A Comprehensive Analysis of Amazon's Operations Management Strategies

Introduction
The organization selected for this research is Amazon, one of the biggest and most successful
online merchants in the world is Amazon. Jeff Bezos founded Amazon in 1994 as an online
bookshop. Since then, it has developed into a global e-commerce giant with operations in
over 17 nations. The foundation of Amazon's business strategy is giving customers access to
a large variety of goods at affordable rates with quick delivery, including anything from
groceries and furniture to books and gadgets. With a market valuation of over $1.6 trillion,
Amazon has emerged as a market leader in the e- commerce sector. Amazon competes in the
very dynamic and competitive retail industry. Due to internet merchants' ease and low
pricing, traditional brick-and-mortar establishments are now obliged to compete. Amazon
works in a very challenging and dynamic environment. Amazon is constantly pressured to
innovate and stay ahead since the market is so fiercely competitive. The internet and
technology have changed the retail business, and Amazon has had to keep ahead of the
competition to succeed (Alshmrani, 2021). Government regulations, customer requests for
speedier delivery, and the need to maintain profitability due to increased expenses further
pressures Amazon. Amazon is also being challenged increasingly by other internet merchants
like Walmart and Target. The report focuses mainly on customer service operations. In a
service company like Amazon, customer satisfaction is critical.

Methods and Tools

Automation and Robotics
Amazon has incorporated automation and robotics at its warehouses in line with Lean
Management principles which focus on eliminating waste and increasing efficiency.
Automated systems, such as Kiva robots,robotic arms, conveyor belts, and sorting machines,
are employed to enhance the speed and efficiency of order processing. The goal is to reduce
human labor, minimize errors, and meet the high demand for quick and accurate order
fulfillment in the rapidly growing ecommerce industry. From 2016 to 2018, Amazon trialed
its first automated store, Amazon Go, offering a new grocery shopping experience. The shops
make use of apps, sensors and other technologies to manage not only the shopping
experience, but the supply chain as well
Advanced Data Analytics and AI
Porter's Value Chain emphasizes technology development as a support activity that enhances
company’s primary activities. Amazon utilizes machine learning algorithms and big data
analytics to forecast demand, optimize pricing, and personalize customer experiences.
Amazon Web Services (AWS) provides a robust infrastructure for data processing and
storage. Tools like Amazon Redshift, SageMaker, and personalized recommendation engines
are used.

Advanced Supply Chain Management

Amazon has also implemented a sophisticated inventory management system to guarantee
that goods remain in stock and easily accessible to customers. This is supported by tools such
as Delivery drones, Amazon Prime Air, and a vast network of fulfillment centers, which
guarantees fast delivery times. Proper inventory management is a critical part of Amazon
product lifecycle management; with proper inventory management, it can make smart choices
about pricing and stock levels for each product. The Resource-Based View (RBV) framework
suggests that unique resources and capabilities, such as a well-integrated supply chain,
provide a competitive advantage.
Transportation and Logistics
Using a combination of independent contractors, third-party logistics suppliers, and its
delivery fleet, Amazon has improved its transportation network to make order delivery easier.
Overall, Amazon’s logistics and shipping system is designed to be efficient, cost-effective,
and reliable, with a focus on delivering packages to customers quickly and at a low cost. The
company continues to invest in and innovate its logistics and shipping operations, including
through the use of automation, AI, and other technologies.
Warehouse management
Amazon has also implemented lean principles in their warehouses to reduce waste and
improve productivity. For example, they have implemented a system called “chaos theory”
where products are not stored in a specific order but rather placed wherever there is available
space. This eliminates the need for excessive sorting and organizing, reducing waste and
improving productivity. Additionally, Amazon utilizes a system called “one-piece flow”
where products are moved through the warehouse in a continuous flow rather than being
stored in batches. This reduces the time and effort required to locate and retrieve products,
improving efficiency.
Customer-Centric Approach
Amazon’s strategy is heavily centered around customer satisfaction. Tools such as the
Amazon Prime membership, 1-Click ordering, and extensive customer review systems are
designed to enhance the customer experience. This customer-centric approach is facilitated
by tools like machine learning algorithms to provide personalized recommendations. By
collecting customer queries and feedback, analyzing customer data, implementing solutions,
and monitoring and tracking customer satisfaction, Amazon can provide customized solutions
that meet their needs. This leads to improved customer satisfaction, customer loyalty, and
overall customer experience. By publishing detailed reports on their customer service
performance, Amazon can ensure that customers have the information they need to make
informed decisions about their interactions with the company. This helps ensure that
customers trust Amazon and feel secure about their purchase decisions.
Amazon Skills and Competencies

