Drawing on relevant literature, analyse the claimed benefits of a web-based business strategy;
Using relevant strategic choice models, identify and explain the ways in which the company could compete and the key strategic decisions that it will need to make;
Identify and critically explain the strategic implementation challenges the company will need to address to turn the e-commerce strategy into a reality.
The current assignment has considered the case of Amazon.co.uk, the e-commerce organization. In this regard, the strategic issues will be discussed along with justified recommendations. Furthermore, the critical analysis will be demonstrated for explaining the significance of the integrational thinking for understanding the strategy and its formation in the complex organizations. The assignment will also focus on the development of the ability for the recognition of the strategic issues and designing the appropriate courses of action. The synthesis of knowledge has been gained from different business modules to generate a comprehensive understanding to underpin the competitive advantage. Finally the critical analysis will be provided on the strategic position and the interconnected activities of POM (Production and Operations Management) in the organizations.
Critical analysis of the case in terms of the strategic issues and justified recommendations:
Logistics:
The logistics is the crucial element to provide the significant customer service. However, it has become the main challenge for the renowned e-commerce player Amazon, since the UK market is too large and fragmented with the medium logistics infrastructure. This has highly forced this e-commerce organisation to build its own logistics system at time outlay and enormous cost. Considering the view of Alshibly and Chiong (2015), Amazon Logistics was set up around two years ago in the UK. Building such logistic system from the scratch requires the enormous cost and time investment. Furthermore, it has three major implications. The first is the substantial impact of Amazon’s profit volume, the second is the delivering the crucial competitive advantage against the new global and local entrants. On the other hand, according to Barnes (2007), the third is that it opens the new business opportunity for the e-commerce players by allowing the competitors for using the delivery network for free. Amazon encourages the small business firms to utilise the marketplace or the cloud computing service. For example, more than 50 e-commerce firms in Russia have already introduced the online retailer Ozon.Rus’ strong courier network.
Digital infrastructure:
The digital infrastructure also plays the vital role in sustaining and establishing the e-commerce operations of Amazon in emerging UK market (Chaffey, 2011). The challenge is not limited to the physical infrastructure alone. It is also associated with the digital infrastructure. As the internet penetration is rapidly increasing in the UK market, the majority of the UK population also has the internet access. However, Barnes (2007) argued that few countries of the Asian market like Singapore, Malaysia, India has the trend of lower internet penetration. However, the linking of Amazon’s businesses for creating the centralised systems for the e-commerce is generating its own challenges. For example, Cleartrip when first started the online travel services in India, it was not the part of the Global Distribution System (GDS). According to Dietz (2006), the GDS is the computerised reservation network, which acted as the single point of access for the reservation of the airline ticket worldwide. As a result, the customers could get easier access of the total inventory access for all airlines.
Payment:
Due to the limited banking and the credit card penetration, the cash-based societies are generated. On the other hand, Ke and Zhang (2009) argued that sometimes, few consumers also have the lack of consumer trust in the online merchants. This has prompted various leading e-commerce firms like Flipkart, Amazon to offer the cash collection on delivery (COD). Considering the opinion of Kauffman (2009), the COD approach imposes the significant financial cost for the e-commerce firms like Amazon in terms of cash handling, labour and the higher return of the purchased items. On the other hand, Diniz, Birochi and Pozzebon (2012) argued that the COD can solve the strategic issue in terms of theft and payment thereby substantially increases the cost. This had resulted new payment gateways, which allow the young customers for buying the prepaid cards at the retail outlets. These cards can be later used for purchasing the online games from Amazon. Amazon has recently launched the installation of the delivery lockers at the convenient store location for providing the service in the United States.
Price Sensitive customers:
The per capita income of the majority of the consumers in the UK market is not equal also in the developed countries like UK, Singapore and United States. This mentality has compounded by the Amazon’s e-commerce offers to the price-sensitive shoppers to compare the price online basis. The online retailers of e-commerce face the extreme price pressure not only for competing in the websites, but also from the offline stores. However, Kim (2006) argued that the offline stores also run in such low cost and highly efficient operations that the powerful organisations also found it challenging issue in the business. The e-commerce firms offer often free shipping for competing with the local merchants (Keskin and Taskin, 2015). These firms also introduce the flexible return policies to make more palatable online services to the specific price sensitive consumers for attracting.
