Amazon's Business Model: Operations, Customer Focus, and Strategy, Papers of Leadership and Team Management

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Company Analysis: Amazon Inc. Sandermoen School of Business (SSB), University of Fredericton Dr. Dani Babb August 18, 2023 Introduction

One company has emerged as a genuine titan in the vast business landscape, transforming the very nature of commerce as we know it. Amazon Inc., whose name has become synonymous with innovation and customer-centricity, is the industry leader in e-commerce. This essay will explore the intricate inner workings of a global powerhouse that reveal a tapestry of inputs and outputs, a dynamic network of customers and partnerships, and an overarching mission that fuels transformation. Amazon's strategic personnel, capacity, and scheduling decisions and Total Quality Management implementation pave the way for excellence. As we investigate the company's location criteria, the revolutionary impact of AWS supply chain, the implementation of Just-in-Time inventory management, and the unwavering commitment to unconventional thinking, we will analyze the factors that have led to Amazon's unprecedented success. In addition, we will propose methods for enhancing the company's operations by employing the Jonah Mentality, a mindset that pushes boundaries and reveals untapped potential. On this enthralling journey, we will uncover the secrets behind Amazon's unparalleled success and its relentless pursuit of excellence. A Glimpse into Amazon's Enterprise Since its founding in 1994, Amazon.com, Inc. has become an unparalleled force in the e- commerce landscape, fundamentally altering the nature of purchasing itself (Statt N., 2018). The company embarked on a relentless pursuit of the latent potential of online book sales under the direction of Jeff Bezos. The deliberate selection of the name "Amazon" placed the company at the top of the alphabet, assuring unbeaten visibility in the digital realm (Lebowitz S., 2019). As time progressed, Amazon expanded its reach across continents, establishing international websites and transcending cultural boundaries to offer a diverse selection of merchandise tailored to the changing requirements of its discerning customers. Physical and

outputs include not only the revenue generated from these transactions but also the priceless customer interaction data (Hall, M., 2017). Amazon has flourished and solidified its position as a dominant participant in the e-commerce market by judiciously managing its inputs and deftly transforming them into desirable outputs. Amazon's Dynamic Network: Customers and Partnerships Amazon is known as one of the world's largest e-commerce companies. It operates a network that includes a dynamic system of customers and partnerships. The network is not only a key driver in Amazon's success, but it also allows the company to reach a global audience and deliver the wide range of services it offers. Amazon network’s core relies on its customers. There are millions of customers worldwide, ranging from individuals, businesses, and organizations of all sizes. On Amazon’s user-friendly platform, customers have access to purchase a diverse selection of products across multiple categories. Amazon’s commitment to customer satisfaction can be seen through in its focus on convenience, competitive pricing, and the reliable shipping options (Baldwin, 2020). Amazon continues to enhance its offerings and to expand its reach, and their strategy vastly depends on building strategic partnerships. One of the partnerships is the Amazon Marketplace, which enables third-party sellers to list and sell their products to customers. This collaboration considerably expanded the available product selection for customers, which also fosters a healthy competition that allows the marketplace growth (Dave Clark, 2021). Additionally, other partnerships with technology companies, social media influencers and content creators, and service providers have allowed Amazon to integrate complementary services and features (Palmer, 2022). For instance, collaborations with streaming platforms like

