In Charter 10 will discuss vertical integration.
Amazon’s vertical integration
Amazon’s vertical integration
Amazon will rule the world if the Department of Justice does not knock on their door first. Vertical integration is the wave of the future in the e-commerce space. From my research, nothing is off limits to Amazon now. You might see an Amazon container ship or two from China in the future.
“Vertical integration is a strategy where a firm acquires business operations within the same production vertical. It can be forward or backward in nature. Vertical integration can help companies reduce costs and improve efficiencies by decreasing transportation expenses and reducing turnaround time, among other advantages. However, sometimes it is more effective for a company to rely on the established expertise and economies of scale of other vendors rather than trying to become vertically integrated.”
When Amazon announced its intention to launch its shipping and delivery business, this sent the shares of stock for companies like UPS and FedEx into a tailspin. After all, Amazon is a master of innovation. Amazon is focusing on multiple segments of the supply chain. From the individual organizations, resources, activities, and technologies from the supplier to the end / last mile with the purchase of a final product to the end-consumer. It has been working on technologies like drone deliveries to reduce the cost of its operations. Amazon is currently experimenting with other technologies such as in-house deliveries and local fulfillment centers across the nation to cut the delivery time down.
One of the highest-profile examples of forwarding integration is when Amazon purchased Whole Foods. Forwarding integration is a type of vertical integration that involves the purchase or control of its suppliers. They want to be a vertically integrated, technology-enabled grocery shopping experience, which nobody else currently offers. The Whole Foods acquisition counts as forwarding integration because it gives Amazon 460 brick-and-mortar Whole Foods stores as a place to sell its products and customers pick them up.
To sum it up, Amazon has become the master of vertical integration for the e-commerce sector. When internet businesses started thriving, there was considerable ambiguity as to whether they will be able to achieve vertical integration. Amazon has indeed shown other retailers the way. It is on the way to becoming one of the most vertically integrated organizations in the world. In the end, Amazon wants to reduce costs by improving its efficiency by decrease transportation expenses to sustain a competitive advantage.
References
Vertical Integration - Investopedia. (n.d.). Retrieved from
No comments:
Post a Comment