Case Study Questions on Amazon

1. Identify the Five-Component model as it relates to Amzon Case.

2. Identify instances of how each of the 4 critical skills could be exhibited by Amazon employees.

MEI: a Strategy and information Systems :1: has been so successful. Singing Valley is 90 percent occupied exceptduring the \"shoulder seasons\" (November. after the leaves . bangs and before the snow arrives. and late April. when winter I sports areiinished but the snow is still on the ground}. Singing Valley's owners want to increase revenue. but be- cause the resort is nearly always full and because its rates are already at the top of the scale. it cannot do so via occupancy revenue. Thus. over the past several years it has focused on up- seiling to its clientele activities such as list-fishing. river rafting. cross-country skiing. snowshoeing. art lessons. yoga and other exercise classes. spa services. and the like. To increase the sales of these optional activities. Singing Valley prepared in-room marketing materials to advertise their availability. Additionally. it trained all registration personnel on techniques of casually and appropriately suggesting such activi- ties to guests on arrival. . . The response to these promotions was only mediocre. so Singing Valley's management stepped up its promotions. The first step was to send email to its clientele advising them of the activities available during their stay. An automated system pro- duced emails personalized with names and personal data. Unfortunately. the automated email system' backred. Immediately upon its execution. Singing Valley management received numerous complaints. One long-term customer ob- jected that she had been coming to Singing Valley for 7 years and asked if they had yet noticed that she was conned to a wheelchair. If they had noticed. she said. why did they send her a personalised invitation for a hiking trip? The agent of another famous client complained that the personalized email was sent to her client and her husband, when anyone who had turned on a TV in the past 6 months knew the two of them were involved in an exceedingly acrinionidus divorce. Yet an- other customer complained that, indeed. he and his wife had vacationed at Singing Valley 3 years ago. but he had not been :here since. To his knowledge. his wife had not been there. ei- ;her. so he was puzzled as to why the email referred to their visit last winter: He wanted to know if. indeed. his wife had recently been to the resort. without him. Of course. Singing Valley had no way of knowing about customers it had insulted who never complained. - During the time the automated email system was opera- tional. sales of extra activities were up 15 percent. However. the I strong customer complaints conflicted with its competitive strat- egy so, in spite of the extra revenue. Singing Valley stopped the automated email system. sacked the vendor who had developed it. and demoted the Singing Valley employee who had brokered the system. Singing Valley was left with the problem of how to increase its revenue. Your team's task is to develop two innovative ideas for solv- ing Singing Valley's problem. At the minimum. include the fol- lowing in your response: 7 a. An analysis of the five forces of the Singing Valley market. Make and justify any necessary assumptions about their market. b. A statement of Singing Valley's competitive strategy. . A statement of the problem. Recall from Chapter 2 that a problem is a perceived difference between what is and what ought to be. If the members of your group have diii'erent perceptions of the problem, all the better. Use a collabora- tive process to obtain the best possible problem description to which all can agree. d. Document in a general way (like the top row of Figure 3-10) the process of upseliing em activity. e. Develop two innovative ideas for solving the Singing Valley problem. For each idea. provide: - Abriei' description of the idea. ' - Aprocessdiagramlfiikel'igureit-llhi' the idea. Figure 3-1] was produced using Microsoft Visio; if you have access to that product. you'll save time and have a better result if you also use it. ' A description of the infonnation system needed to imple- ment the idea. f. Compare the advantages and disadvantages of your alternatives in part c and recommend one of them for implementation. ' O M The Amazon of Innovation )1: Cyber Monday. December 1. 2014. Aniazonnom customers attend more than 18 toys per second. And almost 60 percent of imazon's holiday shoppers bought gifts using a mobile device. This contributed to a 20 percent increase in Amazon's total an- Lual sales of $893. Amazon's last order for the holiday season was placed on December 24 at 10:24 PM and was delivered at 1:06 PM just in time for Christmas. (Some of Amazon's major nnovations are listed in Figure 3-18.) You may think of Amazon as simply an online retailer. and that is indeed where the company achieved most of its success. To do this. Amazon had to build enormous support- ing infrastructurejust imagine the information systems and fulfillment facilities needed to ship toys ordered at a rate of 1 8 per second. That infrastructure. however. is needed only dur- ing the busy holiday season. Most of the year. Amazon is left with excess infrastructure capacity. Starting in 2000. Ama- zen In it ' tern 6. PI es s: tern you: lines in 19 Case Study 3 109 110 CHAPTER 3 Strategy and Information Systems First online Amazon.com Prime bookseller know that Amazon played any role at all. You can also sell that FBA Costs 16 - Alexa Web Information Service - Launch of Amazon.com same inventory using Amazon's retail sales applications. Associates Program-sellers Kindle Amazon Web Services (AWS) allow organizations to lease Order handling (per order) $1.00 earn revenue by featuring - Amazon.com Web time on computer equipment in very flexible ways. Amazon's Amazon.com products Services enhance- Pick & pack (per item) $1.04 on their Web sites ments and upgrades Elastic Cloud 2 (EC2) enables organizations to expand and con- Weight handling (per Between $0.50 for less than 1 -1-Click TM Shopping - Kindle 2 and tract the computer resources they need within minutes. Amazon Kindle DX has a variety of payment plans, and it is possible to buy com- pound) pound, to $1.59 plus $0.39 per - Amazon.com Advantage pound for items over 2 pounds Kindle Program-self-service puter time for less than a penny an hour. Key to this capability consignment sales for media applications for iphone and is the ability for the leasing organization's computer programs Storage (cubic foot per $0.51 between January and to interface with Amazon's to automatically scale up and scale month September and $0.68 from - Amazon.com ipod Touch auctions-competitor - Kindle for - Fire TV down the resources leased. For example, if a