To identify Amazon’s core skills and competencies the VRIO framework was utilized. In
this framework the following items were taken into consideration for each competency:
1. V - Valuable: if it provides customer value and competitive advantage
2. R - Rareness: if the competition does not possess it or possess it in a very inferior
level
3. I - Imitability: if it can be easily imitated by competitors
4. O - Organization: if the firm is structurally organized to exploit this competency
Core Competitive
V R I O Competency Advantage
Career plan and employee training - - - Parity

Accumulated expertise on e-commerce - - Temporary

retail
Extensive skills in digital marketing - - Temporary
Wide range of options for ordering,
returning and delivery - - Temporary

Multichannel digital experience - - - Parity

Proprietary delivery service (land and air) Sustainable

Strategic network of warehouses and
distribution hubs distributed Sustainable
internationally
International network of affiliates to Sustainable
expand market reach
Advanced R&D centers with highly
developed human capital Sustainable

Growing portfolio of private label Sustainable

products
Growing diversity of online businesses - - Temporary

Growing diversification of businesses Sustainable

Advanced IT platform architectures - - - Parity

systems
High global brand equity Sustainable

Table 3 - Amazon's Core skills and Competencies

According to the matrix, seven main core competencies were identified:

 Proprietary delivery service

Amazon is expanding its business beyond the retail, creating its own delivery systems, an
investment that creates differentiation and is difficult to replicate and only viable in large
economies of scale.
 Strategic network of warehouses and distribution hubs distributed
internationally
Amazon invested a lot to have its own facilities. Again, being so big allowed the company to
expand its operations in a much more efficient way that differentiates the company from its
competitors.
 International network of affiliates to expand market reach
Getting to such a dominant market position might not have been easy for Amazon. The fact is
that now the very developed network of Amazon in multiple markets is a big leverage for the
company, and a major source of sustainable value.
 Advanced R&D centers with highly developed human capital
To sustain the technological innovation, Amazon invested on its own R&D centers and
brought to the company a strong human capital. Amazon is not just an online retailer
anymore. Being aware that innovation is a major disruptor for any company, Amazon
invested in R&D focused on technology to develop and ideate new possible value
propositions for the customer. The company has many patents that can create source of
competitive advantage.
 Growing portfolio of private label products
Amazon is also known for its own products (Kindle, Echo, etc.). That is a major competitive
advantage because it allows Amazon to bundle services that create more value for the
customer.
 Growing diversification of businesses
Amazon constantly pushes the boundaries of the company’s scope. It keeps investing in new
areas that ultimately will create a more diversified business and a more resilient company.
 High global brand equity
Amazon keeps building its brand equity. The brand value, recognized by the customer, will
allow Amazon to be more competitive in the future.
Challenges and Enablers

To assess a company’s current position and prospects, creating a SWOT matrix enables
the alignment between internal and external factors. The framework enables decision
makers to have a snapshot of their current position in terms of Strengths and
Weaknesses, alert to Threats that the company can try to mitigate and list the available
Opportunities to be seized.

