Organizational Analysis: Amazon Whole Foods Inc

Executive Summary 

This report is the case study of Amazon Whole Food, a merger between Amazon Inc. and Whole Foods Market. The report analyzes different elements of the merger such as its internal and external environment, the managerial culture, its corporate strategy, and the corporate social responsibility issues that the firm faces. The report notes that the merger is an advantage to the nature of operations of each of the two companies since it brings together two of the most experienced companies in the industry. The only challenge that the merger might face is the legal and ethical implications of its operations. 

Introduction 

Undoubtedly, people now stay during a time of fundamental changes in the economy. Specifically, acquisitions and mergers have grown increasingly common tools of business, which thousands of firms have implemented the world over. Spearheaded by the shareholder value philosophy, they are a form of both cultural, social, and economic environment as well as that of factors that enable strong organizations to grow at a speedy rate than their competitors (Tamosiuniene and Duksaite, n.d, p. 11). In this case, the mergers and takeovers are tools of providing rewards to entrepreneurs for the efforts, through ensuring weaker firms are swallowed quickly or even made unsuitable for the market. With this common understanding of the significant role of mergers and takeovers in the modern economy, Amazon Inc. recently completed a takeover of Whole Foods Market, and the aim of the takeover was to create a competitive advantage for the business. The scope of this report, therefore, analyzes the strategy of Amazon Whole Foods, the new company that resulted from the merger. The report indicates that the most significant corporate strategy that Amazon took into the merger was that of cost leadership as opposed to differentiation, which is a common strategy within the whole foods industry. 

The Strategic Analysis 

It is worthwhile noting that the environment of a company has a significant influence on the nature of its operations. Specifically, managers have to be increasingly aware of the factors within both its internal and external environment if it has to be as competitive as possible. For example, comprehending the internal factors of the company helps managers to learn of the potential strengths and weaknesses and use such knowledge to recommend desirable changes to its strategy that will make it more competitive (Noe et al., 2003, p. 33). In addition understanding the external factors that affect the nature of corporate operations is a useful approach to understanding how an organization should tackle competition, customer expectations, and legal issues that would otherwise affect the nature of its operations. Therefore, this section of the report analyzes both the external and internal factors that affect the operations of Amazon Whole Foods as well as reviews its corporate strategy. 

Analysis of the External Environment 

The PESTLE Analysis of Amazon Whole Foods Inc 

Table 1 below indicates the influence of the external factors on the nature of operations of Amazon Whole Foods using the PESTLE analysis framework. 

Political Factors	Economic Factors
The company is engaged in the US public policy for the interest of businesses (Dorfam, 2017, p. 1)  The company has to adhere strictly to the regulations on GMO products	The firm operates in a country with a fairly stable economic background  Rising costs of labor in the US and abroad (Berman, Bound, and Griliches, 2014, p. 370)  Adverse macroeconomic circumstances may affect the nature of business activities since the organization relies on the volume of sales
Social Factors	Technological Factors
Growing levels of public awareness concerning healthy organic foods  Grocery commerce is growing in popularity worldwide  Rising levels of cultural diversity in the US	Amazon, is well-reputed for being one of the most innovative companies globally  A continued rise in the levels of adoption of new technologies for usage in commerce
Legal Factors	Environmental Factors
The company is required to adhere to strict laws of environmental protection  The existence of anti-trust laws  Strong compliance to the required standards of food such as the labelling of GMO products	The need to adhere to strict policies of corporate social responsibility

Table 1 : the PESTLE analysis of Amazon Whole Foods Inc 

From table 1 above, the firm is in a prime position of dealing with the external factors within its macro and remote environments. However, it is imperative that strategic improvements be undertaken by the management of the company to boost the performance of the organization in the industry for the fact that Amazon is not known for this line of business. 

Porter’s Five Forces for Amazon Whole Foods Inc 

Table 2 below presents the Porter’s Five Forces of Amazon Whole Foods Inc. 

