Amazon and Whole Foods [PDF]

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Executive Summary This report contains information on the acquisition of Whole Foods Market by Amazon. We as a group have put in required strategic frameworks for acquisitions taught to us in strategic management course. This report also contains factors which has influenced the acquisition, and how the situation is in both the companies post acquisition. Individual opinions of group members on areas like Finance, Marketing, Human Resource, Operations and Technology is also present. Important Strategies which have been involved during the acquisition has been highlighted. Reasons for choosing this topic are firstly, tariffs on a range of agricultural products are working their way through the supply chain and will impact retail prices over time. Secondly, U.S. retail sales for food and beverage stores increased 3.7% in the first eleven months of 2018 compared to 2017. The grocery business is enormous, about $675 billion per year in the U.S. alone. Thirdly, The Consumer Price Index (CPI) for food increased 0.3 percent for the 12 months ended December 2018 (unadjusted); prices for food at home also increased 0.3 percent for the same period. Lastly, December 2018 marked the 18th month of increases in CPI for food at home. Amazon is a Fortune 500 e-commerce company based in Seattle, Washington. It has the distinction of being one of the first large companies to sell goods over the Internet. In 1994, Jeff Bezos founded Amazon, which launched the following year. Amazon quickly diversified by adding other items, including DVDs, music, video games, electronics, and clothing. Whole Foods is a leader in the distribution of natural and organic food products in the United States, Whole Foods Market is the first US-certified organic distributor. The group generated revenues of $15.7 billion at the end of September 2016, $1 billion in operating cash and had a return on invested capital of 12.7%. Amazon’s takeover of Whole Foods sent the stocks of competing grocery chains plummeting. Walmart sank $3.67 (4.7%), Target fell $2.85 (5.1%), Costco dropped $12.95 (7.2%). Amazon’s $13.7 billion acquisition of Whole Foods in 2017 has effected little change to the industry from the perspective of retail stores. Amazon continues its struggle to make the online grocery channel profitable despite leading the industry in sales. Amazon has almost $31 billion in cash and cash equivalents and marketable securities. Amazon acquiring Whole foods added Amazon a huge number of data in their account and the true differentiator lies in the company's effectiveness in using data to better understand their customer’s needs and predict shopping behaviour and also to generate loyal customer base.

Table of Contents Introduction .............................................................................................................................. 1 Amazon .................................................................................................................................. 1 Marketing Mix of Amazon .................................................................................................... 3 Whole Foods .......................................................................................................................... 4 Marketing Mix of Whole Foods ............................................................................................ 5 Amazon acquiring Whole Foods ........................................................................................... 7 Strategic frameworks............................................................................................................... 8 Amazon’s Mission and Vision ............................................................................................... 8 Whole Food’s Mission and Vision ........................................................................................ 8 SWOT Analysis ..................................................................................................................... 9 Segmentation, Targeting and Positioning Analysis ............................................................. 10 Porters five force model ....................................................................................................... 12 7’s Framework ..................................................................................................................... 14 PESTEL Analysis of Amazon ............................................................................................. 15 Principal Strategic aspect ...................................................................................................... 17 Individual Opinions ............................................................................................................... 19 Sumer Nagbhushan Rao ....................................................................................................... 19 Vrishabh Kumar ................................................................................................................... 20 Darshan M Urs ..................................................................................................................... 21 Rakesh R .............................................................................................................................. 22 Thripthi ................................................................................................................................ 23 Findings and Recommendations........................................................................................... 23 Conclusion .............................................................................................................................. 25 Bibliography ........................................................................................................................... 26

Introduction Amazon

Amazon is known for its disruption of well-established industries through technological innovation and mass scale. It is the world's largest e-commerce marketplace, AI assistant provider, and cloud computing platform as measured by revenue and market capitalization. Amazon is the largest Internet company by revenue in the world. It is the second largest private employer in the United States and one of the world's most valuable companies. Amazon is the second largest technology company by revenue. Amazon.com, Inc. Is an American multinational technology company based in Seattle, Washington that focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence. It is considered one of the Big Four technology companies along with Google, Apple, and Facebook. Amazon was founded by Jeff Bezos on July 5, 1994, in Bellevue, Washington. The company initially started as an online marketplace for books but later expanded to sell electronics, software, video games, apparel, furniture, food, toys, and jewellery. In 2015, Amazon surpassed Walmart as the most valuable retailer in the United States by market capitalization. In 2017, Amazon acquired Whole Foods Market for $13.4 billion, which vastly increased Amazon's presence as a brick-and-mortar retailer. In 2018, Bezos announced that its two-day delivery service, Amazon Prime, had surpassed 100 million subscribers worldwide. Amazon product lines available at its website include several media (books, DVDs, music CDs, videotapes and software), apparel, baby products, consumer electronics, beauty products, gourmet food, groceries, health and personal-care items, industrial & scientific supplies, kitchen items, jewellery, watches, lawn and garden items, musical instruments, sporting goods, tools, automotive items and toys & games.[citation needed] Amazon has separate retail websites for some countries and also offers international shipping of some of its products to certain other countries. (Wikipedia, 2019)

