazon.com: Supply Chain Management are -
Workers concerns about automation
– As automation is fast increasing in the segment, Amazon Supply needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Products dominated business model
– Even though Amazon Supply 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 - Amazon.com: Supply Chain Management should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Amazon Supply 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.
High cash cycle compare to competitors
Amazon Supply 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.
Capital Spending Reduction
– Even during the low interest decade, Amazon Supply 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Amazon.com: Supply Chain Management 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 Amazon Supply has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study Amazon.com: Supply Chain Management, 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.
Slow decision making process
– As mentioned earlier in the report, Amazon Supply 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. Amazon Supply 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.
Low market penetration in new markets
– Outside its home market of Amazon Supply, firm in the HBR case study Amazon.com: Supply Chain Management needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Amazon Supply 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.
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 Amazon Supply supply chain. Even after few cautionary changes mentioned in the HBR case study - Amazon.com: Supply Chain Management, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Amazon Supply vulnerable to further global disruptions in South East Asia.
Opportunities Amazon.com: Supply Chain Management | 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 Amazon.com: Supply Chain Management are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Amazon Supply 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, Amazon Supply is facing challenges because of the dominance of functional experts in the organization. Amazon.com: Supply Chain Management 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.
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. Amazon Supply 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. Amazon Supply 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Amazon Supply 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 Amazon Supply to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Amazon Supply 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 Amazon.com: Supply Chain Management - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Amazon Supply to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Amazon Supply has opened avenues for new revenue streams for the organization in the industry. This can help Amazon Supply to build a more holistic ecosystem as suggested in the Amazon.com: Supply Chain Management case study. Amazon Supply can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Amazon Supply 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.
Manufacturing automation
– Amazon Supply 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.
Developing new processes and practices
– Amazon Supply 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Amazon Supply can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Amazon.com: Supply Chain Management, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Amazon Supply 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, Amazon Supply can use these opportunities to build new business models that can help the communities that Amazon Supply operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Building a culture of innovation
– managers at Amazon Supply 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.
Threats Amazon.com: Supply Chain Management External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Amazon.com: Supply Chain Management are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Amazon Supply 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Amazon Supply with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Amazon Supply 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 Amazon.com: Supply Chain Management .
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.
Increasing wage structure of Amazon Supply
– 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 Amazon Supply.
Stagnating economy with rate increase
– Amazon Supply 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.
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 Amazon Supply business can come under increasing regulations regarding data privacy, data security, etc.
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 Amazon Supply.
Shortening product life cycle
– it is one of the major threat that Amazon Supply is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Amazon Supply can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Amazon Supply 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
– Amazon Supply 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. Amazon Supply can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Weighted SWOT Analysis of Amazon.com: Supply Chain Management 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 Amazon.com: Supply Chain Management 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 Amazon.com: Supply Chain Management 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 Amazon.com: Supply Chain Management 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 Amazon.com: Supply Chain Management 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 Amazon Supply needs to make to build a sustainable competitive advantage.
