Challenges and Recommendations for Sustainable Management of the Amazon Rainforest

Case Study 4: Challenges and Recommendations for sustainable management of the Amazon Rainforest

Brief

This report by Amazonia Inc. highlights the adverse environmental effects of human activities on the Amazon Rainforest today to President Bolsanaro of the Social Liberty Party of Brazil. I am the Environmental Scientist, with 25 years’ experience in this field, and I am reviewing the harmful environmental effects caused by mining on the Amazon Rainforest, its ecosystem and its climate, focusing on Brazil. My colleagues of Amazonia Inc. will address other aspects of this. Dylan O’Flynn is the Ethicist, Cian O’Reilly is the Economist, and Connor MacAndrew is the Environmental Remediation Solutions Expert.

Introduction

The Amazon Rainforest plays a critical role in nature today. It is home to a huge range of biodiversity including plants, animals and indigenous humans. It acts as a carbon sink and is vital to regulate global atmospheric composition, as the plants of the Amazon store billions of tons of carbon through photosynthesis, whereby they filter the air of carbon dioxide, replacing it with oxygen and water vapour (Withgoff et al., 2015). It provides natural resources such as fuel, medicine and research opportunities. Local communities especially depend on the multiple resources the Amazon Rainforest can provide for survival. The highest percentage of area of Amazon Rainforest is in Brazil (Butler, 2012). The Amazon Rainforest has been around for at least 55 million years since the Cretaceous period (Daily Facts Daily, 2016) (Malhi et al., 2008).

Deforestation

2.1.1 Mining

Mining in Brazil is one of the anthropogenic activities that is causing deforestation of the Amazon Rainforest. Mining has been on the rise for many years in Brazil, especially in the Amazon Rainforest region. Minerals which are being mined for include gold, copper, diamonds and other precious metals. Mining for these materials is conducted by both large-scale mining companies and small-scale ‘unofficial’ miners (Butler 2012). Carajas in Brazil is the world’s largest iron ore mining operation and Trombetas is the largest bauxite mining operation in Brazil (Sonter et al. 2017). There has been ten times the number of small-scale miners in Brazil in 2010 than in 1990, with over 200,000 operating in the Brazilian Amazon, due to the price of gold rising. The Tapajos-Xingu region has the brunt of this mining (Erickson-Davis, 2015). Gold is a mineral which is extensively mined for in the Brazilian Amazon Rainforest, due to rising prices of gold globally (Erickson-Davis, 2015). 1680km2 of Amazon rainforest was deforested between 2001 – 2013 across South America due to gold mining alone. 90% of this deforestation occurred across four ‘hotspots’, with 11% (183km2 loss of forest) of this occurring in the Tapajos-Xingu tropical rainforest region in Brazil (Alvarez-Borrios et al., 2015). This region has seen an increase of thousands of small-scale gold miners since 2008, with up to 5000 new miners in the municipality of Itaituba (O Globo, 2013) (Alvarez-Borrios et al., 2015). 

2.1.2 Off-Lease Mining

Mining in Brazil occurs on designated mining sites; however, illegal mining also occurs outside of lease boundaries, which is relatively unaccounted for by the government. Deforestation due to mining occurs both inside and outside of leased mining areas. From 2005 to 2015, 11,670 km2 of Amazon forest in Brazil was lost to deforestation outside of leased mining areas due to mining (Sonter et al., 2017). This affected areas up to 70km outside of areas leased for mining (Sonter et al., 2017). This massive loss of forest accounts for 9% of forest lost in the Amazon in this time period, which is 12 times more deforestation than occurred within leased mining areas (Sonter et al., 2017). Mining in the Amazon has knock on affects that cause this deforestation outside of lease areas, such as (Sonter et al., 2017):

Expanding urban areas for the mining employees

Construction of infrastructure for mines (e.g. roads, housing)

Development of supply chains for the minerals which are mined

Constructing infrastructure due to fear of waste discharging into surrounding environment

Even though Brazil has reduced annual deforestation rates by 80% (Nepstad et al., 2009) by implementing policy interventions and economic conditions to fight deforestation, 127,000km2 of forest has been lost to deforestation since 2005 (Valeriano, 2007). Most of the deforestation due to mining occurred outside mining lease areas, in areas up to 70km which the study refers to as buffer zones. The deforestation in these areas are generally more extensive than inside lease areas, as these areas are not regulated. The level of mining in Brazil is continually increasing, which is worrying as Brazil has the largest extent of Tropical Amazon Rainforest in all South America, and largest area of Tropical Rainforest globally (Sonter et al., 2017).

2.1.3 On-lease Mining

60% of all regulated mining in Brazil is in the Amazon, covering an area of land of over 1.65 million km2 (DNPM, 2012). Deforestation did not occur as extensively in lease areas; however, it is still a problem. 14% of forest within lease areas was lost to deforestation between 2005 – 2015. Therefore, 983km2 of 6880km2 of forest was deforested. The total area of land deforested between 2005 – 2015, including lease areas and their 70km buffer zones, equalled 37,830km2 from 337,690km2. 31% (11,670km2) of this deforestation was caused by mining alone (Sonter et al., 2017).

2.2.1 Habitat loss

Mining directly and indirectly causes deforestation. Generally, desired minerals only make up a fraction of rock, therefore large amounts of rock in the target area must be disposed of. Considerable areas of land are thereby disturbed. Open pit mining is a common mining technique used in the Brazilian Amazon Rainforest, where a large hole is dug in the ground to remove the waste materials and desired minerals. This leads to huge habitat loss for native animals, plants and indigenous people, as well as degrading the aesthetic nature of the region (Withgoff et al., 2015). Infrastructure such as roads built to transport material to and from mines is also a cause of deforestation, and loss of biodiversity. An example of this is the 890km-long railway road developed by the mining company in Carajas, Brazil for transporting iron ore material to the deep-water-port (Ponta da Madeira) in Sao Luis, Maranhao (Sonter et al., 2017).

2.2.2 Forest Fragmentation

Indirect habitat and species loss are another problem due to forest fragmentation (Withgoff et al., 2015). This is shown in an experiment by Dr. Thomas Lovejoy in the Biological Dynamics of Forest Fragments Project, beginning in 1970 (Withgoff et al., 2015). This applied island biogeography theory to assess the impact of forest fragmentation on the remaining forest and its biodiversity. Ranchers could clear forest within study zones for cattle pastures but had to leave “square” fragments of forest untouched and fence these areas to keep cattle out. 11 “Islands” of isolated forest fragments of different sizes were left and compared to 12 fragments of forest that were established within continuous forest as controls. The study showed that:

Smaller forest fragments lost more species than larger forest fragments

Smaller forest fragments lost species faster than larger forest fragments 

Forest fragments need to be 1000 times bigger, to slow down species loss by 10 times

This is due to animals such as monkeys needing large ranges to survive, as well as army ants and types of birds. Organisms adapted to deep interior forests will not relocate to other areas of forest fragment, even over small gaps in land between forest fragments, leading to their demise. This study also showed that as ‘corridors’ of forest regrew, connecting fragments, foreign species to various areas who are adapted to disturbed areas of forest invaded new forest fragments, replacing the native species. The loss of forest and forest biodiversity is due to deep interior forest which are used to a dark, wet and windless environment, now being exposed to sunlight and strong winds (Withgoff et al., 2015). The construction of roads and urban developments for the influx of people due to mining cause forest fragments to occur which contain “edges”, which expose trees and wildlife to ‘edge conditions’, which they are not suited for; therefore, killing them (Withgoff et al., 2015).

Impact on Ecosystem

3.1 Soil

The Brazilian Tropical Amazon Rainforest has very high biodiversity and has more variety of species of animals and plants than any other biome globally (Withgoff et al., 2015). This biodiversity relies on the native plants to supply its nutrients, because its soils are acidic, have poor fertility and are low in organic matter (Withgoff et al., 2015). Leaves and branches of the leaf litter fall and nourish the soil. Many soil organisms also help to decompose this fallen material and cycle nutrients within the biome. The soils low pH (high acidity) and low amount of organic matter means that cation exchange is very low (Withgoff et al., 2015). Cation exchange is needed for plant growth and needs low acidity and high organic matter to work. Cations (positively charged ions) such as calcium, magnesium and potassium are held onto soil by negatively charged soil particles (anions) (Withgoff et al., 2015), due to ionic bonding where opposite charges attract each other (Chemistry Libre Text, 2018). Plant roots then donate hydrogen cations to the soil in exchange for these cation nutrients. The soil then replenishes these cations via exchange with soil water. However due to the high acidic soil and low organic matter of the Brazilian Tropical Amazon Rainforest this cation exchange is not possible, hence the reliance on plants for nutrients. The low acidity of the soil and the absence of cation exchange causes nutrients to leach away, and harmful ions such as aluminium ions may be supplied to plants which damages them. This causes a constant cycle of deforestation because as rainforest is cleared for mining, logging and agriculture, the biome is left without any plants for nutrients. The soil itself cannot support agriculture for long, therefore cattle pastures and land for crops is used only for a short period of time, before farmers move off to new land where they will again clear tropical rainforest and cause deforestation and loss of biodiversity. (Withgoff et al., 2015).

Figure 1 Cation Exchange in Soil (Franklin Soil Fertility, 2014)

3.1.2 Aquatic Life

Open-pit mining is common in the Brazilian Tropical Amazon Rainforest, as it is often used for gold mining (Withgoff et al., 2015).  It involves digging a huge hole and removing the desired minerals, as well as waste. Chemical contamination is a negative environmental impact caused by open-pit mining (Withgoff et al., 2015). This is caused by acid drainage, where water runs off the waste heaps or collects in the giant pits of the mine once it is abandoned (Withgoff et al., 2015). This becomes acidic as water and oxygen react with sulphides from the ore and produce sulphuric acid and can harm the wildlife of the surrounding environment by spreading through the region and permeate into aquifers, therefore, contaminating waterways (Withgoff et al., 2015). Abandoned open-pit mines can be filled with clay and soil and planted with vegetation to mitigate this; however, these mines can continue to leach acid for hundreds or thousands of years (Withgoff et al., 2015). Gold mining also causes pollution of arsenic, cyanide and mercury to air, soil and water (Eisler, 2004) (Veiga et al., 2006). Pollutants and sediments can also travel long distances along waterways from gold mining activities, adversely affecting wildlife and humans (Uryu et al. 2001). For example, environmental and ecological effects of metal minerals such as copper and zinc have been found up to 50km from mines due to mining (Duran et al., 2013). Elevated mercury levels in humans have been found hundreds of km from mining sites (Ashe, 2012). Mercury ends up in rivers due to its use in amalgamation in gold mining (Nevado et al., 2010). Small-scale, illegal minors, are inefficient with their mercury use, releasing approximately 1.32kg of mercury for every 1kg of gold produced (Butler, 2012). Mercury can be methylated into methylmercury (Butler, 2012) which is the most toxic and most commonly formed organic compound (Nevado et al., 2010). It is found in the Tapajos Amazon River Basin, Brazil which has the largest small-scale miner rate in South America (Nevado et al., 2010). Methylmercury is bio accumulative and biomagnified through the aquatic trophic chain; therefore, is toxic to small aquatic life, all the way up the food chain to humans (Nevado et al., 2010).

Climate Change

The Amazon Rainforest is a global atmospheric carbon sink, storing billions of tons of carbon (Butler, 2012). The Amazon Rainforest help to regulate atmospheric carbon through photosynthesis, where leaves of plants use sunlight, water and CO2 to produce their own food (Withgoff et al., 2015). This releases O2 into the atmosphere and reduces CO2 in atmosphere, as seen in the following reaction: 6CO2 + 12H2O + sunlight → C6H12O6 + 6CO2 + 6H2O (Withgoff et al., 2015). Deforestation in the Amazon Rainforest contributes massively to global greenhouse gas emissions, due to the lack of plants conducting photosynthesis (Butler, 2012). Brazil has been the global leader in deforestation in recent decades, clearing 19500km2/year on average from 1996 – 2005, releasing 0.7 – 1.4 Gt CO2 e/year (Nepstad et al., 2009). The Amazon has warmed by about 0.25°C/decade in recent decades, however, temperature is projected to rise by 3.3°C this century (Mahli et al., 2008). This is a very significant rise and is largely contributed to by Amazon deforestation. Risk of drought is a huge possibility due to this (Mahi et al., 2008).

 

Figure 2 Photosynthesis (Withgoff et al., 2015)

Conclusion

It would be unethical and unwise for us as humans to deforest and degrade the Amazon Rainforest anthropogenically, after it survived for so many millions of years naturally without human intervention. There are many factors causing deforestation, negative impacts on the ecosystem, and climate change in the Brazilian Amazon Rainforest. This destroys vast ecosystems, degrades habitats for wildlife, and displaces indigenous humans. Global climate change is contributed to significantly by Amazon deforestation, with less plant and tree life in the Amazon Rainforest to regulate atmospheric composition. Action must be taken by the government to prevent this. Possible solutions for environmental remediation will be reported by my Amazonia Inc. colleague, Connor MacAndrew.

 

References

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Environmental Issues for the Amazon and Murray River

Environmental Change & Management Rivers

All life on earth depends on water. Trees and plants need water to grow, and water helps shape the earth and its islands, continents and countries. About 71% of the earth is covered in water by oceans, rivers and lakes. Almost all river water comes from rain or melted snow. Rivers are large streams of water flowing downwards to the sea along channels they have cut. Some rivers flow into lakes and some join other rivers. A river ends when it flows into another river, ocean or lake. When a smaller river flows into a larger one, the smaller one is called a tributary. This is commonly referred to as the mouth. Commonly, rivers start (the start is known as headwaters) as small streams on high grounds, gradually increasing in volume. Rivers have played an important part in the development of civilisation. Rivers are one of the main ways in which rainwater returns to the sea in the water cycle. On their way to the sea, rivers help shape the land through erosion.
A river is the main part of a river system, which also includes smaller streams that supply water to the river. The second largest river in the world is called the Amazon River, located in South America. The Amazon is 6,436 kilometres long, and carries more water than any other river in the world. The chief river of Australia, the Murray, flows 2,589 kilometres from the Snowy Mountains to the Great Australian Bight at the entrance to the Indian Ocean. It rises near Mount Kosciuszko in south-eastern New South Wales and flows north-westward to form the border between Victoria and New South Wales.
Rivers can be influenced by human actions, sometimes with a positive result and sometimes with a negative result. In both the Murray and the Amazon, humans have cleared the land surrounding the river, constructed dams and weirs and created a hazardous environment for many animal species neighbouring this environment. Pollution is also a major cause for some of the environmental issues that these rivers face. Indigenous people in the Murray and Amazon regions have cared for and maintained the rivers over a long period of time. They have achieved this by taking from the river what it can sustain and by not polluting it excessively.