Porter’s Force	Description	Overall comment
Competitive Rivalry	A large number of companies in the same trade (Laudon and Traver, 2013, p. 111)  The large number of companies are aggressive in competition  The industry experiences low switching costs	Strong competitive rivalry
The Bargaining Power of Consumers	Small volumes of personal purchases by the consumers (Laudon and Traver, 2013, p. 87)  High quality levels of information  Low costs of switching from one retailer to another	Strong bargaining power of consumers
The Bargaining Power of Suppliers	A high number of suppliers  Large volumes of individual deliveries from suppliers  Moderate levels of supply	A moderate force of bargaining power of suppliers
The Threat from Substitute Products	Substitutes are readily available  There are low costs of client switching to the substitute products  The substitute products are of low costs	A strong force of threat from substitute products
Threat of New Entrants	The industry has ease of doing business  The switching costs are low  The costs of doing business in the industry are relatively low	A strong force of threat of new entrants

Table 2 : An analysis of Porter’s Five Forces for Amazon Whole Foods Inc 

From table 2 above, it is notable that Amazon Whole Foods operates in an environment, which is quite aggressive, which is contributed by the fact that the numbers of retailers and suppliers are many. This scenario gives the consumers of the firm’s products an ease of choosing between vendors for the best deals. Therefore, the organization should be aware of this pressure and work for the best strategies of coping through an aggressive corporate strategy. 

Analysis of the Internal Environment 

An analysis of the internal environment of Amazon Whole Foods in this section is done through the SWOT approach, which evaluates the strengths, weaknesses, opportunities, and threats that a company faces in its operations. Table 3 below presents the SWOT analysis of Amazon Whole Foods. 

Strengths	Weaknesses
The existence of a robust supply chain of the company  A strong brand reputation of both companies in the merger  A high demand for organic goods in the US market  High-quality and standardized products  String and healthy financial position of the company  A supporting legal environment for business  Amazon is a leading technological company	An almost over-dependence on a narrowed American market, especially North America  No subsidies given for organic farming (Laudon and Traver, 2013, p. 234)
Opportunities	Threats
E-retailing  High chances of horizontal expansion  The chances of an international expansion  Lowered prices of healthy foods	Government regulations and rules  Expansion of the extant competitors such as Costco  Economic stagnation

Table 3 : a SWOT analysis of Amazon Whole Foods 

From table 3 above, it is observable that the company has greater strengths and opportunities than it does for the weaknesses and threats. 

Analysis of the Corporate Strategy 

The Competitive Strategy of the Company 

Companies around the world use different strategies for the generation and sustenance of a competitive advantage in the market. According to Barney (1991, p. 100), there are two major types of corporate strategies, cost leadership and differentiation. An analysis of the case study of Amazon Whole Foods indicates that the firm has adopted the cost leadership strategy (Dorfam, 2017, p. 1). The biggest threat of the Whole Foods Market company that merged with Amazon was the fact that its products were considered to be a little more expensive than most other companies within the industry (Dorfam, 2017, p. 1). For such a reason, Amazon Whole Foods, the new company devoted to supplying products at the lowest prices to the clients. The company is able to use this strategy for the fact that it experiences economies of large scale operation, which means that it is able to obtain its supplies at discounted prices (Dorfam, 2017, p. 1). Additionally, the firm has an advantage of reduced costs of operation since it has a significant level of adoption of technologies that reduce the costs of operations. Therefore, the business is able to provide products at a lower cost to the consumers who are all the households in the US and around the North American continent. Additionally, the fact that Amazon Whole Foods deals in retail grocery means that its products are more appealing to the large proportion of US citizens who have a concern for healthy eating and organic foods. Therefore, the company ensures that it offers high-quality products at reduced prices for it to attract more clients. 

Analysis of the Ethical Issues and Corporate Social Responsibility 

Dealing in organic grocery business such as the type of business that the firm engages is an issue of ethical consideration. Specifically, the issue of organic production has been a debate in the US and around the world. The main concerns stem from an over-exposure of the consumers to chemicals used in the production of the products and fact that such type of farming has potential implications on greenhouse gases emission (Greatist, 2013, p. 1). Concerning the first concern, it should be understood that should Amazon Whole Foods increase its volume of sales of the organic food products, it means that it has to improve its supplies. The supplies come from two sources, the local US farmers and imports from other nations. Whatever the case, when people consume such products for a long time, it is likely that they would accumulate the toxins found in the chemicals contained in their production. The second primary concern in the ethical sense comes from the issue of an importation of produce, which is associated with an increase in the levels of greenhouse gases emission (Greatist, 2013, p. 1). Therefore, the organization has the duty of caring for the wellbeing of the consumers and environmental sustainability through its corporate social responsibility programs. Now, the organization is concerned with improving the lives of its customers through its strong mission and vision statements that dictate its strong focus on clients. 

