Executive Summary
This report seeks to come up with an innovative idea for Amazon developing its brand of private products and marketing them to a wide range of its customer base. The report recommends that Amazon combine this idea with sourcing the products and raw materials from farming communities in developing countries that endure poverty and exploitation and helping these farmers embrace healthy organic farming practices. To develop its brand of products, the report recommends that Amazon seek strategic acquisitions and embrace accelerator programs for high-potential startups that it can use to advance its course. The report identifies Amazon’s strong brand name, value, and reputation as key strengths that would help amazon succeed in introducing its private brands. Its solid financial muscle is a key strength identified that would help finance the diverse ventures, while the brick-and-mortar stores acquired through the acquisition of Whole Foods company are a key strength that would help the company in the physical sale of these products. A fundamental weakness identified is that despite Whole Foods’s acquisition, the company has yet to invest in physical stores in other lines of products. Opportunities identified include the chance of appealing to the millennials who are increasingly concerned with companies’ corporate citizenship and the chance of leveraging the loyal customer base. However, the huge financial capability needed to facilitate the implementation of this project is identified as a key threat to the profitability and financial sustainability of the company. The report recommends that being a complex project that requires strategic planning and huge resource allocation, at least three years would be needed for the project to materialize and start fetching profits.
1.0. Introduction
Amazon is an American multinational company involved in diverse ventures: e-commerce, digital streaming, artificial intelligence, and cloud computing. The company was founded by Jeff Bezos; Amazon’s founder had two comprehensive ideas that drove the company’s vision, building a customer-centric company and creating an environment where customers would buy almost everything online. Since its inception, the company has experienced immense growth to become one of the largest retailers in the U.S. and globally (Majed, Nuraddin and Hama, 2018). According to a 2021 research by JPMorgan, Amazon is expected to overtake Walmart as the largest retailer in the U.S. by the end of 2022 (Palmer, 2021). The key to Amazon’s success can be attributed to its great focus on innovation and aggressive customer service approach.
1.2. Innovation Idea to Enhance Amazon’s Business Performance
The recommended innovation idea for Amazon is to develop its private brands and market these brands to its broad base of loyal customers. Currently, products featured on Amazon’s e-commerce website are from third-party sellers who list their products on the company website. Amazon’s primary means of earning from the products is through the commissions paid by the third-party sellers. By developing its brands and marketing to its loyal customer base, the company stands a chance to boost its revenue hugely.
Besides boosting sales, this innovative idea has the possibility of advancing Amazon’s corporate social responsibility in addressing social needs in diverse ways. First, the company has the chance to customize its product features such as packaging to ensure their eco-friendliness. It has the chance to customize its sourcing process such that it supports communities from developing countries. The company can advance this idea by combining the aspects of Fairtrade and Bio+fair in the sourcing of their products and raw materials used in the manufacture of the private brands. Through this, the company can aim to support the rights of the workers in developing countries from exploitation by sourcing their products at more competitive prices while at the same time supporting and advocating for consumers to grow their products organically, thus ensuring that these products are healthy for both the consumers and the workers (Raynolds and Bennett, 2015).
Embracing this approach would be a huge differentiation strategy that would help Amazon boost its revenue. As of current, most of Amazon’s key competitors, such as Walmart or Alibaba, have not embraced this approach. Notably, combining the branding idea with ideas of Fairtrade and Bio+fair would turn out as a huge differentiation innovation that would help them tap into the huge customer base of the millennials who hugely embrace corporate social responsibility. According to a 2015 study by Cone Communications Millennial CSR Study, nine in every ten millennials would switch to brands associated with good social causes. Besides, the study revealed that two in every three millennials engage on social media on matters pertaining to corporate social responsibility (Cone Communications Research, 2015). Thus, with the Millennials already having overtaken the baby boomers as the generation with the largest spending power, the idea of addressing social issues is a key factor that would help Amazon tap into the spending power of this generation.
One key area that Amazon has diversified into is the Grocery sector. The acquisition of Whole Foods, a multinational American supermarket that targets health-conscious customers, is an indicator that Amazon perceives the potential for diversification in this area. Thus, this innovation approach advocates for Amazon to combine the approach of Fair Trade and Bio+fair in the sourcing of its grocery products. The company should source its grocery products from farmers who embrace organic farming practices. Besides, these groceries should be sourced from poor farmers in developing countries. Through this, Amazon would be advancing a noble course that would seek to increase its publicity, recognition, and thus its brand value. Consumers will always be proud to purchase these Grocery products from Amazon since they derive satisfaction and joy from knowing they are supporting a greater social course.
