Choose a company to research. The company can be either a publicly-traded company or privately-owned, perhaps a company you are familiar with (but not your current employer). The key elements in choosing a good company for your case study are: Is the company relatively easy to research? Is there plenty of available information on the inner-workings of the firm? Is it a company you’re interested in and/or do you like their product or service? (This will make it more fun.) Is the company newsworthy? (Perhaps they’ve had a stunning failure, legal issue or maybe they recently created a killer product everyone wants.)
QUESTION
MG5615: Organizational Economics
Final Case Study Instructions
Choose a company to research. The company can be either a publicly-traded company or privately-owned, perhaps a company you are familiar with (but not your current employer). The key elements in choosing a good company for your case study are:
- Is the company relatively easy to research? Is there plenty of available information on the inner-workings of the firm?
- Is it a company you’re interested in and/or do you like their product or service? (This will make it more fun.)
- Is the company newsworthy? (Perhaps they’ve had a stunning failure, legal issue or maybe they recently created a killer product everyone wants.)
Once you have picked a company, post your company to the final case study paper assignment – week 4. No two students can pick the same company and approval will be given on a first come-first assigned basis.
Note that for a large, multi-line or multi-product company, you may want to choose a single business line within the firm for your analysis. For example, if you choose Apple, you might want to concentrate on their iPhone business only or if you choose Google/Alphabet, you might want to concentrate on just their driverless car project. Students will find it much easier to focus their business analysis on one business line within a large diversified company.
Your final case study paper should be 6-8 pages and will consist of 4 sections (each about 1.5-2.0 pages).
The first section should be an overview of the company. What does the company do? What product or service does it offer? Where is it located? Who are its main competitors and what is the market structure (e.g. pure competition, monopoly, oligopoly, etc.)? How is it regulated? This first section should provide a background or base-line understanding of the company in support of the rest of the paper.
For the remaining sections, pick any three from the following:
- A demand analysis illustrating the most applicable terms, concepts, or ideas in Chapter 3.
- A production and cost analysis illustrating the most applicable terms, concepts, or ideas in Chapters 7-8.
- A pricing analysis illustrating the most applicable terms, concepts, or ideas in Chapter 14.
- A “What they got wrong” analysis detailing a strategy mistake using the course concepts.
- A “What they got right” analysis detailing a strategy win using the course concepts.
- Any other analysis that illustrates the terms, concepts, or ideas in the course (must be approved by the instructor in advance).
If you are having trouble addressing or finding enough information for any of the sections above, you can augment your analysis by articulating what you think the company should do. For example, if you can’t find any information on your company’s pricing strategy, explain how you would price the product or service and why. This is Organizational (managerial) Economics; make some decisions on behalf of your company and support them using concepts and ideas from the class!
The goal of this paper is to illustrate that you understand the concepts covered in this course and that you can apply them to a real company.
Remember to document or source borrowed research using the standard APA citation style. Extensive quoting is not necessary (and not additive to your grade). Reference the source, but, to the extent possible, explain the concept or strategy in your own words. For example, if you find a great article on your company’s pricing strategy, explain the article and concepts in your own words and source it. Do not cut and paste long passages of text.
The paper should be 6-8 pages (or more) double-spaced, size 12 font Times New Roman, Calibri, or Cambria. The final paper is due on Sunday of Week 15.
ANSWER
Case Study: Amazon.com Inc.
Introduction
This case study provides an analysis of Amazon.com Inc., a globally recognized company that has transformed the retail industry with its innovative business model. Amazon is known for its vast product offerings, efficient supply chain management, and customer-centric approach. This paper will delve into the company’s overview, market structure, competition, and regulatory environment. Additionally, three key sections will analyze demand, production and cost, and pricing strategies, showcasing the application of organizational economics concepts.
Company Overview
Amazon.com Inc., founded by Jeff Bezos in 1994, is an American multinational technology company headquartered in Seattle, Washington. The company initially started as an online marketplace for books but quickly expanded its operations to encompass a wide range of products and services. Amazon’s primary focus is on e-commerce, cloud computing, digital streaming, and artificial intelligence.
The company’s core product is its online retail platform, which offers a vast selection of products, including books, electronics, clothing, home goods, and more. Amazon operates globally, serving customers in numerous countries through localized websites. Furthermore, the company has diversified its portfolio by entering other industries, such as entertainment (Amazon Prime Video), cloud services (Amazon Web Services), and smart devices (Amazon Echo).
