Amazon is a multinational company, the largest trading platform in the world. The organization uses third parties to deliver goods offered on the website. The corporation’s status in the market as one of the Big Five companies in the United States (US) allows it to innovate and take bold actions to increase the quality of its services. It is Amazon’s priority to provide products that are available at a press of a button to satisfy the consumers’ wants and needs. In pursuing that goal, recently, the company has been purchasing planes to reduce the impact of other transportation firms, imposing costs for transfers.
In the article “Amazon Adds 11 More Cargo Jets to its Growing Air Fleet,” the acquisition of eleven Boeing jets by Amazon from two airline companies is discussed. Previously, leasing airplanes directly from owners involved expenses for their exploitation. However, the organization decided to reduce costs of transportation by bypassing them to hold ownership over vehicles. Amid the health crisis, the air travel industry has “frozen,” leaving jets on the ground full of undelivered cargo (“Amazon Adds 11 More Cargo Jets to its Growing Air Fleet” para. 3). Thus, Delta Air Lines and WestJet Airlines chose to sell eleven of their passenger planes to Amazon to maintain their performance. Therefore, the corporation’s tactic to acquire several aircraft for shipping purposes is a well-thought move to eliminate the intermediaries.
The airline industry is highly competitive and full of giants akin to United Parcel Service and FedEx Corporation. Amazon is a new entrant in the market where barriers such as costs of equipment and brand image prevent others from joining in. Nevertheless, the company is growing rapidly and already owns around “80 planes before this latest deal” (“Amazon Adds 11 More Cargo Jets to its Growing Air Fleet” para. 5). It has an advantage of reputation among consumers and their loyalty to the label. What is more, Amazon has already established various air hubs in Germany, Florida, California, and Kentucky (“Amazon Adds 11 More Cargo Jets to its Growing Air Fleet” para. 5). The company attempts to improve customer service quality and fulfill the demand for its products. Indeed, the pandemic movement restrictions force people to order goods online. Thus, Amazon’s response to the growing need for fast delivery is a rational business decision. The company will still utilize other firms to maintain planes. Furthermore, the corporate representative, Sarah Rhoads, asserts that the combination of ownership and leasehold will assist in superior management of existing operations. Thereupon, despite its recent participation in the air market, Amazon promises better client care.
Vertical integration (VI) is when a company controls more than one stage in a supply chain. It is a process, that enterprises use to turn raw materials into products and bring them to consumers. There are four stages in the supply chain: goods, production, distribution, and retail. The company vertically integrates when it supervises two or more of these stages. Thus, Amazon’s purchase of planes is a VI intended to regulate the distribution procedure. It is a forward VI since the company goes further and ships goods without a third party. It can be noted that such integration allows the corporation to gain a cost advantage. Additionally, it is less likely to experience irregularities or delays during the customs inspection. The company can enjoy VI as its suppliers have considerable market power, dictating conditions and cutting profits. There is an opportunity to reduce prices as the absence of the intermediary diminishes shipping costs. Thereby, Amazon’s decision can be deemed as a favorable choice considering cost and price benefits.
Amazon must examine some of the detrimental consequences of owning multiple airplanes. First, the cost of maintaining the equipment and building air hubs is a huge risk to the company. However, Amazon can tackle the business risk by maximizing activities in the most profitable area and investing in the new project. In case of failure of one branch, revenues from the others will help to cover expenses. At the same time, the corporation assumes essential responsibilities for all tasks shipping firms routinely perform. The recruitment process, customs duties, and legal control of the company should be explored and analyzed. The concentration on delivery might affect the quality of other services such as e-commerce and artificial intelligence. Nonetheless, years of experience in adopting new stages of supply chains demonstrate that Amazon will integrate successfully. The company built an exclusive chain, buying most of the competitors and creating a closed ecosystem in its market segment. Thus, the decision to integrate into a forward direction involves costs, which can be reduced by the application of knowledge and skillful strategies.
In a nutshell, Amazon’s recent acquisition of eleven jets is a significant step towards the provision of a better quality customer experience. While the health crisis makes businesses shut down, airline firms manage to survive by trading their passenger planes. Amazon used a possibility and bought them from two companies. Despite some difficulties, I expect Amazon to integrate effectively into the air industry, taking into account its previous productive cases and cost opportunities. A well-developed set of tactics, thorough research, and profound investigation will provide a solid base for future expansion and growth.
Reference
“Amazon Adds 11 More Cargo Jets to its Growing Air Fleet.”DC Velocity, 2017. Web.