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Topic:

Amazon's expansion environmentally sustainable retailing in Michigan

Case Study Instructions:

Assignment #2

FIM 220

 

Amazon’s Expansion Environmentally Sustainable Retailing in Michigan

Due: March 28, 2019

 

 

Points: Assignment 2 is worth 50 points of your final grade.

 

Groups: You are allowed to do the project as an individual or in a group with a maximum of 3 students (the assignment will receive a zero if there are more than 3 students). Be careful about who you pick to be a part of your group. If you have a group member that does not participate, you need to speak to me immediately when the problem arises. If you do not involve me early, I cannot assist in the solution, then do not complain to me after the final project has been turned in.  If it has been determined by the professor that a group member or members is not participating in the group project, they will receive a zero for this assignment.

 

Objective: The goal of this assignment is to have you apply your knowledge of the food supply chain to a real life activity that a consultant to the CEO and to the Director of Worldwide Sustainability and Social Responsibility for Amazon might have to evaluate. This activity requires the formulation of a relevant problem statement, the collection and analysis of information, and the articulation of recommendations.

 

Write this paper as if you are the Consultant to Amazon concerning their expansion of food retailing into Michigan.  Your analysis and recommendations will be presented to the CEO and the Director of Worldwide Sustainability and Social Responsibility for Amazon.

 

The paper should have the following sections

 

  1. Introduction – This section should include a description of the issue, how big the issue is, and what impact will it have on Amazon’s ability to compete for the food retail market in Michigan.  Being hired as a consultant for Amazon, describe the issues that Amazon may face attempting to expand retailing of food in Michigan in an environmentally sustainable way.  All forms of retailing should be considered (traditional Whole Foods stores, Non-traditional Whole Foods stores, online, and home delivery formats).  This section should explain and list why Amazon may and may not want to expand in Michigan due to environmentally friendly: competitive market pressures; supply chain constraints; population density and etc.  This section should include research, including peer reviewed articles, government documents and other reputable sources.  (This section should be no longer than 2 pages.) (10 points)
  2. 2.      Methodology – Explain in detail how Amazon has invested or not in other food and non-food markets in the U.S. and what that implies for the Michigan market.  How successful or not were the different strategies used and did it positively contribute to growing their market share and/or profit, and why. This will require an extensive literature review of peer reviewed publications. (This section should be no longer than 4 pages.) (You should have a minimum of 10 peer reviewed articles references for this section) (20 points)
  3. Recommendations –Provide a minimum of two recommendations for the sustainable development of Amazon’s Michigan market development.  First, discuss the new investment strategy for Amazon in detail.  Second, discuss how competitive they will be in the future if Amazon decides to do nothing different in terms of environmental sustainability in the Michigan market for the next seven years.  Provide a final recommendation, invest or not and the associated strategy to implement your recommendation.

 

 

  1. Make sure that you reference correctly, see reference guide under the Assignments tab.

 

Try to keep the report between 7 and 10 pages, double-spaced and typed. The page limit does not include the figures or charts used.

 

Grading:

Introductory                                      10 points

Methodology

Analysis                                 10 points

References                             10 points

Comprehensive Recommendations   12 points

Organization                                        4 points

Grammar                                              4 points

Total:                                                  50 points

Case Study Sample Content Preview:

Amazon Expansion
Name
Institution
Amazon Expansion
Amazon is currently one of the most successful companies in the world. According to YCHARTS, as of March 27, Amazon’s market capitalization stands at $867.32 billion. This figure is seconded by Yahoo Finance which reports that Amazon’s market capitalization is at $867.31 billion. This means that in the world today, Amazon is among the top five richest companies in the world.
However, despite the above, Amazon is still not satisfied and is currently working hard to topple the top retailers in the industry. In her 2017 article, Debter reported that Amazon and Alibaba are closing in on Wal-Mart and may soon topple it. It is widely known that Amazon is the largest e-commerce company in the world. However, with the company making great strides in the world of brick-and-mortar retail, one can only anticipate a war of the Titans. However, how is Amazon doing in the food industry? Is it making headways and are its expansion programs doomed to fail?
Problem statement
First of all, Amazon came into the food industry late, and this means that the barriers of entry are quite enhanced. However, as it has shown before and continues to confirm, time is not a factor. In the food industry, there are myriad of companies that are far ahead and have better infrastructure, experience, and sizable market share in the industry. In the state of Michigan, for example, other food businesses have already established themselves. These include Harvest Fresh, Simply Fresh, Wal-Mart, Kroger, among others. Names like Kroger and Wal-Mart are global brands and have been in the business for years. The others have also made a name for themselves and continue to expand their wings as they devour new markets. So, Amazon’s late entry could be a problem. However, with a good business plan and approach, Amazon has shown resolve in the e-commerce industry and could replicate its genius in the food industry.
However, several issues need to be considered here. The first one is that the existing network of delivering non-perishable products using the Amazon infrastructure may not work with foods. In the food industry, perishability and urgency for most of the products are key. This means that Amazon needs to invest greatly in its infrastructure if it seeks success in the food industry. Experts being interviewed by Reuters note that Amazon needs to invest in specialized distribution centers (Dastin, 2017). This statement is echoed by Wells (2017) who notes that at the time of writing the paper, Amazon had about “3 million square feet of warehouse space for its AmazonFresh and Amazon Prime grocery operations.” This means that the company needs to invest more in warehouses.
Another hurdle for Amazon in its bid to expand retailing of food in Michigan is its lack of suppliers within the food industry. However, this is not a major problem as the reputation of Amazon always seem to precede it. Finally, there is the notion that not all non-perishable foods consumed in Michigan are produced in Michigan. A good example is a seafood. This means that the company needs to create a network of suppliers and distributors that is wide enough to help it maintain profitability while making headways in the industry.
Some important facts to include here include the fact that there are seven whole food stores in Michigan. Six of the seven are in the Detroit area while one is ins Lansing. These areas are potential hubs for foods. If used well, these areas could help enhance the success of Amazon in the food industry. It should also be noted that the most populous area is around Detroit with the north and west being relatively less populated. However, the south offers Amazon options because of the Whole Foods store in Mishawaka in Indiana. This store will help cut the transportation costs while still keeping the dream of expanding retailing food in Michigan alive.
However, some things need to be taken into perspective. One of them is the high cost of losses which often comes as a result of food going bad. Soper and Zaleski (2017) note that Amazon has never had this issue “with books and toys.” It continues to say that for “conventional grocery sellers, browning bananas can be sold at a discount to smoothie-makers and bread bakers.” However, with Amazon Fresh, “such items must be discarded or are returned by frustrated customers.” Additionally, there is also the issue of Amazon trying to do things in a non-traditional way by making people buy groceries online. However, Amazon ignores the notion that people do want and like going to stores to buy groceries.
Methodology
Amazon has done a lot to set the stage for its grand entry into the food industry, and this has softened the ground for it in Michigan. It is widely known that Amazon purchased Whole Foods in 2017 for a whopping $13.7 billion (Soper, 2018). The acquisition of Whole Foods as Petro (2017) notes it is because of two things. “First, the treasure trove of consumer data that comes with this acquisition; and second, Whole Food’s private brand product.” As indicated earlier, Whole Foods had seven stores in Michigan, and these provide Amazon with a head start.
The second investment for Amazon has been its in-house subsidiary which is known as AmazonFresh. AmazonFresh is a grocery delivery service whose presence makes it possible for Amazon to succeed in the food industry. It offers customers an opportunity to purchase their groceries online. At AmazonFresh, you can purchase vegetables, fruits, packaged snacks, canned goods, raw meat, etc. The options are many, and customers can get anything they want. However, the disadvantage here is that AmazonFresh is not available in Michigan. This means that the customers in Michigan who may wish to try the grocery service are denied this chance.
However, it is also crucial to consider how these investments have helped or have contributed to Amazon’s entry and success in the food industry. Have they contributed to it having a greater market share? Well, yes, especially for the Whole Foods acquisition. Acquiring Whole Foods meant that Amazon had access to the thousands if not millions of Whole Foods customers. Finally, Amazon had managed to break into the food industry after years of struggling to find a way in. As reported by Hirsch (2018), “through Whole Food stores, Amazon has renewed efforts to deliver fresh food – a service that has been a struggle for it in the past.” He continues to say that “Whole Foods’ stores provide a more cost-effective way to take care of fresh food, while also providing a launching pad to transport those groceries.” The name Whole Foods has also helped Amazon because as Hirsch notes, “shoppers are more likely to order and trust fresh food and meat from a retailer-branded Whole Foods than they are from one named Amazon.” These are but a few ways in which Amazon has managed to increase its market share and profitability indirectly.
However, when it comes to AmazonFresh, the story is different. While the idea of having AmazonFresh sounds appealing, it may not be something that helps the company increase its profitability. Soper and Zaleski (2017) note that shopping groceries online has not been as profitable as Amazon may have foreseen. A correspondent of their article, CEO of TABS Analytics blatantly said that “online grocery is failing.” Apparently, “only 4.5 percent of shoppers made frequent online grocery purchases in 2016, up just slightly from 4.2 percent four years earlier, despite big investments from companies such as Amazon.” This means that AmazonFresh has not been performing as per expected.
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