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The assignment for this week is to answer the four questions that are listed in the MIS Case # 1. This case can be found in your text on pages 110 – 112. The case deals with the challenges facing Walmart and Amazon as they compete in the changing world of retail.
Your response should be at least 3 pages in length and follow the format provided here. This assignment should be submitted via the Canvas attachment function. Simply click on Submit Assignment button in the right corner and attach your completed solution. I will return your paper with my comments and your grade in your Gradebook. Be as thorough as possible. Be mindful that I do subtract points for grammar, spelling and format errors. The assignment is worth 120 points in the course.
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BUSINESS PROBLEM-SOLVING CASE
Walmart Versus Amazon and the Future of Retail
Walmart is the world's largest and most success
For online shopping, Amazon has some clear-cut
ful retailer, with more than 5485 billion in 2016 advantages. Amazon has created a recognizable
sales and nearly 11,700 stores worldwide, including and highly successful brand in online retailing. The
more than 4,600 in the United States, Walmart has company has developed extensive warehousing facili
2.3 million employees and ranks number one on the ties and an extremely efficient distribution network
Fortune 500 list of companies. Walmart had such specifically designed for web shopping. Its premium
a large and powerful selling machine that it really shipping service, Amazon Prime, provides fast "free"
didn't have any serious competitors until now,
two-day shipping at an affordable fixed annual sub
Today Walmart's greatest threat is Amazon.com, scription price ($99 per year), often considered to be a
often called the "Walmart of the Web." Amazon sells weak point for online retailers. According to the Wall
not only books but just about everything else people Street Journal, Amazon's shipping costs are lower than
want to buy DVDs, video and music streaming Walmart's, ranging from S3 to 54 per package, while
downloads, software, video games, electronics, Walmart's online shipping can run $5 to 57 per parcel
apparel, furniture, food, toys, and jewelry. The com- Shipping costs can make a big difference for a store like
pany also produces consumer electronics -notably Walmart where popular purchases tend to be low-cost
the Amazon Kindle e-book reader, Fire tablet, Echo items like S10 packs of underwear. It makes no sense
and Tap speakers, and Fire TV streaming media for Walmart to create a duplicate supply chain for
player. No other online retailer can match Amazon's e-commerce
breadth of selection, low prices, and fast, reliable However, Walmart is no pushover. It is an even larger
shipping. For many years, Amazon has been the and more recognizable retail brand than Amazon.
world's largest e-commerce retailer with the world's Consumers associate Walmart with the lowest price,
largest and most powerful online selling machine. which Walmart has the flexibility to offer on any given
Moreover, Amazon has changed the habits and item because of its size. The company can lose money
expectations of consumers in ways to which Walmart selling a hot product at extremely low margins and
and other retailers must adapt. According to Brian expect to make money on the strength of the large
Yarbrough, a retail analyst at Edward Jones in quantities of other items it sells. Walmart also has a
St. Louis, Amazon and online retailing is probably significant physical presence, and its stores provide
the biggest disrupter of retail since Walmart itself the instant gratification of shopping, buying an item,
Walmart was founded as a traditional, offline, physi- and taking it home immediately as opposed to waiting
cal store in 1962, and that's still what it does best. But when ordering from Amazon. Seventy percent of the
it is being forced to compete in e-commerce as well. U.S. population is within five miles of a Walmart store,
Eight years ago, only one-fourth of all Walmart cus- according to company management.
tomers shopped at Amazon.com, according to data Walmart has steadily increased its investment in
from researcher Kantar Retail. Today, however, half its online business, spending between $1.2 billion and
of Walmart customers say they've shopped at both $1.5 billion annually in 2015 and the next few years
retailers. Online competition and the profits to be on e-commerce. This includes fulfillment centers and
reaped from e-commerce have become too important technology and purchases such as $3 billion for Jet.com
to ignore.
to secure expertise for delivering the lowest-cost basket
Walmart's traditional customers
who are pri- of goods online. Walmart.com is now the second-
marily bargain hunters making less than $50,000 most visited e-commerce site in the United States with
per year-are becoming more comfortable using 88 million unique visitors per month. Walmart has
technology. More affluent customers who started constructed one of the world's largest private cloud
shopping at Walmart during the recession are return- computing centers, which provides the computing
ing to Amazon as their finances improve. Amazon horsepower for Walmart to increase the number of
has started stocking merchandise categories that items available for sale on Walmart.com from 1 million
Walmart traditionally sold, such as vacuum bags, three years ago to more than 50 million today. In the
diapers, and apparel, and its revenue is growing much spring of 2015 the company opened four new fulfill-
faster than Walmart's. In 2016, Amazon had sales of ment centers around the country, each of which is more
nearly S136 billion
than 1 million square feet. To further counter Amazon.
110
with information Systems
Walmart introduced its own free two-day shipping pro- phones for home delivery, through in-store pickup, or
gram for orders totaling more than 35.