Regarding developing and branding Amazon’s products, the idea is that the company can seek strategic acquisitions of manufacturers of key profitable products and seek to implement manufacturing and branding. Accelerator programs are another key approach that can help amazon accelerate its process of introducing its brand of products in its e-commerce store. Accelerator programs have emerged as key ways to support new companies through increasing their adaptation and learning abilities. These programs are vital in helping startup companies search for scalable business models. Thus, Amazon can seek to partner with startups with promising potential in diverse areas of product manufacturing interest. The acquisitions and accelerator programs would help the company to introduce products with its private labels. Through this, Amazon will have embraced organizational innovation, which pertains introduction of new organizational methods, practices, or systems. Amazon will gain a competitive advantage by embracing an innovative practice that most of its competitors are yet to embrace.
2.0. Analysis of Internal and External Determinants Critical to the Innovation Success: SWOT Analysis
The SWOT analysis is a critical tool that helps analyze the internal strengths and weaknesses and the external opportunities and threats. SWOT analysis helps organizations identify the strong and weak points regarding innovation to determine the right decision to commercialize a specific innovation idea.
2.1. Internal Environment
2.1.1. Strengths
One of the key strengths of Amazon is its brand name and brand value. Amazon embraced the brand in the world thanks to its strong focus on customer satisfaction. Through this focus, coupled with its innovative approach to solving solutions, the company has claimed the top position as the most valuable brand globally. The company overtook Apple in 2020 to become the most valuable brand globally, a position it has held till then (Heather, 2021). Amazon can leverage the brand name and reputation as a key advantage that would see them succeed in introducing their own brand of products. Due to the brand reputation, more customers would be willing to purchase Amazon-branded products since this would offer more reliability and quality assurance. Besides its focus on innovation, its creativity in engaging customers and building trust through exceptional service is a key reason for the immense growth in brand value and trust.
The brand name and brand value would be key to the adoption and diffusion of the innovative idea. This is key to the diffusion of the innovative idea for Amazon. Ajzen and Fishbein (1980) provide a model that demonstrates how innovative ideas diffuse. The model is illustrated below:
This theory explains how attitudes affect behavior. Attitudes usually lead to manipulation of an individual’s behavior, thus changing how individuals act. According to Ajzen and Fishbein, a person’s intention to perform a particular behavior is a function of a person’s attitude towards the behavior. Subjective norms are regarded as a combination of perceived expectations and the intention to comply. Regarding perceived expectations, individuals usually engage in behaviors that they perceive valuable to them (Otieno, Liyala, Odongo and Abeka, 2016). In the context of Amazon, exceptional customer service in terms of reliability and expectations of quality due to its success and innovativeness would serve as valuable aspects of customers that would drive customers to adopt their branded products.
Another key strength of Amazon is its strong financial muscle. In 2021, the company reported a net income of 33.36 billion U.S. dollars, up from 21.3 billion U.S. dollars recorded in 2020. During the same year, the sales revenue amounted to more than 469 billion U.S. dollars (Amazon annual net income 2021 | Statista, 2022). Thus, the company has the financial capability to execute projects that demand substantial financial input. This would particularly be beneficial in executing the strategic acquisitions and accelerator programs. Its strong financial capability means it can execute strategic acquisitions and execute accelerator programs that would help them introduce more customized brands. Regarding accelerator programs, the company possesses the needed technological capability to help advance this idea.
Another key strength of Amazon is its Brick and Mortar stores and the acquisition of Whole Foods. While Amazon has always been regarded as a retail e-commerce giant, the company is slowly diversifying into physical stores. For example, in May 2022, the company opened its first physical fashion retail store in Los Angeles, U.S (Sriram, 2022). Such areas as the fashion segment are some of the potentially profitable areas where Amazon can seek to introduce its brands. The acquisition of Whole Foods is another significant advantage for the company to advance innovation. In the U.S. alone, whole foods have over 500 physical stores and seven in the U.K. (Eaducicco, 2017). Thus, this acquisition gives a huge physical retail footprint. The company has a massive reputation as an organic grocer. Thus, this would act as a massive boost for the company’s pursuit of advancing the course of supporting poor farmers in developing countries by seeking to procure organically produced products from these farmers.