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Strategies adopted by amazon 1. Prime as the hub of the wheel Amazon Prime was first framed as an incremental improvement in its value proposition, in the form of free shipping. That has since evolved into the linchpin of the Amazon empire. Jeff Bezos claims that Prime has over 100 million subscribers, making it the most successful loyalty program of all time. Amazon will only magnify its use of Prime as a barrier to entry. 2. Fuel for small businesses While Amazon's consumer business gets all the buzz, its foray into business-to-business is equally disruptive. It is believed that Amazon aspires to dominate services like warehouse robotics, logistics, infrastructure and cashless checkout 3. Home delivery and supply chain logistics Among the most astonishing of its patents is the creation of an "airborne fulfilment centre" where products will be delivered by drone from a blimp line contraption. Holy crap, George Jetson. Amazon will find ways to embed technology into third-party logistics (3PL) and freight businesses much in the way it has with Whole Foods. 4. Artificial intelligence Alexa and Siri are grinding away like two or three sorority sisters battling about who gets the chance to utilize the restroom first. While Siri is installed in the iPhone, Alexa offers unmatched access to Amazon's secret weapon: zero-click. Zero-snap will upset shopping, giving clients the capacity to recharge genuinely necessary supplies consistently through verbal directions. Amazon has even built up an "Alexa Fund" for new companies, directed at game-changing AI ventures. 5. Healthcare Amazon seems ready to enter medicinal services, maybe starting with a strong move into drug store administrations. With medicinal services swelling unchecked, drug store is an industry it could upset rapidly. It has additionally united with Cardinal Health and different wholesalers with an end goal to stretch outreach in restorative gadgets to medical clinics and others.

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6. Geographic expansion As per CITI Research, Europe has been the organization's essential geographic extension focus with universal deals moving toward 40 percent of volume. In any case, the organization will develop in developing markets, for example, Asia and the Middle East. There are open doors for suppliers to position as specialty players in these business sectors. 7. Acquisitions Being procured by Amazon would be a blessing from heaven for some, and some will get their desire. The organization has significantly expanded procurement action, with 10 arrangements in 2017 including Game Sparks and Blink (home security). As its stage extends, Amazon will rush on new organizations that can use its backend. Amazon is ready to turn into the most important organization on the planet. Others will be well-encouraged to make separating techniques. Ride Amazon's coattails or escape the way. (Inc, 2019)

Marketing Mix of Amazon

Product Through proceeded with development and expansion, the organization's items presently incorporate online retail, yet additionally an assortment of different items that address market needs like Retail service, Retail goods, Amazon Prime, Consumer electronics, Digital content distribution service, Amazon Video, Amazon Web Services (AWS), Amazon Publishing, Amazon Fresh, Amazon Prime Pantry, Amazon Dash, Video Direct Place The scenes used to arrive at objective clients are distinguished in this segment of the promoting blend. Amazon.com Inc. is a principally online business association. In any case, the organization utilizes the accompanying spots to arrive at its web-based business clients: 1. Official e-commerce websites 2. Amazon Books

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Promotion This segment of the promoting blend includes the techniques and strategies that an organization uses to speak with its objective market. Amazon.com Inc. expects to influence its clients to visit its sites and pay for its online administrations. The accompanying procedures and strategies are utilized in such limited time blend, organized by significance in the organization's internet business: 1. Advertising (most important) 2. Sales promotions 3. Public relations 4. Direct marketing Price This segment of the promoting blend centres around the value levels and evaluating procedures a firm utilizes in selling its items. Amazon.com Inc. uses low costs as a method for pulling in clients to its online business site and item contributions. In any case, given the assortment of the organization's items, the accompanying evaluating procedures are utilized: 1. Market-oriented pricing strategy 2. Price discrimination strategy 3. Value-based pricing strategy (PanMore, 2019)

Whole Foods

Entire Foods Market Inc. is an American worldwide general store chain headquartered in Austin, Texas, which solely sells items free from hydrogenated fats and fake hues, flavours, and additives. A USDA Certified Organic food merchant in the United States, the chain is prominently known for its natural choices. Entire Foods has 500 stores in North America and the United Kingdom as of March 4, 2019.

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It was set up in 1980 with the merger of Safeway and Clarksville Natural Grocery stores. Today Whole Foods Market has more than 400 stores in USA, Canada and United Kingdom with more than 91000 representatives. The organization is exchanged on Nasdaq with a market capitalization of over $10 billion and is a Fortune 500 organization. It is the country's biggest retailer of natural nourishments, fifth biggest open sustenance retailer, and the tenth biggest retailer in general dependent on 2014 deals rankings (Whole Foods Market, 2015). The organization's main goal is to "advance imperativeness and prosperity of all people by providing the most elevated quality, most healthy sustenance’s accessible" (Whole Foods Market, 2013). A portion of the organization's fundamental beliefs are selling the most noteworthy quality regular and natural items, bolster colleague greatness, make riches through benefits and development, serve and bolster nearby and worldwide networks. (Wikipedia, 2019)

Marketing Mix of Whole Foods Product Entire Foods conveys enormous assortments of top notch natural and common items. A portion of the items are generally extremely outlandish and not accessible in different grocery stores. A normal store conveys 34000 SKUs and a lot of bigger stores more often than not convey around 50000 SKUs. Because of the attention on conveying high calibre solid nourishments, the company doesn't often discover items in Whole Foods that are basic in different markets. It additionally has its very own mark, 365 Everyday Value and is conveyed in all stores alongside other selective nearby and autonomous brands. It conveys an immense choice of cheddar, wines and imported brews. Entire Foods does not convey items with hydrogenated fats, creatures raised with anti-infection agents, confined hen eggs, items containing counterfeit flavours, hues and sugars. Place Entire Foods sells its items both in stores and on the web however dominant part of the buys are made coming up. They as of late marked an elite organization with Instacart and are currently conveying food supplies to their clients (del Rey, 2016). Entire Foods commonly targets premium land and contemplates part of criteria before focusing on a spot. A normal store is around 35000–40000 square feet, with copious parking spot. A normal store has around 200,000 individuals living inside 20-minute drive, have enormous number of school instructed occupants, simple access to roadways and clear perceivability of its 5

