University of Toronto Amazon Company Case Study

Case study:

The logical process of analyzing a case study involves: (1) Determining if the organization faces a problem that requires action on the part of managers; (2) the nature of this problem, including both direct and in-direct causes of the problem; and (3) the specific actions that should be taken in order to improve or rectify the situation that the firm faces. Students are typically asked to role-play by assuming that they are either an individual identified in the case or an individual being asked to provide specific advice to the central organization in the case study.

Specifically, students are provided with a case study document that recounts a real management challenging facing a manager/management team. Students then analyze the situation by defining the Primary Problem, developing Alternative Solutions, and creating an Implementation Plan that covers the short/medium/long term. This is a written assignment and students will prepare a report of not more than seven (7) pages in length (single-spaced, 12-point font, 1 inch margins), not including a required Executive Summary.

(Here is the case information, the whole text is on the file below. )

William Blair Funds investing for the future: The Global/Local Challenge of Online Groceries

Introduction:

The global COVID-19 pandemic has forced billions of people into their homes and out of retail stores. The result has been a massive shift towards online shopping which has hugely benefited e-commerce companies. In addition to being one of the world’s most valuable companies, Amazon is now also the world’s most valuable brand, having expanded from books to almost everything consumers want to buy. Well, almost everything. For a company like Amazon, that seeks to make life more convenient for consumers, developing an online grocery always seemed like a natural fit, and they have long coveted this valuable, if competitive, global market. But success in this market has proven elusive, both for Amazon and other would-be online grocery retailers. One of the key questions surrounding, what most expect will be a robust online market for groceries even when the current pandemic passes, is whether the online world of groceries was likely to be more international or even global when traditionally, grocery retailing had remained dominated by domestic competitors.

William Blair & Company is an American investment bank and financial services company headquartered in Chicago. The company was established in 1935 and has almost $100B USD in assets under management. Their International Growth Fund looks to invest into companies that are likely to experience growth in the next couple of years, over and above what is expected for the industries in which they are operating. In other words, they are looking to select the companies that are best positioned to out-perform their competitors.

As a new investment analyst with William Blair, you have been asked to look at the market for online groceries and to select one company from either the United States, Canada or the United Kingdom which you believe is well-positioned to outperform over the next few years in this market. The company can be an existing grocery retailer such as Loblaw, Wal-Mart or Morrisons, or one of the app developers such as Instacart or an online retailer such as Amazon. You will want to consider the business model of the company (how they make money), the market(s) in which they operate, and the likelihood of success of their approach to on-line grocery shopping compared to the others being developed.

(I prefer to choose Amazon for the case study )

