Table of Content
What was the business opportunity for Amazon? How did the company capture it?.
The strategy used by Amazon.
Identify Risks and Opportunities for Amazon in entering this new market.
Prepare a short marketing project for launching the Whole Food and Amazon cooperation, from market research to operational marketing.
Analyze the impact of this new business model on the social and economic environment
Impact on the social environment
Impact on the economic environment
The aim of the report is to analyze the case of Amazon – Whole Foods. Amazon and Whole Foods Market, Inc. on June 16, 2017, announced that they are entering into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market’s net debt (Alvarez, Lane and Coughlin 2017). The report will discuss the business opportunities for Amazon in merging with Whole Foods Market along with the strategies that how the company will capture it. Moreover, the report will identify risks and opportunities for Amazon in entering this new market. A short marketing project for launching the Whole Food and Amazon cooperation, from market research to operational marketing will also be presented in this report. Besides this, the report will also analyze the impact of this new business model on the social and economic environment.
Amazon is one of the successful companies in terms of revenue (Alvarez, Lane and Coughlin 2017). It is an e-commerce and cloud computing company selling various products online. The business opportunity for Amazon was that it can learn the process of how the grocery business runs in order to convert it into an online business where customers do not have to visit the grocery stores and wait for hours to buy groceries. This business opportunity was so unique that no had imagined it until Amazon did. Selling grocery online was very hard (Baskin and Olszyk 2018). The main aim for Amazon was to learn about the business and understand things that how the consumer will behave if they are converted to online grocery consumers. Besides this, buying Whole Foods Market will help Amazon to increase the number of subscribers. Another business opportunity for Amazon was that the company entered a new market where it will sell groceries online. Any other company has not done it yet before (Campbell, Sandino Barnett and Snively 2018).
It was hard for Amazon to sell groceries online but the technology used by Amazon had made it simple. Amazon is one of the technology leaders in the field of retail business. Amazon has innovative technologies better than any other retailer has. Buying the Whole Foods Market was a risk for Amazon but it was a unique opportunity for Amazon. It was a power move by the company to buy Whole Foods Market for almost $ 14 billion (Brites 2018). Amazon captured this opportunity in several ways which include the following things:
Allowing people to purchase groceries online had boosted the profit of the company with an increase in the number of consumers for Amazon. In the present scenario company has now become a great threat for most of the grocery stores as it provides home delivery of fresh items directly from the Whole Foods Market.
Entering into a new market generated both risks as well opportunities. Risks and opportunities involved with acquiring the Whole Foods Market by Amazon are as follows.
Entering in this new market will have certain risks involved with it. As Amazon is an online retailer shop it does not have any experience in entering food grocery stories. For Amazon, it is a completely new field and entering into it will certainly result in profit but with a certain amount of risk. One of the risks involved with it is that Amazon will face a large amount of competition from other grocery stores like Walmart (Conaway, Regester, Martin, Nixon, and Senior 2018). The company will also face problems in maintaining the quality of the item as there are large numbers of competitors who only deals with food items having high quality. Being a beginner in this new market Amazon may lack in providing a better quality of food items from its competitor including Kroger chains and Target. The second risk involved in entering a new market is that to get a return on its capital investment in Whole food, the company needs to take aggressive steps. Amazon will require expert knowledge for planning innovative strategies, aggressive marketing, and lucrative deals to overcome its other large competitors. The third risk involved is that Amazon is an automated oriented company whereas Whole Food is a people focused company (Lynch and Haskins 2019). Acquiring a company having different background will result in dissatisfaction of employees as whole food give rewards to its employees for their loyalty as well as gives a fair amount of autonomy to individual stores. On the other hand, Amazon gives a little concern to staff turnover as well as seeks uniformity and puts a premium on performance.
Merging with the Whole Foods market will produce a large number of opportunities for Amazon as it will be a completely new market for Amazon. Amazon is an online retailing shop which provides almost all kind of items in its app. By purchasing Whole Foods Market, Amazon had gained a chance of increasing its profit per year (Alvarez, Lane and Coughlin 2017). Customers having Amazon prime account will be able to order their groceries from their home that is online, and then they can pick their orders from the stores. As the business strategy used by Amazon is unique. It will enable Amazon to get more numbers of the company to link with it in order to reach a large number of customers around the globe. Some of the business opportunities for Amazon are as follows:
To launch the whole food and Amazon corporation market strategy is need to be planned for which segmentation, targeting and positioning of customers is required.
Whole Foods Market only operates under one segment that is natural and organic food supermarket. Amazon will have an opportunity to online retail the grocery items available at Whole Food Market for this the customer segmentation is required. Segmentation offers different ways to divide the customers according to their demographics, geography, lifestyle belief, behavior, and psychology(White 2020). The customers in this segment are usually health conscious and environmental friendly. Therefore segmentation according to geography will be people from North Australia having urban and rural density. Demographical segmentation will include both male and female using Amazon prime for purchasing accessories (Lynch and Haskins 2019).