signage (Whole Foods Market, Real Estate, n.d.). The two stores I have visited, in Fremont and Palo Alto meet these land necessities. Both are rich rural areas with exceptionally taught populace. Promotion Entire Foods Market has been commonly opposed to run advertisements in either print or visual media. They depend on their image attention to get clients to their stores and guarantee that the shopping knowledge will tempt the clients to return. WFM's advertising costs has been under 0.5% of offers for over recent years . The organization did not have an unwaveringness program until 2015 and still has built up a dedicated client following all over the place. The organization depends a great deal on verbal exchange and online networking. They have dynamic showcasing group on Pinterest, Twitter, Facebook and Instagram with a joined reach of 11 million adherents. The accentuation for showcasing speculations has been on network non-benefit associations that help develop its business and nearby networks also. This was seen in stores too where focal point of standards and on the signage was the means by which Whole Foods is serving the nearby networks and about its associations with non-benefits. Each store has its own advancement procedure. Greater store in progressively upscale neighbourhoods have computerized signage and furthermore end of the week cooking classes with unmistakable culinary specialists. Price Entire Foods Market is known for its exceptional evaluating and has a moniker of Whole Pay check. Because of its high calibre and severe adherence to benchmarks, a large number of the items are costly at Whole Foods contrasted with other grocery store chains. Albeit a significant number of the normal clients of Whole Foods are not value delicate, to pull in clients from Trader Joes or Sprouts, Whole Foods is presently offering a bigger number of offers on its items than previously. Its 365 Everyday Value name is relatively less expensive than other named brands it conveys in stores. They are additionally offering normal deals on different things including perishables, named brands and furthermore on it possess names. At the passage of the Whole Foods store at Fremont, they put coupon books, which had coupons for that specific week. Different passageways were obviously set apart in huge yellow sheets about the limits. Pennants were put elevating its portable application to download more coupons and spending neighbourly plans. (2019)

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Amazon acquiring Whole Foods Amazon reported that it's purchasing Whole Foods for just shy of $14 billion, the retailer's biggest obtaining ever. The buy holds suggestions for the eventual fate of staple goods, the whole sustenance industry, and—as hyperbolic as this may sound—the fate of looking for pretty much anything. At the least difficult level, the arrangement speaks to a clear intersection of interests. Amazon needs nourishment and urban land, and Whole Foods needs assistance. The web-based business goliath has been venturing into goods and physical areas, including book shops, incidentally, working itself once again into the physical business that it's additionally upsetting. Entire Foods, in the interim, offers the greatest name in elitist staple goods and an armada of urban areas, which can twofold as Amazon distribution centres. In the interim, the merchant is in a spiral, its stock cost falling as income development has fallen each year since 2012. Speculators had for quite a long time been pushing the organization to offer itself to a bigger food merchant, as Kroger. That Whole Foods wound up with Amazon is idyllic equity, considering that, in 2015, CEO John Mackey said Amazon's move into basic food item conveyance would be "Amazon's Waterloo." Doubters of Amazon's system can point to the way that goods are a horrendous, low-edge business. That is valid—nearly as horrendous and low-edge as web-based business, where Amazon has officially exhibited that it can spellbind Wall Street's near-sighted agents, while it burns through many billions of dollars assembling a worldwide warehousing and conveyance framework for a shopping future that is moving on the web. To put it plainly, Whole Foods was in a free fall, and Amazon is the ideal net to get it. It's been a long time since Amazon purchased Whole Foods. At the season of the arrangement, which came as the merchant was feeling the squeeze from lobbyist financial specialist Jana Partners, Whole Foods was battling. It had been first to the claim to fame and natural game, yet as bigger contenders likewise moved into the space, it was surrendering ground. With scale and better framework, these retailers could offer huge numbers of similar items at a superior cost. Entire Foods was behind its rivals in innovation and building up a dedication program. Its difficulties appeared through in its accounts. In 2017, preceding its deal to Amazon, same-store deals were declining 1.5 percent, as indicated by administrative filings. The earlier year, they were declining 2.5 percent. 7

The arrangement between the two — which was at one point known as Project Athena — met up under extraordinary mystery, after Whole Foods CEO John Mackey connected with Amazon CEO Jeff Bezos through an industry expert. Amazon disclosed to Whole Foods if expression of the arrangement spilled, it would cancel it. (Economic Times, 2019)

Strategic frameworks Amazon’s Mission and Vision

Mission: We strive to offer our customers the lowest possible prices, the best available selection, and the utmost convenience. Vision: To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online. Core Values: The core values of Amazon are  Customer Obsession  Ownership  Invent and Simplify  Learn and Be Curious  Hire the Best  The Highest Standards  Think Big  Bias for Action  Earn Trust  Deliver Results (Amazon, 2019)

Whole Food’s Mission and Vision

Mission: Whole Foods Market does not have an official vision statement. However, their motto is “Whole Foods, Whole People, Whole Planet”.

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Vision: We are a mission-driven company that aims to set the standards of excellence for food retailers. We are building a business in which high standards permeate all aspects of our company. Quality is a state of mind at Whole Foods Market. Core Values: The core values of Whole Food are 

We sell the highest quality natural and organic products available.

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We satisfy, delight and nourish our customers.

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We support team member excellence and happiness.

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We create wealth through profits & growth.

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We serve and support our local and global communities.

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We practice and advance environmental stewardship.

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We create ongoing win-win relationships with our suppliers.

