2020

FINAL DEBRIEFING

MANAGEMENT AND BUSINESS STRATEGY ALBERTO GIL MARTINEZ

UNIVERSITÀ DEGLI STUDI DI TERAMO

Final debriefing about case n.____AMAZON____ (state n. and name of the selected company) Analyzed by __ALBERTO___ - name – _GIL____ - surname

Scientific articles/papers

State at least n.1 scientific article/paper you selected to support your analysis and recommendations

N. Title Author Journal Year, Link number 1. Will James HARVARD 2020 https://hbswk.hbs.edu/item/will-suddenly-challenged-amazon- Challenged Heskett BUSINESS SCHOOL tweak-its--business-model-post-pandemic Tweak Its Retail Model Post- Pandemic?

2. Competitive Evangelina 2018 https://www.tandfonline.com/doi/full/10.1080/1331677X.2018.1429288 convergence Aranda in retailing 3.

Describe the company’s strategic profile and its Applying the tools of analysis covered in the whole textbook, identify and evaluate the company’s strategic profile, strategic issues/problems that merit attention (and then propose, in the following section, recommendations to resolve these issues/problems).

Amazon is getting more serious about its brick-and-mortar retail ambitions with its first-ever Amazon- branded . The store does source a number of its items, including some produce and and other fresh , from Whole suppliers. It also carries Whole Foods’ 365 brand for certain items. But Amazon’s store offers other products, like Kellogg’s breakfast cereal and Coke products, that you won’t find at Amazon’s higher-end, organic-focused subsidiary. Amazon says the store combines the product availability and low prices of a grocery chain like or with the convenience and quick times of its Go model, with a selection that includes both big mainstream brands and local, organic produce. It joins the 25 Go stores currently open throughout the country in cities like and . stores use overhead cameras and computer vision technology to track both shoppers and items throughout the store. That way, the system can identify when a specific person has picked something off the shelf and placed it in their cart, and even when they decided to put something back. The end result is that customers don’t have to sit through check out. When you’re done at a Go store, you just walk out and your receipt is sent to you through Amazon’s companion app. The same is true of Amazon’s new grocery store, which features shopping carts, but no checkout lanes or counters. But not everything is positive aspects and Amazon has some things they should upgrade to get success, like Amazon Go is still in testing mode and the model could be better suited to non perishable consumer goods rather than grocery. Furthermore is required the use of a and this is a problem for 1 everyone who is unbanked, more less nine million American people and are excluded shoppers who relied on cash and coupons for grocery shopping. And its clear that this shop rule out people who doesn´t have smartphones, so there’s a lot of people directly can not buy here, and these things induce to lose public. The competitive strategy used by amazon in its new form of business after acquiring Whole Foods is the differentiation, not of the product, but of the way of buying and the purchasing process itself. Amazon goes a step further and innovates in something that very few companies can innovate due to the complexity of the ways to improve these processes.

Now i’m gonna comment some general problems about this Amazon new business: -Amazon first grocery initiative had been relatively not so good in its growth with a presence in only limited markets. The competitors have advantage beacause of largely partnered with local grocers to supply produce, and Amazon has invested in inventory and refrigerated warehouses that reportedly limited AmazonFresh’s ability to expand more quickly. -One of the problems is also the high cost of losses causes due to food spoilage and we know that some customers, sometime had complained the online store lacked the product range found in regular . -Another one is the add price for get . -If we want to compare this Amazon form with Walmart we should to know Amazon has bought Whole Foods including their shops, but these are 460, and Walmart has more than 5.000 stores, so we can see the evidence. Amazon is at a disadvantage. Like a curiosity and strategy form, I want to highlight one of Amazon’s quirkier attempts at physical retail are its Treasure Trucks. The mobile shopping kiosks are located in 30 cities across the country and offer one item selected by Amazon at a discount. Amazon will text users when a has an item available in their area. Shoppers then purchase the item in the Amazon app and can pick it up the same day at a truck.