Netflix and Spotify enable the integration with Amazon devices, enriching the entertainment experience for customers (Bernazzani, 2023). Amazon's commitment to fostering partnerships is also seen through the Amazon Web Services (AWS), and AWS Partner Network (APN). As part of the APN family, technology partners, consulting firms, and even service providers can collaborate with Amazon's cloud computing division (Bains, 2019). AWS operates APN, which is a powerful program that offers innovative solutions to customers. It facilitates the development, marketing, and sale of products and services built on AWS infrastructure, fostering a thriving ecosystem of AWS-based solutions (CV, Mutta, & Neti, 2023). Lastly, customer reviews and ratings play a huge role in Amazon's dynamic network. Customers contribute to the network by providing valuable reviews and feedback on the products they purchase, and by sharing their experiences. These user ratings not only aid customers in making informed purchasing decisions, but it also enhance the overall trust and credibility of Amazon’s marketplace (Chen, Samaranayake, Cen, Qi, & Lan, 2022). In conclusion, Amazon's dynamic network of customers and partnerships drives its global success in delivering a wide range of products and services while prioritizing customer satisfaction. Customer Value: Gauging Amazon's Distinctive Offerings Quantifying customer value is a multifaceted task that extends beyond mere sales figures. This section will dig deeper into the various methodologies that Amazon measures customer value, highlighting the company's commitment to its customers. Amazon has revamped the traditional approach to customer value, by emphasizing Customer Lifetime Value (CLV). This considers the entire customer journey, focusing on not just an individual transaction, but also the potential for long term commitment and repeat

Amazon's mission to be the "Earth's most customer-centric company" has brought about a significant transformation in operations management (PEREIRA, 2023). This customer-focused vision has been a driver for the company to constantly seek efficiency, innovation, and scalability in its management operations (Envision Horizons, 2021). Efficiency can be seen at the heart of Amazon's mission-driven approach. The company has refined its supply chain, fulfillment centers, as well as logistics to perfection. Utilizing data analytics and advanced machine learning algorithms, Amazon has streamlined processes to reduce lead times, minimize errors, and cut operational costs, making their operations as efficient as possible while setting new standards for efficiency in the market (Amazon science, 2022). Innovation also plays a fundamental role in Amazon's mission, inspiring the company to embrace technological advancement at every turn. From employing robots and automation, to leveraging artificial intelligence for inventory management, Amazon has refined its business. In addition, scalability and adaptability are essential to Amazon's mission. The company can scale up operations during peak seasons and handle demands efficiently is a proof of its dedication to meeting customer needs under any circumstances. However, it is important to also realize that Amazon recognizes the significance of supply chain resilience. By diversifying suppliers and distribution networks and investing in sustainability efforts, the company demonstrates a commitment to responsible and robust operations (PEREIRA, 2023). Therefore, through Amazon’s dedication to efficiency, innovation, scalability, and resilience, Amazon has redefined industry standards and set an example for others to follow. Management's Strategic Choices and their Ripple Effects on Workforce, Capacity, and Scheduling

Amazon's mission places significant importance on its workforce as the backbone of delivering exceptional customer experiences. To achieve its customer-centric vision as stated in their mission statement, the company focuses on recruiting and retaining top talent (PEREIRA, 2023). The implications for workforce management can be seen as below:

1. Employee Training: Amazon invests heavily in employee training programs to ensure its workforce is highly skilled and knowledgeable. They focus on customer service, order processing, and technology to provide seamless and efficient service.
2. Flexibility and Scalability: as mentioned in the previous section, the mission drives Amazon to maintain a flexible and scalable workforce. They adapt to changing demands, especially during peak shopping seasons, by hiring seasonal workers and using automation to optimize operations.
3. Employee Engagement: Amazon recognizes that satisfied and engaged employees are more likely to deliver better customer service and take the company towards success. Amazon promotes a positive work culture, emphasizes employee satisfaction, and values employee feedback to improve working conditions. In addition, to fulfill its mission of catering to customer needs promptly, Amazon's capacity management decisions are crucial, and their mission has implications as follows (Amazon science, 2022):
4. Fulfillment Centers: The company strategically locates its fulfillment centers within cities to minimize delivery times and costs, ensuring products are closer to customers. This approach enhances efficiency and reduces transit/wait times.