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We promote the health of our stakeholders through healthy eating education. (Whole Foods, 2019)

SWOT Analysis Strengths: 

Amazon has the strong brand image in the e-commerce industry which is the reason behind their rapid growth in the online Industry.

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The company has moderate and expanding business diversification. With this they are able to provide their customers with online retail services, consumer electronics, brick and mortar services, information technology services, cloud services and others which makes them a formidable competitor in the industry.

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The high capability and rapid innovation in technology strengthens their business and help them adopt easily to the change in trend.

Weakness: 

The business model of Amazon is their major weakness, because this model is being easily imitated by many of the other companies which is helping them in establishing their business in e-commerce sector.

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The other weakness that Amazon is facing is the company’s limited brick and mortar (retail) stores present, which is stopping them from expanding their business in nononline market.

Opportunities: 

Amazon has a huge opportunity to penetrate their business in the developing markets. This move should help them in having a stronger competitive advantage over the others.

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The company also has an opportunity to expand their business in brick and mortar operations which should help them in generating potential income.

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They also have an opportunity to develop new partnerships with the other firms where the company can exploit and expand other business to become a global e-commerce company.

Threats: 

Competition remains as one of the strongest threats to Amazon from huge firms like Walmart, , Costco Wholesale, Home Depot eBay, Google, Apple, Microsoft and Netflix which creates a lot of pressure on the company.

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Most of the new and emerging companies are easily adopting the business model of Amazon and becoming a major threat to the company in the industry. (Strategic Management Insight, 2019)

Segmentation, Targeting and Positioning Analysis Amazon’s segmentation, targeting and positioning covers a set of activities aimed at determining specific groups of people as customers and developing products and services attractive to this group. Amazon’s segmentation is based on actual purchase behaviour . It involves what they actually did and not what people might have expressed interest in.

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Positioning Amazon has successfully positioned itself as a Glocal (Go global Act local) e-commerce giant where people can buy anything and get it delivered at any remote locations. Amazon uses the catchphrase #AurDikhao in is campaign in India. Types of positioning: 

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Multi-segment positioning. Amazon offers a wide range of products and services, which successfully exploits more than one segment at simultaneously. Specifically, the online retail giant sells millions of products, satisfying the needs and wants of different range of customer segments. Adaptive positioning. Amazon carefully monitors changes in external marketplace and addresses increasing customer expectations by constantly repositioning of products and services according to changes in each segment.

Segmentation and targeting Segmentation involves dividing population into groups according to certain characteristics, whereas targeting implies choosing specific groups identified as a result of segmentation to sell products to. Different segments and its target audienceGeographic  

More than 100 countries Density- Urban and rural

Demographic   

Age - 18 and older Gender - Males & Females Occupation - Students, employees and professionals

Behavioural    

Level of loyalty - ‘Hard core loyals, ‘Soft core loyals’ , ‘Switchers’ Benefits sought - Widest range of products, Convenience of online purchasing, Competitive price. Personality - Easygoing, determined and ambitious User status - Non-users, potential users, first-time users, regular users, or ex-users of a product

Psychographic  

Social class - All social classes: lower class, working class, middle class and upper class Lifestyle - Resigned, Struggler, Mainstreamer, Aspirer, Succeeder, Explorer Reforme

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Porters five force model Amazon has its competition against small size online retail stores as well as enormous firms like Walmart. the company must make sure that it remains resilient even with all the changes in the conditions of the online retail industry environment. The following are the external factors affecting Amazon, based on Porter’s Five Forces Analysis model Competitive rivalry or competition (strong) Bargaining power of buyers (strong) Bargaining power of suppliers (moderate) Threat of substitutes (strong) Threat of new entrants (weak) Industry rivalry Amazon has its competition against strong competitors. They are as follows   

High aggressiveness of firms Availability of substitutes is very high Switching cost is low

Retail firms are mostly aggressive in nature , and they have a strong competitive force against one another. One example would be , Amazon.com Inc. has direct competition against big companies like Walmart, that has a crucial and growing e-commerce website. Amazon also has to go through the strong force of substitutes due to high level of availability. For example , Walmart has physical presence and its brick-and-mortar stores are substitutes to Amazon’s online retail service which is one of the threat . Numerous other brick-and-mortar bookstores and small size retailer are also competitors of Amazon. Also, low level of switching costs has a strong impact on the company resulting in low barriers for consumers to go from one retailer to another and also from one company to another that can provide substitute. Due to all of these external factors in this impacting Amazon, competition must be of strategic priority to make sure the company maintains its competence.

Bargaining Power of Amazon’s buyer: Amazon has its vision and mission statement that highlight the company’s approach of customer-centricity with regard to e-commerce business. This shows the influence that consumers have on firms and the environment where industry operates. Few of the following external factors support the strong intensity of the bargaining power of customers that impact Amazon:   

High quality information Substitutes are available Switching cost are low 12

High quality information is available to consumers with regard to the services of online retailers and the products that they sell. This external factor has an impact on Amazon in terms of the ability of customers in finding alternatives to the online retail services of the company. Adding to this , the low switching costs also makes it convenient for consumers tomove from Amazon to any other company like Walmart. The availability of substitutes are high in this aspect which enables consumers to move from one retailer to another. For instance, the consumers can easily visit Walmart’s stores, instead of purchasing items on Amazon’s e-commerce website which are located wisely throughout the United States.

