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Will Amazon Meet Its Waterloo In India

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Will Amazon Meet Its Waterloo In India

Sooner or later every empire builder starts a campaign which is too ambitious, too audacious and too resource sapping.

That is the first thought which came to my mind as I read in this morning’s paper that Amazon was making two moves – one into Grocery Shopping, and other into the Indian Online retail market.

For very different reasons, either – or both – of these could easily prove to be Amazon’s Waterloo.

Let me explain: When I wrote my recently released book, The 5-STAR Business Network, I was highly impressed with Amazon’s ability to use its supply chain expertise to create, sustain and harness a business network of related parties – suppliers, market-place participants, outsourced service providers, customers and developers. Amazon does this in a highly systematic manner to innovate, milk the cash cycle, optimize profitability of each transaction, develop a pipeline of new ideas, and leverage service providers.

While, Amazon was not the top ranking company in our 5-year study of more than 1000 companies (it ranked a tied 63, and the top honour belonged to a little known firm from Denmark called Novo Nordisk), I used Amazon case study extensively in my book because it was a shining beacon of good corporate decision making among mediocrity.

This Is What I Wrote About Amazon:

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Overall, the business philosophy is rather simple – make online shopping simple and suitable so that the customer won’t think twice about buying now with one click (Anders, George. “Jeff Bezos’s Top 10 Leadership Lessons.” Forbes. 4 Apr. 2012) [2]. The complexity lies in how this simple business philosophy is translated into consistent action, resulting in nearly a billion customer visits a year. There is nothing simple in the complex execution of this simple business philosophy. Therein lies the dilemma of the modern business

world – the quest for simplicity at the highest level, underpinned by the highest level of sophistication reminiscent of nanotechnology under the hood. Almost all successful businesses do this dance of 5-STAR business network well – but Amazon does it exceptionally well on almost all 5 fronts. There are many other businesses – some even well-known ones – who could be a poster child for the emerging trend of global Business Networks we show case in this book. However, no one is more successful, more visible, has higher potential and is more assured of its role in this revolution. That is why- Amazon.com is a prime example of the 5 STAR Business Networks, which showcase Fire-Ready-Aim Innovation, Seed-to-Store Ef iciency, Transaction Prof itability Optimization, Advanced Product Phasing, and lastly, Results-focused Modular Outsourcing.

To temper my optimism about Amazon’s role as the poster child of 21st century commerce using 5-STAR Business Networks, I also wrote elsewhere in the book:

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The first business book I read was “In Search of Excellence” by Tom Peters and Robert Waterman. It was a gushing account by two ex-McKinsey consultants truly in search of excellence among American businesses, and contained a plethora of advice that to my then untrained mind (after all, I was then just an untutored merchant navy off icer) appeared rather obvious – for example, walk around your operations to see what is going on.

What struck me most about the book was that in the intervening 13 years or so between the time the book was written and the time I read it, most of the companies singled out as excellent by the authors were already in trouble. That impression – that companies once lauded as excellent can quite rapidly lose that mantle – has never left my mind as I have read more than 5000 business books, countless book summaries, business commentaries and news reports. Invariably, each of these tries to generalize the key determinants of success from examples of certain companies. In more cases than not, those companies singled out as models of success falter in a few years time, sometimes victims of changing circumstances and other times victims of their own success.

This morning, on reading about Amazon’s move into the Grocery trade, I have a vague feeling – is Amazon turning into a victim of its own success?

Grocery business is notoriously low margin trade, with very high logistics costs, high level of perishability, and different customer buying behaviour than anything else that Amazon sells. Amazon’s reasons for this move are being documented well enough by the mainstream press. For example see this article in the Wall Street Journal. Here is a quote from the article:

The service harkens back to a time when Americans found fresh milk, bread and eggs delivered each morning to their doorsteps. Indeed, in Seattle, where the service has expanded over time to more suburbs, Amazon customers can combine their apple and butter orders with 100,000 disparate Amazon items including videogames, toilet paper and motor oil. “Amazon really could use this as a means to drive sales of general merchandise, which may have better margins than groceries,” said Matt Nemer, a Wells FargoWFC -1.53% analyst. “That’s what could really set them apart from the pure grocery delivery guys—they might not need to make a lot of money on the groceries themselves.”