New technology will also give Walmart more exper-
by wandering down the aisles of a Walmart superstore.
tise in improving the product recommendations for
Walmart is aiming to be the world's biggest omnichan-
web visitors to Walmart.com, using smartphones as
nel retailer
a marketing channel, and personalizing the shopping
Amazon is working on expanding its selection of
experience. Walmart has been steadily adding new
goods to be as exhaustive as Walmart's Amazon has
allowed third-party sellers to sell goods through its
applications to its mobile and online shopping channels website for a number of years, and it has dramatically
and is expanding its integration with social networks
such as Pinterest
2009 purchase of online shoe shopping site Zappos.com
More than half of Walmart customers own smart-
phones, Walmart has designed its mobile app to maxi-
to give the company an edge in footwear. Amazon
has been building its grocery offerings, with Amazon
mize Walmart's advantage over Amazon: its physical Prime, Prime Now, Prime Pantry, and Amazon Fresh
locations. About 140 million people visit a Walmart offering delivery times as short as an hour in some
store each week. The app's Walmart Pay feature
enables users to quickly, easily and securely pay with It looks like Amazon is trying to innovate in vial
their smartphones in all Walmart store
cases
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Walmart's technol-
112
Part I: Information Systems in the Digital Age
and the cost of these centers as a portion of Amazon's
operations is decreasing. Amazon is building up its
own delivery operation
to compete with UPS, FedEx,
and the U.S. Postal Service by offering better delivery
those of other retailers. Both Amazon and Walmart
are experimenting with drones to accelerate fulfillment
and delivery. But Walmart has thousands of stores, one
in almost every neighborhood, which Amazon won't
The winner of this epic struggle will be the company
ever be able to replicate.
that leverages its advantage better.
ogy initiative looks promising, but it still has work
to do before its local stores are anything more than
local stores. Can Walmart successfully move to an
Walmart's management believes the company's advan- and lower costs for both its own customers and possibly
Instead, CEO Doug McMillon is crafting a strategy
designed to replicate Amazon's business model.
that gives consumers the best of both worlds what
some real interaction with
tage is that it is not a pure-play e-commerce retailer
is called an omnichannel approach to retailing,
orously through the web and also in its physical stores.
ers want som
retaining its hallmark everyday low prices and wide
product assortment in both channels and using its large
network of stores as distribution points Walmart will
closely integrate online shopping and fulfillment with
er it's ordering on their mobile
its physical stores so that customers can shop how-
and that cust
ever they want, whether i
omnichannel strategy? Can Amazon's business model
work for physical retail store sales? Which giant will
dominate future retailing?
Sources: Rachel Abrams, "Walmart, with Amazon in Its Cross Hairs,
Posts E-Commerce Gains," New York Times, May 18, 2017; William
White, "Walmart Shipping Pass to Be Replaced by Free Two-Day Shipping."
Investor
Place, January 31, 2017; Nick Wingfield, "Amazon's Ambitions
Unboxed: Stores for Furniture, Appliances and More," New York Times,
March 25, 2017, and "Amazon's Living Lab: Reimagining Retail on Seattle
Streets," New York Times, February 12, 2017; Tim Denman, "Walmart's
Plan for Worldwide E-Commerce Domination," Info Systems News,
November 21, 2016; Greg Bensinger and Laura Stevens, "Amazon's Newest
Ambition: Competing Directly with UPS and FedEx," Wall Street Journal,
September 27, 2016; Rachel Abrams, "Walmart Outperforms Estimates, but
Online Retail Lags." New York Times, May 19, 2016; Nathan Olivarez-Giles,
"Amazon's Alexa Now Lets You Order Tens of Millions of Products with
Your Voice," Wall Street Journal, July 1, 2016; Farhad Manjoo, "How Ama-
zon's Long Game Yielded a Retail Juggernaut," New York Times, November
19, 2015; Brian O'Keefe, "The Man Who's Reinventing Walmart," Fortune,
June 4, 2015; and Nathan Layne, "Wal-Mart Eyes Amazon in Potentially
Costly E-commerce Battle," Reuters, May 20, 2015.
chegg.com
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CASE STUDY QUESTIONS
3-13 Analyze Walmart and Amazon.com using the
competitive forces and value chain models.
3-14 Compare Walmart and Amazon's business
models and business strategies.
3-15 What role does information technology play
in each of these businesses? How is it helping
them refine their business strategies?
3-16 Which company will dominate retailing?