Total Quality Management (TQM) principles can be seen at the core of Amazon's operational attitude, driving the company's commitment to excellence. As it was seen in the previous section, Amazon, is a customer-centric organization, places great emphasis on understanding and fulfilling customer needs and expectations (Kimmy, 2021). This focus on the customer is the foundation of the TQM principles that are being applied in the company. Amazon's pursuit of continuous improvement is one of the most noticeable TQM principles. The company nurtures a culture of innovation and encourages employees at all levels to contribute to the ongoing modification of processes and services (PEREIRA, 2023). Regular performance evaluations and feedback gives employees power to identify areas for enhancement. In addition, employees are empowered to share ideas, participate in decision-making, and take ownership of their work. This approach fosters a sense of responsibility among employees, contributing to the overall quality of services provided to better serve its customers (PEREIRA, 2023). In addition, data-driven decision-making is another crucial TQM principle that is widely seen by Amazon. The company relies on data analytics to gain insights into customer preferences. This data- centric approach enables Amazon to make calculated and informed decisions, optimize processes, and reach its mission (A., 2023). Furthermore, Supplier relationships are also a key aspect of TQM at Amazon. The company collaborates closely with its suppliers, which fosters strong partnerships to uphold quality standards for the products it offers. Effective supplier relationships are a huge player in maintaining the integrity of Amazon's supply chain (Chaffey, 2023). Lastly, Amazon invests significantly in employee training and development. The company emphasizes enhancing their technical skills, fostering a customer-centric mindset, and promoting a culture of quality

awareness throughout the organization. By nurturing a skilled and motivated workforce, Amazon ensures that TQM principles are ingrained in every aspect of its operations (PEREIRA, 2023). In conclusion, Amazon's dedication to TQM principles has played a vital role in making it a global e-commerce leader. By constantly improving, using data to make decisions, involving employees, and nurturing suppliers, Amazon ensures outstanding customer experiences and sets high standards in the competitive business landscape. Amazon’s Strategy on Location Decisions Strategic decisions such as where to place a new Amazon location are critical to businesses’ success. Several factors must be considered in selecting the right location such as proximity to economic or shipping centers, population density and demographics, cost of doing business in that region, level political or economic security, environmental controls, regulations, taxation, etc. (Perez-Benitez et al., 2021). Additional criteria such as the availability of local skilled talent are factors that add complexity to this decision-making process, but Amazon sees this as a priority because them because it can have significant impact on the success and long- term growth (Perez-Benitez et al., 2021). This analysis will review the core elements of Amazon’s business strategy and how these variables influence where the company establishes their business locations. Focusing primarily on their core retail operations business because it makes up 60 percent of share of the Amazon’s sales today (2023), this investigation will look at the different considerations for Amazon offices versus warehouse locations. This exploration will highlight how strategic priorities of Amazon are reflected within every business decision they make including decisions on location. Amazon’s vision is to continuously innovate and deliver unbeatable value for the customer by offering a wider selection, and more convenient, fast service at highly competitive prices

would be sourcing a new location for their next headquarters (Bosetti and Brown, 2019). From the call for site bids, three factors were identified including the preference for a city of more than one million people, a location that attracts skilled talent, and a business-friendly environment as reflected in tax breaks, incentives, etc. (Bosetti and Brown, 2019). Research shows that location connectivity and geographic clustering are a draw for large tech companies as evidenced by high technology locations such as Silicon Valley in California, or the Cambridge Cluster in England (Bosetti and Brown, 2019). These locations possess the density of business operations, industry competition, and access to investment capital to support growth as well as the ability to attract and retain top talent because these regions offer desirable amenities and a lifestyle (Bosetti and Brown, 2019). In contrast, Amazon warehouse locations prioritize other needs such as cost of commercial real estate, utilities, labor, and tax costs. With warehouse locations, Amazon aims to keep the costs of doing business low while remaining accessible to vendors, customers, infrastructure, transportation, and logistical systems to ensure a fast and efficient movement of goods and services maintaining their core value proposition (2022). In these decisions, proximity and more densely populated communities that offer more favorable conditions for business operations bring an ease of doing business that makes it favorable for large companies such as Amazon to establish themselves in a location. Other variables such as time zone, culture, political, regulatory, or legal, and climate influence location selection (2023). Business purpose and strategy hold significant influence over location decisions. Amazon’s Supply Chain as a Competitive Advantage Amazon’s supply chain is a competitive advantage for the business enabling the company to deliver low-cost goods to consumers faster than the competitors. The most profitable of

