Trends in IT Management at Amazon

Section 1

Introduction

Young, old, rich or poor, the online marketplace known as Amazon is recognized by all walks of life all over the globe. In 1995, the history of the billion-dollar company, all started with their founder Jeff Bezos. The company was launched into the market, ready to test their prowess on the masses. The e-commerce giant that we know and love today, was slated to be called “Relentless”, which was introduced by one of Amazon’s first lawyer, Todd Tarbert. Bezos decided to settle on the name, Amazon, since it’s the largest river in the world. Little did he know, Amazon would go on to become the largest online retailer. A fitting name for looking back in hindsight. The company operated through three different channels: A North American branch, several international branches, and their world-renowned Amazon web services. The online retailer expanded their merchandise selection to include independent third-party sellers. As of a few years ago, Amazon has manufactured and sold electronic devices of their own like the very popular Kindle. Amazon saw the potential to innovate the grocery industry, so it sought after one of the most popular health food supermarket franchises, Whole Foods. Amazon acquired Whole Foods for an astounding $14 billion. Amazon inked the deal in August of 2017, which extended their reach into the grocery sector of retail sales. By acquiring Whole Foods, which has around 460 stores, is a long-term investment by Amazon into the brick and mortar sector. Amazon continues to innovate, not just online, but in the brick and mortars with features like a cashless payment and a speedy delivery service. While grocery sales dominate a large majority of the US economy, it remains a small percentage of online sales due to the lack outlets offering online grocery shopping. With Amazon’s unquenchable thirst for total market domination, they set out to introduce new and innovative ways to change the shopping experience forever. A new kind of store has emerged in recent months that give a glimpse into what the future has to offer, and it’s called Amazon Go. Amazon Go is a fully autonomous store which runs on infrared lasers scanning every item the customer puts into their shopping cart, making the old cashier and even self-checkout system obsolete. Since this is the direction Amazon plans on taking the future of in store shopping, only time will tell what kind of shift this will have on retailers and the market in general.

External Environment

In terms of customers

It’s safe to assume that the average consumer is also an Amazon customer, considering amazon dominates the majority of online sales. Business owners can benefit from Amazon by selling their products on the platform as well as purchasing supplies at competitively low prices for their own stores. With an Amazon Prime membership, buyers have the option of two-day shipping on most items, or for a fee they offer overnight shipping that rivals USPS. A report that dates back from 2016 stated that Amazon has amassed approximately over 300 million active subscribers to the famed Prime service, launching it into one of the most used online platforms in the world. We can easily be astounded by the sheer amount of traffic Amazon receives every day by their massive user base. Since shopping online has progressed over the years, people in general seen it as a more convenient way of shopping rather than physically being in the store. Amazon attracts more customers from the brick and mortar stores because of their hassle simplicity and convenience, lack waiting lines, and lowest prices of goods sold on the market, physical or online.

In terms of main competitors

In terms of competitors, they range from grocery, clothes, electronic retailers to music and entertainment streaming platforms. Reason being, that amazon has extended their inventory to virtually everything on the market.  Amazon also competes with auction sites, such as the famously renowned eBay, which was known to dominate the online arena in their time. Since online services began to see popularity, companies like Netflix and Hulu, of which provides consumers with instant on-demand shows and movies at any time or given place, as long as the user has an internet connection. As well as Apple’s iTunes, instantly becoming a hit in the music market and instantly cutting down the demand for physical copies of music. Stores like Blockbuster, whose lack of foresight and ability to adapt to the digital realm led to their untimely demise. Of course, we cannot forget one of their largest competitors, Google Play and their release of cool gadgets that hit homeowners every year. To counteract all of these innovations in the market, Amazon has launched their own music and video streaming services, quickly adding to their expansion of items and services offered on the website. Amazon, being the massive conglomerate, it is, can compete and in many aspects, blow many of their physical competitors out of the water. Stores like Walmart, whose sales have seen a massive decline in sales, have added features like store pickup. This grants the buyer the ability to pre-purchase their shopping cart online and load them in the designated pick up area of the parking lot. We can see where the influence of this feature comes from. Amazon forces stores to adapt to the new technological age, thus benefitting the consumer with convenience as well as saving time. As the saying goes, “time is money”.

