IED210 New Venture and Product Innovation

Introduction

Digital platform offers a place for exchanges of goods, services or information between consumers, producers and community that interacts with that platform. Community is an essential part of the digital platform. There are various key aspects associated with the digital platform such as security, trustworthiness, ease of use, providing value to the community and facilitation of exchanges between consumers and producers (Parry and Kawakami 2017). In this context, it should be mentioned that there are both merits and demerits of digital platform. It has been noticed that the incumbents faced disruption from the digital platforms. This paper takes into account one organization from the supermarket industry such as Amazon to analyze the disruption faced by the incumbents from the digital platform. In this regard, this paper provides a comprehensive analysis on the background of the supermarket industry of the United States (US). E-commerce has altered the shopping behavior of the customers.

Thus, it has also led to transformation of retail landscape of the US from the brick and mortar to omnichannel. It has been observed that the supermarkets have stayed immune to digital disruption. Over the past several years, the supermarket business has disrupted due to the evolving consumer behavior and attitude and powerful trends such as technological advances and new competitive pressure (Tan, Anderson Jr and Parker 2020). It also scrutinizes the disruptive effect of the technology through identifying the before and after state. It examines the strategies of disrupters. In this regard, it involves the principles of platform design. As the disruptive technologies affects the incumbents on the digital platform. Thus, it forces these incumbents to take appropriate strategies to respond in a proper way. Therefore, this paper finds out the response strategies of the incumbents along with the disruptors. It helps to compare and contrast between the response strategies of the disruptions and incumbents. The stakeholders are also affected by the ongoing repercussion of disruption. There are both positive and negative effects o the stakeholders. Thus, this paper emphasizes on evaluating these repercussions caused by the disruption.         

Discussion

Identification Of The Organization Or Industry Under Disruption

In private ventures, platforms are remarkably popular among investors and entrepreneurs. There are various sectors that have platform businesses around the world. The most valuable public companies of the world built on digital platforms (Caffarra and Latham 2018). The digital platforms bring together two or more market actors and grow through network effects. The trillion-dollar businesses in terms of market capitalization include Amazon, Google, Facebook, Alphabet, Apple, Tencent and Alibaba. The market value of these platform businesses was worth above 6.3 trillion US dollars in 2020. Here, the disruption brought by the Amazon in supermarket industry of US and rest of the world is investigated. Many supermarkets have learnt from other retail sectors and countries, seized opportunities, recognized threats early and caught a wave of profitable growth. The fierce competition of this market has also led to the disappearance of some supermarkets from the industry. Amazon is the leading player in this market that brought disruptive technology to create drastic changes in the market. Amazon Inc is a technology company based in United States (US). The former name of the company was Cadabra.

The company focuses on the self-driving car, cloud computing, entertainment, artificial intelligence, consumer electronics, digital distribution and e-commerce. It was founded on 5^th July 1994 and the founder of the company is Jeff Bezos (Aboutamazon.com 2021). It headquartered in Seattle in Washington in US. It expands its business across the world. The multinational company offers numerous products and services. The main products offered by Amazon include Kindle, Fire Tablet, Echo, fire TV and Fire OS. On the other way, the main services offered by the company include Amazon Alexa, Amazon Music, Amazon.com, Amazon Prime, Amazon Appstore and Amazon Web Series. As of 2020, the total amount of revenue earned by Amazon was 386.064 billion US dollars. Moreover, the total net income of the company stood at 21.331 billion US dollars in 2020. The employee strength of Amazon around the world is 1,298,000 as of December 2020. It has an employee strength of 810,000 in US as of October 2020. Though, the supermarket industry of US was remained sheltered from the forces of e-commerce over the past several years.