Amazon’s revenue generating operations is broken into three core segments including the North American retail business (online and instore), international retail business and Amazon Web Services subscription business (Johnston, 2023). As of August 2023, this North American segment accounted for $82.5 billion of sales, international segment $29.7 billion, and AWS segment $22.1 billion. As a result, this analysis will focus the North American online and instore retail supply chain including vendors and distribution centers that support the flow of goods to consumers (Johnston, 2023). As per the 2022 Annual Report, Amazon owned 611 physical stores in North America supported by an additional 417,579 square feet of shared service centers to support distribution in the region. This immense network supports their leading e-commerce platform to position Amazon as one of the fastest growing companies today. Amazon is trend setter by offering two options in their supply chain to sellers for order fulfillment on every type of product imaginable. The Fulfillment by Amazon (FBA) option enables third-party sellers to send products to Amazon in bulk for sorting, picking, packing, and shipping onsite vs the Fulfillment by Merchant (FBM) that allows sellers to list their products but handle all storage and fulfillment on their own (Bauer, 2023). These options allow for efficiency, flexibility, and exceptional service delivery meeting both vendor and customer needs (Bauer, 2023). Amazon’s supply chain is characterized by a high degree of specialization where by different goods are managed through a complex network of designated inventory warehouses, packing and shipping centers including sortable (for small goods) and non-sortable fulfillment centers (for large bulky items), receive centers (for goods that sell quickly), specialty centers (for seasonal needs or specific product categories), and delivery stations (for last preparation before delivery) (2020). This supply chain network enables sellers to select the most effective fulfillment method for their unique business needs. This system is also designed to address the

party seller, contractors, and subcontractors work together to deliver the final product. These diverse stakeholders are organized under Amazon’s Supply Chain Standards to maintain alignment, international regulations, and best practices. These standards relate to worker protections, health and safety, environmental regulations, responsible sourcing, ethical conduct, and management systems. Another important element is supply chain transparency whereby Amazon openly shares supply chain information online through an open supply hub including details on locations, suppliers, product type, details on the manufacturing facility, and details on the parent company or any other companies involved in assembly or finished product (New, 2023). Amazon took this step in 2019 to drive greater accountability, and collaboration within its supply chain while supporting consumer confidence in the company’s products and business practices (New, 2023). Amazon’s supply chain is a competitive advantage for the company. Just in time Inventory Management at Amazon As described above, Amazon’s inventory management system is a key driver of operational success as it controls the flow of goods from suppliers and third-party sellers to customer on- demand. A successful just-in-time system supports this effort driving efficiency and preventing excess inventories from increasing costs and hurting business cashflow. Anticipating and managing consumer demand is a core function of Amazon’s inventory management system. System mathematical models forecast demand for each product, calculating the correct level of inventory to purchase and store from third party sellers, as well as the right location to house this inventory to optimize distribution across Amazon’s fulfillment network (2021). Algorithms automate complex decision making regarding the millions of products that Amazon sells globally (2021). For example, when a customer purchases an item on Amazon’s