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The greatest river of South America, the Amazon, is the world’s largest river in water volume and the area of its drainage basin, together with its tributaries the river drains an area of 7,050,000 square kilometres—roughly one third of the continent. It empties into the Atlantic Ocean at a rate of about 220,000 cubic meters per second. The Amazon region is covered by dense tropical rainforest. This has one of the highest rates of rainfall in the world. Agriculture only has a potential on 2% of the floodplain, and the whole Amazon basin supports a population of only four million, of whom 75 000 are native Indians.
The Murray River is the longest permanently flowing river in Australia. It is an important source for irrigation and industry. The Murray River system includes the Darling, Lachlan, and Murrumbidgee rivers, and it drains an area larger then that of France and Spain combined. The Murray rises in the Australian Alps near the eastern boundary between Victoria and New South Wales. It then crosses eastern South Australia and flows into Encounter Bay, south of Adelaide. The Murray River is 2,589 kilometres long. Along the Murray, wheat, sheep and cattle are a main source of income for farmers. However, this is becoming a problem because chemical run off from the crops pollute the river.
In the Amazon, subsistence farming, practised since before the Portuguese settlers arrived in Brazil in the 16th century, remained the major money making activity until the 19th century. Indigenous groups such as the Yanomamo and Kayapo have been living in the Amazon for thousands of years.
The first human settlements in the Amazon had populations’ approx 35,000 years ago. Since that time, Amazon people have developed lifestyles that are well incorporated with the benefits and restrictions of rainforests and the Amazon River. Normally, daily meals included wildlife found close to rivers, such as fish, turtles, capybara and crocodiles. Until recently, blowguns, arrows tipped with poison and spears were an everyday tool used to hunt down the wildlife for the daily meals. Unfortunately, these prehistoric weapons have been replaced with guns. The guns cause more damage to the river because they are more accurate, and they kill quicker. Hunter-gatherer groups were once generally nomadic, living in small temporary settlements for 4-5 years until all natural resources had diminished. Due to land colonisation by non-indigenous people, many local (indigenous) groups were forced into inactive lifestyles causing them to become peasants. This started to degrade the river because they weren’t using it in a traditional way. Such changes not only destroyed traditional lifestyles but also caused the local peopleto lose control over their territory and for the river to lose many of its traditional protections. Whilst the new settlers treated the river without concern for its well being.
There are many environmental issues along the Murray. Many of these problems are caused by drought. Some of the problems are so serious that despite two years of rain (2000 – 2002), areas of the river are yet to recover. The Murray mouth closed in 2002, only the second time recorded in history. This was because of the lack of water in the basin. In April 2009 in the Lower Lakes region, 20,000 hectares of acid sulphate soils were exposed and fresh water levels fell dramatically, to more than one metre below sea level. Ecosystems were also affected by this, because of the increase in salinity and exposure of acid sulphate. It also threatened the water supplies for people and livestock. Low water levels also caused some sections of the riverbank to dry out, crack, and eventually give way. There were more than 160 incidents of river bank collapse along the Murray. Many turtles were affected by the rising salt table, and became sick, and finally died.[1]
The salinity problem in the Murray serves as a predicament for all Australians. Salinity is an issue when an excessive quantity of salt in the water and soil causes problems with the use of water and land. Due to land logging, land reproduction and land colonisation, the salt table of the Murray is rising. Water stored in the dams and weirs is mainly used for irrigation, causing the salination problem. Some salt flows naturally into the Murray – Darling, but irrigation, land clearing, dams and weirs have all forced increased amounts of salt up from deep underground. Unfortunately, most of this salt eventually ends up in the rivers which increases the river’s salt content. Every year, three million tonnes of salt flow down the Murray River. Another issue that the Murray faces is stagnentation. Parts of the river, especially the lower Murray, are now more like a series of still lakes rather than a flowing river, resulting in some significant changes. The water is cloudier and contains less oxygen, encouraging the growth of algae and making it difficult for some fish species to survive. The Sand and silt are slowly building up on the river beds behind the dams. Because of the build-up of sand and silt, the fish cannot move from one part of the river to another or from oceans to lakes. This disturbs the food chain by creating over population of some species and lack of others.
The major environmental issue for the Amazon River is deforestation, in the greater Amazon basin. The main sources of deforestation in the Amazon rainforest are human settlement and development of the land. In nine years from 1991 – 2000, the total area of Amazon rainforest cleared rose from 415,000 to 587,000 square kilometres. Most of this lost forest has been replaced with pastures for cattle. Because of this, the salt table has risen dramatically. Deforestation of the Amazon rainforest can be recognised by many different factors. The rainforest is mainly seen as a resource for cattle pasture, hardwoods, housing space, farming space, roads and medicines. The deforestation rate in the Amazon region increased from 1990 to 2003 by 70%. As a result of deforestation, the river effectively dies. The tree roots are no longer present to hold the bank in, therefore the rivers walls collapse. As a consequence of this, the silt builds up. This causes the river to flow slower.
Since approximately 2005, inhabitants along the Amazon have become aware of the need to conserve the river. This has led to conversation with governments regarding management of the river.
Before Europeans arrived, the land surrounding the Murray was occupied by Australian aborigines. The Murray River has been home to the Aboriginal people for thousands of years. This river was commonly known to the indigenous as Milewa or Tongala. The land surrounding, and the river have always been imperative to the indigenous. Near the river, there were once many swamps and billabongs. These were flooded each spring when the melting of the winter snow in the spring, flowed into the Murray.
Indigenous people caught much of their food using nets and dams. The nets were for catching fish, animals and birds. They made them from fibres of rushes that grew beside the creeks. The rushes were chewed and then twisted by rubbing them on the thigh. Aborigines also caught fish by making dams across the narrow creeks. First they pushed the stakes into the creek bed. Then they wove branches through the row of stakes. At flood time the fish swam into the shallow creeks and billabongs. As the flood waters went down, thousands (not the 10’s of 1000’s like the fisherman of today) of fish were trapped behind the dams. Women gathered all the plant food. They dug for bulrush roots and rushes and collected pigface berries. The indigenous also ate bulrush roots with every mean, just as white people ate bread. In the river the women caught crayfish and yabbies and spent much of their time diving for mussels. They carried the food back to the camp in net bags and baskets. The river itself can replenish itself after this sort of gathering. However, the river cannot replenish itself after a bulldozer digs out plants by their roots. Fish and shellfish were the main food of the indigenous people. Men did the hunting with spears or nets as well as dams. Flocks of ducks, pelicans, black swans and other water birds trapped in the nets that they strung across the creeks. They made stronger nets and staked them out between trees. These were catching emus and kangaroos. The cords of these nets were as thick as your finger. To hide from animals they hinted, men made screens of branches woven with grass. They would creep up on the emus and kangaroos until they were close enough to speak to them. The men also made rods to snare waterbirds. For camouflage they put braches through the reeds. They snared them around the neck one by one.
The current environmental issues that the Murray and the Amazon face are primarily caused by modern man. Some of the issues that the Murray faces include rising salt table, water pollution and decreased water flow. The Amazon also faces a major concern – deforestation. These environmental factors have only surfaced since the areas have developed. Indigenous people were conservative and only took from the land what it could sustain. We can learn from these traditions and ensure that rivers remain a sustainable environment in the future.
Bibliography:
Encyclopaedia
Deforestation of the Amazon Rainforest, {Online accessed 13 February 2014}
URL:http://www.en.wikipedia.org/wiki/Deforestation_of_the_Amazon_Rainforest
Impacts of Deforestation on the Amazon, {Online accessed 26 February 2014}
URL:http://www.greenpeace.org/usa/en/news-andblogs/news/impacts-of-deforestation-on-the-Amazon
The Achuar of Peru, {Online accessed 13 February 2014}
URL:http://www.amazonwatch.org/work/achuar
Murray River Aboriginals {Online accessed 26 February 2014}
URL:http://www.murrayriver.com.au/about-the-murray/indigenous-culture/

[1] URL:http://en.wikipedia.org/wiki/Environmental_issues_of_the_Murray_River
 

Amazon Rainforest Deforestation

Amazon Rainforest Deforestation

The Amazon rainforest is the largest, most diverse ecosystem in the world. Located in South America, the rainforest has borders in nine countries such as Brazil, Ecuador, Bolivia, Peru, Colombia, Guiana, Venezuela and others, with 60% of the florest the majority lies in Brazil. Covering 40% of the South America, the Amazon is the most species-rich biome on Earth, The region is believed to be home to 10% of known species on Earth, including 2.5 million species of insects.

The Amazon rainforest deforestation is still impacting society everyday by supplying 20% of Earth’s oxygen, deforestation have a large impact on the climate change around the world and the loss of millions of species.

 Life in the Amazon

 

The Amazon is a tropical forest, which has the largest river basin and known to have over half of the world’s species, making it the Earth’s most diverse ecosystem. Species being extinct will cause how the forest behaves.

The Amazon river flows over 4,000 miles into the Atlantic Ocean, it’s home to more than 3,000 species of fish, also includes the largest number of freshwater fish species in the world. Deforestation can lead to erosion, contaminating the river bringing undesirable chemicals and contaminating the fishes which are consumed by humans. Without trees to cover to soil, the moist land can become dry and drying rainforests leads to less absorption of CO2 which promotes more climate change.

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Home too 400 tribes in the Amazon, “Awá is one of the last nomadic hunter-gatherer tribes left, are the most threatened tribes in the world” (Wallace 48) attacked by loggers, gunmen, and settler farmers, Awá children are being killed by loggers, deforestation and the invasion of other men has brought the tribe diseases which they don’t have natural immunity. Awá tribe fully relies on the forest.

Water vs. Fire

 

The Amazon is a rainforest which produces its own rain, and being deforested by fires can lead to land drying out and causing wildfires which cause even more deforestation.

The loss of moisture-creating forest could lead far more than drying out, would lead to reduced rainfall, in a self reinforcing spiral. Decades of logging and climate change and land-clearing intentionally set wildfires.

The “moisture of the forest nourishes winter rain supplies Uruguay, Argentina, Brazil and Paraguay with water, and with recent droughts led to water shortages in Sao Paulo, Brazil’s largest city” (“How Cutting the Amazon Forest could Affect Weather”) . Also the rainfall helps supply water to farmers and beef ranchers. Brazilian agriculture truly needs the Amazon.

The massive deforestation of the Amazon could change weather outside South America. Because water vapor heats the air condenses high in the sky to form raindrops, a significant reduction of rain caused by the deforestation would actually cool the atmosphere above the region..

Deforestation

 

People cause deforestation in the Amazon to grow crops, cattle and to get wood for housing and furniture.

Twenty percent of the Amazon biome has already been lost and the trend will worsen if let it happen.The massive deforestation of the Amazon could change weather outside South America. “The past 30 years, more drought-tolerant plant species have appeared in the Amazon, while the wet areas are declining. Fast-growing trees and taller trees that are better at accessing the sun are outcompeting shorter, damp loving species.” (“How Cutting the Amazon Forest could Affect Weather”) This means that, the soil in the Amazon is becoming dryer less moist. The damp loving trees are disappearing which could affect the whole ecosystem.

A deforested Amazon could begin releasing stored greenhouse gases, 60% percent of the forest where to degrade to a savanna. The forest could absorb less CO2 which leads to more climate change.

Fig. 1 Rhett Butler, graph, Mongabay, 26 June 2013

Impact

If the deforestation of the Amazon rainforest continue, in the next few years the whole world could be affected. It’s really important that more people know the effects of the deforestation because not only it will impact South America but the whole Earth.

The world would have less species, less trees, less everything, the forest gives us 20% of our air, helps our Earth survive and thrive. If the deforestation continues, tribes will die, animals will disappear, the magnificent rainforest that is known as the lungs of our planet will disappear, Maybe it’s not going to happen right now, but if we don’t do something about it future generations will be greatly affected.

Deforestation creates a huge impact in climate change, and that causes ice to melt, wildfires, storms and other horrible things, and it all happened and still happening because of us.

“Amazon.” WFF, www.worldwildlife.org/places/amazon. Accessed 15 Jan. 2019.

“Amazon Deforestation.” GreenPeace, www.greenpeace.org/usa/forests/amazon-rainforest/. Accessed 22 Jan. 2019.

“Amazon Deforestation.” WFF Panda, 2017, wwf.panda.org/our_work/forests/deforestation_fronts/deforestation_in_the_amazon/. Accessed 14 Jan. 2019.

Amazon rainforest. Photograph. Britannica ImageQuest, Encyclopædia Britannica, 25 May 2016.

quest.eb.com/search/132_1372263/1/132_1372263/cite. Accessed 15 Jan 2019.

“Amazon Rainforest.” Britannica Library, library-eb-com.ezproxy.kcls.org/levels/youngadults/article/Amazon-Rainforest/631208. Accessed 14 Jan. 2019.

Earth Observatory Nasa. earthobservatory.nasa.gov/world-of-change/Deforestation.Accessed 22 Jan. 2019.

https://quest.eb.com/search/amazonian-rainforest/1/132_1234150/

Colonisation-of-the-Amazonian-rainforest

“Last Tribes of the Amazon.” National Geographic, Oct. 2017, pp. 46-71.

National Geographic. www.nationalgeographic.com/environment/2018/11/

how-cutting-the-amazon-forest-could-affect-weather/. Accessed 22 Jan. 2019.

“The Amazon rainforest.” UKEssays.com. 11 2018. All Answers Ltd. 02 2019 .

Economic Analysis of Amazon and Boeing’s Management Decisions

I. Amazon

Amazon has taken a new idea and brought it to the doorstep of small business owners. The business idea was created to allow small business dreamers to get a chance to grow their business through a larger company. The Amazon Delivery Service Partner Program was launched in 2018 with plans to assist small business owners across the globe (Bishop, 2018). “Launched with its help, Amazon hopes these businesses will ultimately employ tens of thousands of delivery drivers in Prime-branded blue vans and uniforms” (Bishop, 2018).

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Due to the program launch, a few pros and cons had risen. The pros of the program are the lower rates Amazon offers to make the program accessible to entrepreneurs, the Amazon promise to remove potential hurdles connected to starting and operating a small business, and businesses that participate in the program benefit from the massive negotiating power Amazon has (Bishop, 2018). The cons associated with the Amazon delivery program center around low profit potential compared to other delivery businesses, blue Amazon branded vans only being used to deliver Amazon packages, and limitations on fleet size (Bishop, 2018).

 A real business issue managers may face is package protection. It is critical customers feel comfortable using Amazon’s services to receive products they purchase without any hiccups. A possible solution to the issue is delivery wherever you are. Knowing that the small business owner is willing to meet the needs of the customers wherever they are could bring a sense of peace to the customer. Another issue that may arise for managers is service cost and low profit margins. Being that Amazon is only offering transit for Amazon packages, it may bring a worry to the manager of the small business. The manager would have to find a way to leverage a partnership with another transit service to get packages delivered for customers. This issue brings a burden to management as well as the business because it hinders the full potential of the company by narrowing the buying power of the customers. A smoother way to solve the issue can be to offer a more broad delivery service through Amazon. Amazon has the ability to leverage partnerships with companies to expand their delivery service. This not only makes it easier for business owners to grow, but also brings in more revenue for Amazon as a whole.

Imagine delivering over one billion packages in one year! Now imagine paying somebody else to do this job for you. This is what is happening at Amazon, they deliver over a billion packages worldwide and pays companies such as USPS, FedEx, DHS, and UPS to deliver these package to the doorstep of the consumers. Furthermore, USPS is increasing their fees and this will increase the shipping cost for Amazon. “The proposed uptick in shipping and mailing fees at the U.S. Postal Service could cost Amazon more than $1 billion in 2019”(Franck, 2018). The solution the management came up with was to the hired drivers to deliver these packages.

“Macroeconomics is a branch of economics that studies how the aggregate economy behaves. In macroeconomics, economy-wide phenomena are examined such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment.”(Chappelow, 2019). By employing all these drivers, Amazon lowered the unemployment rate which attributed to the study of macroeconomics according to the definition above. The solution would save the company a lot of money and also contribute to the country economy by lowering the unemployment rate. The problem is the method has caused controversy with the labor practice that is used. The drivers are hired as contractors, with zero benefits from the company. The drivers used their cars, pay for gas and insurance out of their own pockets.  The entire process is very Uber-esque, meaning drivers chose when they can work by blocking off times on an application that would also be used to confirm delivery and tracks drivers’ movement. After blocking off the schedule work time, they have to go to the warehouse and get all the packages and deliver them to the customers. After going through all that process, the majority of the drivers only get single digits in pay per hour.

Mind you the minimum pay for drivers is $18 and could be spiked to $25 (Using price surge). After calculating the mileage cost after delivering packages, gas cost and meals—the hour wages would most times falls below $10 an hour. Sometimes if the driver delivers during a price surge (mainly stem from a hazardous driving condition which would increase the demand for more drivers) the base pay might get a boost to $13-$15 an hour.

Although there may be many solutions to this problem, we will dive into the two. One of the steps to the solution is already been used by Amazon, which is to give the current non-drivers employee a $10, 000 stipend to quit their jobs and work as a delivery driver (Novet, 2019). This, in turn, does not solve the macroeconomics issue but instead the micro, since it does not affect the unemployment rate. Another solution that would contribute to the decrease in the unemployment rate, and similar to the above is to give a monthly stipend to new and current drivers. This stipend would be a gas stipend to reimburse the driver for their usage while delivering. Some other stipends that the company could give are to pay a portion of the driver insurance up to a certain amount and a stipend for the depreciation value to those drivers who drive their own vehicle.