2.1.2. Weaknesses
A key weakness of Amazon is its few physical stores in the U.S. Apart from the grocery stores, which were significantly boosted due to the acquisition of Whole foods, the company has limited physical stores offering other consumer products. Internationally, the company has not sought to invest in physical stores. This would be a huge challenge for the company in its attempt to introduce its branded products since physical stores would have helped complement the online store.
While Amazon may benefit from sourcing law materials from farmers in developing countries to support the welfare of these farmers and advocate for healthy habits, the treatment of its warehouse workers turns out to be a huge negative for the company. Diverse reports have exposed the toxic working environment that Amazon warehouse workers have to endure daily (Kantor and Streitfeld, 2015). These expose have hugely damaged Amazon’s reputation, so in its attempt to address other social issues, addressing the concerns regarding the warehouse farmers is critical to stamping their credibility in the pursuit.
2.1. External Environment
2.2.1. Opportunities
The company has a huge opportunity to leverage a huge base of loyal customers. According to data from Statista.com, Amazon’s retention rate of its Amazon Prime members stood at 98% in 2021. The customer-centered approach to customer services, such as offering free 100-day delivery to the prime members and fast delivery, is one key reason for the high retention rate (U.S. Amazon Prime retention rate 2021 | Statista, 2022). Amazon can expect to tap on this once they launch their branded products.
Another key opportunity is that the company can leverage the growing purchasing power of millennials, who are increasingly attracted to products linked to socially responsible organizations. Several researches have revealed that millennials prefer such products. For example, research by Nielsen Holdings, an American Information, data, and Market measurement firm revealed that 73% of millennials would prefer purchasing from companies linked with good social responsibilities; 81% of them indicated that they would expect companies to make public declarations regarding their corporate citizenship (Rudominer, 2018). By pursuing sourcing products and raw materials from farmers in less developed and developing countries, Amazon would be helping address the poverty and exploitation experienced in these communities.
2.2.2. Threats
With the construction, design of new products, and other costs incurred in activities such as acquisitions, a considerable amount of funds is needed. Thus, this poses a significant risk to Amazon’s profitability since these projects may consume much of their revenue at the initial stages. Thus, Amazon needs to be careful and select only the products with the potential for high returns. Through this, Amazon will avoid investing in projects that may take years to break even.
3.0. How the Innovation Improves Amazon’s Competitive Position
As established earlier, Amazon currently sells products from third-party providers and does not feature its brands on its e-commerce store or physical retail shops. This is the norm with most other Amazon competitors, such as Walmart or Alibaba. By introducing its product streams, Amazon differentiates itself from its competitor and can leverage its huge base of loyal customers. Although the company will likely invest huge money in commercializing the idea in the short run, it will bring massive revenue through sales in the long run.
Additionally, the recommendation is that Amazon ensures that the production operations are done most naturally through organically produced products primarily sourced from less developed countries where farmers endure huge poverty and exploitation. For example, suppose the company decides to introduce products in the food or cloth line industry. In that case, the company needs to ensure that the dyes and materials used to manufacture clothing are natural. For example, the use of cotton and natural dyes. Besides attracting health-conscious individuals, it would hugely attract a broad base of consumers, especially the millennials whose attraction towards institutions that engage in social good is growing.
4.0. Action Plan, Leadership and Champion Roles
The innovation plan is a complex one and so needs a substantial amount of time to be completed. On the introduction of Amazon’s private products in its e-commerce and physical stores, at least three years would be needed for the company to achieve substantial results. Identifying and negotiating with potential customers needs a substantial amount of time. So the company should allocate enough time to ensure due research is done to identify the most appropriate partners. Besides, since this innovation idea may call for the company to build facilities such as production facilities to facilitate the production of their brands, this process may need a substantial amount of time. However, due to the company’s financial muscle, approximately three years would be enough to actualize this plan. Regarding sourcing organic products and raw materials from farmers in less developed countries, a recommendation is that the company partners with reputable organizations such as the Fairtrade organization to hasten the speed of implementation. With partnerships, this would take approximately six months to actualize. A lean canvas model is a key tool for implementing the venture plan. This tool establishes that organizations must consider aspects such as strategic partnerships, explore target customer segments, consider the value proposition of the innovation, the revenue streams, and the cost structure. The model is illustrated below:
While seeking partnership, Amazon should be guided by the diverse principle to ensure partnerships of mutual benefit. For example, the company should seek to develop clear goals tied to each partner’s strategy or seek to negotiate with the partners on such goals, and seek to understand the strengths and weaknesses of each partner to ensure they have a clear picture of the needed actions, and seek to ensure they clearly define the background I.P. rights to the partners. During the ongoing relationship, the company should seek to ensure that they nurture partnership as an ongoing process to ensure commitment to a long-term project, and should seek to ensure partners, especially the senior management, is committed to the ideas (Kinderis and Jucevičius, 2013). This would ensure that there are no conflicting interests, misunderstandings, or disagreements that would break the relationships.