The emergence of the e-commerce platform of Amazon has influenced the market and consumers dramatically (de Reuver, Sørensen and Basole 2018). The preference of shoppers of US to select their food including produce, meat and other perishable goods have created hinder to the growth of forces of e-commerce. In this regard, the financial constraints also play a vital role in keeping the retailers away from the e-commerce platform. Amazon came up with the platform like Amazon Fresh to offer preferred food items of the Americans. Moreover, the company also invested huge amount to make highly efficient, large scale cold chains required to make home deliveries at a profit. In addition to this, the retail online company, Amazon sell products from every niche all over the world (Watanabe, Naveed and Neittaanmäki 2018). Thus, the customers able to access all kind of products and services from the single platform of Amazon. Thus, the company disrupted the way people purchase product online, which in turn considered the brand as ultimate disruptive brands. This one stop shop for all kinds of need provides from aspirin to groceries and lawnmowers.            

Identify the before and after state explaining the disruptive effect of technolog eral decades. A disruptive brand born when the business experiments new idea and concepts, which gain attention and respect from the individuals. The appetite for disruption in consumer world has led to the emergence of Amazon. In 2019, the online sales in grocery market of the US accounted for 3 % to 4 %. It is expected that online sales in grocery market of the US will expand by 10 % by 2025 (Majumdar, Banerji and Chakrabarti 2018). The platform company like Amazon invested in innovative operating models and automation in order to solve challenges in last mile delivery and fulfillment. The company offered improved quality of the products and services. The disruptive effect of technology led to the compelling offers for the consumers. It provided comfortable option to shop for millions of shoppers. Online grocery is supply driven, which encouraged the company to provide more supply.

Thus, it helped the consumers to adopt the new method of shopping through online mode. The disruptive effect of technology in relation to Amazon can be referred to as the impact led by the e-commerce, digital and online market place on the traditional brick and mortar business model (Edelman 2015). It led to the change in customer expectations, shopping pattern and competitive landscape of the supermarket industry. This change in pattern caused by the Amazon has gained popularity in e-commerce and online shopping. Hence, it has hurt various traditional businesses that are compelled to compete with the online marketplace with only a physical location. Therefore, one of the key disruptive effect of technology include the disruption to conventional brick and mortar retail locations led by the rise in online shopping (van Astyne, Parker and Choudary 2016). The biggest e-commerce website, Amazon has attracted large number of shoppers towards the mobile application instead of brick-and-mortar stores. In 2018, online sales in the US stood at 13.6 %, which scaled up to 14.9 % in 2019.

The company has maintained its lead in global online selling, which have caused the closure of many brick and mortar stores in the country. In 2017, the total numbers of stores that were closed include above 9400 (Smits 2019). The revenue of conventional retail stores was dropped drastically due to the emergence of disruptive effect of technology led by the technology giant Amazon. The revenue of the conventional retail stores has hit by the disruptive effect of technology led by the Amazon other than significant changes in the shopping pattern of the consumers. The online shopping portal of Amazon offers convenience to the consumers. Moreover, the expectation of the consumers regarding more wide variety of products while purchasing has also fulfilled by the online platform offered by the Amazon (Constantiou, Marton and Tuunainen 2017). It has become easier for the consumers to check the product details on a small sized packet in large text on online shopping site instead of in a retail store. The use of artificial intelligence and big data powered systems by the company has provided improved monitoring of shopping behavior and pattern of consumers through online portal. In this way, Amazon forwards shopping portal benefits and customized promotions and offers by pitching products with a high likelihood of being bought. Thus, the disruptive effect of technology has influenced the performance of conventional retail stores drastically.      

Critically Analyze The Strategies Of The Disrupter

Platforms have existed for years. The need to possess physical assets and infrastructure have reduced in this era due to the information technology. The making and scaling up of platforms has become cheaper and simpler due to the information technology (Bonina et al. 2021). Here, it is necessary to mention that the use of informational technology has contributed towards frictionless participation that strengthened network effects and boosted the ability to analyze, exchange and capture large amount of data that have increased the value of platform of the company to all. The spectacular growth of the platform business like Amazon abruptly upended the supermarket industry (Tou et al. 2019). The strategies adopted by the disruptor play a profound role in this respect. The principles of platform design have incorporated by the brand in order to disrupt the market. The traditional value chain is revamped by the platform businesses. In general, these platform businesses com in many varieties.