Amazon has an impact on the American economy, both macro and micro. Their “…enormous workforce and economic influence means it has the power to squeeze wages and even warp the political process…”(Story by Lydia DePillis, CNN Business Video by Jon Sarlin, CNN Business, 2018).

Like any other business, Amazon aims to increase their profits. In 2017, even though their net sales were $178 billion, their annual profit was only $3 billion. This reflects a 1.7% profit margin. In an attempt to cut costs, and at the same time assist small business owners, they introduced The Amazon Delivery Service Partner Program. (Bishop, 2018). This solution would have a positive effect on the unemployment rate, by creating more potential jobs, as well as be a long-term business solution to help increase their profits.

The delivery service program would help individuals interested in starting their own delivery business by offering lower rates, as well as alleviating some of the burdens faced with start-up and operations. They even offered to pay their own employees $10,000 to quit and start up their own delivery business. (Novet, 2019). Their offer comes with stipulations, though. These newly established businesses would only be able to deliver Amazon packages and only be allowed a limited fleet size. (Bishop, 2018). Though this business strategy could benefit Amazon, it could hamper the newly established business owner’s ability to grow and be profitable themselves.

II. Boeing

In early March 2019 a decision made by the FAA to ground all Boeing 737 MAX airplanes was made. This decision was imposed after an investigation of recent plane crashes showed that these crashes may have been a result of faulty software installed the aircrafts.   The impacts of this decision have had and continue to have significant economic impacts at a micro-level.   “With its fastest-selling plane grounded in the U.S. and around the world, Boeing faces potential hits to its bottom line as well as to its reputation. A lengthy delay could cut Boeing’s revenues by billions, some analysts say.” (Domonoske C., 2019).  

With approximately 370 aircraft grounded there are a number of other economic issues arising that are impacting, not only Boeing, but its primary and secondary customers on a micro level.  Between rebooking flights, refunding tickets to passengers who can no longer fly, paying to park the aircraft long term and paying flight crews that are unable to work, airlines are incurring a significant amount of expenses. “”This is costing millions of dollars per day,” says Phil Seymour, who runs an aviation consultancy called IBA.” (Domonske, 2019).  As a result, major airlines such as Norwegian Airlines are seeking compensation directly from Boeing.

In addition to the monetary costs, Boeing’s reputation has also been tarnished and it will likely take quite a bit of convincing to put the company back into the good graces of its customers. “A poll conducted by Business Insider a week after the Ethiopian Airlines crash showed that 53% of American adults would not want to fly on a Boeing 737 Max even after the FAA clears the aircraft for service.” (Zhang, 2019).

To solution the problem, Boeing has put a significant amount of time, effort, and money into addressing the aircraft issues and concerns of its customers.  Frequent press releases confirming that the company is actively developing a software update, slated to be released later this year, have been published.  While it is encouraging to see the efforts Boeing is putting forth to correct the issues, they will likely need to adjust their business model in order to thrive again.  They have consistently operated under a business-to-business model which has worked well for them.  However, since this situation has been felt downstream on many levels, they will likely need to adjust their strategy and move towards a business-to-consumer model in order to win their customers (and their customers) back.

The main goals of the economy are overall health and sustained growth.  These goals are typically demonstrated through steadily increasing GDP (especially per capita GDP, a more accurate indicator of quality of life), low unemployment and keeping inflation in check. Expectations about the market drive the economy either up, down or cause it to remain flat. Business decisions of whether to make capital investments or not, expand or contract production, hire or lay off workers are a direct response to both the current economic state and predictions about its future direction. Changes in savings, interest rates, wage rates, inflation, trade balance, overall supply and demand and other factors are the results of the business decisions within the market. Attempts to facilitate desired directional economy shifts are also accomplished by governmental intervention through fiscal and monetary policy implementation.

 The grounding of Boeing’s 737 Max planes following two closely timed airplane crashes, with no survivors, has sent shockwaves throughout the airline industry and created ripples in the U.S. Economy.  Boeing management has a number of issues to consider as the macroeconomic impacts caused by this situation have far reaching implications. The primary macroeconomic implications currently in play resulting from this problem are 1) negative impact on GDP, 2) negative pressure on U.S. trade balance, specifically reduction in exports and 3) market supply shortage of airline flight availability. (Kearns, 2019)

Typically, the business fortunes of one company have little measurable effect on the U.S. Economy, on a whole, but in the case of Boeing, the largest component of the Dow Jones Industrial Average, that is not necessarily the case.  Boeing is a giant with annual sales in excess of $100B employing over 140,000 people.  One the trade side of the equation, it is largest manufacturing exporter in the U.S. (Gelles, 2019).  Estimates predict the potential national productivity impact if 737 production is halted would be to shave approximately 0.15% – 0.20% off GDP for the affected quarter, or an annualized reduction of between 0.6% and 0.8%.  The most immediate impact on GDP has yet to result in a reduction as production at Boeing continues, however we have experienced a shift in its composition. (Kearns, 2019).  We have seen a decline in overall U.S. business investment and gross exports, however these declines have been offset by inventory increases resulting from stockpiling of the 737 planes already produced. (Gelles, 2019). The fleet supply shortage resulting from every airline in the industry taking their 737’s offline had immediate impacts on consumers with flight delays and cancelations following. Another potential macro impact could be an uptick in the unemployment rate.  If the grounding is prolonged the mounting costs Boeing is already incurring could lead to implementation of cost cutting measures up to and including employee layoffs.  Based on Boeing’s size, this could quite possibly, negatively impact national unemployment figures. From a macroeconomic perspective, as it relates to impact on GDP, in the most recent published statistics from the Commerce Department, we see the first signs of potential hits on national productivity.  Orders for durable goods increased 2.7% in March driven in part by strong demand for commercial aircraft. The Commerce Department reported that orders for civilian aircraft increased 31%.  Actual shipments, however, of commercial planes dipped by 0.4% during March. This coincided with the timeframe in which Boeing ceased deliveries of the 737 Max planes.  Boeing has also scaled back production of the Max jets indefinitely.  It is working on finding a fix to the possible culprit, the anti-stall system, implicated in the crashes.  Boeing management has also recently announced that it is slowing the monthly production of the 737 Max planes. (Horsley, 2019) The prolonged grounding of these planes could have a noticeable impact on the supply of available planes to meet the demand for flights leading to further delays and/or cancelations. This can be demonstrated by the supply and demand curve below:                                                                                                                                                                                                                           

Under normal conditions, the shift in supply would result in fewer available flights with a corresponding increase in market price.  This situation would be further exacerbated during peak travel seasons with family vacations and holidays approaching producing an increase in demand at the same time supply is being reduced. This situation can be depicted in the diagram below where demand shifting from D2 to D1 could approximate what might happen during the summer months while supply moves from S1 to S2 due to the 737 Max jets remaining off line with insufficient airline inventory to make up the difference.

                                                     

Since Boeing’s management has decided to scale back production, one solution to lesson both the sting on its revenue and orders for durable goods is to continue to sell through its existing orders which should take care of the inventory backlog (Gelles, 2019), In the meantime, they should continue to work feverishly to remediate all real or perceived safety concerns to the satisfaction of the FAA and other national and international regulating bodies.  Finally, a concerted effort to regain public trust in this aircraft will go a long way in balancing out economic impact into the future.  To mitigate some of the shortage issues with the airlines, Boeing must foot the bill for concessions that airlines will need to make in mitigating those shortages such as shifting customers to other under capacity aircraft and leasing other planes to fill gaps among other things. Given the current state of the market for commercial aircraft, there should be little long-term risk  to the company and therefore the macroeconomic factors mentioned above. Since Boeing only has one real competitor in the manufacturing of commercial aircraft space, the 737 Max remains one of only two midsize fuel-efficient passenger jets on the market.  Airbus’ A320neo being the other (Gelles, 2019).  Since this is a supply-constrained industry the risk of losing substantial future business is minimal.                                                                                                                                     

 In summary, the actual impact on GDP, trade balance, and unemployment should be minimized as a result of the sell through of existing 737 Max jet inventory and future orders likely to pick back up in the long run which will mitigate potential trade balance issues. The short term market shortages will also be minimized, albeit at increased cost to the company, however Boeing’s financial position is substantial enough to absorb the impact in the long run.

III. Business Problems

Boeing’s largest competitor is Airbus, and in 2010 Airbus was looking to update one of their planes, the Airbus A320, by upgrading the engine, thus creating the Airbus A320neo (Yglesias, 2019). This engine would be larger while also being 15% more fuel efficient, meaning airlines could carry more people/cargo while saving money on fuel. This caused Boeing’s management to react extremely quickly, because if Boeing did not offer a similar airplane, Airbus could dig into Boeing’s market share, costing them millions of dollars. This resulted in Boeing updating one of their planes with a new, more fuel-efficient engine, the 737 now became the 737 Max (Yglesias, 2019).

A feature of the Airbus plane was that it was essentially the same plane as its predecessor, requiring little to no additional training. Not to be outdone, Boeing announced that their plane was also essentially the same as its predecessor, but that was not an accurate representation of the 737 Max (Yglesias, 2019). Because of the way Boeing’s new engine was mounted, the plane required additional software to help maintain course in times of max thrust, like during takeoff, which meant the planes did not operate the same (Kitroeff, Gellas, Nicas, Kaplan, & Haberman, 2019). For training, Boeing offered a 2-hour iPad course, instead of a simulator, and the new system was not mentioned (Kitroeff, Gellas, Nicas, Kaplan, & Haberman, 2019).

This decision by Boeing, to quickly roll out a plane that was advertised as “essentially the same” and offered miniscule training on the new software system, led to two devastating crashes. After which, governments across the world acted and grounded the entirety of the 737 Max planes. This decision has negatively affected Boeing, the U.S. economy and the world economy.

Amazon, on the other hand, thought about its problem a bit more carefully. By offering free shipping on certain orders, and with prime members receiving free two-day shipping, Amazon incurs a lot of costs on the over one billion packages sent. And with shipping rates looking to increase, Amazon needed to think of a way to save money that could be easily adopted by the company. Amazon’s management created a way save money by taking ideas of other companies and incorporating them into one. This creation was a service to deliver packages through the normal, everyday person.

IV. Conclusion

Amazon is a massive company and as a function of that new driver jobs would be available all across the country, thus lowering unemployment. However, this comes with its drawbacks, such as the costs associated with driving – fuel and maintenance, and drivers are treated as contractors instead of Amazon employees. Amazon’s management team needs to not only think about their bottom line, but to also think about the people making those deliveries.

The analysis and research conducted in this paper yields interesting results. Amazon and Boeing are very large and successful companies, $920.17 billion and $199.74 billion respectively (Macro Trends, 2019). These two large companies take very different approaches to solving managerial economic issues they face. This is true whether the issue is considered macroeconomic or microeconomic in scale.

Amazon’s managerial economic dilemmas began as an exercise to lower shipping costs. In 2017, Amazon spent $21.7 billion on shipping with all transportation partners (Garcia, 2018). Amazon evaluated many factors, Prime growth rates, shipment frequency, holiday surge volumes, carrier capacity, and associated carrier rate increases. Amazon took a purely economic and applied those concepts to the outcome. Amazon had changed consumer expectations by offering two day free shipping if they were Prime members. They also reasoned that customers did not care who delivered their shipments, as long as they arrived in two days. This substitution effect meant there was no advantage for Amazon to us any single carrier. Finally, when they examined the expected volume of shipments with the carrier capacity, they discovered a looming shortage in the short term. Amazon quickly came to the realization that the only possible outcome was to start their own transportation and package delivery business, creating more capacity in the market. The idea is not that far-fetched. The unit does not have to make a profit for Amazon, just save enough money from their transportation budget to cover the unit’s costs.

Amazon was not finished with their economic problem solving. Since they were expanding their lines of business that required transportation to customers, Amazon would need to create a pool of variable capacity. Amazon chose to implement a contractor model. This contractor model allows more people to own their own businesses, work when they want to, or to pick up additional income as they work around their primary job. However, this model is not perfect and may result in a lower wage for some contractors.

Boeing economic dilemma stems from a single issue. The Boeing 737-800 Max has been grounded by the FAA and global airline operators as a direct result of two separate incidents in which the plane suffered a software related issue that caused the new aircraft to stall, crash, kill all passengers and crew on board. Naturally, this has affected Boeing’s value and between 2/18/2019 and 5/17/2019 Boeing’s market cap has fallen by $52.21 billion dollars (Macro Trends, 2019). These serious issues have far reaching micro and macroeconomic issues.

On the micro level, Boeing cannot sell its most popular model and is losing future orders for the 737 Max. Boeing’s response has been to create a higher level of transparency, push status updates to the public, and add resources to accelerate the software fix delivery all in order to create goodwill. These microeconomic effects extend to Boeing’s reputation. The harm to their brand could be more costly than the direct costs associated with the grounding of the 737 Max. This includes expenses related to liability for loss of life, property, and the airline carrier’s costs for the loss of capacity, passenger re-booking, idle crews, idle assets, and cancelations.

Boeing is the largest manufacturing exporter in the U.S. (Gelles, 2019) and the macroeconomic impacts are far reaching. The impact to suppliers, supply chains, contract service providers, and other supporting businesses has yet to be measured. The numbers are being monitored, but expect a drop in GDP, a larger trade deficit, and with a passenger capacity shortage there will be higher costs for travelers at least in the short term. There is also a danger that existing orders could be canceled. While not perfect substitutes, Boeing’s closest competitor and European conglomerate, Airbus Industries, is gaining traction with potential customers. These aircraft are built in Europe and that economic benefit would move there and away from the U.S.

In conclusion, the analysis performed by the team reveal the reasons behind each micro or macro decision and their intent. These companies are rational, make rational decisions, and the carefully considered decisions either lead to higher profits, larger scale, deliver economic value, or create value.