It will be interesting to watch what happens.

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Copyright - These concepts, frameworks and ideas are copyright of GLOBAL SUPPLY CHAIN GROUP from the time of their creation. Do NOT copy these without permission and proper attribution.

Notes:

1. These ideas and concepts will be usually expressed by our thought leaders in multiple forums - conferences, speeches, books, reports, workshops, webinars, videos and training. You may have heard us say the same thing before.

2. The date shown above the article refers to the day when this article was updated. This blog post or article may have been written anytime prior to that date.

3. All anecdotes are based on true stories to highlight the key points of the article - some details are changed to protect identification of the parties involved.

4. You are encouraged to comment below - your real identity and email will not be revealed when your comment is displayed. Insightful comments will be featured, and will win a copy of one of our books. Please keep the comments relevant, decorous and respectful of everyone. All comments represent opinions of the commentators.

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ABOUT THE PRINCIPAL AUTHOR

Today, Vivek and his partners are among 20-30 people on the planet earth who have this deep understanding of supply chain systems, practices and tools. CEOs, COOs, executives and Boards call them in most challenging situations once they know the full potential of supply chain based transformations. Following are key milestones in Vivek's journey:

  • Started in 1983 as a merchant navy cadet at 18 years age, worked his way to qualify as a Captain – qualified to take command of any merchant ship, worldwide.
  • Earned a top tier MBA from UNSW at the top of his class.
  • Joined highly regarded strategy consulting firm Booz Allen & Hamilton, consulting to the CEOs, Boards and senior management of global corporations within Australia.
  • To learn and specialise in supply chain – against all odds, sought out the co-inventor of supply chain in Germany and convinced him to be a partner in his firm, GLOBAL SUPPLY CHAIN GROUP, launched in January 2000.
  • More than 500 successful blue chip projects with high impact business transformations in large corporations using the full power of SUPPLY CHAIN MANAGEMENT.
  • 4 Seminal and path breaking business books IN SUPPLY CHAIN MANAGEMENT – these are available in bookstores and universities and libraries worldwide.

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THE 5-STAR BUSINESS NETWORK

If you are deeply passionate about the world of business and supply chain networks as I am, and enjoy digging answers to critical questions that will help build and steer your business with wisdom, then join me. This book is a journey of exploration through the world of business networks that run along the veins of today’s commercial world.

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OUTPERFORM OUTSOURCE OUTPROFIT

The trend of outsourcing continues to grow unabated with the whole gamut of services, from simple to mission-critical tasks. There is not a single company on earth that does not outsource anything. It is not just about cost arbitrage, it is also a finer expression of division of labour at the organisational level. Like all leverage, outsourcing is a double-edged sword too. On one hand, it allows you to do more, faster. On the other hand, if it goes bad, it can easily kill your business. If you do not believe that is possible – you can google the Fox Meyer saga from the 90s and see for yourself.

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UNCHAIN YOUR CORPORATION

Businesses Are Chained By Unseen Chains. If You Are Looking For Ways To “Unchain Your Corporation” A Successful Business Transformation Is Required.

Successful Business Transformations Are Difficult, Yet Rewarding.

Business Transformation Is Fast Becoming A Question Of Survival In The Modern Globalised Era.

Modern Supply Chains Integrate Businesses And Economies Faster By Systematic Information Sharing From Internal And External Sources.

Companies Can Multiply Profits By Progressively Ramping Up Cohesion And Collaboration Of All Moving Parts In B2B Network To Achieve Tighter Integration.

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GREEN SUPPLY CHAIN – AN ACTION MANIFESTO

It is generally accepted that environmental consciousness is now changing to environmental proactiveness as organizations are discovering that it makes good commercial sense.

Boards are asking the management to review their policies related to environmental norms, not only to bolster their corporate social responsibility aims, but also because consumers are asking for greener supply chains

It is also widely agreed that consumers will increasingly prefer to buy more and even pay more for products or services provided in an environmentally sound manner.

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