However, all of these businesses have an ecosystem with the same basic structure including four sorts of players. In case of amazon, the governance and intellectual property are controlled by the owners. Providers of the company acts as the interface of platform with users (Hagiu 2015). Further, offerings of the products and services are created by producers under platform of Amazon. These offerings of producers are used by the consumers. There exists difference between the value chain of conventional pipeline business and platform business. The value chain strategy of Amazon indicates a distinct role of producers. Here, platform controls movement and curates (Lucas Jr and Goh 2009). The company has created a value flow that match with network. Amazon is categorized as mixed structure platform. The principles of platform design need to be discussed due its significance in relation to platform business of Amazon. Firstly, the value unit should be well-denied.

Secondly, the process should be designed in a way that adds value and delivers this value unit to the consumers. Finally, as per the principle of platform design, the entire process should be optimized and controlled by the appropriate value chain design. Amazon designed the interaction between consumers and producers around the value unit (Subedi 2016). Thus, the platform design of the company encourages complete exchange including goods or services, information and currency between the consumers and producer. In order to optimize the platform, the company designed the architecture in such a way that support tools, data and a network. Thus, Amazon shifted its focus of strategy from controlling to orchestrating resources, from rising customer value to maximizing ecosystem value and from optimizing internal processes to facilitate external interactions.                     

Analyze The Response Strategies Of The Incumbent Vs The Disrupters

In the face of industry digitization, the companies that adopt offensive strategies will come out as the winners. Therefore, the digital transformation has led to the adoption of appropriate response strategies for the incumbents as well as disruptors in order to sustain in the market. A long held non-aggression pact between traditional supermarkets have overturned due to the aggressive digital entrant like Amazon (Cusumano, Yoffie and Gawer 2020). Thus, it has led to the unprecedented wave of competition in the industry. The response strategy of disrupters includes search engine optimization to establish dominant market positions. As a result, it left behind little choice for the incumbents. Therefore, these incumbents are forced to respond by taking their business online to compete against digital disrupters. Moreover, it also helps the incumbents to compete with each other on pricing instead of relationships and reputation. The disruptive influence of digitization is growing at an exponential rate.

In this regard, it should be mentioned that it is difficult to identify the actual response of the incumbents with respect to the strategies of disrupters. The leaders of the incumbents know very well that they need to react to the problem they have from the emergence of digital disrupters. However, the determination of the right course of action by the incumbents is restricted by the little guidance. It has been noticed that the response of the incumbents remained relatively not effective, which has threatened their position in the supermarket industry in presence of disrupters like Amazon (Carroll 2016). The strategy of disrupters has brought adverse effects on the profits of incumbents through two loop effects (Sharon 2016). The disrupters use disruptive models to compete with the incumbents. On the other way, the incumbents respond to disruption through creating more fierce competition with each other.

The incumbents respond of the incumbents should be in a way that helps to concentrate on new customer segments instead of focusing on current customers. Thus, the emphasis should be given on finding out new ways to re-segment the market by the incumbents. It has helped the incumbents to stop solely depending on the labor saving and cost cutting with the help of automation. Many incumbents have adopted the strategy of incorporating some form of digitalization in response to the disruptive business model of platform businesses. Other incumbents have followed the response strategy in form of bold strategy and at scale. Some incumbents have implemented the strategy related to re-segment or bundle demand. The concept of digitization is multidimensional (Harracá 2017). The disrupters took the route of automation in supply chain or a strategic shift from the product-based to service-based offerings to disrupt the market as part of their strategy. In contrast, the incumbents have also planned for full digitization as part of the response strategy. However, there are few incumbents that has successfully opted for full digitization. Though, the disrupter like Amazon has upper hand in the supermarket industry, the incorporation of appropriate response strategy will strengthen the position of the incumbents in the tins market in future.             