Analysis of Strategic Leadership and Culture 

Owing to the fact that the world is globalized, Amazon Whole Foods has a diverse workplace. For such reasons, the managerial concern is to formulate workplace strategies that avoid discrimination of employees based on their backgrounds or any other criteria defined by the Civil Rights Act of 1964 (Greatist, 2013, p. 1). At the company, the management has cultivated a culture, which directs the employees to focus on clients as opposed to the levels of competition within the market. However, it does not mean that the firm is completely ignorant of the effect of competition. Rather, the culture of customer focus makes the employees of the organization to be as much focused in the service of clients and the delivery of high-quality services to them as possible. This approach does not also place unnecessary pressure in the employees to deliver quality services to clients, but creates a thought among them that they are co-owners of the company. According to Koys (2011, p. 107), making employees feel a part of an organization raises their morale, which allows them to focus on their tasks since they will be satisfied with their work. Therefore, while there exists a top-to-bottom approach to management at Amazon Whole Foods, it is imperative noting that management does not place unwanted pressure on the employees. specifically, the vision statement of the company is ‘Affordable for All,’ while its mission is ‘to bring the highest quality food to our customers,’ (Greatist, 2013, p. 1). Therefore, the company is committed to the service of its clients through offering quality products at the lowest prices while caring for the environment. 

Conclusion 

Amazon Whole Foods Inc. is destined to succeed as a merger between Amazon and Whole Foods Market. This argument draws from the fact that the merger comprises companies with a great reputation in the retailing industry. The biggest advantage that Amazon brings to the new business is its experience with e-retailing and a large customer base while Whole Foods Market comes with over thirty-nine years of experience in retail grocery. The merger has a stronger ability to outdo competition because its external environment analysis indicates that it has a superior reputation and its internal analysis indicates that it has more strengths than weaknesses. Coupled with the fact that the company has a strong managerial culture, which focuses on consumers, its corporate strategy of cost leadership is likely to work to its advantage. However, the organization should be constantly aware of the ethical and legal implications of the nature of its business. 

Bibliography 

Barney, J., 1991. Firm resources and sustained competitive advantage.  Journal of management ,  17 (1), pp.99-120. 

Berman, E., Bound, J. and Griliches, Z., 2014 . Changes in the demand for skilled labor within US manufacturing: evidence from the annual survey of manufactures .  The Quarterly Journal of Economics ,  109 ( 2), pp.367-397. 

Dorfam, D., 2017. Amazon And Whole Foods Merger To Introduce Cross-Platform Selling And Lower Prices . [Online] Available at: https://www.forbes.com/sites/jeffreydorfman/2017/08/25/amazon-and-whole-foods-merger-to-introduce-cross-platform-selling-and-lower-prices/#727ae8e012f8 [Accessed 9 Dec. 2017]. 

Greatist. (2013).  What Are the Ethical and Environmental Costs of Healthy Food? . [online] Available at: https://greatist.com/health/ethical-healthy-food [Accessed 9 Dec. 2017]. 

Koys, D.J., 2001. The effects of employee satisfaction, organizational citizenship behavior, and turnover on organizational effectiveness: A unit‐level, longitudinal study.  Personnel psychology ,  54 (1), pp.101-114. 

Laudon, K.C. and Traver, C.G., 2013 .  E-commerce . Pearson. 

Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M., 2003.  Gaining a competitive advantage . Irwin: McGraw-Hill. 

Tamosiuniene, R. and Duksaite, E., n.d. The Importance of Mergers and Acquisitions in Today’s Economy. [online] Available at: http://www.tksi.org/JOURNAL-KSI/PAPER-PDF-2009/2009-4-03.pdf [Accessed 9 Dec. 2017].