Your action recommendations Write your recommendations and be critical not descriptive. Quote the references you accessed to let the reader understand how you used them to prepare the answer: you will have to justify and reinforce your suggestions even to actualize problems and solutions to the current scenario (that could be different than the one descripted in the reading).

1. The food retail market is extremely competitive. Firms have sought to develop distinct sources of competitive advantage. Sources of competitive advantage extend beyond those traditionally identified in the course text. Nonetheless, , reputation and relationships are an important starting point for investigation and revision. have sought to innovate by expanding the size of store formats and increasing the range of products offered. They have also sought to move away from just offering food and have moved into , electrical and . The advantage of these sectors is that they typically offer higher profit margins than the food retail sector. Relationships are an important aspect of the food retail market. Supermarkets seek to build relationships with a range of stakeholders. Relationships with staff are an important part of ensuring customer service. Motivation theory can be applied to an examination of the relationship between supermarkets and employees. Remember examiners are looking for candidates to support arguments with economic and business theory. Commonsense answers will not be good enough to ensure a high grade. Pay and conditions are factors which will affect the quality of staff recruited and the quality of customer service offered. In relation with five competitive forces I think the most damaging competitive force for amazon in its entry into the grocery sector is the rivalry between companies that we have to know in the scientific article. The sector is very busy and that makes it more difficult to open a gap in and manage to maintain a market share that makes interesting the great investment that Amazon has made to start its journey in the world of supermarkets. At the same time, I think that the weakest forces are that of substitute products and the threat of new sellers for the following 2 reasons. In the case of substitute products, I think that this way of buying groceries should not be threatened by people preferring to save a few euro cents on a product because it is a substitute. As we have seen in CASE 16 of the book on Amazon we can see in exhibit 3, the people who buy in this type of store, most prefer to pay a little more and save the queues and the factors that make a purchase longer . In addition, Amazon can easily access economies of scale and therefore can obtain good prices that do not need to use substitutes. Also, in the case of the threat of new competitors, I think it is not a problem due to the large investment that must be made to be able to operate in this way and to be able to make sales in such a modern and innovative way. Very few companies live up to those investments that only giants like Amazon can make.