website, the system instantly identifies the location of that item dispatching a warehouse worker or picker to retrieve it and start the packaging and shipping process (Baraniuk, 2022). This advanced inventory management system enables the company to not only offer same day delivery services but to also remain agile and adapt to changes in the market or consumer preferences (Baraniuk, 2022). The inventory management system is also fed data on website traffic to better anticipate fluctuations caused by popular items, product launches, seasonal holidays, or unexpected changes in consumer spending due to factors such as rising inflation, natural disasters, or a world pandemic (2021). Amazon’s revenue and continued growth is contingent on this ability to quickly anticipate and respond to customer demand while preventing waste. One unique aspect to Amazon’s just-in-time inventory system is that third party sellers have visibility, access to track, and manage their inventories using the company’s technology. Sellers benefit from automation of their sales channels and from a platform that shares sales trends and indicates when to restock their products (Linnworks). For small to medium sized companies, this service helps to streamline their business operations, plan for production, improve sales, and save on overhead enabling them to keep product costs low. In turn, Amazon benefits from improved vendor relationships, reduced supplier lead times on products, and lower inventory holding costs to enable their just-in-time methodology (Linnworks). By opening their inventory management system to their vendors, Amazon also reduces the risk of overselling or running out of products losing out on potential sales. Amazon’s “Out-of-the-Box” Approach Amazon is known for out-of-the-box thinking and the company’s bias for innovation and action is a cornerstone of their success (MentorCruise). Whether the company is reimaging an

marketplace by serving people who may not have insurance or whose insurance does not offer enough coverage (Amazon). While the business has not taken off yet, it aims to disrupt the prescription drug market and drive greater competition and value to consumers (Cohen, 2023). This new business clearly demonstrates their approach to innovation and business growth as well as their ability to adapt and embrace change. Proposed Strategies for Company Enhancement: Embrace the Jonah Mentality To bolster its market dominance and sustain its ongoing success, Amazon can embrace the Jonah Mentality, a comprehensive approach centered on continual development and the investigation of unexplored possibilities (Kim, R., 2023). Like the biblical character Jonah, who had a profound journey of self-exploration and personal development, Amazon has the potential to embark on a transformative expedition aimed at exploring novel pathways for expansion, innovation, and distinctiveness (Kim, R., 2023). One potential aspect of this plan may be expanding its commercial operations outside the limitations of electronic commerce. Amazon, a company renowned for its expertise in supply chain management, data analysis, and cloud computing, has the potential to expand its operations into several sectors, including renewable energy, urban mobility solutions, and sustainable agriculture. By leveraging its operational proficiency and technology capabilities in these industries, Amazon has the potential to not only generate additional sources of income but also tackle urgent global issues. A further aspect of the Jonah Mentality pertains to a revitalized emphasis on sustainability and social responsibility (Kim, R., 2023). With the growing customer demand for environmentally conscious products and activities, Amazon can assume a leading position in advocating for sustainable sourcing, packaging, and distribution techniques. Through the

establishment of strategic alliances with environmentally concerned firms and the allocation of resources towards the development and implementation of innovative sustainable technology, Amazon has the potential to significantly transform the industry's competitive environment and appeal to a burgeoning cohort of socially and environmentally aware consumers. Moreover, the Jonah Mentality serves as a catalyst for Amazon to embrace a decentralized strategy towards fostering creativity. The organization has the capacity to cultivate a climate of intrapreneurship, thereby granting employees the authority to foster inventive concepts inside their own areas of expertise. The extensive workforce of Amazon offers a multitude of valuable ideas and diverse views that, if correctly utilized, have the potential to drive significant improvements and innovative commercial endeavors. By adopting the Jonah Mentality, Amazon may not only expand its presence into unexplored domains but also strengthen its standing as a worldwide pioneer committed to crafting a more promising tomorrow. Conclusion In summary, Amazon's notable trajectory from an innovative online bookstore to a worldwide e-commerce powerhouse has been distinguished by its focus on customer satisfaction and unwavering commitment to achieving high standards. The company's dedication to comprehending and fulfilling consumer requirements has not only propelled its operational effectiveness but also enabled the development of a far-reaching network that encompasses many continents. Amazon has achieved a commendable level of economic success through the implementation of various creative techniques, such as the measurement of Customer Lifetime Value, adherence to Total Quality Management principles, and the implementation of rigorous supply chain management. Moreover, Amazon's steadfast commitment to innovation has resulted