1.1 Amazon
Amazon has, for a long time, now operated following the virtuous cycle that was drawn by the founder and CEO of the company Jeff Bezoz (Uenlue, 2018). The selection and lower prices are the primary factors that drive a customer’s experience. Amazon can translate the low-cost structure into high profits and offer dividends to their shareholders (Uenlue, 2018). However, Amazon’s competitors are proving to be a great challenge whereby they already had low and scaled unit costs (Uenlue, 2018). On the other hand, Amazon only had a low cost structure but no scale given that the firm mainly saved on the costs from their brick and mortar stores. The firm passes this down to its customers through sustainable low prices and reinvestment of surplus into growth. So in the competitive rivalry force side they are facing a huge challenge.
Huge amount of these investments are used in their delivery and fulfillment network. Resultantly, this furthers lowered unit costs and amplifies the following elements within their virtuous cycle (Uenlue, 2018). Amazon’s key customer value propositions are vast selection, lowered prices, and fast delivery of orders.So their buyer power is relatively strong since their customer is sensitive to the rise of price change.
According to the CEO, customers are only loyal until someone else offers them better services. This motivation fuels Amazon hence turning into the largest online retailer (Singh, 2020). Since its inception, the firm has redefined how people shop hence forcing other retailers to reconsider their marketing strategies. The four principles which guide Amazon are a passion for invention, long-term perspective, customer value rather than focusing on competition, and commitment to operational excellence (Dudovskiy, 2020). In all their locations, whether online or physical, the firm focuses on price, selection, and convenience.
Dudovskiy argues that Amazon’s business strategy is described as cost leadership at its extreme (Dudovskiy, 2020). Generally, Amazon’s business strategy mainly consists of an investment in technologies, improving web services through the fulfillment capacity, research, and development activities in logistics, enhancing logistics applications, and experimentation with Fintech (Dudovskiy, 2020). It is cooperating with software company to develop Amazon Go as well, the industry barrier for entering this industry is high because of the advanced technologies involved. Traditionally, retail business does not have a very high industry barrier, the threshold of entering the retail trades is low, they do not need an advanced technology, patent, or certificate of authorization, the involved capital is low and most retail goods do not have a famous brand. The opposite examples are famous branded products of Apple Inc and communication operators like China Mobile, products of Apple Inc have high technologies, patents and valuable brands; and business of communication technology requires certificate of authorization of government.
However, as an online retail business, there are significant differences exist when compared with traditional retail industry. Online business involves higher costs and technologies like maintaining the operation of shopping websites needs professional employees. And because of the impact of economies of scale, customer loyalty, huge market shares, the industry barrier for new entrants is high.
1.2 Woolworth’s and Coles’s business model, subsequent strategy and Porter’s forces analysis
Woolworth has segments of Logistics, Food, Clothing, and General Merchandise, Financial Services, David Jones, Treasury, and Country Road, Group(Stock Market MBA, Inc, 2020). The key activities including supply chain management, inventory management, customer service, reasonable pricing, and merchandising (Vizologi, 2020). The primary value propositions include good prices, provision of the right ranges, partnering with recognizable and trusted retail shops, and availing a wide range of offers and promotions to their customers (Vizologi, 2020). The firm shows customer value by offering loyalty programs, ensuring customer satisfaction, personalization, and customer culture. Hence the buyer power and the supplier power are strong.
Woolworths’s major strategy is to provide products that fully satisfy the demands and needs of customers (Woolworths Group, 2020). The firm achieves this by analyzing the customers’ shopping habits and dividing supermarkets into various segments to enhance easy access (Woolworths Holdings Limited, 2020). Customer satisfaction not only attracts customers but also creates brand value. The firm emphasizes creating great relationships with its customers to retain them (Woolworths Holdings Limited, 2020). Mainly, the firm offers loyalty points to customers hence creating goodwill. Intense availability and high-quality product offerings are other strategies adopted by Woolworths (Woolworths Group, 2020). Products are available in most parts of Australia; hence customers can easily access them. Other business strategies of Woolworths include reasonable pricing, sustainable farming programs, product dominance, and personalization.