As we can see in the graph, whole foods is located in a central position, highlighting prices above the average but without being extremely high. Regarding the market segment, only Trader Joe's is located in the most central position between health-organic and social-organic, so I think it is very well positioned on the strategy group map. The market section grocery retail industry has some key drivers that are imperative to improve all the time and no-stay back. Trend 1: Consolidation in the Retailing Industry: numerous retailers are facing imminent problems since they are unable to deliver high levels of value relative to their more astute competitors. As a consequence, significant consolidation by big retailers is likely to take place, e.g., the acquisition of Sears by and the merger of May Department Stores with Federated Stores, Inc. Trend 2: Value Is Key: successful retailers are developing strategies that offer customers greater value over competitors’ and are sustaining them over time. To do so, they are focusing their energies on creating centers of excellence, such as connecting with their customers, being a leader in terms of the merchandise and assortment that they provide, and having excellent operations in place. Although retailers that provide value don’t always do so at a low price, extreme value retailers like are expected to continue to take share of wallet from the retailers that have traditionally appealed to lower income, treasure hunting, and otherwise valueconscious consumers. Trend 3: Being Innovative: retailers are more and more experimenting with their store formats. Additionally, they are effectively designing and managing the various strategic levels to enhance the overall customer shopping experience. The problem with being known as an innovative retailer is that it can only remain innovative as long as its customers believe the are fresh and exciting. Recall, department stores were once thought of as being an innovative . Thus, innovative retailers must continuously implement new ideas or else their customers will begin to view them as being “old hat.” Retail Success and Key Drivers 29 Trend 4: Cost Controls: successful retailers, particularly those competing in the low price segment and many in The Big Middle, are efficient and effective in integrating their suppliers, manufacturers, 3 warehouses, stores, and transportation intermediaries into a value chain, in order to minimize system-wide costs, while satisfying the service levels required by its customers. They are seeking out and using innovative technology throughout their supply chains, to reduce costs and provide value for their customers. In the last few years, some of the largest retailers in the U.S. have invested in sophisticated merchandise optimization techniques that help them make decisions about planning assortments, initial pricing, buying, allocation of merchandise to stores, promotion, planning replenishment (rebuys), space management (planograms), and markdown pricing. These techniques enable retailers to better control costs, buy, allocate, and promote the right merchandise, and price and markdown merchandise. By utilizing these techniques, customers get what they want, which translates into loyal customers and in many cases a competitive advantage. In my opinion, combination Amazon-Whole Foods is potentially disruptive because it has trend 1 (consolidation) thanks to 460 shops Whole Foods have given to this combination. Also keep on trend 2 with some evaluate instruments provided by Amazon used in other business form. Amazon is the king on Trend 3. Always surprising to customers with new buy forms and innovation on the retail industry. Also complies with 4 TREND because Amazon is constantly doing cost revision and strict controls about this factor. In short, Mr. Bezos would recommend a comprehensive analysis of the situation of amazon-whole foods to be able to see from the acquisition the failures that have been made and try to solve the problems derived from these failures. To identify these problems, carry out a temporary swot analysis to observe the threats that amazon has and those that have whole foods, and then observe the threats that affect the combination and repeat this process with weaknesses, opportunities and strengths. Then we must make an analysis to evaluate the political, legal, economic and social factors and know exactly the needs of the clients so that there are no complaints or there are as few as possible. For the specific problems that we have discussed before, I give Je Bezos the following recommendations: -Make a detailed study of the public of the amazon grocery stores to be able to identify the customers and that the fact of not having a credit card or smartphone is not a problem. We would solve this with a customer and estimate customers who do not have the resources such as a card or mobile phone to be able to buy. Once located and accounted for, make an investment so that all stores have some devices that can be left to customers who do not have them. - solve the deterioration of perishable products by getting customers to buy the product that could not be sold on a normal day. For this, I think it would be necessary to sell them at a lower price than normal, but the losses would be less and, as the case says, it is an important factor in the store figures. For example, the or can be sold to beverage manufacturers that include these ingredients or to cream factories for these. Ways of exiting products that we have not been able to sell in their original form. -Another measure that I would propose would be to eliminate the payment of prime to enjoy the advantages of this amazon store. For the customer, a fixed cost prior to any purchase causes first- hand rejection, so I believe that this money could be distributed among all the products sold and the price of each would rise very little. -I see it very necessary to put very clear and simple guidelines for use for people who are not very familiar with the new technologies for which amazon offers its competitive advantage. older people tend to be not very supportive of technologies and are a large percentage of the public in supermarkets, so this could bring us great benefits. -Lastly, in order to alleviate the disadvantage compared to Walmart, amazon must propose competitive advantages that make the customer prefer to go to the amazon store because it has a series of discounts, coupons, gifts or other types of benefits that make the relationship it has established Walmart with the citizens of the local supermarkets will be replaced by these advantages. Amazon stores have a non-contact form of sale, you cannot establish a seller-buyer relationship that Walmart can have.

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Optional section: additional sources (company disclosures, web pages, video etc) N. Title Author Journal Year, Link number 1. “Visiting Raul XATAKA 2020 https://www.xataka.com/analisis/visitamos- Amazon Go: Alvarez spain this is our amazon-go-asi-es-la-experiencia-de- experience” compra-en-una-tienda-semi-automatizada- sin-cajeros 2. Amazon just Annie CNBC 2020 https://www.cnbc.com/2020/02/25/ opened a Palmer cashierless supermarket – here are all the ways it’s trying to upend the grocery industry 5

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