Operationalization

Operations Management - Amazon

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A) Significant Forces

Amazon remains the leader in online retail marketing, especially coming from the integration of issues which have been identified in the Porters five forces analysis. This is regarding the firm's strategies and operations management (Akzin, et al. 2017). The Porters five forces model will help in analyzing the external model of the firm, especially factors which impacts its operations and management. The factors to help define the conditions of the e-commerce environment, with focus on the market. The organization remains the biggest market player, and to maintain this desired market position, Amazon needs to evaluate the factors which affect its operational effectiveness regularly.

i) Market rivalry or competition

Amazon, just like any other established organization, competes against very strong competitors in the market (Akzin, et al. 2017). Analyzing this will help show three distinct aspects which end up affecting operations management, regarding competition in the market. Such factors include; high aggressiveness of other firms in the market, the high availability of substitutes and the low switching costs. Retail firms are known to be aggressive and exert significant competitive forces.

For example, Amazon's chief competitor is Walmart. The physical or the brick & mortar stores are perfect substitutes for the online retail services at Amazon (Akzin, et al. 2017). Management dealing with Amazon's market presence needs to come up with better ideas to mitigate the competition more proactively. There is a need to make the competition a strategic factor of consideration, and a priority meant to ensure that the organization maintains long-term competence in the market.

ii) Bargaining power of the consumers

The influence of the firm towards the consumers in the market is determined by this force. Operations management in an organization needs to be well aware of the strong intensity of buyers, and the need to always satisfy their demands in the market (Akzin, et al. 2017). Factors affecting operations management based on the bargaining power of consumers at Amazon include; high quality of information, low switching costs and the availability of substitute commodities, in the competitive market.

Consumers access a lot of quality information online, especially regarding services that the retailers offer. In the future, this aspect is bound to affect Amazon, since it will make it easier for consumers to transfer from Amazon to more productive firms and operational friendly entities like Walmart stores. There is, therefore, a need for the operational managers in the organization to consider the substantial bargaining power of all consumers, including addressing its business challenges in the retail industry (Akzin, et al. 2017).

iii) Bargaining power of the suppliers

Suppliers can control the materials and the e-commerce operations which Amazon is involved in. In this case, there is a need for Amazon to consider fundamental factors including; the small population of suppliers in the market which is a strong force in operations management. Other moderate forces include forward integration and the size of suppliers. Regarding operational management at Amazon, the small population of suppliers allows the suppliers to impose a powerful force on the organization's e-commerce business (Akzin, et al. 2017). For example, the degree of control that suppliers have in the market, impacts the retail operations of Amazon as a business.

iv) The threat of substitutes

Amazon just like most organizations competes with the availability of substitute products within the online retail market. The availability of substitutes affects the operations of the organization and the industry environment at large, hence this is a strong force (Christopher, 2016). Important aspects which should be considered strong forces based on the threat of substitution include; low switching costs, the high availability of substitutes as well as the lower costs of substitutes from other companies. The management at Amazon will be affected in the future, primarily if substitutes are not controlled in the market. High availability leads to decreased product costs, which also limits the operational profitability of the organization.

v) Threat of new entrants into the market

This threat can be considered the weakest force affecting the operational management at Amazon. New firms are bound to lead to a reduction in the market share at Amazon, in online retail business. This ends up affecting the organization, which experiences weaker intensity based on significant factors such as; high economies of scale, and the high cost of brand development, which are both relatively weaker forces (Christopher, 2016). If this force is not handled, consumers at Amazon are likely to transfer to new firms in the industry, which will lead to the empowerment of the new firms to impose a stronger force, against Amazon's operational success. There is a need to develop strategies to counter operational inefficiency.

B) Key Obstacles

The evolution of operations management in the modern era, especially in the competitive business platform is alarming. This displays just how much change has been experienced and the intense need for organizations such as Amazon to keep adapting to changes as they come in the dynamic business and industry platform. Amazon must be detailed to keep up with a lot of business challenges and pressures, during the evolution of operations management, to fit into the modern era in business (Christopher, 2016). Amazon was extremely keen to share its plans regarding making moves and working on the next generation smartphones.

However, the management experienced greater challenges, which does not get as much attention. International growth has been a significant challenge for the organization, especially in operations management. This was evident when the entity reported its annual financial results, recently. The foreign exchange fluctuations played a significant role. The organization cost was approximately $1.3 billion, to international revenues. However, this pattern could not have been sustained in the growing American business and the industry as a whole. The pattern is more worrying especially because the entity is not failing to invest in the business. It is also losing money which greatly affects its profitability.

Losing on profitability and revenue is a nightmare to all profit-making entities. In countering this problem, the management at Amazon handled the issue through embracing the need to invest into a fulfillment center actively and increasing more efficient and diverse infrastructure, in every country in which it operates (Christopher, 2016). This move was aimed at building capacity and increasing the overall demand in the market. The operations management team believes that Amazon's strategy is aimed at building capacity so that demand in the market can be adequately met without any struggle, and with a seamless experience. This was a relatively proactive approach, which helped Amazon tackle international growth problems on a different level.