References

Bishop, T. (2018, July 17). Owning an Amazon delivery business: The risks, rewards and economic realities of the tech giant’s new program for entrepreneurs. Retrieved May 17, 2019, from https://www.geekwire.com/2018/owning-amazon-delivery-business-risks-rewards-economic-realities-tech-giants-new-program-entrepreneurs/

Chappelow, J. (2019, May 02). Macroeconomics Definition. Retrieved from https://www.investopedia.com/terms/m/macroeconomics.asp

Domonske, C. (2019, March). For Boeing, Costs of Grounding Have Only Just Begun. Retrieved from https://www.npr.org/2019/03/13/703189895/for-boeing-costs-of-grounding-jets-have-only-just-begun

Franck, T. W. (2018, October 23). Higher postal fees will cost Amazon more than $1 billion in 2019, estimates Credit Suisse. Retrieved from https://www.cnbc.com/2018/10/22/usps-fees-to-cost-amazon-more-than-1-billion-in-2019-credit-suisse.html

Garcia, T. (2018, February 13). This is the $21 billion reason Amazon wants to build its own UPS. Retrieved May 19, 2019, from https://www.marketwatch.com/story/amazon-has-a-multibillion-dollar-reason-to-build-its-own-shipping-business-2018-02-09

Gelles, D. (2019), Costs for Boeing Start to Pile Up as 737 Max Remains Grounded. Retrieved from https://www.nytimes.com/2019/04/12/business/boeing-planes-economy.html

Horsley, S. (2019), Aircraft Orders Jump, But Boeing 737 Max Grounding Could Trim U.S. Growth. Retrieved from https://www.npr.org/2019/04/25/717142288/aircraft-orders-jump-but-boeing-737-max-grounding-could-trim-u-s-growth

Kearns, J., Bloomberg, (2019) Boeing 737 Max Grounding May Sway U.S. Economic Indicators Including Trade, Durable Goods. Retrieved from http://fortune.com/2019/03/21/boeing-737-max-grounding-economic-indicators

Kitroeff, N., Gellas, D., Nicas, J., Kaplan, T., & Haberman, M. (2019, March 16). After 2 Crashes of New Boeing Jet, Pilot Training Now a Focus. Retrieved from https://www.nytimes.com/2019/03/16/business/boeing-max-flight-simulator-ethiopia-lion-air.html

Macro Trends. (2019, May 19). Amazon Market Cap 2006-2019 | AMZN. Retrieved May 19, 2019, from https://www.macrotrends.net/stocks/charts/AMZN/amazon/market-cap

Novet, J. (2019, May 13). Amazon will pay employees $10,000 to quit and start their own package-delivery companies. Retrieved May 17, 2019, from https://www.cnbc.com/2019/05/13/amazon-will-pay-workers-10000-to-quit-form-delivery-companies.html

Story by Lydia DePillis, CNN Business Video by Jon Sarlin, CNN Business. (2018, October 4). It’s Amazon’s world. We just live in it. Retrieved from https://www.cnn.com/2018/10/03/tech/amazon-effect-us-economy/index.html

Yglesias, M. (2019, April 5). Boeing’s effort to get the 737 Max approved to fly again, explained. Retrieved from https://www.vox.com/2019/4/5/18296646/boeing-737-max-mcas-software-update

Zhang, J. (2019, April). Boeing’s Reputation Has Been Stained by the 737 Max and it’s Going to Have to Fight to Convince People the Plane is Safe. Retrieved from https://www.businessinsider.com/boeing-difficult-convice-airlines-passengers-737-max-safe-2019-4

 

Application of Management Theories to Amazon

Table of Contents

I. Introduction

Amazon introduction

II. Body

Taylor’s scientific management

Taylorism & Amazon warehouses and shop floor practices

Critics of Taylorism and its irrelevance in Amazon

Other theories

McGregor – Theory X and Y

Mayo’s Hawthorne Works Experiment

Amazon’s culture

III. Conclusion

References

Introduction

For such a long time, management concept is generally defined as managing the work of people until Frederick Winslow Taylor initially called it as “science” in his book “The Principles of Scientific Management”, which was published in 1911. After his introduction of the new theory, it created a strong influence in America and Europe’s factory system in the early of the twentieth century because Taylor invented a new process to maximise output and productivity by examining human behaviour and setting formal rules in the operation of factories (Udin & Hossain, 2015). He also believed that scientific management (or Taylorism) is “one best way” in designing and performing any works on the shop-floor practices (Taylor, 1911). Looking from the point of views of previous papers, the relevance of Taylor’s principle to the practices of factory shop-floor is a controversial question in the modern world until Vijai et.al (2016) conducted a benchmark work study by using an interdisciplinary approach. Vijai and his co-workers used the sample size of 15 observations in the repetitive manual element and Computer Numerical Control (CNC) – machine factor from the shop-floor of a heavy electrical company in Hyderabad, India. From their findings, there is evidence of Taylorism in the modern shop-floor practices in manufacturing organisations when the standard process of operation was established and executed for each element of the worker’s jobs. Although this study provided empirical proof for the high relevance of Taylor’s theory, it excluded the sector of service and retail industry that also plays an important role in the modern business. This limitation was covered by Jaikuma (1986) and Jeacle (2004), who attempted to convince that new principles in scientific management were witnessed in the modern retail shop-floor. In another research, Gronroos (1994) focused on finding the existence of scientific management in the modern industry that mainly concentrated on service-oriented companies. Nevertheless, the study appears to show that old management principles as Taylorism become less appropriate and effective when there are different trends affecting the changes of service management, for example, the development of new technology, the increase of educational level and living standard of the workforce (Gronroos, 1994). These trends have drawn the attention of this paper to re-examine the relevance and suitability of Taylor’s principle in the service and retail sector under the research of management practices in a typical company: Amazon.com, Inc. – one of top three most valuable brands in the world with a brand value of $101 billion (Monaghan, 2018), especially in the context of the emergence of modern management theories.

Amazon introduction

The company was established in 1994 and located the headquarter in Seattle, Washington, USA. According to 2017 Annual Report, the company is providing services to customers through its retail websites and physical stores with hundreds of million products (electronic devices, books, clothing, sports equipment, healthcare and beauty products, home appliances) which are sold by Amazon and other third parties. Amazon also supports Amazon Web Services (AWS) for developers and enterprises with a set of storage, database and other services (Amazon, 2017). At present, the company has organised the operation into three segments, North America, International and Amazon Web Services (AWS). Among them, North America and International are two main segments, which contributed more than 90% of total net sales ($178 billion) in 2017, increased 31% compared to the previous year. In these two segments, the company has a huge network of fulfilment centres, warehouses, shop-floors and delivery systems to provide digital delivery and physical stores for customers to purchase products. Operating a complicated system of warehouses and fulfilment centres is not an easy task to generate a huge profit, especially Amazon’s management practice is one of the biggest concerns when “the giant” needs to manage the total number of employees of 566,000 (including full-time and part-time) as of December 31, 2017. 

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Therefore, in the interest of Taylorism and Amazon case, this paper will investigate the management practices of Amazon, particularly in its warehouses and shop-floors – the main generated profit segment of the company on purpose of examining the appropriation of Taylorism. This research also provides some critical points to find out aspects that Taylorism cannot fully explain in the case of Amazon and uses other theories to further discuss its management and shop-floor practices. The paper is structured into three main parts. Firstly, it will explore the management and shop floor practices in Amazon using Taylorism. Secondly, the next section will provide the discussion about the irrelevance of using Taylorism to analyse the sophisticated management practices in Amazon. Finally, the last one will use other theories in terms of motivation, culture, and leadership to fully explain Amazon management practices.

Body

Taylor’s scientific management

Taylorism was introduced in the context of the Industrial Revolution, which started in the eighteenth century in Great Britain and steadily spread to a larger scale. This revolution generated the idea of improving productivity in factories with the transformation of the machine to gradually replace the human workforce (Kiechel, 2012). Taylor, in his point of view, realised that to enhance productivity, it needs to eliminate the waste of national resources and materials (Taylor, 1911). He also viewed that human labour can be analogous to the machine if they are “engineered” to work more efficiently (Koumparoulis & Vlachopoulioti, 2012). By such way, Taylor generalised the rule of thumb and transformed it into “time and motion study” through splitting tasks into different and smaller steps, scientifically observing the behaviour of workers, and measuring the precise time for them to complete each step. Each motion of work is designed to utilise the maximum capacity of workers through training to generate high profit for organisations (Udin & Hossain, 2015). Taylor also introduced “piece rate”, which is a new wage system to pay a fixed salary per unit of production based on the performance of jobs in order to motivate workers to work harder. Another core principle in Taylorism is the idea of specialisation between planning and executing. Specifically, management must focus on setting up systems to plan, control and supervise employees while workers must concentrate on manual labour in accordance with the plan of managers. The idea of Taylor is analogous to Adam Smith in his book “The Wealth of Nations” published in 1776. Adam Smith approached the specialisation of labour on a broader scale – a nation to convince that “Division of labour has caused a greater increase in production than any other factors” (Smith, 1776). It is also an explanation for the reason why some countries are wealthier than others and the necessity of free trade among nations to get benefits when concentrating its resources and labour to manufacture products that it has a competitive advantage. To sum up, scientific management pioneered by Taylor has four philosophy:

The management develops the science of work for workers to replace the old rule of thumb method.

Managers scientifically select, teach and train the labour workforce to develop their own capacity of performing tasks.

The management cooperates to workmen to make sure the jobs done aligned with principles of science that were developed.

There is an equal responsibility between management and execution, then conflicts will be eliminated when managers and workers are specialised in their tasks. 

With these principles, Taylor has a strong belief that scientific management is particularly designed for shop floor tasks, which is partially illustrated in the case of Amazon.

Taylorism & Amazon warehouses and shop floor practices

From the evidence collected in the secondary source of data, mainly from the journals, it seems to appear that there probably exists the presence of Taylorism in Amazon warehouses and shop-floor practices with the use of advanced technology. In the warehouses, employees are monitored by a sophisticated electronic system to control and manage the number of target boxes that they need to pack every hour (Kantor & Streitfeld, 2015). Meanwhile, in the office for management, the company uses a complicated set of management, data and psychological tools to set the target for white-collar workers to perform jobs in warehouses. It means that there is a specialisation of labour in Amazon when managers focus on the task of planning, setting targets for workers and the workmen to concentrate on the jobs of packing boxes in accordance with their goals proposed by the management.

 One of the similarities between Taylorism and Amazon management and shop-floor practices in warehouses may be the way “time and motion study” is applied to assess employee’s performance. Every motion of workers is under the control when in huge warehouses, workers have hand-held computers to record their movements (Spicer, 2018). He also mentioned that Amazon has a wristband, which received a patent but did not put into use, to control the hand movements of workers via “haptic feedback”. Currently, stock pickers in warehouses are reported to be under the observation rigidly of cameras that strictly controlled their behaviours (Spicer, 2018). Based on a study of motion and observations at the workplace, the performance of employees is continuously measured by the algorithm, which is running as a tool to measure and enhance the performance of white-collar employees over time (Kantor & Streitfeld, 2015). Workers at the warehouses, therefore, receive the salary in accordance with their performance assessment. For example, at Florence warehouse, the wage system or “piece rate” is calculated by 50 cents per hour that can be raised every 6 months together with a monthly bonus after taking into consideration of personal attendance, outperformance to exceed production goals of pushing out 600,000 items per day (Rittenhouse, 2017).

To sum up, most of principles and terminologies in Taylorism appear in the management and shop-floor practices of Amazon when there is evidence for the division of labour, time and motion study, and “piece rate” salary system according to the performance evaluation.

Critics of Taylorism and its irrelevance in Amazon

Despite the fact that most of the key points can be clarified by Taylorism but actual management practices in Amazon is more complicated and Taylorism fails to explain to them as it under-looked some important aspects.

Firstly, there is no equal right between managers and employees in practices when employees at warehouses are treated as a machine or robot, not human. It is also one of the limitations of Taylorism when he implied that human labour might work effectively as the machine provided that they are “engineered” to do so (Koumparoulis & Vlachopoulioti, 2012). The ideal workers or effective workers in Amazon are assumed to be Amabot – human-robot of Amazon (Kantor & Streitfeld, 2015) without the time of breaks. They even do not have time to go to the bathroom as a fear of missing productivity targets. They spend most of their lunch breaks waiting in line for onerous security screenings and feel pressured with under-report warehouse injuries (Sainato, 2018). Although Amazon uses robots in fulfilment centres (Florence warehouses), the work done is not relieved but turns workers into robots without any time for relaxing.   

Secondly, the resistance in the behaviours of most managers to pay the piece rate or remuneration to workers makes it difficult to satisfy Taylorism principles. Clegg et.al (2016) views that few managers accept to pay for productivity in Taylor’s system. They want to adopt piecemeal and efficiency from time measurement but not rewards in form of bonus using piece rate. In the case of Amazon, although workers at warehouses have to work under the poor conditions, for example, ambulances were called 600 times in three years at British warehouse due to work abuse to employees (Sainato, 2018), or workers at an eastern Pennsylvania warehouse fell down under 100-degree heat when the workplace was not installed with air-conditioning (Kantor & Streitfeld, 2015), employees cannot get appropriate compensation and bonus. Some local warehouses try to reduce wages, for instance, Lexington County, South Carolina (decrease over 30%), Chesterfield, Virginia (17%) and Tracy, California (16%) (Sainato, 2018). Additionally, Amazon also claimed that employees can receive a promotion with the title of an ambassador but, this position does not offer any additional payment (Rittenhouse, 2017). This can be partially understood by a decline of the traditional retail industry of America and a fierce competition among other competitors internationally (Alibaba, eBay, JD) which force Amazon to exploit employees (Sainato, 2018).

To sum up, these two reasons are partly caused the sceptics of Taylorism in analysing the management and shop floor practices. More importantly, there might be the possibility that the principle or assumption of Taylorism does not hold in the case of Amazon. It is because of the contradiction between the reality of Amazon and Principle 4 of Taylorism, which states that managers and workers must collaborate closely, then conflict is eliminated (Clegg et.al, 2016). However, the conflict happened when thousands of Amazon warehouse workers across Europe took actions to object harsh working conditions on the biggest sales day of the year – Black Friday in Germany, Spain, Italy, Poland, France, and UK distribution centres on 24 November 2018 (World Socialist Web Site, 2018). The strikes partially reflect the assumption of Taylorism that may not true in the case of Amazon. Notably, workers seem to view that going on strikes is the primary way to fight for the unfair treatment from the company as historically, in Italy, after strikes, Amazon agreed to end unfair treatment on scheduling practices (Sainato, 2018).

Hence, Taylorism can partly explain the artefacts of Amazon such as how managers use techniques to manage warehouse workers, and how employees are paid based on their performance. Nevertheless, it is not the whole picture when there are some doubts showing that Taylorism might not be fully appropriate to explain management and shop floor practices in Amazon such as motivation, culture and leadership.

Other theories

The first thing that Taylorism fails to explain in the case study of Amazon is the worker’s motivation, which is a part of management practices. Taylor in his book implied that money is the only motivation for workers “what the workmen want from employers beyond anything else is higher wages, what employers want from workmen most of all is low labour costs in manufacture” (Taylor, 1911). However, it is not really true when there are more important and specific factors to determine the motivation of employees, which linked to individuals or jobs themselves. If the assumption of Taylorism holds to be true, then, in Amazon warehouses, where is described as standardized jobs (packing, stock picking), poor working conditions, employees may still feel motivated when they are paid money for the jobs. In fact, employees do not feel so, even for new employees. Over through tough recruitment to become the best candidates for the job, the newcomers often feel “dazzled, flattered and intimidated” by responsibility on their shoulders (Kantor & Streitfeld, 2015).

McGregor – Theory X and Y

From previous literature, motivation can be viewed in the employer’s perspectives – McGregor theory’s assumption of employers (McGregor, 1960). He introduced two theories X and Y. At the beginning of a few decades in the twentieth century, Theory X is conquered in business after the mechanical system of Taylorism (Mohamed & Nor, 2013). Hindle (2003) views that Theory X is the autocratic style, emphasizing on “productivity, on a concept of a fair day’s work, on the evils of featherbedding and restriction of output, on rewards for performance”. Theory X is a negative way that employers see their staff, who are reluctant to do the jobs and try to find ways to reduce work output or do the jobs with little effort (McGregor, 1960). In another word, managers have the responsibility to identify second-class workers, who are naturally lazy, and “soldier” them into first-class by urging them to work and monitoring their behaviours rigidly to prevent the situation of doing less. However, the conflict potentially arises when managers use penalties or punishment towards employees to eliminate the cases of avoiding the work, which may not help to improve the relationship at workplace between them.

On the other hand, Theory Y states that employees will become productive if employers see employees positively and delegate more trust and responsibilities to them. McGregor (1960) also believes that Theory X is simply the satisfaction of low-level physical needs, which cannot expect to be productive. Thus, in the case of Amazon warehouse, strict rules and punishment to force employees to attain productivity goals, for example, employees are not allowed to sit on the company time, workers will be reduced 10 hours from vacation if not taking enough mandatory overtime shift (Rittenhouse, 2017), invisibly cause the fear for workers of missing targets. They just try to complete the job in time bounce without any thoughts that they really want to do so “It’s a job, it’s not a career” (Rittenhouse, 2017). Productivity and trust are truly created when employers change their negative views about the employees.