Bargaining Power of Amazon’s Suppliers (Moderate Force) Suppliers have the control on the availability of supplies and materials for Amazon’s needs for its e-commerce operations, like hardware components for information systems. The suppliers have huge influence on the online retail industry environment in this aspect of Porter’s Five Forces Analysis model. Amazon experiences a moderate level of the bargaining power from the suppliers part that is based on the following external factors:   

Suppliers are less in number Moderate forward integration Moderate size of suppliers

The small number suppliers gives them the power to levy a strong force on Amazon’s ecommerce business. For instance, the price changes in equipment from a small number of large suppliers may directly impact the company’s online retail operational costs.

Threat of Substitutes Amazon’s one of the main competition is the prevailing substitutes in the online retail market. This factor of Porter’s Five Forces Analysis model highlights how substitutes can impact the industry environment. In the case of Amazon, the following are the external factors that has strong intensity of the threat of substitution:   

Low switching costs Availability of substitutes is high Substitutes that have low cost

There is high force of substitutes for amazon, which threaten the e-commerce company’s performance. Due to low switching costs customers can easily transfer from one company to other retailers. Its easy for consumers to buy from Walmart stores or other retail establishments instead of buying from Amazon. The availability of substitutes highly impacts Amazon and the prevailing low costs of their product offerings increases the impact of substitutes against the company.

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Threat of New Entrants or New Entry (Weak Force) New firms can significantly reduce the market share of amazon. The impact of new entrants are involved in this aspect of Porter’s Five Forces Analysis model. Amazon’s experiences the low level of the threat of new entry which is based on the following external factors:   

Low switching costs High cost of brand development Economies of scale is high

It is very easy for Amazon’s consumers to transfer to new firms, due to which the empowering new firms impose a strong impact against the company. This is because of the low switching costs, and the low negative effects of moving from one provider to another. The cost of brand development in online retail is high thus this weakens the impact of new entrants on the performance of Amazon. It would take years and billions of dollars to establish a strong brand that can compete with the Amazon brand which benefits from high economies of scale that make its e-commerce business strong. (PanMore, 2019)

7’s Framework Strategy. Amazon exercises a cost leadership business strategy. The largest internet retailer in the world has been able to sustain and maintain this strategy due to economies of scale, innovation in business processes and diversifications in its business. Amazon’s business strategy has huge impact on uplifting communication between various components of its ecosystem. Structure. Amazon has an organizational structure which is hierarchical. It is difficult for the company to adapt a different structure like divisional or matrix because of the big size that contain 560000 employees that serve more than 300 million customers globally. There exists two CEOs, and four Senior Vice Presidents who report directly to Amazon CEO. Amazon also has organizational structure that integrates Global Corporate Affairs and Digital Management segments. Their heads report to CEO Jeff Bezos. Systems. The systems in amazon has wide range that facilitate Amazon business. These involve employee recruitment and selection system, team development and orientation system, transaction processing systems, business intelligence system, CRM system and others. The company carefully evaluates each of these systems often with the goal of increasing their efficiency and thus, increasing competitive advantage for the business Skills The skills and competencies essential to be successful at Amazon include creativity, ability to work under pressure, resourcefulness, physical ability and others. The interpersonal skills 14

aspect relates to Amazon in a lesser extent compared to other e-commerce companies because of iunique aspects of Amazon organizational culture. Willingness to work under pressure is the most important skill for Amazon employees. Staff. Amazon has more than 560,000 full-time and part-time employees. Employment levels vary due to seasonal factors impacting its business. The company makes use of independent contractors and temporary personnel to supplement its workforce.

Style The style factor can be named as healthy curiosity way of work which means understanding that you’re never done learning as a leader – and everyone has a different journey . In Amazon’s leadership principles, team members are encouraged to learn and be curious.

PESTEL Analysis of Amazon Political Factors: Amazon operates along with the influence of political. This political analysis mainly focuses on governmental activity and its effects on businesses. 

Stability in politics of lead countries like U.S.A. and European countries.

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Support of Government for e-commerce.

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Efforts are made to increase cyber-security by the Government.

Economic Factors: The performance of Amazon depends on the conditions of the economies where the company operates its online and non-online businesses 

Economic stability of lead markets, mainly the U.S. and European countries .

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Disposable incomes are increasing in lag countries.

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Potential economic recession of China.

Social/Sociocultural Factors: Social/Sociocultural Factors identifies the effects of social and cultural changes in the company’s performance. 

Wealth disparity is being increased.

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Consumerism is dramatically increasing in lag countries.

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Increasing in online buying habits.

Technological Factors: Technological advancement directly affects Amazon, considering the centrality of technology in its business 15

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Rapid technological obsolescence.

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Efficiencies increasing in IT resourcing.

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Rates in cybercrime are increasing.

Environmental Factors: Amazon even though is mainly an online business; its operations are influenced by the natural environment. 

Interest rate increase in environmental programs.

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Emphasis on business sustainability is increasing.

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Low-carbon lifestyles are increasing.

Legal factors: Amazon operations should adhere to legal requirements 

Increase in product regulation.

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Import and export regulations are changing.

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Increase in business environmental protection regulations.

Competitive advantage of amazon : Amazon is one of the greatest innovations in twentieth century. It was established by Jeff Bezos in 1994 . The brand developed to be an exceptionally confided in e-retail brand in a serious limited capacity to focus time developing from an online book shop to e-retailer selling a large number of things. It is one of the main innovation marks that are known for their monetary clout and worldwide presence. In 2017, it positioned on sixth position in the Forbes world's most important brands' rundown. it is also known for its ability of giving attention to convinience of its customers. Brand image Brand image is a significant factor and a basic quality that enables brands to develop their impact and discover an initiative status in the business. It is likewise a basic quality as far as gaining new clients just as holding the old ones. Amazon is a brand based on trust and it is the most significant reason the brand grew so rapidly. Its strength also lie in exceptional customer service and continually focusing on customer centric approach. Technology Technology is an essential strength in e-retail sector that has helped Amazon deal with a higher level of customer satisfaction . The brand constantly puts resources into present day and advanced innovation to up the degree of client experience. The artificial intelligence have helped it better serve its clients.