William Blair Funds investing for the future: The Global/Local
Challenge of Online Groceries
Tyler Chamberlin Ph.D.
Introduction:
The global COVID-19 pandemic has forced billions of people into their
homes and out of retail stores. The result has been a massive shift
towards online shopping which has hugely benefited e-commerce companies.
In addition to being one of the world’s most valuable companies, Amazon
is now also the world’s most valuable brand1, having expanded from books
to almost everything consumers want to buy. Well, almost everything.
For a company like Amazon, that seeks to make life more convenient for
consumers, developing an online grocery always seemed like a natural
fit, and they have long coveted this valuable, if competitive, global
market. But success in this market has proven elusive, both for Amazon
and other would-be online grocery retailers. One of the key questions
surrounding, what most expect will be a robust online market for
groceries even when the current pandemic passes, is whether the online
world of groceries was likely to be more international or even global
when traditionally, grocery retailing had remained dominated by domestic
competitors.
The Grocery Business:
Food is a necessity of life, and big business all around the world. For
around a hundred years now, grocery stores in most highly developed
countries, such as Canada, the US and the UK, have been dominated by
large “cash and carry” stories where customers picked what they wanted
off of shelves and then lined-up to pay for them. Stores were large, and
got larger over the years, and could easily sell over 50,000 individual
items. Change occurred but not all that rapidly with the introduction
of private label brands, such as President’s Choice for example, and new
offerings were added and removed as consumers tastes changed and evolved.
But despite a fairly standardized customer experience, grocery retailing
remained a largely domestic business. In Canada, the major players were
Loblaw, Sobey’s and Metro but since the mid-2000’s Wal-Mart has also had
a strong presence in groceries2. When Wal-Mart entered the market there
was great concern that the world’s largest retailer, at least at the
time, would be able to out-compete its Canadian rivals. The same sort
of concerns were held by British grocery store chains when Wal-Mart
bought the ASDA chain of grocery stores in 19993.
1 Abboud, Leila (2019). “Amazon clinches top spot in the world’s most valuable
brand ranking”, Financial Times, June 11th.
2 Shaw, Hollie (2014). “Walmart Canada gaining ground in retail food fight”,
Financial Post, Nov 13th.
3 Cowe, Roger; Buckingham, Lisa and Martinson, Jane (1999). “Wal-Mart swallows
Asda”, The Guardian, June 15th.
Grocery retailing has proven remarkably resilient to foreign
competition. Of course people’s tastes for specific foods differed from
one country to the next, but given that the business models were the
same it was surprising that companies had been able to be successful in
their international operations. Where companies have had at least some
success, as Wal-Mart has in Canada and the UK it has usually required
them to acquire an existing domestic player and then expand or evolve
the product offerings. But while Wal-Mart now holds about 12% of the
Canadian market4, disappointment with their progress in the UK market
(where they operate under the Asda brand) led to a proposed merger with
domestic rival Sainsbury’s, a merger that was eventually rejected by the
UK government on the grounds that it would create too large a competitor5.
Efforts by the British grocery chain Tesco were largely unsuccessful and
required the company to pull back from their attempt to penetrate the
US market in 20136. Just recently, it was announced that the company had
sold its Polish stores, it’s largest market in Europe outside of the UK,
for £181m (about $307m CDN) to a discount chain out of Denmark7. Earlier
this year, it sold its chain of over 2,000 stores in Thailand and 74 in
Malaysia for $10.6B (USD)
8. It has also announced that it was ending it’s
20% share of a Chinese jointventure9.
With these experiences in mind, there was much excitement, and concern
amongst established competitors, when Amazon bought the premium American
grocery store chain Whole Foods in 2017. Whole Foods had already started
to slowly expand into both Canada and the UK and with Amazon’s pioneering
success in on-line commerce it seemed that revolution, as opposed to
evolution, might finally be upon the grocery business.
Online-Retailing of Groceries:
Groceries presented a set of new logistical challenges, even for a
dominant on-line player such as Amazon. First is the issue of the sheer
number of products that customers expect to choose from in a grocery
environment, over 50,000 at least. Would online delivery necessitate a
reduction in product offerings? The second challenge is the perishability
issue. Many groceries need to be kept refrigerated and cannot be just
left on people’s doorsteps. Urgency is a third challenge, as many
4 Shaw, Hollie (2014). “Walmart Canada gaining ground in retail food fight”,
Financial Post, Nov 13th.
5 Eley, Jonathan; Walker, Owen and Pickard, Jim (2019). “Sainsbury’s takeover
of Asda blocked by UK’s competition regulator”, Financial Times, April 25th.
6 Finch, Julia and Walsh, Fiona (2012). “Tesco’s American dream over as US
retreat confirmed”, The Guardian, December 5th.
7 Nilsson, Patricia (2020). “Tesco quits Poland in further retreat from
overseas ambitions”, Financial Times, June 18th.
8 Reed, John & Eley, Jonathan (2020). “Tesco agrees $10.6bn sale of Thai and
Malaysian operations”, March 9th.
9 Ibid.
customers are looking to receive their products today, if not
immediately. Two days is convenient for most Amazon purchases but
delivering today is a new challenge. Did these last two challenges
require a new technological solution? If so, it would appear that a
company like Amazon, that was already developing its own delivery
technologies, would be in a much better position to succeed.
The Situation in 2020:
Most the largest players in the grocery business had begun selling
products online and offering either in-store pick-up or home delivery,
albeit typically only in select urban markets. When the COVID-19 pandemic
hit in early 2020, retailers of all products scrambled to find new ways
to get their products into the hands of customers. In-store or curb-side
pick-up was a much easier solution for stores but avoiding going to
stores appeared to be what customers really wanted. The ways in which
companies had chosen to go on-line with their delivers varied
significantly.
In Canada, both Wal-Mart and Loblaw have partnered with a US-based
company called Instacart which has both an app and ‘boots on the ground’
delivery service. In the UK, Amazon is providing delivery services for
the established grocery store chain Morrisons, despite their ownership
of Whole Foods. It was thus not yet clear whether delivery would end up
being a service provided by established retailers or by new specialized
technology companies. Finding the right partner company could mean
success and an early advantage for firms operating within markets that
remained largely domestic but developing the “last-mile” solution to
grocery delivery could be the basis upon which a global grocery retailer
might finally be developed into a dominant player in multiple markets
internationally.
William Blair Funds LTD:
William Blair & Company is an American investment bank and financial
services company headquartered in Chicago. The company was established
in 1935 and has almost $100B USD in assets under management. Their
International Growth Fund looks to invest into companies that are likely
to experience growth in the next couple of years, over and above what
is expected for the industries in which they are operating. In other
words, they are looking to select the companies that are best positioned
to out-perform their competitors.
As a new investment analyst with William Blair, you have been asked to
look at the market for on-line groceries and to select one company from
either the United States, Canada or the United Kingdom which you believe
is well positioned to out-perform over the next few years in this market.
The company can be an existing grocery retailer such as Loblaw, Wal-Mart
or Morrisons, or one of the app developers such as Instacart or an online
retailer such as Amazon. You will want to consider the business model
of the company (how they make money), the market(s) in which they
operate, and the likelihood of success of their approach to on-line
grocery shopping compared to the others being developed.

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