Question

Question 1:

Following is a statistically estimated demand Curve for Amazon’s regular services (i.e, on-time delivery of products). The marginal cost of delivery/shipment of an order is given as $3.50. Amazon predicts that demand for its regular 3/5 business day service during this year’s holiday season will be in the tune of 120 million orders for the period of April- June, 2018.

            Amazon’s Daily Demand Curve for a 2-day delivery is given as: Q = 14.5 - P; where Q represents Quantity demanded in millions of orders; and P is the price Amazon charges per order.

Is Amazon currently maximizing its profit? Why or why not?

Now assume that its average total cost (variable and fixed combined) is about $5.50 per shipment, and Amazon charges 7.00 flat rate for a 2-day delivery. What will be Amazon’s projected profit for this season? (Hint: You may assume that Amazon is not charging any higher price than what is established currently).

Suppose, Amazon is not very happy with their projected profit scenario, and some of its managers are not also happy about the price that they charge to their customers. On hearing these grumblings Jeff Bezzo, Amazon’s CEO hires a team of consultants and you happen to be one of those highly paid consultants. What will be your recommendation and Why?

Answer 1

Amazon’s Businesses	Critical Success Factors
Amazon Business? -Creating content (making books, TV shows) Amazon Product Sales Manufacturer of consumer electronics	It was innovative, one of the first companies to sell goods thru e-Commerce
	Removed the need of an intermediary between the producer and the customer
	Created fulfillment centers, which allowed Amazon to distribute their products more efficiently.
	Very goods prices, which attracted the customers.
	- Information Systems that gave the company the ability to constantly update their processes to achieve a higher level of efficiency.
Supply Chain Management for other companies There are a third party logistics provider	Very effective in managing the distribution of products
	The fact that they had higher turnover ratios than any other company, giving them credibility
	Heavy use of technological means to improve the process and efficiency (robots, software, data)
	Giving companies the opportunity to subcontract their logistics to a third party (3PL)
Cloud Services Cloud Computing Services	One of the first companies to offer cloud services for movies, books, music
	Developed a platform that was built from scratch, making it easy to use for users.
	Large repertory of media such as movies, CDs, DVDs, and applications.
Back-end Fulfillment Services Their an ecommerce	1. Scope of offering
	2. The quality of the website itself
	Pricing Transparency Supply chain management Customer Relationship management Supplier Relationship Management

Answer:- Challenges faced by Amazon when it first entered the marketplace

• No or very limited profit because of the low prices they offered, which made it harder to pay their debt.
• Enormous initial capital required to build and operate the fulfillment centers, the heart of the company.
• Creating a new industry from scratch.
• Developing a platform and systems for managing their operations (no experience since no company had done it before).

Answer:-

Fulfillment Center Operations	Warehouse Operations
Very high cost to start because of expensive planning and machinery.	Lower initial costs.
Larger inventories to be managed	Smaller inventories to be managed
Covers a very large area or region, which makes it harder to manage.	Covers smaller regions, which are easier to manage.
Riskier since there is a higher cost of start but if successful and managed well proves to be a good investment since it can be constantly improved and updated.	Safer since there is a lower cost of start, but leaves very little room from improvement.
High use of technology, which has high development, costs and requires a lot of hard work specially if built from scratch.	Less use of technology, which makes it easier to start and manage.

Answer:-

Level of Information Processing	Information Needs
Transacting	Customer order details, product, quantity, specifications
	Customers Shipping and Billing Information
	Customer Account Details (Login, Email, Password, Phone Number, Stored Credit Card, Stored Addresses)
	Information about how the product is going to be sent.
	Information about from which of the location centers the product is going to be sent (which one is closer and more efficient)
management and control	Information about the location of the product.
	Information about parcel delivery services.
	Inventory Information
	Inventor Reorder information
	Invoices and Accounting
Innovation and corporate learning	Information about the customer’s and the target market
	Information about new products released that might be of interest to the customers.
	Information about previous errors or process that are not being fully efficient to improve them.