To overcome these strategic issues, the e-commerce firm Amazon is required to invest heavily in the logistics and the infrastructure (www.statista.com, 2016). These are helpful to enhance the fixed cost. Building the offline presence can earn the consumer trust for managing the highly price sensitive customers. Despite of the challenges, the promise of potentially large valuations and a rapidly growing market could rise the increased score for the e-commerce player like Amazon.
Importance of the integrational thinking in understanding the strategy, formation and development in complex organizations:
Since the majority of the e-commerce organisations are facing logistics and shipping problem, it has become prime time FOR the marketers integrating e-commerce business with other functionalities to serve customers in a flawless way. In this context, Kauffman (2009) stated that the integrational thinking could help the e-commerce firms making real time integration through a large ERP platform. However, the integration becomes too complex in the bigger organisation, as it comprised of different departments, which starts from payment gateways, shipping, order fulfilment, product inventory and final communication to the customers (Kim, 2006). The integrational thinking could help the firms, managing proper coordination among different departments in the global business context.
Payment gateway integration and strategy formulation:
The transaction failure in the e-commerce companies such as eBay, Amazon, and Flipkart has created customer issues, due to which the tendency to switch to emerging brands is increasing rapidly. Considering the fact, Dietz (2006) stated that e-commerce payment gateway integration could enable the marketers resolving customer payment issues in a faster way. Eventually, higher brand sustainability can be managed.
Real time shipping integration:
Amazon can be taken as a good example of this integration, as it is integrated with its own logistics as well as logistics firms such as FedEx, UPS, etc. Once the customer places an order, it could increase the convenience to send instant messages regarding the delivery date. Formulation of the shipping integration has helped Amazon to increase its sales volume up to 25% in the last year (www.amazon.co.uk, 2016). Additionally, the shipping integration has also enabled Flipkart increasing margins on the shipping cost by 12.5%. Eventually, the overall profit margin has been increased accordingly.
Order fulfilment integration:
Order fulfilment integration reduces the manual labour options from the firm, thereby enhances the operational efficacy (Chaffey, 2011). Statistical data show that Amazon has experienced reduced sales volume in the year 2009, due to the lack of adequate integration between the UPS and FedEx logistics services. Mass customer complaints generated and many customers switched over to the brands like Flipkart, eBay, etc. Hence, integration over the order fulfilment platform needs to be made so that the people and systems associated with shipping can be made fully coordinated, which in turn, could speed up the warehousing communication as well.
Product inventory integration:
Managing product diversity has become a crucial agenda of the present e-commerce organisations. At the same time, all product information needs to be integrated with the website information, so that customers could choose and place the order as per their requirement. Supporting to this fact, Barnes (2007) stated that Amazon has created a custom selling point option for serving global marketers in the online business process. This strategy has helped the Amazon synchronising product and inventory data to potentially synchronise with the website.
The custom point of sale (POS) or the ERP system integration saves time and money by reducing the administration time employed by the workers. The database synchronisation helps to fetch data as and when required and ensures data accuracy as well. Malaga (2011) also indicated that expectation of the customers can also set in accordance with the price and product availability as well. Hence, the overall integration process could improve the efficacy of the e-commerce business, thereby improving the long term sustainability as well.
Customer information and communication integration:
The customer information and communication process improves the overall functionality for B2B e-commerce systems, by employing ERP framework. The custom requirement for B2B e-commerce employs ERP in all modules, which pushes the customers to visit the website frequently. This type of data consists of company name, specific account number, and email id for customers, zip code, contacts, pricing discounts and shipping address. Considering the fact, Mamaghani (2013) stated that Flipkart and Amazon has employed ERP modules, which has enabled the firm addressing all customer requirements within a lesser time span and the order fulfilment process has also become typically flexible as well.