Identify The Ongoing Repercussions Of The Disruption On The Stakeholders

The performance and operations of a business largely impact the stakeholders. Here, in case of Amazon, it is equally important to identify the ongoing repercussion on the stakeholders. The performance and operations of platform business of Amazon have brought bot positive as well as negative impact on the stakeholders of the company (O’Reilly and Binns 2019). The labor practices under the disruptive business model of Amazon have criticized by the stakeholders. The business model of the company depends on its warehouse workers those who are paying the price for lower prices and faster deliveries of the products of the Amazon. However, the company remained unresponsive towards the questions of shareholders related to labor issues.

Therefore, it is necessary for the company like Amazon to learn to respond to pressure from stakeholders in order to fulfill the social responsibility to mitigate any kind of negative impacts on the laborer. In addition to this, it will help the company to evolve to become growingly sophisticated at using the market power as a force for good (Christensen, Raynor and Mcdonald 2015). It is necessary for Amazon to engage in solving the environmental and social challenges like human rights, toxics, immigration, clean energy and paid paternal leave to reach the perfection, which will in turn help to satisfy majority of employees, customers and investors. In 2017, the company gained a profit amount of 5.6 billion US dollars from the US market. However, it did not pay a dime of federal income taxes. To control the negative impacts on the suppliers, consumers and shareholders, Amazon took initiatives to identify and eliminate friction in the purchasing processes. According to the vision of the company, there is no future of work involving jobs for human beings.

Despite being largest disruptive e-retailer, the company failed to embrace the social responsibilities. As a result, it has impacted the stakeholders adversely (Tripp and Grégoire 2011). It cannot be denied that there are some positive impacts of business practices of the company on the stakeholders. The company has taken some initiatives to lower its packaging footprint, advance product traceability and transparency and embrace renewable energy. The efforts of the company in terms of sustainability strategy should not be overlooked. There will create positive effect of these practices in the long run on the stakeholders. However, the labor practices of the disruptive brand have led to the agitation among the stakeholders as the company take no such initiatives to correct it (Choi and Ozkan 2019). Therefore, it is suggested for the company to invite the stakeholder leaders including opinion leaders, change agents and critics to help it address the harmful environmental and social impacts of its disruptive business model. It will assist the company to avoid the mounting skepticism from investors, consumer and stakeholder and regulations of the country.        

Conclusion

Amazon is the largest e-retailer of the world that disrupted the market with its platform business. It left little or no space for the incumbents that has brought severe difficulties. The shopping experience of the consumers has also changed due to the emergence Amazon as e-retailer. Earlier, the consumers preferred to shop from the bricks and mortar stores especially food items such as meat and other perishable foods. However, the launch of Amazon Fresh has given a whole new experience to consumers in form of online grocery shopping. Thus, it has attracted a large customer base in the retail market of the US. The use of artificial intelligence and big data has enabled the brand to track the purchasing habits of the customers and offer them with customized products and services. The revenue earned by the brick-and-mortar stores have dropped dramatically due to the disruptive effect of technology adopted by the Amazon (Rossman and Euchner 2018). As a result, many conventional stores have forced to close due to the intense competition in the market. As the brand like Amazon disrupted the entire market with advanced technology and e-commerce platform.

It should be noted the value chain of the disruptive brands differs from the conventional pipeline business. The unique platform design of Amazon has contributed towards the success of the platform business model, which is lack on conventional businesses. The conventional businesses respond strategies led to the more intense market competition. The incumbents took the business online in order to respond to business practice of disrupters. Furthermore, it also enables the incumbents to compete with the disrupter like Amazon on basis of pricing instead of reputation. The influence of disruptive business model of Amazon on the stakeholders cannot be denied (Chen et al. 2016). It has created both positive and negative impacts. The labor practices of the company have led to the agitation among the stakeholders, which need to corrected in order to achieve the social responsibility of the brand. It has also taken the initiatives like lowering its packaging footprint and embracing renewable energy to bring positive impact on the stakeholders.

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