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Customer base A huge customer base is an essential strength for brands like Amazon that are vigorously centered around client maintenance. Its number of dynamic customers has kept on growing over the years. The active customers has developed by a few millions all these years and has reached 310 million by 2016. it has also used prime membership to retain its customers for long. Financial strength The revenue has always been growing in amazon. the financial strength is very essential for many reasons as follows- investments can be made by the brand in a few territories including innovation and HR and will enable fast growth this also strengthens distribution channels. Global presenceGlobal presence of the brand is a significant quality of the brand. Because of its growth abroad ,brand has acquainted a few territorial commercial centers with serve the clients in North America, Europe, Japan, China and Asia. All of this demonstrates the competitiveness of the brand and its developing global presence . Leadership and strategy Leadership and strategy have likewise turned out to be significant qualities of the brand. A large portion of the brands in 21st century have developed on account of their great leadership and strategy. Jeff Bezos has always been an exceptional leader and because of his vision Amazon is among the ten most important brands of the world (Forbes list). (Marketing Guide, 2019)

Principal Strategic aspect Amazon, the Seattle-based e-commerce giant with a market capitalization of more than $768 billion, announced that it will acquiring Whole food for $13.7 billion which is an organic food chain and closed the agreement on August 28, 2017. With this purchase of the upscale food market chain, Amazon became the world's second most precious business by earning $19 billion in market capitalization. This move by Amazon is a strategic move for both companies, as Whole Foods can obtain economic support from Amazon, as well as it will boost the presence of Amazon by having brick and mortar stores all around the USA. Even though amazon has its own grocery subsidiary that is Amazon Fresh which was launched in 2007 and it controls only 1% of the grocery market but, most of the consumers would like to buy groceries inside grocery stores. In order to become a major player in groceries amazon must increase the number of physical stores which helps them in providing better quality products at a cheaper rate with faster delivery. Also, Amazon can make use of the physical

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retail store of Whole Foods without much of an investment as their warehouse which not only help them to deliver groceries but also, they can quickly deliver other products to their customers or even the customers themselves can pick their products or groceries from the nearby stores. Thus, by acquiring Whole Foods, two leading brands can be combined which are both focused on a customer-centred approach and deliver the customer service in a better and more improved way. The other strategies and advantages that amazon will gain from this acquisition are: 

Amazon's partnership with Whole Foods enables its multi-channel service to grow and improve its customer experience.

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The growth potential is huge in retail grocery, because today the Whole Foods Market primarily exists in the USA with more than 450 physical stores, and the same idea can be expanded to other nations.

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However, rather than attempting to compete on cost, Amazon will make use of Whole foods to compete on service, providing customer pick-up and distribution online, placing pressure on Walmart and Kroger who are the main competitors in US.

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Amazon also has over 100 million Prime members worldwide, and it continues to invest in advantages for its Prime members, including those provided at Whole Foods.

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Prime Now by Amazon is a two-hour delivery service for select products which is present in 60 cities at the moment. So, Amazon can make use of the tiny distribution centres and grow their prime facilities.

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Many supermarket chains continue to invest strongly in technology to compete with ecommerce giants when it comes to competitive operational performances such as buyonline, pick up store, buy online and return in store, but amazon delivery platform has already surpassed many retailers.

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Grocery purchasing habits and trends, all Whole food consumers information and their preferences can be a big advantage to Amazon as the pattern has correlations between purchases of different goods and even different categories.

By looking at all the above-mentioned advantages and strategies behind the acquisition of Whole Foods by Amazon we can say that this as a business level strategy because Amazon wanted to improve its customer base in addition to service quality. So, with this move amazon will not only have a strong foothold in their home market, they can make use of the physical stores of Whole foods which are in the important locations of USA. 18

Thus, this will not only help amazon in fulfilling their customer needs but also achieve distinctive competencies. (Seattletimes, 2019)

Individual Opinions Sumer Nagbhushan Rao

On March 20, 2018, Amazon turned into the second most important organization on the planet, with a market capitalization surpassing $768 billion. The US retailing goliath made key interests in 2017, including an idea to purchase the Whole Foods Market natural staple chain at $42 per share, or a sum of $13.7 billion. Amazon has picked up nearly $19 billion in market upper casing not long after the declaration, and the securing was finished in August 2017. This merger has increased the “Brand Image” of the company in Fresh Produce and has opened a new segment for amazon where it can do its business. Amazon was mainly known for technology and retail related products, but now after the merger both the companies are benefitting off of each other, as even Whole Foods Market is dependent on amazon on its capital resources. As Whole foods has a good brand image in fresh produce, Amazon is not investing much on promotional activities to enter into this segment. Amazon had entered into this space in 2008, but it wasn’t very popular among customers when it came to shopping grocery online. Whole foods Market follows a similar goal as of amazon which states that the company should be “Customer Centric”. This merger will result in both the companies offering customers value for money and experiences which the customers wouldn’t have ever experienced. The US mammoths(Amazon) have all observed their market capitalization falling as of late. European wholesalers are additionally worried by these new methods of online utilization and the requirement for a multi-channel advertising. In France, real wholesalers are falling behind in web-based business and the entry of Amazon as another contender just as that of Costco on the French market since June 22, 2017 just make the difficulties considerably increasingly significant. The sustenance circulation industry is a low-edge industry and in this way the quest for proficiency and economies of scale are key components.