Selling organic food items and groceries online is a unique idea. Targeted customers will be those who are not a member of Amazon prime account. Amazon is providing a great discount to its loyal customers and prime user consumers and this will attract large number of people to register on Amazon to advantage of this offer. Moreover, targeting this base of customer will result in better revenue for the company (White 2020). Moreover, people who are health conscious and have environmental concerns will also be targeted. Besides this, customers living in urban areas or metropolitan areas will be another targeted group as this type of customers does not require any discount as they do not want to stand for hours to purchase their order. As Amazon is providing facility of home delivery, these customers will be an easy target to get attracted towards this scheme. Apart from this, young families, business persons and college students will be another group of target. As most of these people do not have time to go to market and purchase something. And due to the availability of home delivery facility, they will be fascinated towards this scheme(White 2020).
In order to increase the number of consumers, the company has to target new group of customers who like to eat good food and have no time to purchase it physically.
Whole Foods market is known for the best source of organic, natural and healthiest foods among its competitors. It is the first grocery store in America who is certified as organic. Moreover, this store has its own identity for providing organic and healthy food. On the other hand, Amazon is also known for its technology which is best among all other online retailers. The key positioning strategy to launch whole food and Amazon is the supply chain. Besides this, the product of the Whole Foods market are manufactured without violating any animal rights, human rights or labor laws(Lynch and Haskins 2019).
For operational marketing, Amazon has to use advanced technology in order to deliver the grocery item fresh and untouched. It is very important for Amazon to deliver the grocery item fresh as Whole Foods market is known for its fresh, natural, organic and healthier food. The company has to situate various pickup points in the area where the delivery of grocery item is to be done. These pickup points should be equipped with high technology in order to maintain the food item fresh and healthy. In addition, staff members are also needed to be increased in the Whole Foods market so that the online order made by the customer can be prepared carefully (White 2020). Delivery the grocery item will be very crucial for the company as it will decide whether the consumer are liking this new technique or not. This will only work when customers will get the same quality of product at home as that of they were getting the product when they were going to buy grocery items physically. The Amazon has to ensure that the customers prefer the app to for purchasing grocery items. The company has to invest money on technology for preserving the food item during the delivery.
To run this unique business of delivery grocery items and organic food through online retail shop the company needs a budget plan so that allocation of resources can be accomplished. The company needs to enhance the technology as well as it need to provide better facilities to delivery boy so that the food item can be delivered safely (White 2020). The equipment used by the delivery person is needed to be upgraded such as the box in which the order is kept. The box should be designed such that the grocery item remains fresh and the box easy fits into the vehicle used by the delivery person. Moreover, the vehicle provided to delivery person is also needed to be upgraded so that large space is available. Other than this, the physical stores are also needed to be refurnished and improved so that the supply chain management can run smoothly and efficiently. The supply chain management will play a very important role as it is the base of online retail shop (Lynch and Haskins 2019).
The new business model used by Amazon had a great impact on the social environment as due to this there will be an increase in wealth disparity (Conaway et al. 2018). As a result of this wealth disparity, there will become a gap between rich and poor people as people having Amazon prime subscription will get higher priority. Customers having no prime account have to wait in line for their order while customers having a prime subscription will get their order easily without any delay. It will differentiate people at grocery stores which will create inconvenience for many customers (Baskin and Olszyk 2018). This sociocultural trend is the greatest threat to Amazon. Another impact on the social environment will be that there will be an increase in online buying habits and consumerism in developing countries. There will be an opportunity for Amazon to grow its e-commerce and IT service business. As a result of this new model used by Amazon, the company will be able to expand its market in physical grocery stores. Moreover, most people around the world prefer to buy things online resulting in additional benefits for the company (Alvarez, Lane and Coughlin 2017).
The new business model used by Amazon has also affected the economic environment in many ways. Some of the economic external factors that are significant to Amazon include an increase in disposable incomes particularly in developing countries, stability of the economy in the developed market especially in the United States and European countries (Baskin and Olszyk2018). As a result of this new business model, the economic issues are minimized in the remote or macro-environment due to which the company has minimized its risk in expanding its online retail business. Moreover, the company has growth opportunities in the field of physical grocery stores. In addition, introducing grocery items online has resulted in better growth for the company in the field of physical grocery stores along with increased profit rates. Besides this, Amazon will be able to raise the margin of the product as it wants. Amazon has undergone a monopoly where the company can change the rates of the product without any interference (Brites 2018).
It can be concluded that the case of Amazon acquiring Whole Foods Market has been studied. The report has discussed the business opportunities for Amazon in merging with Whole Foods Market along with the strategies that how the company will capture it. Amazon has gained lots of opportunities as it was a completely different market where the order for groceries was made online but the order is picked by the customer from the store without any wait. Amazon has got the opportunity to sell food items online with the help of the Whole Foods market. Moreover, the report has identified risks and opportunities for Amazon in entering this new market. The risk involved in acquiring Whole Foods market includes a high degree of competition, social and economic disputes between rich and poor people, employee dissatisfaction as Amazon is an automated oriented company, and many more.
On the other hand, Amazon also has various opportunities which include gaining physical store presence by entering the grocery category, higher preference to Amazon from its customer for online purchase of grocery items as customers having prime subscription do not have to wait for a long time in queue, opportunity to boost its infrastructure, increase the margin of the product due to direct sells resulting in higher profit, increased number of subscribers for Amazon account, increased in the wealth of Amazon shareholders and many more. Besides this, a short marketing project for launching the Whole Food and Amazon cooperation, from market research to operational marketing has also been presented in this report. In addition, the report has also discussed the impact of this new business model of Amazon on the social and economic environment.
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