The customers’ accessibility in the login page through email address and outing items in the cart has increased the customer freedom within the website of Amazon. Only, the billing information needs to be provided by the customers. The ERP integration has made the order fulfilment process so flexible that all booking details are automatically updated and sends to the packaging and shipping department (www.wiley.com, 2016). Finally, the customers can look into the order placing details and the tentative delivery date by viewing the website of the e-commerce firm as well. All in all, it has been identified that the integrational thinking is of sophisticated level, which enhances operational flexibility for the company. Thus, the strategy formulation and development might become easier for the operating firm.
Evaluation and development of the ability for identifying the strategic issues and designing the appropriate course of action:
The e-commerce activities by Amazon till date have been really experimental. However, several crucial issues have been emerged which can be recognised for the purpose of the promotion for future analysis. These strategic issues actually vary depending on the type of product and services, the e-commerce organisations sell online. According to Malaga (2011), the online selling pattern, approach to online selling, resource expansion and the online customer base are also the crucial parameters for the development of the strategic issues. The emerging issue in this regard is the pattern of the sales. The total sales level to date varies between Amazon and other e-commerce firms. The majority of the e-commerce partners experience the erratic sales pattern like extremely high in one month and drop in the next month. Such erratic sales pattern might attribute two factors. The major issue of this activity is not creating the revenue. However, Mallor et al. (2009) argued that the primary focus of the private-sector online selling organisations is to make profit. In this regard, the e-commerce firms put more stress on marketing the products for gaining competitive advantage in the marketplace. However, the major issue is that the e-commerce firms like Amazon might not be able to put enough capital for marketing the products in the marketplace. Without implementing the strategic marketing technique, the potential customers may not be able to know the product’s existence (Yang, 2011). So the customers will not buy the products online. Hence, the sales pattern of e-commerce firms depends on the customers’ online ad-hoc purchasing pattern. Thus the e-commerce firms are required to take the appropriate course of action for identifying the purchasing pattern of the online customers. On the other hand, the adequate resources can be put in developing the most effective marketing techniques and strategies for the product being offered.
The impact of the internet on the marketing mix elements and the competitive forces are the crucial ways to gain the synthesis of knowledge to achieve the competitive advantage in the e-business strategies. The customers can easily collect the information through the internet regarding the products and services (Miller and Cross, 2012). As a consequence, the consumers rely on the product retailers and the suppliers for aiding in the search. As a result, the suppliers and retailers take total advantage of this situation and charges higher prices (Noyes and MacInnes, 2006). The consumers end up with paying more and also often don’t receive the desired product. In case of the e-commerce market, the consumers can do the complete search regarding the product offerings. This is possible at no cost as made virtually. The e-commerce firms are forced to reduce the prices, as the customers can compare the prices easily and find the close substitutes e-commerce companies. Thus , the companies in the e-commerce can achieve the competitive advantage than the physical market.
The innovation in the product lines and introducing the niche markets can generate the competitive advantage in the e-commerce players (www.marketwatch.com, 2016). By using the internet, the e-commerce companies can directly access the consumer’s preferences, needs and trust regarding the product and services. Considering the view of Stuart, Sarow and Stuart (2007), the e-commerce companies can also collect the information regarding the new innovative products through the small segments from the market. However, Park et al. (2011) argued that the customer-centric strategy can act best with the innovation or niche products. Through the creation of the products which meets the requirements of the consumers in the niche market, the e-commerce companies can easily command over the higher prices. Thus the product-centric strategy pushes the products directly to the consumers. Thus, the customer-centric strategy helps to pull the information from the customers for improving and customising the products. This approach is highly beneficial for the e-commerce organisation to build the competitive business advantage.