In terms of suppliers

Amazon has acquired five companies to be part of their main infrastructure for supplying products to the tech giant as well as for research and development. First, Applied Optoelectronics, which is located in Sugar Land, Texas. The company manufactures and expands on optical, laser, fiber optic like-devices. From their facilities they produce photodiodes, which is a semiconductor device that helps change light into a usable electric current for use. Related uses for this technology are modules and circuitry for the televisions, data networks, and wireless transmission, for various industries. Applied Optoelectronics has amassed a whopping $254 million and receives approximately 46% of their profit, $189.9 million, from Amazon alone. The next company in line is Wellnet Corporation, which is located in Tokyo, Japan. Wellnet engages in electronic business settlements and authentication-like services. The company has ventured itself internationally by the uses of billing, payment systems, and publication services, by using credit cards for online transactions through either a point of sale register systems or ATMs. Wellnet being a leader in mobile payment systems as well, which helped reel in a total of $346 million and to which an estimate of 40% of their revenue depends greatly on Amazon to display and distribute their products. Up next is a management company called TrueBlue, whose headquarters are located in Tacoma, Washington. TrueBlue brings in specialized solutions for the workforce of today through staffing segmenting, recruitment, and a full-time management team. Company operates on a massive global scale by placing over 800,000 people in positions each year for companies in many of the industries existing today. TrueBlue’s staffing section brings in blue-collar services such as general and skilled labor trades and is hugely responsible for placing many positions in the Amazon warehouses and providing employees in a plethora of Amazon’s facilities. TrueBlue brings in an enormous net revenue of $1.1 billion deriving from it total of $2.7 billion through dealing with Amazon. The fourth installment of Amazon’s suppliers is GoPro, which is founded by Nicholas Woodman in 2002 in San Mateo, California. The company produces wearable video cameras and accessories to accommodate them. Also providing exclusive media content created by their own users for advertisement. GoPro marked $1.6 billion and of that $1.6 billion in sales, 12% of those sales were through Amazon. Since using Amazon as their main selling platform, they are able to dominate on the action/adventure camera market. The last company, of which helps Amazon supply their own products, is Nautilus, whose headquarters are in Vancouver, Washington. Nautilus manufactures a diverse range of fitness-related products. Nautilus produces training equipment that can be used in your home like rowing machines, treadmills, and free weights. Its brands include Nautilus, the famed Bowflex, Schwinn and Universal. The company brought in almost $600 million worth of sales, of which 11%, can be attributed to the Amazon platform. Amazon is able to boost sales significantly, which is why every company, whether it be tech and so forth, competes for the company’s attention.

Purpose or Mission

Jeff Bezos has always envisioned himself to do greater things by bringing people from all walks of life together to shop at a centralized location to where businesses of all ages can grow and flourish in today’s competitive environment. This quote helps illustrate Amazon’s mission statement in today’s challenging world, “Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online” (Farfan). As you can see in today’s world, Amazon hasn’t yet even reached their peak and continues to grow. With Amazon acquiring Whole Foods at an astonishing $14 billion dollars, which made it their most expensive acquisition yet. This seemed to help catapult Amazon into the grocery sector of the market. In their everlasting hunger to conquer every aspect of the market, Amazon will soon implement technologies that will allow users to shop and go, without ever needing to be rung up at the register. Although this news seems well and convenient, it can cause labor issues. People who used to rely on those kinds of jobs are being left to fend for themselves. But, with innovation comes new jobs, like software developing and manufacturing of such technology.

Regulators

For Amazon the regulators would reside with the federal government. Since their growth has reached to new heights, the tech giant has brought upon itself new political spectators to the arena. Since big companies try to lobby their way into governmental affairs, in order to advance their agendas, they pay politicians to help push their mission and ideologies without any hiccup from Uncle Sam himself. After the 2016 elections, President Trump has been eyeing large corporations and, to our surprise, bashed Amazon’s efforts to cut down on the taxes they owe. Amazon has been in some hot water for their “antagonistic” approach to the consumer market by the federal government. Though on the flip side, many people in congress believe also that as many as 50,000 new jobs are being created in an environment of which does not require a college degree. Earlier in the year, Democratic Sen. Cory Booker was alarmed about Amazon’s most recent acquisition of Whole Foods for $14 Billions. The tech giant also lobbied close to $6.1 million dollars in lobbying efforts to enhance their expansion across the country in states like Arizona, California, Delaware, and Florida, Etc. Uncle Sam has been aware of the recent moves Amazon has done through buying out larger companies and essentially cornering the market leaving smaller businesses to fend for themselves. Lawmakers like Sen. Elizabeth Warren, who questioned whether the tech giant has grown to a level of uncomfortable proportions, since they have stuck their hands inside the pockets of lobbying interests’ groups. Stacy Mitchell, the co-director of the Institute for Local Self-Reliance added it shocks her that Amazon has created a situation in which government officials across the country are signaling to their constituents that Amazon is a magnificent company, and it should receive special treatment for their growth across the nation.

Structure (Optional)

Amazon operates through three main components of their own geographic infrastructure: North America, International and Amazon Web Services (AWS). In terms of what kind of organizational charting Amazon goes for, it’s a mix of both Divisional and Geographical. As Amazon acquires more companies the structure would only get bigger and more geographic locations would be added onto the chart.  Another thing to note is that Amazon also includes third-party sellers with their own line of products that they produce. By using Amazon’s platform for grabbing customers. This in turn can be advantageous to an e-commerce company like Amazon, if it wants to reach a wider consumer base, hence the complexity of structures it utilizes for itself.

Image result for amazon's organizational chart

Organizational Life Cycle

Amazon is currently dominating the market and their projects seem to be increasing steadily. Meanwhile, other companies are experiencing a decline. Looking through Amazon’s ever-expanding portfolio, trends indicate that the company may be towards the middle phase of their life cycle. Though not only has Amazon accumulated in profit but acquiring other companies and adding additional services to itself. As the company stands, it can easily be labeled as a prospector, since stocks and internal growth within the company do not seem to slowdown in sales or innovation. With the large cash flow, they have at their disposable, one can only wonder what direction the e-commerce titan might turn to.