Mayo’s Hawthorne Works Experiment

Besides the employer’s perspectives and motivator factors, employees also need human relation and organisational culture that can be built through management practices. These points were emphasized in the study of Mayo with Hawthorne Works Experiment. Although the initial purpose of Mayo study is to develop Taylor’s scientific management, the finding is strikingly contradictory to Taylor’s beliefs. Mayo also implicitly agreed that monetary reward is not the determining factor of work satisfaction, which should be created by working conditions, attitudes, communications, and positive management response (Mayo, 1946). For such standardized and simple jobs such as “standing, walking, lifting and bending” (Rittenhouse, 2017), Clegg et.al (2016) argue that specialization of jobs with a high degree of centralization apply best for simple and repetitive tasks, however, this may be no longer true especially the business environment changes significantly. Workers of standardised and repetitive tasks in the modern world still have the rights to require motivation factors like other jobs. Mayo also emphasized the importance of the informal group in the workplace that subsequently causes the sub-cultures in the organisation. He believed that group dynamics and social makeup can create greater participation of workers, and openness in the workplace as well as groups (Onday, 2016). Particularly, in Amazon, informal groups play a substantial role in asking for benefits from the company. They are grouped together to go for strikes, recently in Europe, to fight against unfair treatment of Amazon in its warehouses on Black Friday. Each geographical group conducted the strikes in their countries to ask about the rights of workers in terms of wages, appropriate management, and break time (World Socialist Web Site, 2018). Importantly, they are linked together to form a larger group in the world, which forces Amazon to modify their rules and conditions. Although Clegg et.al (2016) viewed that Taylorism does not explicitly refer to culture, Parker (2000) still argues that the organisational culture in Taylorism is “single utilitarian to minimise employee resistance and maximise productivity”.

Amazon’s culture

The culture in Amazon, more precisely, warehouses, might be not integrated when the norms and beliefs of the company and employees are not analogous, which results in the conflict between them. Mayo (1946) also refers that there would be cultures in the informal organisations and the way of management causes the cultural effect by the collection of worker recognition. To be more specific to Amazon case, its culture focuses on “Leadership Principles”, which is clearly stated on its website and probably applied in every function in its company. Briefly, these principles are privileged for leaders, accordingly, leaders are owners and they are always right a lot because they have strong business judgement and good instincts (Amazon n.d).

It appears that the culture in Amazon in general and Amazon’s warehouses in specific is kind of bureaucratic. In this culture, action can be taken by formal rules from managers or supervisors with a high hierarchy in the organisation (Weber, 1976). For example, management work is to set up goals and employees need to follow the goals rigidly. Otherwise, they cannot receive an additional bonus. Or they need to conduct mandatory overtime shift unless they want to cut 10 hours from vacation time to work instead. Owing to the strict rules, which may be not flexible in some occasions, for example, World Socialist Web Site (2018) cited the case of a pregnant woman, who still needed to work hard to ensure the productivity while she felt depressed with a lot of work, it is partially caused the different cultural effects on employees. This may be one of the reasons for the differentiation in culture of Amazon, causing the conflict of interests between managers and workers.   

Conclusion

In conclusion, the paper provides arguments and evidence in the case study of Amazon in order to analyse the management and practices at its warehouses by re-examining the relevance of scientific management in shop-floors. From the investigation and research earlier, it is drawn a conclusion that scientific management can partly explain the management of Amazon warehouses in terms of the way that the company conducts the specialization of labour, performance measurement and salary based on the level of productivity. Due to the sophisticated management practices in Amazon, scientific management appears to not fully reflect the real situations of the company, especially in the aspects of motivation and organisational culture. The paper also points out the weaknesses of scientific management such as the unequal right between managers and workers, the resistance of managers to pay bonus for employees in form of piece rate, the wrong assumption of Taylorism in factors of motivation, and proposes other theories in order to clarify the matter of concern namely McGregor’s Theory X and Y, Mayo’s Hawthorne Works Experiment for culture effects and Weber Bureaucracy. Limited by the time frame, the paper reveals some drawbacks that cannot be covered in the discussion such as a small scale of the paper, which is only focusing on the management practices in warehouses of Amazon, not the whole company. Further research is also suggested in the case study of Amazon such as Amazon management practices under the view of different management theories.

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Financial Performance Analysis of Amazon

Executive Summary
Amazon.com, Inc (Amazon) registered strong growth of 36% in 2008 mainly due to increased unit sales and expanded sales base in several categories. Meanwhile during the 3rd quarter of 2009, Amazon managed to report a steady growth despite the recession period. This report reviews and analyse Amazon financial performance as well as comparison with its competitors. All analysis and ratios are derived from data collected from respective companies’ annual reports and www.reuters.com.

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Brief Description of the Company
Amazon is one of the leading online retailers in the world based in Seattle, Washington, United States of America. The company started its operation in 1995 and has regional involvement in the Asia Pacific, North America and Western Europe. Initially the core business of the company is selling online books however has diversified to products such as apparel, electronic and home improvement products.
The company is involved in the internet retailing industry with 7.5% market share in 2008. The e-commerce industry has gone through major phases of growth and decline however, Amazon persevered and surprised everyone. Amazon achieved its first annual profit in 2003 and has continuously performed better each year.
Amazon’s main competitors are the book retailer, Barnes and Nobles (BN) and third party retailing non-book related good, Ebay.com (Ebay). BN and Ebay are engaged in the similar industry as Amazon, which is online business and catalogue retailing of single and diversified product lines
In terms of market capitalisation, Amazon has the highest at $59.57 billion and followed by Ebay and BN at $30.59 billion and $1.21 billion respectively. This indicates that Amazon has greater stability and low risk compared to the competitors.
Financial Analysis
Profitability
The company’s performance has improved wherein it has performed above the projections made throughout the four years period. Net sales have increased by 29.2% from $14,835 million in 2007 to $19,166 million in 2008 with net income of $476 million and $645 million respectively. The Cost of Sales (COS) has increased throughout the years partly contributed from the free shipping cost and has affected the net income figure. There was a drop in the net income in 2006 due to increase spending on technology and content and in income tax expenses. However, the said figure has increased thereafter.
In terms of sales, Amazon has performed double from the competitors throughout the four-year period. Sales increased tremendously primarily due to low prices, vast selection of products and free shipping offers.
However, in terms of Gross Profit Margin (GPM), Ebay operated at 74% has outperformed Amazon at 23% in 2008. The reason behind this is due to Amazon’s high expenditure on Cost of Sales (COS), which is about 70% of its sales value. The high COS was mainly contributed from the free shipping cost incurred. In comparison to Ebay, the company applies different business model from Amazon and have managed to minimise its expenditure on COS at about 20% of its sales value and therefore reflected to a high GPM. GPM proves that eBay is generating a very large percent of net income from each dollar of sales and this contributes greatly to the growing of eBay’s overall financial strength. Meanwhile, BN showed a better margin because of its smaller size and the retailer aspect.
Amazon and BN have a stable Operating Profit Margin (OPM) of 4% compared to Ebay, which fluctuates within the same period. Its constant operating expenses of 20% from its sales value support the stable growth for Amazon’s OPM. Ebay’s fluctuation figures are resulted from high expenses incurred from selling, general and administrative.
Based on the industry standard, Amazon and its competitors have performed ahead from the standard, which are 14.1% and 0.53% for GPM and OPM respectively. The low OPM standard can be ascribed to the effect of the recent financial crisis.
As of the 3rd quarter of 2009, Amazon’s sales were $14,989 million with net income of $518 million. For the current year, it is projected a further increase of 21% and 19.5% in sales and COS respectively from 2008 primarily to the low prices, vast selection and free shipping offers. With the said sales projection, the net profit is projected at $743 million in 2009. The basis for the projection takes into consideration on the global economic downturn and changes in customer purchasing preferences.
Based on the current quarter performance, the same trend was observed wherein Amazon is still having the highest net sales while Ebay still dominating the net income figure. BN was badly hit from the result of economic crisis.
In comparison with the competitors, Amazon’s Return on Equity (ROE) was high in 2005 at 135% but drastically dropped throughout the years to 40% and 20% in 2007 and 2008 respectively. The main reason for the decrease was due to the yearly increase in the business’s equity. As at 2008, Amazon’s ROE is equivalent to the competitors and is expected to be in line with the competitors in the future.
In comparison on the ROE and Return on Assets (ROA), Amazon has the highest growth among its competitors as it has a smaller capital base than Ebay and a higher profit level than BN. The high ROE is indicates that Amazon is continuing to grow. Meanwhile the ROA showed that Amazon is efficient in generating income from its assets compared to its competitors. The industry standard for the ROE and ROA are 3.8% and 1.6% respectively. The lower industry standard might be driven by the economic condition, which has a great impact to the performance and profitability of most companies.
There was an increase of 1% for each year from 2006 to 2008 for the Return on Investment (ROI), whereas the Return on Capital Employed (ROCE) was at the highest in 2008 at 29%. These have indicated that Amazon is efficientat using its assets to generate earnings compared to the competitors.
Liquidity and leverage analysis
The company’s current ratios are more or less similar to BN during the four-year period. The company’s current ratio was between the ranges of 1.3 to 1.5 for the past four years. This indicates that Amazon is able to lay its hands on $1.30-$1.50 for every $1.00 they owe.
In comparison between current and acid test ratio, acid test ratio is lower at average of 1.0 within the years. It will enable the company to cover its short-term liabilities adequately with its liquid assets. This is within some of the industry standards of 1:1, showing that the company will be able to cover its short-term liabilities adequately with its liquid assets.
In comparison with the industry, Ebay performed better than Amazon for both the current ratio and acid test ratio. Amazon fell below the standard in the initial years but almost meeting the standard in 2008 at 1.5:1. Although not performing better than the industry average, Amazon has good and stable ratios, which indicates that the company is able to cover its current liabilities.
Amazon’s gearing ratio was high in 2005 at 86% and subsequently reduces within the years to 13% in 2008. Due to the operational efficiency, increased sales and improved liquidity, Amazon was able to reduce its debt and currently the business is funded with internal generated funds. Meanwhile, Ebay has no borrowings and BN has an average of 30% for the gearing ratio.
The high borrowing in 2005 has a huge impact on the debt-to-equity ratio, which was 6:0:1. However as the borrowings is paid, the debt equity ratio when down to 0.2:1 in 2008. This indicates that Amazon has 20 cent debt for every $1 equity the company have. As for BN, its debt/equity ratio was at average of 0.5:1 during the four years. Therefore, in comparison, Amazon is less risky than BN. As Ebay has no borrowing, the interest cover for the said company is high compared to Amazon and Ebay.
In comparison with the debt-to-equity ratio set by the industry, Amazon has a very low ratio of 0.2 compared to 40.98. As mentioned earlier, the industry ratio is on the high side due to the economic condition.
Investment analysis
Amazon’s common shares outstanding plus shares underlying stock-based awards outstanding totalled 446 million on December 31, 2008, compared with 435 million a year ago. As of to date, the said shares amounted to 451 million.
Based on Amazon’s Earning per Share (EPS) trend, it indicated that the market’s willingness to pay for the company’s earnings has increased. This indicates that the market foresees Amazon’s long-term prospects over and above its current position. As at 3rd quarter 2009, the EPS was $1.20 and to grow further based on the company’s projection on higher earnings in 4th quarter. Analyst predicts that strong online holiday sales will boost the shares of retailers, including Amazon and has recommended that the said shares will outperform in the market (Reuters.com, 2009).
In terms of market performance, Amazon’s share price fluctuates throughout the years and increased tremendously in 2007 at $92.64 due to the launch of its e-book reader, Kindle. However, during the economy downturn in 2008, the share price dropped to $51.28 due to low operating profit as Amazon begins its price reduction for the goods and services. In 2009, the share price gradually increased and after the 3rd quarter results, it continuously went up and as at 11 December 2009, the share price was $134.15. The current Price/Earning Ratio has increased to 80.70 times from 33.80 times in 2008. Analyst predicted that with a strong revenue growth Amazon would be able to gain significant market share from other competitors (Stahl, 2009).
Due to the economic downturn, all companies are affected which was reflected in its performance. Similar to Amazon, Ebay’s and BN’s share prices had an initial stable growth but in 2008 it dropped by about 50%. While others are still struggling to recover from the economic situation, Amazon has showed a growth in 2009 and the share price has currently increased by 168% compared to Ebay and BN at 70% and 62% respectively.
Cash flow Analysis
As at 3rd quarter 2009, the cash and cash equivalents was $2,514, which a reduction from the opening balances at the beginning of the year of $2,769. During the period, the cash used in financing activities was $229 million compared to $1,199 million in 2008 of which the cash outflows results from repurchases of common stock, repayments of long-term debt. Repayments on long-term debt and payments on capital lease obligations were $379 million for the 3rd quarter 2009 and $335 million in 2008. Meanwhile, free cash flowwas $446 million for the quarter.
Throughout the years, Amazon has managed to have a positive cash flow from its operating activities. This indicates a good sign that the core operation of the company is generating income. In comparison of Amazon’s total liabilities to the cash flow generated from operations, the company has enough funds to cover level of investment and takes about 3.3 years to pay back all its financial commitments. With the current cash, cash equivalents, and marketable securities balances, the company is likely to be able to meet its anticipated operating cash needs for at least the next 12 months.
In comparison between the cash flow from operating activities and net income, it indicated that Ebay has the higher ability compared to Amazon in managing its operating cash cycle through receivables, payables and inventory. The reason is that Ebay takes advantages of its payable days for as long as 361 days. Due to the similar business model, both companies have a negative cash cycle of which cash is generated from its payable and quick settlement payment from the customers.
Management of Working Capital
In terms of managing working capital, Amazon had maintained its positive cash flow being the highest at 2007 for an amount of $1,450. This indicates that the company is able to pay off its short-term liabilities and operating expenses accordingly. In comparison between the competitors, Ebay has the highest working capital of $4,023 million in 2007 while BN has the lowest at $841million in 2006. The high working capital for Ebay has enabled the company to be successful in its expansion programme and improve their operations.
For the 3rd quarter ending 31st December, Amazon’s working capital is $1,832 million and is expected to increase further due to higher expectation of sales in the coming quarter.
Working capital provides information on the company’s underlying operational efficiency. In terms of efficiency, Amazon is efficient in using its assets in generating sales compared to its competitors, which are reflected in the asset turnover ratio. This indicates Amazon’s improved efficiency in inventory and asset management that is partly supported from the low pricing strategy and low profit margin.
In comparison to the competitors, BN has the lowest account receivable days due to its retail business model, which is based on the cash transaction. Based on the account payable days, Ebay has taken advantage on the free source of finance for the business at 361 days compared to Amazon at 62 days. In respect of the inventory days, Amazon is able to turn the inventory quickly as low as 12 days compared to BN at 140 days. BN has high stock inventory days due to the reason of its retailing business model and product which requires some time to be sold. Due to the same business application, both Amazon and Ebay have a negative cash operating cycle, which indicates efficiency in cash management. In term of the industry standard, the three companies are performing above the indicative ratios, which are supported by the significant growth in the industry.
Based on the industry standard, Amazon and the competitors are performing ahead from the standard. For the assets turnover ratio, Amazon was the highest at 2 times compared to 0.7 times industry standard. This indicates the company’s efficiency at using its assets in generating sales. The reason Amazon performed better than the competitors is relatively derive from the pricing strategy wherein low profit margin company tends to have high asset turnover.
Amazon Future Prospects
Based on Amazon’s current performance, it is projected that the company will have a strong growth supported by the low pricing strategy and free shipping. Moreover, the latest acquisition of Zappos.com and improvised version of Kindle are expected to increase Amazon’ sales which leads to higher profitability. Due to the growth of Amazon, its annual earning is expected to grow over the next two to three years with sales reaching $2.38 million and $2.86 million respectively. Due to robust financial performance during the current economic condition, it has enhances investor’s confidence. Share prices are expected to increase with earnings of $2.57 and $2.38 per share in 2008 and 2009 respectively. In line with the said growth, Amazon will benefit in gaining additional market share despite tough competition from other online sites such as Ebay.
References

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Amazon.com 3rd Quarter 2009 Report Available from: http://amazon.com (accessed on 11th November 2009)
Ebay.com Annual Report 2008 Available from: http://ebay.com (accessed on 11th December 2009)
Barnes and Noble Annual Report 2008 Available from: barnesnobleinc.com ((accessed on 11th November 2009)
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George Stahl (2009), Amazon Shares Hit All Time High. The Wall Street Journal (0nline), Available from: http://online.wsj.com/article/SB125630854623203899.html (accessed on 4th December 2009)
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Amazon Supply Chain Management and Logistics Management

The case study I have chosen for my topic is on “AMAZON.COM”, the area where I would be focusing is on the core concept of e-business and the benefits it provide effectively in adopting e-supply chain strategies. The main focus here in on the word ‘e-‘as it has change the way of doing business in a global environment. Therefore, technology here plays a vital role in expanding new areas for businesses and enabling organizations to minimize their costs and work more precisely and effectively. Internet has made the world a small village for customers as now customers from across the world can assess any product of their choice by one click of mouse. Internet is world of opportunities as I come across a statement given by Tony Blair (UK’s X Prime Minister),
“If you don’t see the Internet as an opportunity, it will be a threat”. (Financial Times, 1999) (Barnes 2001)
Furthermore, this paper would be focusing on Amazon’s history and background, and then the focus would be on the product and services Amazon is offering to its customers, the practice of supply chain within the company and its customers. The paper also comprises of the benefits of e-business Amazon is providing to the customers effectively as well as importance of logistics in fulfillment of supply chain strategy throughout the supply chain.