Strategic positioning of Amazon:
The inventory turnover of Amazon has been sequentially increased to 9.15% in the year 2013, which has been identified remarkable strategic brand positioning in the global e-commerce business market. As per the financial data published by CSI Market, the inventory growth has been accounted for 11.23%, while the cost of sales growth has been identified 14.55% in the year 2015, 30th September (www.amazon.co.uk, 2016). However, the average inventory processing period has been found 40, which needs to be revised by Amazon. Analysing all the perspectives, it has been identified that Amazon has lost its strategic positioning, although in terms of inventory turnover ratio Amazon has been ranked number 1. Radford (2014) also indicated that the sector wise ranking has been acquired by Amazon is 8. On the other hand, the sales volume of the Amazon has been increased by 35% in the year 2014, which is also remarkable value in the e-commerce business portfolio. The recent mobile application of the Amazon has also increased customer purchase frequency by 48%, due to which the past losses met by Amazon has been replenished by the current revenues. Moreover, if Amazon could put inventory turnover ratio up to 51.16%, the firm can be termed as highest strategic positioning achiever in the global e-commerce market.
Interrelated functions of production and operation management:
The production management functions consist of selection of product design, production process, right production capacity and adequate production planning as well. Yang (2011) also indicated that the e-commerce chain has a significant relationship with the production management, as the right production planning helps to manage production control. It is a proven fact that Amazon has increased its quality and cost control by 31%, employing right inventory control and its optimum maintenance as well (csimarket.com/stocks, 2016). Out of all these elements, the most vital part is the production planning, as it helps to manage adequate routing, scheduling of the product to the global consumers. Depending on the planning, e-commerce firms such as Amazon, Flipkart, update the website information related to the availability of the product.
On the other hand, the operation management functions are termed as ethically responsible management of an operating system, which helps firm to meet its strategic objectives. The inputs, processing and the outputs streamline the business competitiveness with the operational system. The strategic initiatives such as managing facility design, potential layout, sufficient material management, moreover the new logistic system unit operated by Amazon has increased the operational flexibility across all global regions. Additionally, Alshibly and Chiong (2015) mentioned that technological the operational management of Amazon has employed equal responsibility to all departmental managers following transformational process, so that modification of the services could satisfy all types of consumer needs. However, apart from the B2C system, the functionality of the operation management impacts on the B2B scenario also (allsupplychain.com, 2016). The operational functionality of the product manufacturers could improve the transaction frequency and the warehouse of the e-commerce firms could also be full of up to date products. Thus, the customer searching can also be fruitful due to the full packaging of differentiated products and the brand loyalty might get influenced. Hence, it can be found that production and operation management is interlinked with each other and one unit’s performance improvement influences another’s efficiency also. Thus, the strategic brand positioning of the Amazon can be improved by employing all interrelated functions of the production and operation management system in the e-commerce industry.
Impact of group work on individual:
From the group work on the e-commerce business of Amazon, my knowledge has been enriched regarding the benefits of the web-based business strategy. The web-based business is more efficient and easy to generate revenue within little time. However, few strategic issues like logistics, digital infrastructure, payment gateway and the price sensitive customers are the factors which can create severe challenges for the e-commerce business. From the group assignment, I have gained knowledge about the relevant strategic models like Porter’s five force, SWOT analysis. Through these models the e-commerce companies can compete and take the crucial strategic decisions for sustaining in the business environment. From the group work, the strategic implementation challenges have also been recognised for the e-commerce strategy. The added cost of the retailers, the engrossing delivery cost are the major issues during applying the membership strategy in Amazon. As Amazon is not associated with the bog capital, hence Amazon Prime has also faced the free shipping delivery issue. Another challenge is the supplier or the manufacturers of amazon are capable enough to open own online business with own capacity. Hence, it is considered as the major challenge for the eimplementation of e-commerce strategy for this company.
Conclusion:
The overall study indicates that logistics issue, digital infrastructure and higher pricing are the basic strategic issues of Amazon. As the market competitiveness has increased rapidly, lack of convenience factors has reduced the sales growth of Amazon in a significant way. Hence, managing payment gateway integration and strategy formulation, the real time shipping integration, order fulfilment integration, etc. have been found as the core catalyst for improving the operational flexibility of Amazon’s operation. However, the improved customer communication has been identified as the result of managing integrated operations in the e-commerce industry. The strategic issue such as fluctuating sales volume has been identified the reason of customers’ changing purchase intention. It has been analysed that it is high time to Amazon for improving its operational pattern, so that more customers can be attracted towards the firm. This can be done by employing right integration between the production and operation management process employed in the e-commerce business environment.
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