Section 2

Background

Jeff Bezos was born on January 12, 1964. As a child, he was embraced by Miguel Bezos, a Cuban immigrant, after his mother married him at his grandfather’s Texas ranch, Bezos spent his summers installing pipes, tending to the animals, and fixing structures. He attended Princeton university and graduated with a degree in electrical engineering and computer science. He then relocated for work to a company called Fitel, Bankers Trust and D. E. Shaw & Co, in New York. After spending some time there, he ultimately decided to leave the field of finance and settled in Seattle, where he later developed the idea of Amazon.

Significant Contributions to organization

Bezos launched a subscription service called Amazon Prime back in 2005. At the cost of $79 per year, where members were eligible for a quick two-day delivery on an unlimited number of items. In 2011, it introduced Prime Instant Videos, a TV and movie streaming service similar to Netflix. It also created the Kindle Library, a digital public library that makes select ebooks available for free. Furthermore, the intensive focus on the customer relationship, long term financial keepings is how Amazon’s vision works smoothly, setting up Prime for success in the long term. Though one of Amazon’s most beloved service didn’t become popular overnight, and presumably is not exactly what amazon wants, as the service sees countless improvements over time. Since, customer satisfaction has been and is the number one priority for Amazon. Bezos also positively benefited the company by building a loyal customer base which would serve the company in the long haul. Amazon’s mentality of providing the best customer service, is what helped build a faithful customer base from the start. Amazon’s model of giving the consumer the voice has positively impacted the way it does business, compared to other companies. As we can see, loyalty is one of the largest factors for Amazon’s growth, from understanding their base ideologies, we can foreshadow Amazon’s future moves by analyzing what their customer base wants.

Struggles/Challenges

Since Amazon is primarily an online e-commerce site, they heavily rely on shipping companies to keep up with demand. In America alone, Amazon has about roughly 70 million subscribers to the Prime service alone. The company also noticed trends in shipping fulfillment difficulties for consumers in the next several years. As online e-commerce seeps its way into everybody’s daily life, the need for the service to deliver products as quickly as possible proves to be an obstacle, even for one of the largest online retailers to date. Reliance on companies like FedEx and UPS is an essential part of how Amazon operates. If deals go sour between the companies, this can cause a large bruise to the tech giant, which can affect their quality service that it promises to provide at all times. In addition, another challenges the company faces, are data breaches. Now since millions of people shop on the website every day, that means credit cards are being used almost every second of the day, which can spell catastrophic consequences if ever broken into, Perhaps the biggest risk facing Amazon is hackers. Though no company can be completely safe from individuals who wish to cause harm to companies in the digital space, it can be a huge problem for Amazon if a breach were to occur. Many companies like Target, have experienced large data breaches involving the theft of millions of credit card information. Imagine a behemoth like Amazon, whose sole sales model relied on the internet since their inception, announcing a data breach involving their 300 million plus user base. As new technologies get introduced into the market, it seems like our lives has been consumed by electronics to the point where we as people could not go a day without using our cellular devices. Amazon even has admitted in the past that it developed systems for the purpose of protecting consumer information with added features of preventing data loss cannot be a fool proof in today’s cyberspace.

Trends in IT Management

One of the trends that we are seeing in terms of growth, especially with tech companies, who market anything related to services done online, seem to have all the same weakness. Which is being hacked and having an outsider gain sensitive information about people and to be sold through the darker portions of the web. A trend that we need to focus on is the ability to protect one’s self in cyberspace, since everything has shifted towards a more technological output on many tasks that are done on a daily basis. Of course, as people, we need to make sure we can safely integrate technology into our lives without it disrupting our daily schedule.  Another trend we have seen shift is the importance of IT in every company, since it used to be a support like role. Now it has become one of the main staples of an organization. In addition, the way information has changed from paper to digital input has sped up the process on many levels, especially since now that we desire output from anywhere in a blink of an eye. Hence, the need for Amazon services to be functional every single second of the day. There was an incident where a day called “Prime Day”, mimicking Cyber Monday, has crashed within the first hour it was launched, causing a massive outrage throughout the country.  Furthermore, a wristband like device that may be soon introduced to employees. This will apparently help manage the inventory and monitor the worker’s performance in terms of managing large groups of items and tracking misplaced goods at all times. This will heighten the idea of management and increase their sophistication on how we manage different groups in an organization. Though it seems that history may repeat itself, since this speaks very closely to the Hawthorne studies that we learned in class, where monitoring workers would neither have a positive or negative effect. Yet tensions will rise, since the ambiguity of how the device might be programmed for their use’s worries many of the Amazon’s employees. Many believe it is used to track performance to see if one would be lackluster on the job. As we progress in society, time will only tell what the next step in advancement can be when it comes to management, especially in the IT world.

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