As for its strong rivalry, Coles has 1200 own brand and over 5000 suppliers. Moreover, supplier power is determined by how easy it is for suppliers to increase their prices. How many potential suppliers does Coles have and how unique is the product they provide, and how expensive would it be to switch from one supplier to another, since the number of suppliers is huge, the supplier power of those suppliers is weak.
For each of them, the force of the competitive rivalry is high since the retail products they sell are very similar and do not require a high skill or technology.
1.3 ALDI’s business model, subsequent strategy and Porter’s forces analysis
ALDI’s business model is founded on three core values that help decide and offer a strategic direction. These are simplicity, consistency, and responsibility (Pahwa, 2019).
ALDI’s business strategy employs thrifty ways to earn high profits while providing quality products at low prices (Pahwa, 2019). The prices are kept cheap by ensuring that only non-perishable products are stocked. The slow sellers are usually removed from the shelves and replaced with fast-moving products. The firm relies on word of mouth marketing and self-service stores, aiming to save advertising and employee costs, respectively. According to Pahwa, the smart strategies in ALDI’s business contours have enhanced its business model’s success (Pahwa, 2019). These contours are marketing, employees, no-frills, and discount—the simple store layout helps enhance convenience, whereby customers can readily access products. All these contours are cost-saving hence increasing the amount of revenue obtained by the firm. Because its revenue model mainly takes advantage of the price, their buyer power is strong and because they mainly operate physical stores, the threat of substitute like online stores, the threat of new entrants is high.
2.1.1 Coles analysis
In Australia, the key business objectives of Coles supermarket are ‘Down Down, Prices are Down’ and ‘The High Quality of Products with Low cost at Coles’ (Keith, S., 2012). The Porter’s value chain including 5 activities that can achieve and deliver the objectives.
| Primary activities | Examples |
| Inbound logistics Coles doesn’t produce the products that sells in its stores, Coles just manages the distribution of products.
| If the products produced from the producers, then they will send directly to particular distribution centres (Kumar, S., 2008). Coles has personal distribution system and personal distribution trucks to deliver the products and services on time (Hays, J., 2007). |
| Operations Coles are responsible for quality assessment and inventory management and processing the raw material and make end products (Knox, M., 2015). | Coles use Corporate Social Responsibility (CSR) as a tangible way to communicate to customer in packing (Pulker, C. E., 2019). Coles use minimal packing model, which decreases influences across the whole supply chain (Cherrier, H., 2006). |
| Marketing and sales: Promotions and launching activities are the key objectives for marketing and sales. | Coles has their own food brand, and promotes prepared meals and organic food to satisfied with the customer who changing preferences frequently (Lyons, K., 2007). |
| Outbound logistics The product of Coles delivered to customer by various intermediaries
| If the order over $100, there’s no delivery fee. Online shopping is available, customers can enjoy distance deliveries, and Click and Collect services (Coles official website, 2019) |
| Procurement the procurement of Coles means the processes in which purchasing equipment, raw material, supplies. | Coles applies IT system for supply chain and procurement with SAP system. Coles has also applied the SAP S/4HANA system for finance (Asha Barbaschow, 2019). |
| Secondary activities | |
| Human Resource management Evaluating Human resource activities including training, rewarding, selecting and other human resource activities. | Coles hired over 200000 employees in 700 stores and more than 100000 employees are training that including relevant skills, academic work and mental services (Coles Training, 2019). |
2.1.2 Aldi
| Primary activities | Examples |
| Inbound logistics Aldi backs its suppliers and establish strong cooperation with the local farms to ensure the quality control. Aldi has about 700 products lines and 95% of them focus on its own brand since 2011. (Chrishan, 2011) | By 2018, Aldi operated more than 500 stores in Australia and accounted for about 13% of the Australian supermarket industry. CEO Tom Daunt stated that they would expand the product lines in the store through self-operated raw materials, and the growth will reach the limit, such as establish the in-store bakery and deli. (Tom,2018) |