The top management, especially the CEO and the departmental managers, should assume a key role in the allocation of resources to spearhead the implementation of the project. A CEO assumes a vital role in the creation of a business network. They are responsible for uncovering the potential acquisition opportunities and sharing the challenges with other junior personnel (Sattayaraksa and Boon-itt, 2017). Thus, the CEO will be key in creating relationships with potential partners. He will also be responsible for managing the risks by considering the viability of diverse ventures based on internal and external conditions (Aitken, 2017). The CEO should act as the champion in implementing this innovative idea. Champions are individuals who initiate and support a project by embracing creativity, agility, and honesty in their approach. Such personnel embrace courage in making bold moves that they perceive as beneficial to the organization. A champion usually sees a vision with a particular approach and advocates and seeks to facilitate its implementation. He is responsible for identifying the priority ventures that have the potential to advance the company’s vision (Dong, 2007). The Amazon CEO should thus assume a key role in vouching for diverse projects aimed at introducing new products and improving sourcing approaches in line with the vision of the innovation idea. This is in line with the concepts of corporate entrepreneurship, which is illustrated below:
The project management office, led by the senior project manager, will also assume a vital role in implementing the innovation plan. He will oversee projects by coordinating the internal agencies with the external agencies, such as the partners (Al-Hajj, 2018). He also is responsible for proposing and managing research into new potential opportunities regarding the products perceived to be of high potential that the company may intend to venture into. He will be responsible for coordinating the technical team in the writing and implementation of necessary specifications. Depending on the specific product the company decides to venture into, there might be a new hire of new project managers with experience in the specific areas. The project managers will be responsible for sourcing and identifying diverse areas where human capital reinforcement is needed (Sergeeva and Ali, 2020). Once the projects have been implemented, the marketing department will be responsible for devising approaches to marketing the products to the potential or target customers. Their crucial role should involve customizing the messages according to the target customers.
5.0. Conclusion
In conclusion, the innovation idea identified at amazon is the development of Amazon’s brands and marketing those brands to the wide range of its loyal customer base. Besides, this idea seeks to help Amazon advance its corporate social responsibility by ensuring Eco-friendliness in the manufacture and packaging of private products. Sourcing the products and raw materials from farming communities in developing countries that endure poverty and exploitation will be a key approach in addressing critical social issues such as poverty. The company advances this idea by combining the aspects of Fairtrade and Bio+fair in sourcing their products and raw materials used in the manufacture of the private brands. To develop its brand of products, Amazon can seek strategic acquisitions and embrace accelerator programs for high-potential startups that it can use to advance its course.
Considering the internal environment, Amazon’s strong brand name, value, and reputation would be vital to helping amazon succeed in introducing its private brands. Its solid financial muscle would help in financing the diverse ventures, while the brick-and-mortar stores acquired through the acquisition of Whole Foods company would help them in the physical sale of these products. However, despite the acquisition of Whole Foods, the company still has not invested much in physical stores in other lines of products; this acts as a key weakness. Apart from the wide base of loyal customers that Amazon can leverage to advance this innovative idea, the corporate social responsibility idea means the company would be attractive to the millennials who are increasingly growing concerned with the corporate citizenship of organizations whose products they purchase. However, the huge financial capability needed to facilitate the implementation of this project is a key threat to the profitability and financial sustainability of the company. Its implementation is a complex idea that calls for a comprehensive assessment of possible ventures. Approximately the implementation of the initial phases of this project may take three years to materialize. The CEO will act as the champion, while the project manager will assume a key role in coordinating technical teams, identifying human resource shortages, and facilitating coordination between the internal and external agencies. The marketing department will be responsible for devising approaches to marketing the products to the potential or target customers.
6.0. Reference List
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