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Amazon is winding up so enormous and monetarily incredible that it can bear the cost of value cuts, a model that may not be maintainable for other sustenance retailers. In the wake of including Whole Foods Market total net offers of $5.8 billion since the obtaining in August 2017, Amazon revealed record results for 2017 with net deals adding up to $177.9 billion (up 30,8%) and a net benefit coming to $3 billion. The American monster is not withstanding focusing on the French market. Reuters declared on February 28 that French retailer “System U” is examining a conceivable staple supply manage Amazon. With nearly $31 billion in real money and money reciprocals and attractive protections, Amazon can perform more acquisitions later on and profits by a solid bartering influence. It appears that Amazon is undoubtedly targeting turning into a key player in the sustenance circulation at an overall level.

Vrishabh Kumar

Amazon plans to open dozens of grocery stores across the United States as it looks to expand in the food business. Amazon is exploring a strategy of strengthening its new supermarket brand by purchasing regional grocery chains that operate at least a dozen stores .Amazon is slow but deliberate when rolling out new brick and mortar concepts. Amazon bringing in retail grocery into e-commerce is a major step taken by the company by acquiring whole foods which diversify them to the grocery segment of the market where they can cater to the needs of the day to day needs of the customers but they also have to look into the delivery patterns, where in the delivery has to be done very fast to cater to the grocery segment. Amazon currently has more than 250,000 Amazon employees and is technologically very much ahead to meet the needs and demands and is also looking ahead to develop the HR strategies to meet the high requirements of the company. Amazon has recently opened its new branch in Hyderabad, India, with 60,000 employees and are mainly aiming in growing and developing the business. Amazon satisfies many of the conventional characteristics of ideal mission statements. For example, the company includes target customers and market, variety of products, and basic business aims (pricing and convenience) in the corporate mission. However, the company does not include technology and the nature of the business and its operations. In this regard, 20

it is recommended that Amazon add details in its corporate mission to give employees and investors a better idea of what the company is all about. This recommendation should make it more comprehensive, especially in representing the company’s businesses, such as ecommerce, cloud-based computing services, digital content delivery, software and hardware, and brick-and-mortar retail.

Darshan M Urs

Amazon has revolutionized online shopping and become an e-commerce market leader. At its core, Amazon is a customer-centric company, which is constantly evolving and testing all various new models in fulfil the wishes of its customers. In addition, by launching Amazon go and Amazon Fresh pickup, it is now diversifying its company into multiple other sections such as retail and grocery to reimagine the entire experience for its clients. Since they required more physical stores to enhance their services so, acquiring of Whole foods gave them an upper hand and will help them in gaining a huge market share in the retail and grocery. As soon as they announced the acquisition its stock price rose and gained almost $19 billion in market capitalization whereas, grocery retailers such as Ahold Delhaize, Kroger’s, Supervalu, Sprouts Farmers Market, and Costco all decline which explains more about the customer response to this move. Moving on to their marketing strategy they can provide their customers with low cost grocery and other food items and high-quality products. They can also provide huge discounts on products and attract a greater number of customers to their business from the major competitors like Walmart and Kroger. Even though the number of physical stores of Whole foods is very less (450+ store) when compared to that of Kroger’s (2600+ stores) and Walmart’s (4500+) stores, Amazon can use these stores in a multi- purpose stores like ware houses to deliver within less time. This Whole Foods stores also becomes the back bone of the Amazon subsidiaries like Amazon Fresh and Amazon Go which will help them in a huge way. Amazon can also make use of the Whole Foods employees as customer relationship managers to improve the quality of their services. So, we can say Amazon always takes decision which helps them in the near future so, this strategic move will give them a plenty of options to execute against their competitors and also to be the market leaders.

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Rakesh R

Amazon and Whole Foods announced that they have entered into a merger agreement On June 16, 2017 under which Amazon will acquire Whole Foods Market for $42 per share in a cash transaction approximately $13.7 billion. This also includes Whole Foods Market’s net debt. Amazon’s offer of $42/share represent almost 27% premium over last closing share price whole food market. Since scheme is yet to filed with the regulatory authority, we have assumed that majority shares of promoter and Institutional investors (holds 92% stake) are bought by Amazon. It is unfolding new heights whose revenue is showing YOY growth whereas Whole Food was a sinking ship whose operating and net income are continuously showing a downward trend from last few years.

Direct Competition Market Cap in $ Revenue in $ Stores (US) P/E Ratio Sprouts Farmers Markets (SFM) 3.15 B

4.18 B

250

26.15

Indirect Competition Wal-Mart

221.59 B

482.13B

5,229

16.62

Kroger

20.35 B

115.3 B

2796

13.57

Target

29.1 B

69.5 B

1,802

10.97

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Amazon has a shipping cost of over $ 7 billion (Dec 16) which is almost 10% of its Cost of sales, selling their online product through the shelves of Whole food market which help them in cutting shipping cost related to online food & grocery business.

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Margin Game- Online selling has a comparatively less margin as it involves many intermediaries as compare to direct selling, Whole food stores will help in increasing the current margin.

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Future Expectation: As per a market study, online grocery shopping will take around 20% market by 2025 but still a long way to go where physical stores are still relevant for the sales.

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Return on Invested Capital (ROIC): Whole food currently having 12.7% ROIC, whereas of Kroger is 13.09%, Target Corp has 15%, Walmart is having 15.5%. Amazon

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needs innovative strategies, expertise knowledge, lucrative deals and aggressive marketing to get return on its capital invested in Whole food which is low as compare to its other big competitors. 