Figure – SWOT
Strengths
 Brand equity and global presence are two key strengths Amazon possesses compared
the competition. As one of the top market cap companies the Amazon brand name
immediately projects a seal of quality and expertise in the e-commerce market.
 Customer focus is another key strength for Amazon. At the heart of most decisions is
the benefit to the consumer. This started through not generating profits to avoid price
hikes, includes their return policy, customer service or One-Click order innovation.
This customer-priority has been the guiding light of where the company moves, and
has played a key role in it getting it to the place it is in today.
 Another strength key of Amazon is their broad product offering. It is possible to buy
almost anything on the platform, and a customer basket can combine items that in the
offline world would require visits to multiple different stores. This convenience factor
links to the drivers of online shopping, and enables Amazon to deliver more value to
its customers, positioning the company in a prime position to keep winning shoppers.
 Amazon’s fulfillment network is another differentiator. It allows Amazon to deliver
faster than most competitors, possibly within one hour in some metropolitan areas
depending on the order. Also connected to convenience, it significantly reduces the
time consumers wait for products, which is another driver of preference for online
shopping. Nowadays it is even possible to take free tours of these facilities.
 Although Amazon aims at having lower prices than its competition, it also excels in
cost leadership across the business. The promise of potential customers compared to a
potential downside of a more limited offline presence is balanced by the non-
existence of those costs, which puts them in a dominant position in case of a price war
against offline or less online based stores. Simultaneously, the economies-of-scale
generated by their size and the aforementioned width and breadth of their product
ranges also place Amazon at a competitive advantage compared to purely online
players that may be hoping their online-only operation will win in minimizing
operational costs.
Weaknesses
 Despite Amazon’s success, its business model can be replicated. It would require a
significant amount of investment to reach its current position, but the fact that there is
little proprietary in their day to day activities leaves the door open for another entity
with large access to capital to try compete directly.
 They have also encountered a few PR issues, mostly surrounding tax avoidance and
bad workplace conditions.
 Although the company is expanding its presence outside of the online world, the
current lack of physical presence can limit future growth in product categories where
 people still mainly prefer to buy in person. The Wholefoods acquisition played a role
in closing the gap in the grocery space, but its presence is not significant compared to
other competitors, such as Walmart, and also because the breadth of categories has
not translated.
 Launching new products can be considered a weakness, as the results have been hit
and miss, not necessarily keeping pace with the company’s overall performance.
Amazon’s Phone launch or Fire TV are two of examples that demonstrate that while
being at forefront of e-commerce and innovation around it, their developments are not
bulletproof.

Threats
 Potential regulatory changes are a threat to Amazon globally. As more transactions
move online, the incentive to try to exploit them illegally increases. Cybercrime
directed at the company or its clients can become an issue in the medium to term
view.
 Another threat that the growing market upside can generate is the increase in
competition. Consumption shifting towards online will also provoke a similar
investment response from both the mainly offline players such as Walmart, but also
from current pure players and new entrants.
Opportunities
 As Amazon’s successes continue to add up in the spaces they already play in, new
verticals in terms of products are an immediate opportunity that can be seized and can
benefit from the current platform. The company has, in recent years, started to play in
Real Estate and Pharmacy, while news of them entering the broader Healthcare or
Insurance markets keep popping up. This is a growth opportunity as they will be
competing for incremental revenue in markets where they can leverage an already
existing platform.
 As both global internet and online shopping penetration grow, Amazon is available to
a larger number of potential consumers every day. Seizing this opportunity by
outperforming competition in attracting as many new shoppers as possible can
increase Amazon’s customer base numbers and contribute to a more sustainable
future.
 Acquiring new physical stores, especially focused on products that under-perform or
cannot be sold online in certain jurisdictions, can bring more growth to Amazon in
areas where it may have been out of reach.
 As Amazon ventures into producing its own products, one opportunity to optimize
profit is by vertically integrating the companies producing their brands, as it would
allow for savings in margins and by allowing the current structure to benefit from
Amazon’s infrastructure and support.
 As a final opportunity, one could consider the ongoing tech disruption in terms of
delivery. As autonomous cars and drones keep getting tested and pilot experiences are
more heavily featured, it would be feasible to imagine fully automated deliveries to
 the consumer’s door in the near future, which would very likely generate savings in
costs and in a decrease in delivery times.

Conclusion
The operational strength of Amazon contributes significantly to its success and gives it a
competitive advantage. Amazon has developed a simplified and effective operational method
that enables the business to provide a variety of goods and services at affordable pricing.
Additionally, Amazon has made significant investments in innovation and technology,
allowing the company to maintain a competitive edge in the online market. Also, Amazon's
solid client base and brand loyalty result from its superior customer service, which adds to its
competitive advantage. These elements show how Amazon's operational capabilities support
its corporate strategy and give it a competitive advantage.
In summary, Amazon has achieved success by putting into practice a variety of operations
management tactics, including the use of robotics and automation, lean manufacturing
principles, and a sizable supplier network. A cutting-edge inventory management system, a
transportation network, and customer support technologies are just a few of the ground-
breaking tools that Amazon has put in place to run its business operations. Yet, Amazon is
currently dealing with various challenging organizational concerns, such as inventory
management, delivery delays, and customer support problems. Amazon should concentrate
on enhancing customer service training, investing in customer service technologies,
increasing production process efficiency, streamlining its supply chain, investing in new
technology and resources, improving supply chain visibility, investing in inventory
management technologies, and streamlining processes to address these issues. By addressing
these issues, Amazon can remain competitive and provide customers with the products and
services they need in a timely and cost-effective manner.
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