C) Changes

The success of Amazon depends on the high-efficiency levels, which are in the operations management, that determine the productivity of the organization (Cummings & Worley, 2014). The organization has learned to embrace and address key strategic decision areas which are optimized by operations management productivity. Being the leading player in the online retail industry, the organization is the best example of technologically supported productivity. The management in the organization has ended up making ten strategic decisions, considering the increasing complexity of operations.

The organization structure has also been modified, considering that the organization also continues to expand and diversify its operations continuous improvement is bound to help enhance the capabilities of the organization to support global expansion (Cummings & Worley, 2014).

Essential decision areas which have been embraced include the following:

i) Design of goods and services

The organization design output addresses the primary concern of technology. Advanced information and communication technologies help address complexity in the organization.

ii) Quality management

Quality management at Amazon is meant to ensure that continuous improvement is not shunned. The organization uses its organizational culture to provide support to idea creation, among its various personnel (Cummings & Worley, 2014).

iii) Location strategy

Accessibility of resources in the organization makes location an area of priority at Amazon. Amazon needs to maintain its warehouses and at the same time, be close enough to its consumers, of the online retail business to maximize satisfaction (Stadtler, 2015).

iv) Supply chain management.

Operations management prioritizes the need to streamline all the supply chain efforts, to support the objectives of the organization. For example, sellers are required to adjust to all supply levels, based on demand.

v) Inventory management.

The focus of operations management at Amazon is to maintain optimal levels of inventory. This is a strategic decision area, which helps in the optimization of retail inventory size for cost minimization while satisfying demand in the market (Stadtler, 2015).

D) Business Operations

Different organizations embrace different approaches regarding processes, as well as operational management. At Amazon, all operational procedures are aimed at obtaining quality output in the long run. The company uses specific organizational processes, which make it more unique and easy to handle considering the numerous demands.

i) Reviewing all plans and objectives

Objectives include all activities which need to be completed for the sake of achieving goals and objectives in an organization (Stadtler, 2015). At Amazon, all activities needed to reach goals are identified and plans also established for development.

ii) Determining work activities, which are needed to accomplish identified objectives.

Once all objectives have been identified in the organization, the management team at Amazon is responsible for analyzing all tasks and listing those that need to be accomplished. In the long run, all goals must be met.

iii) Classification and grouping of activities into manageable units

Managers are expected to categorize all group activities based on four distinct models at Amazon. These include; departmentalization, geographical, product, customer and functional.

iv) Assigning activities and delegation of duties

The management is responsible for assigning the defined roles to specific persons. This is based on the specialization of specific groups of personnel (Stevenson & Hojati, 2017). Equal authority is provided to allow easier and more favorable work environment.

v) Designing a hierarchy of relationships

Managers at Amazon are keen to determine the vertical decision making, as well as coordination, or horizontal relationships of the organization. Management also needs to diagram all relationships to allow easier determination of hierarchy (Stevenson & Hojati, 2017).

The business operations at Amazon have been designed to support the strategic plan, mission and vision and the values of the organization. The business operations at Amazon complement all operations, which makes everything in the organization run smoothly and effectively. For example, the strategic plan, mission, and vision of the company are encouraged based on the operational activities. The ultimate goal is to achieve overall success, for the benefit of the organization as a whole (Stevenson & Hojati, 2017). A lot of factors affect the profitability and productivity at Amazon. For example, profitability is affected by organizational expenses, corporate social responsibilities, and the overall economic conditions.

E) Key Trends

Production trends have since evolved, following the dynamic business platform in the global context. Quality, resource, and information management have also changed, which have majorly impacted the business operations of Amazon as an organization. For example, regarding information management and quality, technology has played a significant role and is recognized as a critical trend affecting organization operations at Amazon. Also looking at the production point of view, most businesses are now producing based on market demand, to avoid stock-outs and costs of holding goods, which increases the losses and expenses incurred (Stevenson & Hojati, 2017). Quality is gauged through consumer acceptance and comparison with other organizations in online the retail industry such as Walmart among other entities.

F) Impact

Business operations of Amazon, just like any other organization, are bound to be affected considering the major developments on business operations products and services in every entity should be maintained, in terms of determining quality effectiveness and control. The trends have led to increased production quality, especially in terms of services (Stevenson & Hojati, 2017). Other trends include; advancement in technology, emerging markets end up gaining power, demographic changes, global warming, and the increased growth of the population. Decisions made at Amazon need to completely conform with the changes, hence the process should strictly rely on global changes in the market.

References

Aksin, Z., Armony, M., & Mehrotra, V. (2017). The modern call center: A multi‐disciplinary perspective on operations management research. Production and operations management, 16(6), 665-688.

Christopher, M. (2016). Logistics & supply chain management. Pearson UK.

Cummings, T. G., & Worley, C. G. (2014). Organization development and change. Cengage Learning.

Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.

Stevenson, W. J., & Hojati, M. (2017). Operations management (Vol. 8). Boston: McGraw Hill/Irwin.