Synergy Gain: Shareholder of Amazon will stand to gain from this deal with increase around $10 billion in their wealth while considering the joint PAT and PE of Amazon.

Thripthi 

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The benefits sought from the acquisition are many. Amazon will finally understand their customer’s needs, predict shopping behavior and tap long term loyal customer base. With Whole Foods acquisition Amazon now has the brick-and-mortar platform that many internet retailers find it essential to minimizing the costs of returns. Amazon can deliver fresh food through Whole food stores— a service that has been complex in the past. Unlike shampoo or paper towels, fresh food can spoil fast. It is expensive to deliver and to store. Those challenges bothered its efforts with prior delivery service, Amazon Fresh Amazon is also looking forward to drive additional Prime memberships from whole foods. The acquisition has made Amazon a national competitor to grocery overnight Grocery distribution system is another benefit to amazon. Amazon will gain the corporate infrastructure of a grocer avoiding the need to build one on its own.

Findings and Recommendations There are mainly two things to tell about Amazon and Whole foods acquisition. Firstly, it’s about Data And secondly, it’s about Product. It was found that Whole Foods data that Amazon would want are mainly Grocery buying habits preferences, patterns and correlations between purchases of other products and even other categories of products. Amazon could get huge amount of data from Whole Foods shoppers and Amazon will ultimately be able to fit the grocery shopping experience to each individual. Amazon has concentrated into the process of upselling, in other words selling additional items that match with the products the consumer buying. Since there are consumables products like groceries, Amazon will get know that when they are running out of cereals and other products and try to deliver the products to the customer at the right time.

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The main question arises here is if amazon really needs data then why it should acquire Whole Foods rather than acquiring any other large grocery chain such as Aldi or Kroger. Firstly, the data collected from Whole Foods customers is considered as literally rich and this data is from prosperous shoppers who represent high degree of credibility in margin upselling for Amazon. Business Insider tells that the typical Whole Foods customer’s income is over $1000 per month. Secondly, Whole Foods has around 265 brands as a strong private label business and importantly it could be noticed that Amazon is becoming more vertically integrated. Amazon runs eight private brand lines of fashion apparel, including Lark & Ro, Ella Moon and Mae, and there is a rapid growth in this business. Amazon also produced a movie “Manchester by the Sea” couple of years ago, which gained an academy award for lead actor Cassy Affleck. Private brand products generally have higher margin than the third-party branded products in vertical integration. It’s true and is a main part of Amazon’s strategy. But important truth is that differentiation is represented by private brand products. It is obvious in retail market that there is a “sea of sameness” and national brands can be found through in almost every channel. Hence, private and exclusive brands start to create a reason for the consumer to buy through Amazon as opposed to going elsewhere. A competitive edge for Amazon Maybe Amazon is the only company away from the only digital company to show some interest in the grocery industry with its Amazon Fresh service. This is available for Prime members for $14.99 per month. Addition of Whole Foods’ selection of items to its service could get the online retail big player a competitive edge against Google. Google Express delivery service effectively have reached 90 percent of the U.S. A stronger presence in the home for Amazon Amazon is now selling smart speakers where one can press buttons to reorder household items. It really works like magic and all one need to do is to wave over a product’s barcode to add it to shopping list. These gadgets act brilliantly, and it is convenient to point consumers to Amazon’s online megastore for their requirements. Hence, there’s no surprise that Amazon is bolstering its selection of grocery items through the Whole Foods acquisition. The point to be noted is Amazon made similar strategy in 2010 while purchasing Diapers.com and Soap.com. Bringing the competition

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It was found that Whole Foods has just 3% of the U.S. grocery market share. This market share is relatively small compared to other grocery giants like Walmart and Kroger. Walmart sells groceries in over 4,800 locations the U.S. and Kroger has over 2,700 grocery locations. But Amazon has only 450 Whole Foods locations in the U.S. Amazon is not doing good in making good profit to take market share from its competitors. Amazon has the opportunity to build 3,000 to 5,000 Amazon Go stores in Canada, Mexico, USA and between 1,000 to 1,500 Amazon Fresh Pickup locations. Amazon Fresh Pickup Amazon Go and Whore Foods is the perfect combination of formats to meet customers demand for groceries. While scaling of Whole Foods, Amazon has to dramatically change the sold products assortment. As already mentioned, Walmart, Kroger and Albertsons have plenty of stores and have more customers because they sell the products that the majority of consumers want to buy. Amazon will have to identify the optimal product assortment consisting of branded products like Tide, Coke, Pepsi, Cheetos and others. Amazon can however surpass Walmart in terms of sales of grocery without matching Walmart's store count. In order to achieve this goal, Amazon should operate in more than 2,000 grocery stores nationwide i.e. all over US as well as provide online ordering and delivery.

Conclusion It’s sure that Amazon doesn't want to be a grocery retailer instead Amazon wants to reimagine the entire grocery and food experience. Amazon acquiring Whole foods added Amazon a huge number of data in their account and the true differentiator lies in the company's effectiveness in using data to better understand their customer’s needs and predict shopping behaviour and also to generate loyal customer base. Amazon when reaches extends into other sectors, what next step Amazon takes can be guessed easily. It is important that retailers and brands learn not only to collect the right kind of data which helps to understand the customers, but also to grow its power to ensure their products and pricing of their products are in line with customer’s expectations and keep them coming back. Amazon has almost $31 billion in cash and cash equivalents and marketable securities. Hence, Amazon has the ability to perform more mergers and acquisitions in the future. It seems that Amazon is trying to become a big player in the food distribution all over the world. 25

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