news site publishes October to December to eBay that failed Mac, iPad, Prime Now a story that causes a rapid ramp-up of traffic, that news site can, Android and Web programmatically, request, configure, and use more computing resources for an hour, a day, a month, whatever. With its Kindle devices, Amazon has become both a ven- If goods are sold via Amazon.com, Amazon uses its own 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 dor of tablets and, even more importantly in the long term, a information systems to drive the order fulfillment process. How- vendor of online music and video. And to induce customers to ever, if the goods are sold via an FBA customer's sales chan- -Amazon.com Associates - WorkMail Web Services-gives buy Kindle apps, in 2013 Amazon introduced its own currency, nel, then the FBA customer must connect its own information Amazon Home Services developers access to Amazon Destinations Amazon Coins. In 2014, Amazon opened a 3D printing store systems with those at Amazon. Amazon provides a standard- Amazon.co L Amazon Coins from which customers can customize their own toys, jewelry, ized interface by which this is done called Amazon Market- Search Inside the BookTM Kindle Paperwhite dog bones, and dozens of other products. It also made a push to place Web Service (MWS). Using Web-standard technology (see Amazon.com Web Kindle Fire HD provide video services by introducing Fire TV.12 Chapter 6), FBA customers' order and payment data are directly Services (AWS)-leasing Amazon Instant Video linked to Amazon's information systems. of computer infrastructure In 2015 Amazon introduced WorkMail, a potential cloud- based replacement for Microsoft Exchange. It also introduced FBA enables companies to outsource order fulfillment to Figure 3-18 Borders Group Alliance and Target Stores Alliance Amazon Home Services (local professional services), Amazon Amazon, thus avoiding the cost of developing their own pro- Innovation at Amazon - Launches Marketplace-sellers Destinations (travel site), and Amazon Dash (a one-button reor- cesses, facilities, and information systems for this purpose. Source: Data from Amazon. com: http://phx.corporate-ir.net/ can sell goods on the Amazon.com dering device). 13 phoenix.zhtml?c=176060&p=irol- Web site and Amazon.com corporate Timeline, accessed June 2013. can fulfill the orders Finally, Jeff Bezos announced in 2014 that Amazon was experimenting with package delivery using drones, a service QUESTIONS called Prime Air. * In March 2015, the U.S. Federal Aviation 3-4. Based on the facts presented in this case, what do you zon began to lease some of that capacity to other companies. Today, it's hard to remember how much of what we take Administration gave Amazon permission to start testing its think is Amazon.com's competitive strategy? Justify In the process, it played a key role in the creation of what are for granted was pioneered by Amazon. "Customers who bought drones in the United States. But drone delivery is something your answer. termed cloud services, which you will learn about in Chapter this, also bought that;" online customer reviews; customer rank- that will happen in the future; consider a business service that 3-5. Jeff Bezos, CEO of Amazon.com, has stated that 6. For now, just think of cloud services as computer resourc ing of customer reviews; books lists; Look Inside the Book; auto- Amazon.com is offering right now. es somewhere out in the Internet that are leased on flexible matic free shipping for certain orders or frequent customers; and the best customer support is none. What does that mean? terms. Kindle books and devices were all novel concepts when Amazon Fulfillment by Amazon (FBA) Today, Amazon's business lines can be grouped into three introduced them. 3-6. Suppose you work for Amazon or a company that major categories: Amazon's retailing business operates on very thin margins. Fulfillment by Amazon (FBA) is an Amazon service by which Products are usually sold at a discount from the stated retail price, other sellers can ship goods to Amazon warehouses for stock- takes innovation as seriously as Amazon does. What Online retailing ing, order packaging, and shipment. FBA customers pay a fee for do you suppose is the likely reaction to an employee Order fulfillment and 2-day shipping is free for Amazon Prime members (who pay who says to his or her boss, "But, I don't know how to an annual fee of $99). How does it do it? For one, Amazon drives the service as well as for inventory space. Amazon uses its own do that!"? Cloud services its employees incredibly hard. Former employees claim the hours inventory management and order fulfillment business processes Consider each. are long, the pressure is severe, and the workload is heavy. But and information systems to fulfill the FBA customers' orders. 3-7. Using your own words and your own experience, what Amazon created the business model for online retailing. It be- what else? It comes down to Moore's Law and the innovative use FBA customers can sell their goods on Amazon.com, sell skills and abilities do you think you need to have to gan as an online bookstore, but every year since 1998 it has added of nearly free data processing, storage, and communication. them via their own sales channels, or both. If the FBA customer thrive at an organization like Amazon? new product categories. The company is involved in all aspects of In addition to online retailing, Amazon also sells order ful- sells on Amazon.com, Amazon will provide customer service for online retailing. It sells its own inventory. It incentivizes you, via order processing (handling returns, fixing erroneously packed 3-8. What should UPS and FedEx be doing in response to fillment services. You can ship your inventory to an Amazon Amazon.com's interest in drone delivery? the Associates program, to sell its inventory as well. Or it will help warehouse and access Amazon's information systems just as if orders, answering customer order queries, and the like). you sell your inventory within its product pages or via one of its they were yours. Using technology known as Web services (dis- The costs for Fulfillment by Amazon depend on the type and 3-9. Summarize the advantages and disadvantages for brick consignment venues. Online auctions are the major aspect of on- cussed in Chapter 6), your order processing information systems size of the goods to be processed. The FBA fees for standard-size and-mortar retailers to sell items via Amazon.com. ine sales in which Amazon does not participate. It tried auctions can directly integrate, over the Web, with Amazon's inventory products as of February 2015 are shown in the table. Would you recommend that they do so? in 1999, but it could never make inroads against eBay.1 1 fulfillment, and shipping applications. Your customers need not