| Operations According to Chrishan (2011), Aldi effectively controls the process of both in-house and independent food laboratories through the long-term contracts. | Aldi adopts a long-term cooperation strategy to maintain the value chain. Specifically, Aldi signed a 10-year power purchase agreement with the Australian Wind Farm in 2020(TLT). |
| Outbound logistics Aldi also has its own outbound logistics,such as mode of transportation, distribution centers and closed warehouses, which could deliver its products to consumers (Logistics ALDI, 2020). | In Australia, Aldi directly trains truck drivers to be familiar with the transportation process and the ability to process information remotely. Thus, the driver could high-efficiently transport the product from the warehouse to the store (Logistics ALDI, 2020). |
| Marketing and sales Aldi raises awareness of its own brand products through exclusive brand concept (About ALDI, 2020). | Aldi successfully maintains customer loyalty and attracts certain market segments through its strategy of low prices and good product quality (Tom,2018). |
| Support activities | Examples |
| Procurement Aldi expects to look for suppliers with best practice, high professionalism, transparent and efficient supply chain. (About ALDI, 2020) | When Juicy Isle announced that its Pure Tassie Organic juices had quality issues, the purchasing department immediately monitored market risks and recalled all apple juice on sale in Australia stores. (Berry and Milenovic, 2020) |
2.1.3 Amazon
| Primary activities | Examples |
| Inbound logistics Amazon Go uses the mature technology to innovate the “Just Walk Out” shopping experience. | According to the annual report (2016), Amazon points out that they apply the cloud-based AI technology to assist the development of Amazon Go convenience store, which successfully eliminate checkout lines through machine vision. |
| Operations The clear vision for Amazon Go is to provide better services and experience to customers in physical stores. | Firstly, Amazon Go resolve the worst thing for physical retail: the checkout lines. Secondly, there are chefs and bakeries in the Amazon Go, to make ready-to-eat breakfast, lunch, dinner and snacks for customers |
| Marketing and sales As a technology innovator in physical stores, Amazon Go need to improve customers to understand the essential facts of technology and to experience the convenience of e-commerce. | With the popularization and accessibility of big data, Amazon Go collects and analyzes the data for customer preferences. Amazon Go adopts a rapid response strategy in marketing (Annual report, 2018), for instance, it would send attractive product information or advertisements to the target consumers before they leave the store, which could effectively and rapidly increase the sales. |
| Support activities | Examples |
| Product and technology development The internal capability and resource are the key factors for Amazon to design the Amazon Go. |
Amazon go attracts customers through innovative approaches. In order to achieve future growth, Amazon’s R&D expenditure in 2017 was $22.6 billion (Loeb, 2018).
On the basis of the annual report (2016), it shows that Amazon has been engaged in practical applications of machine learning for many years. This would be the significant fundament to improve the program of Amazon Go by artificial intelligence. |
2.2 Comments and suggestions for Amazon Go
Market can be considered as ‘pie’ involving how the pie can be distributed to different firms. In other words, if sellers want to get $100 more, which means the other sellers must get $100 less (Meegan, D. V., 2010). Therefore zero-sum competition (see figure 1) was born among different firms. In order to gain more profits and customers, pricing strategy will be implemented in various firms.
Figure 1.
Fortunately, expanding the size of the pie, that means more profits in the market can be shared. The Positive-sum competition (see figure 2) incur at in a bargaining where desired interest is negotiated and competitors can reach their needs, no matter who is winner or loser (Landau, R., 1986). The firms including Amazon Go can increase resources in the market and implement a business strategy which marketing requests and competitor needs of all desired are satisfied.
Figure 2.
According to 2019 industry report, more than 150,000 groceries are operating in the U.S. Only 3% of the total revenue was created by online retailer. This is the reason that Amazon expands a chain of groceries is the groceries industry is profitable. Amazon Go also expand the Cashier-less Go model in the groceries, this can address the needs of customers who like a convenience and have speed requirement shopping experience (Kurt Schlosser, 2020). Amazon Go might barrier to enter new market in other countries if the business model is still not sophisticated. Amazon Go could seize opportunity to create ‘Tap to Go’ model, which can be used in the business strategy, customers can assess shelf readers and pay with loyalty branded cards or phones.
