Week 8 Blog Post Chapter 8
Flexibility: Real Options Analysis under Risk
In this week’s blog post we will discuss Amazon’s Flexibility and Real Options Analysis under Risk. Flexibility allows Amazon’s business model is to be disruptive and innovative to keep and sustain a competitive advantage. There are six types of flexibility in options.
Table 8.2 from Barney’s, Gaining and Sustaining a Competitive Advantage 4th edition.
Currently, Amazon has built a portfolio of options that include the options to defer, grow, contract and to expand.
The option to defer- Amazon leases planes for potential exploration for Prime Air instead of buying them.
The option to grow- Amazon is currently building fulfillment centers across the nation with the ability to add capacity at low cost.
The option to contract - Amazon contracts temporary employees for the holiday season instead of full- time employees. Amazon is currently hiring 3,000 remote workers right now for customer service associates positions in Alabama, Arizona, Arkansas, Iowa, Kansas, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Tennessee, Texas, Washington, Wisconsin, and Wyoming.
The option to expand - Amazon investing in a new segment of business such as cloud base services and transportation could lead to the development of other products and services in the near future.
Lastly, in today competitive market Amazon has the ability to change direction quickly and at low cost, given unanticipated changes in the competitive situation. There are some trade-offs and uncertainty in being flexible. But, in Amazon case flexibility and options has served them well.
Resources:
Barney, Jay (2004). Gaining and Sustaining Competitive Advantage. Pearson Education Inc. 
No comments:
Post a Comment