Explain your answer.
customers
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chegg.com
nearly S136 billion
than milion square feet. 10 lurther counter AS
110
e with information Systems
2009
Walmart introduced its own free two-day shipping pro- phones for home delivery, through in-store pickup, or
gram for orders totaling more than
New technology will also give Walmart more exper-
535
tise in improving the product recommendations for
by wandering down the aisles of a Walmart superstore.
web visitors to Walmart.com, using smartphones as
Walmart is aiming to be the world's biggest omnichan-
nel retailer.
a marketing channel, and personalizing the shopping
experience. Walmart has been steadily adding new
nazon is working on expanding its selection of
goods to be as exhaustive as Walmart's Amazon has
allowed third-
and is expanding its integration with social networks
applications to its mobile and online shopping channels website for party sellers to sell goods through its
such as Pinterest
expanded
for a number of years, and it has dramatically
More than half of Walmart customers own smart-
product selection via acquisitions such as its
purchase of online shoe shopping site Zappos.com
phones, Walmart has designed its mobile app to maxi
to give the company an edge in footwear. Amazon
mize Walmart's advantage over Amazon:
has been building its grocery offerings, with Amazon
its
locations. About 140 million people visit a Walmart
physical Prime, Prime Now, Prime Pantry, and Amazon Fresh
store each week. The app's Walmart Pay feature
offering delivery times as short as an hour in some
enables users to quickly, easily and securely pay with
cases
their smartphones in all Walmart stores. Users link a
It looks like Amazon is trying to innovate in physical
credit card or bank account to the app. At checkout,
retail store sales as well as online. Amazon has opened
they can just scan the phone to pay rather than pulling
retail bookstores in Seattle, Chicago, San Diego, and
other U.S. locations featuring Amazon electronic
out their wallets. The app can also store shopping lists, devices as well as books. It is thinking about moving
save wish lists, and arrange online orders. About
22 million people now use the app as they shop.
into the grocery business as well as retail stores for
The Walmart website uses software to monitor prices that lend themselves less easily to online purchasing
furniture and appliances. These are retail experiences
at competing retailers in real time and lower its online because customers like to see and feel these types of
prices if necessary. The company is also doubling goods in person. Amazon set up a physical grocery
inventory sold from third-party retailers in its online store in downtown Seattle called Amazon Go that is
marketplace and tracking patterns in search and social designed around an app that is able to place the items
media data to help it select more trendy products. This customers buy in a digital shopping cart so they can
strikes directly at Amazon's third-party marketplace, leave the store without waiting in a checkout line. The
which accounts for a significant revenue stream for system automatically charges the credit card linked to
Amazon. Additionally, Walmart is expanding its online the customer's Amazon account and even knows when
offerings to include upscale items like $146 Nike sun- that person puts something back.
glasses and wine refrigerators costing more than $2,500 Amazon continues to build more fulfillment centers
to attract customers who never set foot in a Walmart closer to urban centers and expand its same-day deliv-
store. A new Product Content Collection System will ery services, and it has a supply chain optimized for
facilitate vendors sending their product catalogs to online commerce that Walmart just can't match. It now
has more than 100 warehouses from which to pack-
Walmart, and the product information will then be
age and ship goods. Warehouses speed up Amazon's
available online
Walmart's commitment to e-commerce is not shipping, encouraging users to shop more at Amazon,
and the cost of these centers as a portion of Amazon's
designed to replicate Amazon's business model.
Instead, CEO Doug McMillon is crafting a strategy operations is decreasing. Amazon is building up its
own delivery operation to compete with UPS, FedEx,
that gives consumers the best of both worlds what
and the U.S. Postal Service by offering better delivery
is called an omnichannel approach to retailing.
and lower costs for both its own customers and possibly
Walmart's management believes the company's advan-
those of other retailers. Both Amazon and Walmart
tage is that it is not a pure-play e-commerce retailer
are experimenting with drones to accelerate fulfillment
and that customers want some real interaction with
and delivery. But Walmart has thousands of stores, one
physical stores as well as digital. Walmart will sell vig-
in almost every neighborhood, which Amazon won't
orously through the web and also in its physical stores,
ever be able to replicate.
The winner of this epic struggle will be the company
that leverages its advantage better. Walmart's technol-
ogy initiative looks promising, but it still has work
to do before its local stores are anything more than
local stores. Can Walmart successfully move to an
retaining its hallmark everyday low prices and wide
product assortment in both channels and using its large
network of stores as distribution points, Walmart will
closely integrate online shopping and fulfillment with
its physical stores so that customers can shop how-
ever they want, whether it's ordering on their mobile
112
models and business stra
3-14 Compare Walmart and A
competitive forces and va
3-13 Analyze Walmart and A
CASE STUDY QUESTIONS
Streets," New York Times, February 12, 201
March 25, 2017, and "Amazon's Living Lab
Unboxed: Stores for Furniture, Appliances
Investor
Place, January 31, 2017; Nick Wing
White, "Walmart Shipping Pass to Be Repla
Posts E-Commerce Gains," New York Tim
Sources: Rachel Abrams, "Walmart, with
dominate future retailing?
work for physical retail store sa
omnichannel strategy? Can An
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