3.1.The concepts of Ethics and privacy
Advanced technology always helps people in many aspects, like Amazon GO, a brand new shopping experience, has made our shopping faster and easier. But every coin has two sides, we may concern about the ethical and security problems that it will bring to us. Ethical problems, as well as privacy, are the top two problems people care about, first, we need to know the basic concept of these two.
Privacy means the right to be left alone and to be free of unreasonable personal intrusion, these personal information includes: your name, your address, your bank account information, your photos. The Privacy Act 1988 allows every individual to know why personal information has being collected, on what purpose it will be used and who will be able to look at it. (Gray,2015) Amazon is the enemy of our personal privacy as it love to target adverting after collecting data from almost all aspect of people’s life (How Google and Amazon are ‘spying’ on you,2020).
Ethic means the principle of right and wrong that individuals use to make choices to guide their behaviors. The basic principles of ethics include responsibility, accountability and liability. There are four widely used standards, the utilitarian approach, the rights approach, the fairness approach and the common good approach, Combined these four standards, it could develop a general framework for ethics. The framework consists of five steps : Recognize an ethical issue, Get the facts, Evaluate alternative actions, Make decision and test it, Act and reflect on the outcome of your decision.(Gray,2015) and from where I stand , Amazon fail to establish its ethical standard. Amazon had long been resisted by Ethical consumers and it also got a nickname, ‘Arch tax avoider’ (Amazon ethical issues, 2020).
3.2 Drawbacks of Amazon GO’s use of “associated technologies”
When we thinking about privacy, we mainly focus on this problem individually. Now, Amazon GO actually are smart enough to forecast the need of its customer. In order to accomplish this, Amazon set cameras inside the shop to see what items have been picked up by the customers, and they also put cameras inside the shelf to see peoples’ actions to their products. These series of actions are considered a violation of customers’ privacy. Among a survey in the UK, 19% feel ‘Unsafe’ and ‘Uncomfortable’ due to the existence of the hi-tech facilities that can ‘monitor’ even ‘track’ human beings.
Based on the data amazon GO collects at their own shop, they have a basic understanding of every customers’ preference, it will sending promotion information during breakfast, lunch, and dinner time based on this preference In order to maximize its own profit. Amazon GO also tracking peoples’ location more than any other APPs. It is a very sensitive problem, because Amazon may basically ‘collecting’ customers’ home address, it is even able to know their trajectory. This means great danger to its customer because that personal information may be hacked, and it is terrible if hackers know your address and your daily routine even your bank account information because those are all included in amazon’s database.
Amazon GO also recording customers’ conversation inside their shop in order to improve their products. This action may result in further privacy and legal problems because people’s voice could be used as an access to unlock their own properties, such as their bank account, their phone, even their office if the door will open if it identified its staffs’ voice.
Not only will Amazon GO pose danger and inconvenience on individuals, but it will also endanger society in ethical aspect. Hi-tech and AI had long been the enemy of real human staff, for example, with more and more advanced applications and technology prevailing in the field of accounting, accountants may lose their job because of these applications and technologies has been used very frequently. And for amazon GO, their newly developed technologies could take the place of human beings in almost every field of their own business. According to a survey, 60 thousand amazon employees will lose their job if only 10 percent of amazon shops apply Amazon GO (Annual report 2019). These sounds horrible and terrible, with the popularizing of Amazon GO all over the world, more and more people will lose their job, these may result in chaos and those jobless vagrants become the heavy burden of the government.
Also, the mode of payment in Amazon GO can result in discrimination in society. transactions are going through smart payment among every amazon GO shop, customers do not have to take out their debit card or smartphone to process their transaction, every time you pick up something and take it out of the Amazon GO shop, your bank account will be charged automatically. Obviously, this payment option put those who prefer cash transaction and those who do not have smartphone out of the door. In the united state, nearly 19 percent of adults do not have a smartphone, so it is impossible for these multitudes to enjoy the service from amazon GO. Governments even pronounced that shops without cash payment should not have the right to open.
In conclusion, although amazon GO benefits its customer in a lot of ways, it has too many drawbacks in both ethical and privacy aspect, it made people wondering whether this kind of shop should prevailed and what actions should amazon take to prevent the bad effect that amazon GO will have on individuals and the society.
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