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Background of Amazon.Com
Amazon.Com was launched on 16th July 1995 by Jeff Bezos known as pioneer in e-commerce (R. Spector 2000) with a tag line under the alphabet ‘A’ “Earth’s Biggest Bookstore” and is based in Seattle. At the beginning the web page was designed for selling books with a message at the top of the website “Welcome to Amazon.com Books” Search one million titles. Enjoy consistently low prices”. (R.Spector, 2000). At Present the company is providing three primary customer sets; consumers, Sellers, and developers. The general idea behind Amazon was to serve as many customers as possible with variety of products that the volume of business would generate profits for Amazon.com. (R.Saunders 2001). In the early phase of business the company agreed upon having a very little or no inventory due to costs involved in keeping inventory.
In the early nineties many traditional bricks-and-mortar retailers worked with their suppliers in accordance with the concept ‘just-in-time’ delivery in order to keep the cost of inventory low but Amazon followed “almost-in-time” delivery introduced by Barton Davis who was the second employee of the firm when Amazon started. (R.Spector,2000). This strategy meant that the books will be delivered to the customers after they order it as they are not kept in the stock until a customer asks for it. At present Amazon have six warehouses where it stocks its inventory. As per the company’s annual report of 2009 it indicates that company is experiencing continuous improvement in customer services which is result of 15 years of previous service like speeding delivery, reducing their cost structure in order to offer customers with ever lower cost prices. (J.P. Bezos 2010).
Products and Services at Amazon
Amazon started with selling of books by filling all orders of books by purchasing from a distributor in accordance with the orders given by customers. At Amazon they have a stock of bestselling books. Amazon’s main strategy is to keep on expanding the set of products and sell them online. In June 2002 Amazon became an authorized dealer of Sony Corp., selling sony products online (E. Turban, 2006). Apart from books Amazon has added many new product categories such as music, toys, electronics, jewelry, shoes and apparel (S.Chopra 2007). According to the annual report of Amazon.Com (2009), it has added 21 new categories around the world which includes Automotive in Japan, Shoes and Apparel in China. Amazon web services as also launched new services and features which includes the Amazon Relational Database Service, Virtual Private Cloud, Elastic MapReduce, High-Memory EC2 Instances and Versioning for Amazon S3. (J.P. Bezos.2010).
Supply Chain Practices of Amazon.Com
Before we come to the supply chain practice of Amazon.Com it’s necessary to define Supply Chain Management, therefore supply chain management refers
“Supply chain management is a set of approaches utilized to efficiently integrate suppliers. Manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize systemwide costs while satisfying service level requirement.”. (D.S.Levi 2008, Pg.1).
Now, after looking at the definition we come across the real meaning of supply chain management, therefore, if we look at supply chain of Amazon.Com it start from the customer and ends up to the customer meaning it’s a continuous process which starts when the customer for the first time makes a request for any product at Amazon, it directly goes into his virtual basket and after pressing the buy button and mode of payment he selects a mode of delivery services which includes overnight and various international shipping options (R. Spector 2000). Amazon have a system where orders are recorded, registered and processed and simultaneously, customer on the other hand is immediately apprised of the status of his order and how long will it take to ship the product with the amount of shipping costs involved in it (R. Saunders 2001).
Inventory Management at Amazon.Com
Amazon stocks best-selling books at its warehouses and get the other titles from other distributors or publishers. To deliver the products Amazon uses U.S. Postal Services, UPS and FedEx to deliver the goods to the customers (S.Chopra 2007). Here we can see the importance of e-commerce in supply chain that how effectively organizations are trying to invest and find new opportunities through e-commerce especially in field of supply chain management. The supply chain of Amazon is very strong just because of responding quickly and accordingly to the customer’s specification on delivering the goods at the right time, at the right place and at the right price during the time specified According to the annual report 2009 of Amazon.Com, the inventories rose over 200,000 titles at the end of the year which enabled Amazon to improve the availability of products for their customers.
Customer Relationship Management by Amazon.Com
Every business revolves around satisfying customers and enhancing their relationship for long term, the same implies with providing services on Internet or e-commerce, the general idea is to create a positive relationship with customers. The Internet has played an important role in making it possible for organizations to focus on building relationships with customers and having a direct contact with each customer (S. Barnes 2001). Therefore, businesses on internet can improve synchronization, both within and across companies while providing a direct contact with end users. If we look at Amazon, it has build a strong relationship with all of its customers by meeting up their expectations and trying to be more effective in going beyond their expectations. From the company’s more than 80 million customers across the world, more than half are repeat buyers (R.Saunders 2001).
The focus of Amazon was to offer customers compelling value from the beginning and to meet customers’ requirement 365 days a year. According to the annual report 2009 of Amazon.Com, Amazon has relied on Word of Mouth advertisement and to date it remains the most powerful tool in customer acquisition because repeat purchasing and word of mouth has made Amazon to be a market leader in online bookselling. Therefore, it is important for retailers to emphasize on satisfying customers because this can enable them to move first time buyers to loyal customers. Bezos, the chairman of Amazon once said,
“A pool of evangelists will use the Internet as a megaphone to help attract new customers with word of mouth.” (R.Saunders 2001, pg.102)
Importance of Logistics in Supply Chain Management
Logistics plays an important role in supply chain because it acts as a bridge or link between the entire processes of supply chain as it is the main source of delivering the products to the end consumers in a timely manner as and when required. There is a big challenge in logistics in managing the whole logistics system in order to meet the customer requirements, perhaps, exceeding customer expectations. In today’s competitive world and speed of ordering via Internet intensify the need of effective logistics system in order to deploy appropriate levels of inventory, delivering the products within the promised time and also managing the returns if required.
The role of Logistics in Supply chain implies in creating a place utility and in managing the time effectively, as place utility is provided through moving the goods from the point of production to the point where demand exists, thus adding a economic value to the goods. Time utility is of greater essence as it is not necessary that the goods and services should only be available where customers need them but also that they are delivered when they actually demand them. These both activities are clearly seen in the case of Amazon.Com as both the services are effectively and efficiently performed by the organisation.
Role of Logistics in Amazon’s Supply Chain
There has been a deep research done by different authors in order to find the secrets behind the success of a retail company, and that is offering the right products in the right location at the right time having the right packaging in the right quantity at a reasonable price to the right customer (R. Saunders 2001, pg. 119). This is one of the most core elements of any organisation and seems to be the most important objective in Amazon’s shipping as well because the strategy is to deliver the product safely to the customer at the time specified. In the year 2000, Amazon developed a “Delight-o-meter” in order to track the total number of items ordered worldwide. Amazon got high marks in terms of delivering the products in time on holidays from all e-business and e-commerce magazines than other e-tailors companies of the world (R. Saunders 2001).
Benefits of e-business in Supply Chain
The success of every retail and e-retail depends on providing quality products at good prices having in mind quality excellent services. One of the most important benefit that e-business is providing organizations is to reach hundreds of millions of people open 365/24/7 in just a click of mouse omitting all the barriers which used to exists before. Companies with just a minimal capital requirement can easily and quickly reach to the best suppliers, unlimited customers and even most suitable business partners across the globe. This activity enables organizations to buy at cheaper rates and sell more in number of quantity.
E-commerce plays a vital role in overcoming the inefficiencies in supply chain such as delivery delays and excessive inventories can be minimized. Furthermore EB also benefits in cost reduction like decreasing the cost of processing, distributing and storage activities (E. Turban 2006). Companies are now investing heavily in order to get the word ‘E’. Customers are getting the benefit due to intensive competition and number of products available to them online, like with just a click of mouse a customer with saving a lot of time can easily gather information of the features and prices of a product and can easily arrange direct shopping sitting at home (S. Korper 2001). Amazon is a classical example of B2C, which means it remains between the seller and the buyer. The objective of B2C is to optimize the business relationships with customers, increasing service levels effectively and efficiently and lastly increasing the sales (E. Turban 2006).
Conclusion
To sum up I would like to say that e-commerce and e-business play is a life blood of organizations, especially when I talk about Amazon.Com. A comprehensive research has been carried out through my research that how Amazon.Com has evolved its virtual door opened on the World Wide Web in July 1995. Furthermore, I would like to state that e-business plays an important role in managing the supply chain of Amazon.Com effectively and efficiently by offering customers what they are looking for and providing them their products within the time specified. Amazon.Com has become very successful in reducing its costs as well as increasing profitability effectively. The Amazon.Com leaves an example on how to do effective marketing on the Internet and satisfying customers.
The role of e-business in expansion of businesses also play an important role as we see now every organisation whether big or small goes on the Web and offer their products or services on the web as well in order to grab millions of customer on the internet. E-commerce plays an important role in minimizing the costs throughout the supply chain and improves the level of service by meeting or exceeding customer’s expectations. At last but not the least, EC enables companies build a positive relationship with customers by providing direct services to the customers which in turn promotes better customer relationship management and increases customer loyalty.
 

Amazon SWOT Analysis

Amazon is an american electronic commerce company that has become an icon of internet business. Jeff bozos founded the company in 1994 and launched it online in 1995 as an online bookstore. However, the logo soon became symbolic as they started to sell everything from a to z. Time magazine names bezos “1999 person of the year” and said, “bezos’ vision of the online retailing universe was so complete, his amazon.com site so elegant and appealing that it became from day one the point of reference for anyone who had anything to sell online. In 2001, amazon.com reported a fiscal loss and over a couple of years they laid off over 1000 workers. But, this set back did not discourage bezos instead he came up with the idea of joining forces with other retailers to sell their products online through amazon.com. So, through hard work and determination bezos has been able to turn the simple online bookstore from its early beginnings into the global phenomenon that is amazon.com.
INTRODUCTION OF AMAZON:,
Amazon is one of the largest ” internet retailing company in the world, that sells from books to electronics to potential buyers from all over the country, it is well known to have cheaper prices for their items, and having great expertise in making sure their customers’ needs are met at all times” (Amazon, 1996-2010)
Amazon has been in business for so many years to where they will not be undersold to any other company that are trying to compete with them. The products are displayed with great “advertising publish with using the press release, competent customers who will invest their products to be displayed through amazon to make money, and great policies that show lower rates, When the customer is needing for their product to shipped to them” (amazon, 1996-2010).

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Amazon has always kept their prices to a minimum, to where most customers will use Them around the holidays, to have the products sent to their families that live in further Countries. There have been customers that apply for a “career at amazon, making money Just sitting at home, waiting for potential buyers to show interest in wanting a great Quality product that they would not find cheaper at any other retail store, such as target, Sears, and toys R us” (amazon, 1996-2010).
Amazon has a type of behavior that it shows customer satisfaction as being no.1, that if a product is defected, it would not cost anything to have it sent back to them. The product will be returned with one that is new and will have warranty.
SWOT ANALYSIS:,
Amazon.com has become the king of its own private little industry. The only problem with being the king is that everyone wants your throne. While Amazon.com has many strengths and opportunities it has threats and weaknesses, too.
STRENGTHS:
Well established web brand

Loyal customers base of over 12million shoppers
Distribution facilities to handle growth and fulfillment
Leader in use of technology to delivery targeted content
Excellent offline customer service
Amazon has moved away from being a low price supplier of books toward a focus on delivering outstanding service at a price,

WEAKNESSES:
Too much diversity in their product line and Amazon.com could risk damaging its brand name. There is the potential for confusing their clients
Shipping costs could be a deciding factor on whether a customer buys from Amazon.com or goes to a traditional store. More online retailers are offering free or discounted shipping and some, such as Wal-Mart, offer site-to-store free shipping.

Need to restructure business to drive toward profitability has meant upward pressure on prices
No offline brand presence

Insufficient community added value
No telephone support
OPPORTUNITIES:,

Opportunity to establish itself as a global mass merchant leader in the online shopping arena
Building community events around the brand would help create brand affinity as well as loyalty
Establish 24×7 hour telephone support for customers and order processing
Frequent shopper discounts will increase retention and repeat purchases
Further offline partnerships can potentially help Amazon by allowing customers to return products offline stores.
Amazon has an opportunity to Create a higher international market segment.

Also can make Strategic alliances with companies.
THREATS:,

Competitors such as Barnes and Noble, eBay.com, and half.com.
Book publishing companies could start up own website and get rid of the middleman companies
The continuous changing of trends in the marketplace.
Amazon’s lack in-depth community leaves it exposed to customer being attracted to competitors with more in-depth content.