Market Structure and Competition
In terms of market structure, Amazon operates in a highly competitive environment. It is part of the e-commerce industry, which exhibits characteristics of both oligopoly and monopolistic competition (Segal, 2022). Amazon’s market power and dominance in e-commerce are undeniable, as it holds a significant share of online retail sales in many countries.
Amazon faces competition from various sources, including traditional brick-and-mortar retailers and other e-commerce players like Walmart, eBay, and Alibaba. In recent years, the company has also faced increased competition from direct-to-consumer brands and platforms. However, Amazon’s extensive infrastructure, vast product selection, and strong customer base provide it with a competitive advantage in the market.
Regulatory Environment
As one of the largest players in the retail and technology sectors, Amazon operates under various regulations and faces scrutiny from regulatory bodies. These regulations primarily focus on areas such as consumer protection, data privacy, antitrust, and labor practices. Governments worldwide have been closely monitoring Amazon’s market dominance and its impact on competition.
In the United States, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have investigated Amazon’s practices to ensure compliance with antitrust laws. Internationally, regulatory bodies in the European Union and other regions have also scrutinized the company’s market position and business practices. Amazon’s expansion into new markets often involves navigating complex regulatory frameworks to ensure compliance and fair competition.
Demand Analysis
To analyze demand, key concepts and terms from Chapter 3 of organizational economics can be applied to Amazon (Wamsler et al., 2022). One such concept is price elasticity of demand, which measures the responsiveness of consumer demand to changes in price. Amazon’s dynamic pricing strategy, algorithm-driven recommendations, and personalized offers rely on an understanding of price elasticity to optimize revenue and customer satisfaction.
Furthermore, the concept of consumer surplus can be explored. Amazon’s ability to offer competitive prices, discounts, and fast delivery options enhances consumer surplus. The company utilizes data-driven insights and customer analytics to understand consumer preferences and tailor its offerings to maximize customer value.
Production and Cost Analysis
Chapters 7 and 8 of organizational economics provide insights into production and cost analysis. For Amazon, understanding economies of scale and scope is crucial. The company’s massive fulfillment network, advanced logistics capabilities, and investments in automation contribute to economies of scale, allowing it to achieve cost efficiencies and provide competitive pricing.
Moreover, concepts such as marginal cost and marginal revenue can be applied to Amazon’s decision-making process. The company continually evaluates the cost implications of expanding its product lines, investing in new technologies, and optimizing its supply chain to maximize profitability.
Pricing Analysis
Chapter 14 focuses on pricing strategies, which can be applied to Amazon’s business model. The company employs various pricing strategies, including dynamic pricing, bundle pricing, and penetration pricing. Dynamic pricing algorithms enable Amazon to adjust prices based on factors such as demand, competition, and customer behavior, optimizing revenue and market share.
Additionally, Amazon’s use of bundling strategies, such as offering discounted prices for purchasing related products together, drives cross-selling and enhances customer loyalty (Node, 2023). The company’s Prime membership program is an example of penetration pricing, where customers pay a subscription fee for access to exclusive benefits, driving customer retention and repeat purchases.
Conclusion
Amazon.com Inc. has revolutionized the retail industry by leveraging technological advancements, customer-centric strategies, and efficient operations. Through this case study, we have examined the company’s overview, market structure, competition, and regulatory environment. Furthermore, the analysis of demand, production and cost, and pricing strategies has demonstrated the application of key organizational economics concepts to Amazon’s business operations.
By applying these concepts effectively, Amazon has been able to maintain its competitive edge and sustain its growth trajectory in an ever-evolving marketplace. However, it is essential for the company to remain attentive to regulatory developments and respond to the changing needs and expectations of consumers to ensure long-term success in a highly dynamic industry.
References
Node, I. (2023, January 19). All You Need to Know About the Amazon Pricing Strategy in 2023 – Blog. Blog. https://www.intelligencenode.com/blog/amazon-pricing-strategies-model/
Segal, T. (2022). Who Are Amazon’s (AMZN) Main Competitors? Investopedia. https://www.investopedia.com/ask/answers/120314/who-are-amazons-amzn-main-competitors.asp
Wamsler, J., Natter, M., & Algesheimer, R. (2022). Transitioning to dynamic prices: Should pricing authority remain with the company or be delegated to the service employees instead? Journal of Business Research, 139, 1476–1488. https://doi.org/10.1016/j.jbusres.2021.10.067
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