AMAZON.COM KEY SUCCESS STRATEGIES:,
CONTINOUS INNOVATION
The areas of innovation shown by amazon was the use of collaborative filter technologies which allows customers to evaluate books on a one to five star rating system and browsers can rate which reviews are helpful and which are not. The site offers peep into books contents index and beginning pages with “a search inside the book” feature that allows customers search the entire text of 120 000 books- about as many times as are in Barnes & Nobles bookstore.
Amazon’s .com one click shopping lets buyers make purchase with one click. Another innovation is the syndicated selling networks. Through this network or association, amazon.com has a cross product programme that enables those who visit those associate sites to purchase several titles across multiples product lines, from single source. In addition, almost all web search engines are members of the associate programme with hotlinks on the entry of every research page, it’s like amazom.com has a store on every major mall around the wall, i.e. clever advertising
Amazon .com has also established itself as an electronic market place enabling merchants of all kinds to sell items on amazon.com. It powers and operates retail websites for Target, the NBA, Timex, Marks and Spencer.
Amazon.com cards offers every visitor the ability to send free cards to friends from its web site, these creates an opportunity to set new customers as well as keep current customer happy, because the recipients of the those cards must visit Amazon’s website to view the personalized messages.
VALUE ADDED SERVICE TO CUSTOMERS
In a competitive environment, amazon.com has scaled through as a firm with the offer of value added service as its competitive advantage which includes courteous, personalised customer services.
Amazon.com personalised the storefronts for each customer by providing more useful information and more choices that could not be found in neighbourhood bookstore. This Allows customers communication flows, information site on products, quality, praise, complaints, rating, featuring, description, reviews, comparison, discussion, problem report, information statistics, ranking prices, discount, e.t.c thereby building its customer relationship management (CRM). Through this (CRM) Amazon were able to record customers reading habits, buying habits and buying trend, which allows Amzon.com to offer different promotion and selling strategies tailored to meet customers demand and needs.
Amazons diversification into other types of services (music, video, home improvement and auction) also enhances their competitive advantage because all other services links back to them faster than their competitors can duplicate.
Amazon.com offers services beyond discount, for example; the ability of the site to allow students search book of related topics for their projects, search for books in foreign languages or out-of-print, provides information about its products— editorial contents in the form of reviews, interviews, excerpts, purchases’, circles and related recommendation made for deeper exploration of the site, provide information for those who can’t remember a book or video or are looking for a sound bit , but don’t remember exactly what they want.
UNBEATBLE LOGISTICS
Amazon.com offering for fast, inexpensive shipping has helped the firm to overcome the lag between purchase and delivery of a product. For a $79 annual fee, Amazon.com prime offers unlimited free express shipping for most items.
At amzon.com customers orders are handled in-house and to achieve this they established distribution centres and each distribution centre is equipped with the latest material-handling equipment technology. For instance, each distribution centre has a pick-to-light system which uses a terminal display mechanism to guide a worker through the picking and packing process; frequency technology is used to direct workers to warehouse locations with a radio signal, and voice technologies which allows computers to communicate instructions to workers.
2. Current Strategic Situation
Amazon’s mains resources and capabilities: ,
The presence of strong as well as effective leadership in today’s organization imposes a great responsibility to the organization’s team and management networks as leadership implies the overall capacity of the organization’s performance like for instance, in terms of operations and research development. It can be said that Amazon’s resources and capabilities can be divided in the management of the company specifically their leader which is Bezos, the ability of the management to effectively use strategic supply chain management and aligning it with their business process and information technology, their competitive advantage in the online market, and the financial resources that it gains through its successful approaches.
There are various resources in the enterprises such as human resources and customer resources. First of all, concerning human resources,
AMAZON COMPETITORS: ,
Amazon.com has major competition including such well known business as below
Ebay.com
EBay is Amazon.com’s prime competition for its online auction services .Ebay.com is also on the Internet and it is much larger than Amazon.com and offers live auctions and bidding for customers. Amazon and eBay all provide generally similar information, but additional information is provided based on the company’s primary of sales method. Customer product reviews are one piece of extremely valuable data for making purchases that is provided by all three companies. One difference is that since Best Buy is a retailer that primarily focuses on driving sales through physical stores and they have a place where customers can go to physically touch and feel their products, they have the ability to provide information that is less extensive on their website
Barnes & Noble.com
Is an internet commerce branch of Barnes & Noble Inc. which includes physical bookstores that have been designed with comfort and convenience. It receives more than six million unique visitors per month to its Web site, www.bn.com. It is perhaps their largest competitor. Barnes and Nobles and Amazon.com are competing, but both stores and other online stores recognize what works and are studying one another – often duplicating one another’s business strategies. This has resulted in them having more similarities than differences and it helps the consumers find similarities across the Web such as;
When a description of an item is given, Amazon and Barnes and Nobles both place the shopping cart option prominently displayed to the upper, right portion of the screen. This makes it very efficient and useable for the viewer and they do not have to search around the page for this button. (Clementina Imobhio May 5, 2001)
In pricing, both Amazon.com and Barnesandnobles.com display the average price for their items above their own discounted rates so that the users feel as though they are saving money. (Clementina Imobhio May 5, 2001)
Both sites are “Flexible”, there is an option of buying things at a later date and placing them in the shopping cart temporarily. This option is called the wish list and it is displayed just beneath the “Add to Cart” button. Users can access this saved information and access it on their next visit. (Clementina Imobhio May 5, 2001)
Both sites offer “Security” that provides safe shopping, privacy and efficiency by requiring customers to join as members at a certain point during a transaction. Membership is free and requires an email address, full name, home address and phone number. It allowing customers to maintain an order status and helps provide a history of what they bought. (Clementina Imobhio May 5, 2001)
C) Wal-Mart.com
Wal-Mart has experienced success internationally because of its ability to transport the company’s unique culture and effective retailing concepts to each new country. They respond to customer needs, merchandise preferences and local suppliers.
Business strategies that have helped Amazon.com to enhance its competitive advantage are –
The first strategy, cost-leadership is pursued by Amazon.com by differentiating itself primarily on the basis of price. Due to this strategy, Amazon.com always makes sure that it offers the same quality products as other companies for a considerably less price.
It’s third strategy is long-tail, Amazon only started the online retail business with books, but now it sells everything from toys to books and is looking in future to sell more and more products.
Unlike its competitor Amazon.com didn’t maintain huge inventories of books; it relied on wholesalers to supply books on time. The most obvious benefit of this “just-in-time” procurement system was that it multiplied inventory turns and reduced working capital requirements. Amazon saved money on everything except people and computers. Amazons investment in computer technology was focused on software rather than hardware. In that sense Amazon.com’s business strategy involved maintaining “Unique resources”, its people.
Amazon did more than just sell books; It also provided a range of services including information about books: interviews with authors, book reviews and recommendations from other customers and media, links to other sites, new release information and more.
Stakeholder Analysis: .
A) . Government Agencies – The Federal Communications Commission, is a commission that defines the broadband to meet customer broad communication needs and desires.
B. Labor Unions – Since Amazon is an online buying center, there are no labor unions. These unions exist when there are enough in center employees to need protection as an employee.
C. Completing Organizations – In the technical products and systems market, competitors are looking towards opportunities to get ahead of others. The best thing for Amazon is to push forward ahead of the competition because of their diverse background and continue their surge for new customers.
D. Employees – Failure to remain competitive will affect the employees. The president is about making cost cuts to improve profits which in turn will cut the salary of current employees. Layoffs are the first method most often in making cost cuts.
E. Suppliers – The suppliers for this company include the sellers that offer their personal products for sale, as well as the partnerships Amazon formed.
F. Customers – Amazon.com caters to people of all ages and discretions. These customers include seniors, baby boomers, generation X, and generation Y. Each group have a percentage in the population of customers with tastes for different products
3. Strategic Direction for the future
Strategic Management
The main area we will look at is Amazons strategic management capabilities, we will look at the External factors that have influenced Amazons stratgey and the Opportunities and Threats this industru poses. We will also look at the strengths and weakenesses that Amazon have to address these threats and take advantage of the opportunites presented to them
Firstly it is necessary to conduct an external analysis of the environmnet that may have influenced amazons strategic management decision. We will look at the PEST analysis model that may have influenced Amazons strategic planning. The main two external factors that influenced amazons strategies were
Political – These factors address legal issues such as trading laws etc. The low sales tax in seattle was one of the factors that encouraged Amazon to set up their first distribution center
Technological Factors – Introduction of new technology can create new markets. The main reason for Amazon setting up an online store was the growth in the use of the world wide web technologies and their ability to offer a flexible service online.
Ansoff matrix:
Amazon seem to have chosen two of the four growth strategies:
1. Market Development Â- through the opening of distribution centers and the launching of websites in the UK and Germany Amazon offered their existing goods and sevices for sale in new markets.
2. Product Development Â- through the acquisition of several online companies such as pets.com and drugstore.com Amazon could offer new products for sale in their existing market
Based on these strategies the following mission statement has been formulated:
Our vision remians being the Earths most customer centric company, the best place for customers to find and discover anything they want to buy online
In addition Amazon wish to achineve the objective to “become the best place to buy, find and discover anut product of service available online”. In line with this and the growth strategies adopted to do this Amazon will continue to enhance and broaden its brand, customer base and eCommerce expertise
Recommended Solution & Implementation
Technology Integration and R&D
Amazon.com should increase expenditure in the research and development arena. We believe that Amazon should prepare itself for additional telecommunications implementations such as high speed internet and network security. These types of implementation, though representative of considerable R&D costs, are probably most significant factors that etailers must prepare for near future. As users, connections increase in speed, any delays on the part of the etailer they are connecting to will become obvious and less tolerable. Amazon can stay ahead of the pack by preparing a unique and comfortable interface for the users.
Strategic Cost Analysis
Amazon.com should also use Strategic cost analysis process where identify the firm’s value chain, diagnose the key elements that drive the costs of each value activity, identify competitors value chains, develop a strategy to lower relative costs by controlling cost drivers, ensure that any cost reduction does not erode differentiation in service and test the cost reductions if its sustainable in the end of the analysis.
Differentiation
They should also consider by costs by determining Differentiation where the process goes as determine who the real buyer is, identify buyer’s value chain and put in rank order the buyer’s reason to purchase, asses the current potential sources of diffentiation, identify the cost of these resources, design a value chain to maximize value relative costs, test for sustainiablity and reduce costs in activities that do not affect the chosen forms of differentiation.
Inventory;
There are programs built to be extremely user-friendly, and most offer great support along the way of usage for online businesses to maintain the book database. Amazon should invest in software to best highlight and maintain the data on the site and importantly back up systems. Keep inventory accurate and up to date; This is also an important aspect that Amazon can out beat its competitors with as this is first step towards building a long-term relationship with that customer. Inventory of the books stock-out and sold out will be kept up to date on the site.
Visionary & Informative
A picture is worth a thousand words; Uploading pictures by decreasing explanations or descriptions could attract customer’s attraction and curiosity in exploring the book. Somehow it boosts up sales compared to other online booksellers who give attention in words. Product Review Information; In case of books, editorial reviews are provided by the company and it applies for all books. Customers can also rate each other’s review. A rating is placed against each review so that customers can decide whether to read or not based on that. Most online booksellers do not include this but they display the customer’s satisfaction on the delivery service provided by them which is less important to boost up sales. People out there want to pay you for your books; Amazon should use own merchant service account or a service offered by a listing site, make sure that customers can buy books quickly and painlessly with a credit card while you have them on the brink of finalizing said purchase. Don’t judge a book by its cover; First impressions are lasting impressions. When a customer receives the book they’ve ordered, make sure the first thing they see is a product and package that you are proud to have supplied by using use clean, new boxes without writing (or envelopes for low-cost paperbacks) for shipments. Customers will be expecting an excellent service but if its vice versa then they are chances for them to switch to other online retailers.
Keep customers in the loop on everything;
Amazon should update the status of order to customers on the order made and also keep them in loop by e-mail the listing service directly with questions about their orders and keep updating the latest events and new stocks of books through emails.
Shipping & Delivery
Follow-up; After shipping out an item to the customer, Amazon should send them an e-mail a day or two after expecting that they’ll receive their package, asking them if they’ve received it and are satisfied, and reminding them that there customer rep are there to help should they have any questions about their order. This is also a great time to remind them that you have similar items in stock or to offer them a coupon towards future purchases.
Expansion to Asia Region
Amazon should strive to expand its expertise to Asia region as well as high potentials are there which huge population. Education is becoming one important aspect in Asia and lack of important reference books are always a problem in many parts of Asia. It should diversify its marketing capability in Asia too to capture the market. Amazon is very less popular in Asia regions. Amazon.com should take Asia to consider for its business expansion. Amazon could also diversify its marketing and research ability to expand mostly to the developed countries of other territory. In order to grow big and always sustain in the market and competition, Amazon should takes this sort of steps to expand.
International Sites; Amazon.com has got an added advantage of international sites on Canada, United Kingdom, Germany, Japan, France and China. All about what the customers have to do to browse the site with their language is by clicking to their national site. For example, if you clink Japan, immediately the whole website will change its descriptions and instructions into Japanese language. This is not at all applicable for a customer in Malaysia or any other regions of Asia. It should expand and add more languages options in its site to accumulate its customers. Giving customers what they want is also one strategy not all online business can do but if this can be proven in Amazon’s case then it have all the potential to be the one.
Word-of mouth advertisement
Amazon also should increase its word-of mouth advertisement. This might seem odd for an industry leader to rely upon such a quaint tactics as this, but we truly believe that in the world of Internet this is a powerful tool. We are quick to visit sites that our friends identify as being fabulous, and Amazon might capitalize on this by rewarding its customers who can reel in a new prospects.
Expand the product lines
Amazon should expand its product lines. Given’s Amazon’s vision and its unique position in the etailer industry, the cost associated with entering new markets is significantly lower than that of its competitors. There is no reasons to let this advantage slip away unused.
Conclusion
In order to stay focus on business Amazon.com has various ways and strategies that can be implemented with proper organizations communication networks. Financial reports should be reviewed annually and quarterly if necessary to come up with decisions whether to boost up sales or to maintain on a certain criteria for the wellness of business.
Amazon.com also should have a frequent customer feedback program where they could exchange view on the services and products most desired to be acquired online by customers. Top level management meetings should be initiated to assure goals are achieved. A proper corrective action should be determined after the first year if annual objectives weren’t accomplished.
3) Recommendations
1. Develop and implement a B2B exchange for supplier’s manufacturers, distributors, and retailers to use. Because the largest percentage of e-commerce sales resulted from transactions conducted on B2B exchanges, this opened up a large potential market for Amazon.com to expand into. The benefit of this alternative was that Amazon.com could easily market this service to its large number of affiliates and partners that it conducted business with.
2. Amazon should expand its online auctions. Amazon has a need for an intermediary in transactions and would be able to market this additional service to both current customer base and use of personalized emails to new customers through advertising campaign. The benefit of this alternative is that Amazon.com would be expanding on an existing service offering and would not incur any developmental or startup expenses. This would work because of the prior experience of Amazon in expanding and marketing other product lines and services.
3. Develop an effective differentiating enterprise wide strategy to survive and prosper over the competition for the long-term future.
4. Amazon should use a web-based model to personalize service. Amazon should attempt to use personalization to “build the right store for every customer.” Each customer has a web page personalized based on his or her recent purchases. This is the equivalent of having a unique storefront for each customer in hopes of drawing in as many return customers as possible.
5. Increase advertisement to increase brand awareness. Through a general advertising campaign, like television and print ads, Amazon would be able to market their service to current customers and new customers.
6. Create a location where people have access to the internet to do online shopping. This could be in an Amazon location in different cities. The cities could consist of major populated areas to start. If this idea is a success, then they could venture out to under populated areas.
Conclusion
Amazon.com is a public owned company, which focuses on employees and excellent services. It is team oriented organized by product. Amazon’s web site offers the ability to present a broad range of merchandise. Well organized and easy to navigate help and FAQ pages make the difference in smooth shopping experience. Building a customer community helps to keep customers coming back to the site. It also helps shoppers identify with the brand. Amazon has built a loyal customer base of millions, thanks to a highly efficient web buying experience and outstanding customer service. With some controlling interest in popular Web sites, word-of-mouth from users, the ease of communication using e-mail and options such as gift certificates, Amazon.com has created one of the most popular home-shopping sites today.
 

Team Management Activity and Reflection of Working at Amazon

Introduction

 Having been employed for the past two years as a packer at Amazon, I have established a solid reputation for my work ethic. Also, I have furthered my education by completing Amazon’s management training program and a Bachelor of Arts in Business Administration at Ashford University’s Forbes School of Business and Technology.  As a result of this hard work and education, I was selected to become a manager of warehouse operations at a new plant. To begin my new position, I will need to analyze the five functions of management planning, organizing, staffing, leading, and controls, to achieve Amazon’s goals

Planning

 To begin, the planning function is the most important of the managerial duties. It establishes the building blocks by which managers can lay the foundation for achieving the organization’s goals. As I enter my role as a new manager I will use my knowledge of packing, managing, and my work ethic to cultivate a positive work environment. Initially, I would use the SWOT to assist in identifying the strengths, opportunities, weaknesses, and threats of the warehouse operations. Also, I would also have the supervisors, with the assistance of their employees, complete a SWOT to get first-hand knowledge of the processes from top to bottom. As a manager, I believe this is the best way I can access the skills, education, and abilities of my first line supervisors and all employees (Baack, D., Reilly, M., & Minnick, C., 2014). By doing this group analysis, everyone would have a hand in the overall operations, which would move to garner the respect of my teams.

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 Amazon started as a bookseller to simplify online transactions for its customers but not carry any inventory. However, in three short years, the company decided to begin holding stock to have more control over deliveries. (Hall, 2018)  Amazon’s found that if you get the products to the customer faster, sales will increase and their investment in multiple fulfillment centers would be a success. With multiple fulfillment centers and utilizing numerous mail carriers, Amazon found its way to reduce its overall shipping cost. (Yarow, 2013). As a manager, it is imperative to review all aspects that keep your business in front of the competition and stave off any potential threats. With my new-found knowledge and the availability of managerial tools, my team and I should be able to create a stable work environment and meet the organizational goals.

Organizing

 The next step is to review the organizational structure of Amazon by examining the leadership structure and the decision-making process along with the operation of the warehouse, and it fits into that structure. The organizational structure “is a formal system of task and reporting relationships that coordinates the activities of employees so that they can work together to achieve organizational goals” (Baack, D., Reilly, M., & Minnick, C., 2014). Amazon can be classified as hierarchical because all operations report to the company’s two CEOs; however, there are seven segments that are run independently under the direction of the CEOs (Dudovskiy, 2017). I feel this is a solid organizational structure due to the key components all being funneled to the company’s CEOs. Since the company is divided into these segments, the CEOs essentially have created experts within every operational segment; they are ensured they have all of the information needed when making an overall decision.

 In this hierarchical design, it is vital to the overall mission to ensure the relationships with all of the employees is active and open. Ensuring open communication will ensure that all employees concerns are heard and respected. I would move towards operating the warehouse as an organic structure that would allow the maximum flexibility to adjust for future changes and create a strong relationship with managers and employees. Organic structures enable the employees to voice how tasks should be completed meanwhile allowing low-ranking supervisors and employees to have their view in the majority of the organizational changes (Baack, D., Reilly, M., & Minnick, C., 2014). Together, our crew would be able to create efficient processes with all subsections of the warehouse thus meeting the warehouse mission and overall organizational goals

Staffing

 Now that we have organized our plan and structure staffing the warehouse is the next step. Staffing, if done properly can have a devastating impact on every aspect of an organization. To achieve our goals in the warehouse, we must be able to select the right people for the job. Through staffing, a company can effectively reach its goals by careful selection and efficient placement of people in roles throughout the company (Baack, D., Reilly, M., & Minnick, C., 2014). Considering the strengths and weaknesses of each potential employee and matching those to the functions needed to be filled will determine if a person would be a good teammate.  At times staffing can be costly if a company if a company has high turnover rates: “In skilled and semi-skilled jobs, the fully loaded cost of replacing a worker who leaves is typically 1.5 to 2.5 times the worker’s annual salary” (Cascio, 2014). To avoid this cost a company should invest in strategic human resource management systems that allow a company to match jobs functions with overall business strategies (Baack, D., Reilly, M., & Minnick, C., 2014).  However, regardless of the hiring costs, a company can recoup that cost over time by hiring quality people for a role they are suited from the start. Ensuring the HR department has the expertise to aid management in effective hiring techniques will secure an effective workforce. Over the long term, through effective staffing, a company will reduce the cost of replacing employees if they do not succeed in their functions.

 Since we have an outstanding HR department, we can ensure that we staff the warehouse with fully capable employees.  Next, we will need to ensure we provide the employees with the proper tools for them to be successful. All new employees will go through an initial orientation and are fully trained before working on their own.  All new employees will be introduced to the overall mission, meet with all levels of management and be introduced to new coworkers through the orientation process. They will be trained on all rules and regulations, given initial expectations, and a tour of the warehouse.  An effective orientation program can foster higher job satisfaction, lower absenteeism, and reduce turnover by creating a stronger relationship throughout all levels and create buy-in to organizations mission (Baack, D., Reilly, M., & Minnick, C., 2014). Once the initial orientation is complete, new employees will go through on the job training (OJT) with highly trained and experienced employees. OJT allows these experienced employees to show the new employees how to perform the tasks properly and efficiently, and offer them the opportunity to gain overall understanding and receive feedback after getting an opportunity to do the job (Baack, D., Reilly, M., & Minnick, C., 2014).  Training this way ultimately eases transitions of new employees into their new job and ensures production standards are still being met.

Leading

 Amazon is aligning as a vertically integrated company through many of their recent mergers. Therefore, so they must have total control of the supplies and distribution centers. To prepare for this dynamic, I will prepare my employees for a system that will require flexibility as I incorporate the organic structure. Amazon is not slowing as it is still growing and perusing an aggressive business diversification strategy and its organizational structure will remain dynamic while being subjected to multiple changes (Dudovskiy, 2017). To maintain morale, I will have to push to be a transformational leader and develop leadership in different roles as this should gain their trust and motivate them by setting high but obtainable goals. (Baack, D., Reilly, M., & Minnick, C., 2014). Following Locke’s goal-setting theory, I will need to establish clear goals that clarify expectations and establish a measurable reference to guide the feedback process as well as providing a basis for self-management (Baack, D., Reilly, M., & Minnick, C., 2014).  This will help me create relationships with my employees and help us succeed together. As the manager, I need to ensure all employees feel they are part of the overall mission, that they understand their job and its critical role, and they feel they are valued member of the overall process.  Remaining engaged and active in leadership will ensure the company’s mission is met and the workforce remains reliable and works as one cohesive group.

Controls

 The controls serve as a cornerstone to maintain stability and smooth operations. Working in a warehouse requires constant controls to be in place, standards must be upheld through production; if an incident occurs, it is essential for management to take immediate corrective action (Baack, D., Reilly, M., & Minnick, C., 2014). These control points are enacted by a company to implement effective risk management procedures. There are four stages in this control process: establishing methods and standards, evaluating performance, establishing whether performance matches criteria and taking the corrective action (Baack, D., Reilly, M., & Minnick, C., 2014). Following this guide, I will need to employ quality control procedures that specifically outline every task and anticipated outcome. “Quality auditing is conducted to assure conformance with standards defined by the organization” (Baack, D., Reilly, M., & Minnick, C., 2014). This allows for a baseline to be established and the data will determine whether the employee has achieved success or failure. The data derived from this process will then be addressed directly to the employee through their performance appraisal since appraisals should be based from measured results of an employee’s performance (Baack, D., Reilly, M., & Minnick, C., 2014). In every effort to utilize an objective appraisal process, we will promote open discussion and be used as formal feedback and provide promotion opportunities.

Conclusion

 In conclusion, implementing the five functions of management: planning, organizing, staffing, leading, and controls will amplify the overall success of the warehouse. Through the use of management tools, the human resources department, quality control procedures, and performance appraisals a manager can maintain high efficiency while effectively achieving the organizational goals. These functions will keep the warehouse on track and prepare us to cope with coming business changes as Amazon sees fit to incorporate into the daily job functions.

Resources

Baack, D., Reilly, M., & Minnick, C. (2014). The five functions of effective management (2nd ed.). Retrieved from https://content.ashford.edu/

Hall, M., (2018, August 23). Amazon.com. Encyclopedia Britannica. Retrieve on October 10, 2018 from https://www.britannica.com/topic/Amazoncom

Yarow, J. (2013, October 28). Former Amazon Employee Explains How The Company’s Business Model Really Works. Retrieved October 10, 2018, from http://www.businessinsider.com/amazons-profits-what-people-dont-understand-2013-10

Dudovskiy, J. (2017, August 01). Amazon Organizational Structure. Retrieved October 11, 2018, from https://research-methodology.net/amazon-organizational-structure-2/

Cascio, W. F. (2014, September 03). The High Cost of Low Wages. Retrieved October 11, 2018, from https://hbr.org/2006/12/the-high-cost-of-low-wages

 

Amazon International Marketing Strategy

International marketing –Amazon   w/c- 2163

Table of contents

Introduction

segmentation

company strategy

Micro environment/porter’s model

Amazon pestle analysis

Amazon swot analysis

Finding and recommendations

References

 

 

 

 

 

 

 

 

 

 

 

Introduction

Leading online giant Amazon was founded by Jeff Bezos in 1994 at a small portion of his house. In the beginning the company was run completely from his house in Bellevue, Washington.  In the beginning he stated the company with a small capital of $40000 and later he found further investment from Tom Alburg who made the website more customers friendly. In the beginning books and related products is the only distributed worldwide customers by the company. In addition to that he changes the retail website as an online community. New website comes with customer review and recommendation for the new customers in order to market genuine products. As a part of progress in the business strategy on May 1997 the firm went public company. The same time Amazon started its international branches in United Kingdom and Germany with huge success. As a premier in the web base  business which has leveraged technology as a  main source of competitive advantage and reaped the benefits of the economies around the world with less competitive and barriers(AAR2017).

Company strategy

Amazon’s marketing strategy is mainly based on on leveraging technological capabilities for business success and following a cost leadership strategy minimise expenditure and maximises profitability. The key business strategy aimed at offering the maximum value for its customers through offering lowest price in the market. Another key globalized feature of company’s strategy is lowest price in market to their loyal customers wherein they use their web site for the online shopping.

Segmentation

The segmentation mean the bigger market is mainly divided into four different customers categories based on different characteristics. Demographic, behavioral, physiographic and geographic are four different segmentations in the marketing. Demographic segment is bases on age, gender, occupation and socio group of society. Geographic segmentation is refers location, region and country divided as a different sector.Behavioral segmentation is divide market into different loyal status and customers willingness to buy. Physiographic segmentation divide marker according to personality, lifestyle and class of people in a social group. As a global web giants Amazon target market is mainly based on both psychographic and demographic sector of the society. Their main target market strategy is based on purchases behaviour of the consumers not expression or interest. Company’s micro segmentation is mainly targeting each and every individual customer to convert them as loyal customers of the company in the future Bernroider, E (2002).

Micro environment and porter’s model

The micro environment is only analysing the internal factors or behaviour of a particular business which directly or indirectly impacts on business activities of a firm. This is research the firm’s general business climate as it relates to the organization within its industry. These factors are generally controllable by the management Roy, D (2011). This can be deeply analysis through Porter’s five force model.

Amazon’s bargaining power of buyers is really high this is because there are many ways to buy products from various sellers such as Argos or eBay. Amazon’s customer focus strategy provides the firm high customer loyalty which attracts customers by low prices products (Chaffey 2009). Amazon’s customer focus strategy is one of the useful tools to attract more customers and deliver sustainable business growth in the micro environment.

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Amazon bargaining power of suppliers based on a friendly atmosphere between suppliers and firm to set lowest possible price. As a biggest online retailer, firm’s huge whole sale purchasing power helps them to set a lower price strategy for the customers. It is attract more customers for the company and maximise their sales volume. This is another useful strategy of Amazon in the micro environment.

 

 

 

 

Amazon Pestle analysis

Due to new innovation in the in the IT industry and growth of internet and latest mobile apps are big boost for the company last decade as leader in the web bases retail. Technology and related factors plays vital role in the growth of the company Company’s shift towards emerging economy countries in the Asia is big boost for the sustainable profit. Apart from technology factor and economy factor remaining pestle factors also plays significant role in the company’s business activities.

Political barriers for the electronic business are not same as traditional business. As a leader in the E commerce all over the world they have affected by several political factors as well. Compare Western Europe and North America all other territories have much restriction on internet and it based product usage. When they are moving to countries that they have much restriction on internet and mobile app industry, the risk impacts on their web baseness are very high. This kind of restriction will affect their supply chain and reduce profitability by low sales volume Gillespie, A (2007).

Better economic condition is very vital for any form of business either traditional or E- Commerce. Better market condition is very important for the sustainable growth of the business will result maximise sales and profitability. The same time better economic condition will increase the risk of more competition in the market.

Social and cultural trends factors play major role in the growth of web bases business. In a society people who they use smarter phone and internet base technology will increase internet base business. A society which uses smarter phone and it based app are big boost for company like Amazon who’s business hundred percentages based on inline. So this change in the society is very vital for Amazon to benefit a lot from the changing consumer demographics and shopping trends because which is the main segmentation of the company Gillespie, A (2007).

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Technology factors such as IT and smarter phones are the magical boost for the business like Amazon over last two decades. New IT technology and its related products are very vital for the both traditional and web business. Especially in the web based business technology and innovation are the key successful formulas to boost their sales volume through a reduce cost formula.

Now a day’s environment factors are a big concern among the multinationals. Like other businesses Amazon much focuses on their packaging and waste management procedures. As a responsible global partner Amazon uses environment friendly recyclable materials on their packaging. This is big boost for their business around the community who love their environment.

Legal factors are very important for the business like Amazon who they deal all their business activities through online. Government who they have severe control over internet and mobile industry are negative factors for their business. So this is vital for them to analysis these kind of legal restriction before entering a market. Otherwise it makes major impact on their business activities on countries have restriction for web bases products and business Gillespie, A (2007)

Above mentioned factors play positive and negative impacts on Amazon business activities   to deliver a sustainable growth in the business.

 

 

 

Amazon swot analysis

This Amazon SWOT analysis reveals how the largest online retailer used its competitive advantages to become the dominant player in the retail industry.

The SWOT of Amazon is analysing the competitive advantages of world biggest web base retailer. This is providing the details about all the key strengths, weaknesses, opportunities and threats that affect the company the most business activities in the long term Grundy, T (2006)

When we discuss about Amazon’s strength in online business, the following three leadership qualities such as market, cost and efficient charismatic leaderships are very vital. As leader in the online market with cost efficiency approach, company deliver much efficiency in the customer relationship to catch new markets. These are the key strength and success in the online business to deliver sustainable growth in the global market.

The same time company due to factors such as seasonal business, low margin and lack of focus on specific product or service (too many sellers) reduces profitability and sales volume becoming weakness in the marketing process. Due to latest technology and innovation strategy on the weaker area reduce these weaker factors Roy, D (2011).

When we analyse the opportunity factors of the company, the latest segmentation such as online business and more focus on own brand such as product call Fire products  are new opportunities for the company in the retail market. Apart from these, more local sites around the world and several cooperation strategies   with online companies such as eBay and ALIBABA, increasing company’s sales volume and profitability. These are new latest opportunity in the global marketing to play pioneer role in the web bases retailing.

Due to restriction on internet and mobile technology in several countries is a big blow for the company’s entry strategy. Online security is a massive threats factor for this kind of segmentation. Low profit margin and complicated entry procedures (several countries) are big threats for the company, to play a leading role in the online retailing (AAR2017).

These are weakness, streanth, opputunity and threats of Amazon to consider, when they plan and implement their strategy to become a leading multinational in the web bases business.

Finding and recommendations

As a leader in the global online trade, company has all the resources and wealth to continue and develop its online dominance in the modern world. At the moment company has a little portion of business in developing and some emerging countries. This is vital for the company to extent their business in those countries this is because the change of life styles of peoples due to globalization. Due to technology and innovation such as internet and various mobile apps bring countries together and reducing barriers between territories. Company like Amazon, they has invest and develop their business model with help of t technology to boost bigger market opportunity on those countries. Their successful business strategies such as technology and innovation are big boost for the company to extent their businesses on those new markets with the low cost strategy. This strategy also helping company to offer customers low price  product and service with the help of technology and its developments on those countries. The bigger disadvantages for the company to extent their online trade on those countries are legal systems and control over internet and mobile app usage.  In most of the developing countries government have direct control over internet and online use. This is biggest challenge for company to deal those markets according to those countries legal system (AS2017). To address those issues and close competition, company must have strategy to develop its brick and mortar stores. This is very vital for them to play a leading role and brand popularity in the multinational trade. On line security is another weakness in this types of segmentation.Thie s is very vital for the company to implement tight security procedure in order to avoid online fraud and keep customers information safe. When they have proper strategy to protect customer’s privacy it increases company’s reputation on web bases trade. These are some measurement they need to adopt to become one of the pioneer in the on line trade (AAR2017).

Conclusion

Amazon has adopts several strategies like blue ocean strategy approach in order to survive this competitive world. This low switching costs models and approach on online trade help them to offer low cost product service to their customers worldwide. This is necessary for them to using technology to expand their business infrascture. Amazon’s another approach call considers consumer buying hierarchy lead them to develop low cost products and service through technology and innovation. These types of approach help their customers, before making decision to buy go through various process regarding product and service’s price quality and reliability. These types of approach create a customer bases model and confident to deliver better low cost product and service for the customer around the world. One of the positive aspects for Amazon online trade is high cost brand development for new entries; help them to merge with world leading brand to become online trade leader. This mechanism and approach make them as a   one and only global realiable search engine for products and service. This is the successful story of Amazon especially in the web bases customers sectors Leigh, & Pershing (2006).

 

References

Amazon Annual Report 2017

Amazon Strategic Analysis2017

Amazon Statistics2017

Bernroider, E. (2002). Factors in SWOT Analysis Applied to Micro, Small-to-Medium, and Large Software Enterprises: an Austrian Study. European management journal, 20(5), 562-573.

Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, 15(5), 213-229.

Gillespie, A. (2007). PESTEL analysis of the macro-environment. Foundations of Economics, Oxford University Press, USA.

.Jackson, S. E., Joshi, A., & Erhardt, N. L. (2003). Recent research on team and organizational diversity: SWOT analysis and implications. Journal of management, 29(6), 801-830.

https://www.bloomberg.com/news/articles/2017-01-24/amazon-said-to-settle-eu-antitrust-probe-over-e-books-clauses

Leigh, D., & Pershing, A. J. (2006). SWOT analysis. The Handbook of Human Performance Technology, 1089-1108.

Roy, D. (2011). Strategic Foresight and Porter’s Five Forces. GRIN Verlag.