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Question: 1.How does Amazon.com illustrate the


1.How does Amazon.com illustrate the sources of service sector growth? Comment on information technology, the Internet as an enabler, innovation, and changing demographics.
2.What generic approach(s) to service design does Amazon.com illustrate, and what competitive advantages does this design offer?
3. Is Amazon.com a model for the future of retailing?

Amazon.com
Like many entrepreneurs, Jeffrey Bezos, founder of Amazon.com had an idea, did his homework, and developed a new service. Amazon opened its virtual doors in July 1995. Since then, the retailer has served millions of customers worldwide and, in 2015, generated more than $100 billion in annual sales through its retailing operation and nearly $10 billion through its Web Services (AWS) operation. 13 Many people regard Amazon as the “golden child” of the Internet. Unlike many entrepreneurs, however, Bezos was not content with just gaining market share for his initial concept. More than 20 years after opening its doors, Amazon still is developing new services.
The young CEO started Amazon with the intention of establishing a strong brand name that he could leverage into other products. He marketed books first, because he believed they were ideal cyberspace products. Customers do not need much physical interaction with the product or with a salesperson to purchase books. Books, therefore, are well suited to marketing over the web.
A key success factor for Amazon is that it captures market share and fosters brand loyalty by focusing on customer needs. Bezos believes that paying too much attention to short-term gains means forgetting about long-term customer satisfactions. Loss of this long-term customer focus comes at a price, however.
Despite impressive sales growth, Amazon did not turn a profit quickly, but that didn’t stop it from becoming a dominant force in online retailing. In addition to books, the Amazon website now includes products and services such as electronics, music, software, toys, clothing, and B2B services for other businesses. Some items are available from Amazon’s inventory, and other products and services are supplied by third-party sellers through its Marketplace capability. These sellers, in turn, pay a portion of their revenues to Amazon. Amazon also manufactures and sells several versions of its Kindle e-book reader, which has made Amazon the leader in eBook sales.

AMAZON’S GUIDING FORCE—THE CUSTOMER
Amazon’s guiding philosophy is to provide superior service to its customers. Bezos and his management team spent one year creating the website and database programs that drove Amazon in the beginning. They sought to create a friendly site that would not demand a high level of computer literacy.
Bezos recognized that Internet commerce would shift the balance of power toward consumers. Consequently, Amazon built customer relationships by customizing its service, involving its website visitors in the service, and creating a communal spirit. Focus on the consumer still is the cornerstone for developing customer loyalty.

CUSTOMER AS COPRODUCER AND SERVICE CUSTOMIZATION
Amazon integrates customers into the service delivery process in several ways. Customers can review items they have purchased and answer other customers’ questions. The “wish list” is another service that Amazon offers. For example, a customer can enter titles of books he or she would like to have into a personal wish list. A friend who wants to give that customer a book as a gift then can make a selection from the wish list.
Amazon also makes personalized recommendations to individual customers. Some of these recommendations are based on the customer’s past purchases, and other recommendations are based on the behavior of past customers who have made purchases similar to those of the customer. If a consumer purchases a book on Amish quilts, for example, Amazon’s software will search for all of the people who purchased this same book. Using a mathematical process developed by Amazon called item-based collaborative filtering, the software determines what other books are popular with people who read the Amish quilt book. The customer then receives a list of proposed titles based on this information. Amazon uses this technique to provide the same friendly and personalized reading advice that a local bricks-and-mortar bookstore operation can, but it achieves greater accuracy and convenience at a fraction of the cost.
One flaw of this early collaborative filtering was its inability to distinguish gift purchases. Someone buying his or her mother a book on quilting, for example, would receive recommendations on this topic despite a lack of personal interest. Amazon solved this problem by including a check box on the order page so the customer can indicate if the item is a gift. Another problem can arise because the power of collaborative filtering is based on the customer’s history. If a person changes e-mail addresses frequently and uses a new Amazon identification, all of the data are lost.
In addition to collaborative filtering, the company uses other strategies to achieve its mission. When repeat customers log on to the website, a personalized web page greets the customer by name and allows him or her to view the new recommendations made by the collaborative filtering tool. Bezos compares this personalized front page with “walking into your favorite store and finding only items that you want on the shelves near the door.” Amazon also allows customers to store information on the company’s secure server.
Customers can authorize Amazon to keep a record of their credit cards and mailing addresses, for example. This technology, called 1-Click, streamlines the service so that customers don’t have to reenter the information every time they make purchases.
Amazon doesn’t wait for customers to come to its site to provide its service. Customers receive periodic e-mails encouraging them to visit Amazon.com and giving a list of recommendations for items to check out on the next visit.

OTHER UNIQUE USES OF TECHNOLOGY FOR THE CUSTOMER
Amazon not only has used technology to personalize the customer experience, but also has designed its site with customers in mind. The pages are easy to understand and use. The website avoids large graphics, which can take a long time to load.
A powerful search engine is another unique feature of Amazon. The company employs a “do what I mean” (DWIM) search function. The site recognizes the misspellings that customers make frequently and changes the search function to account for these mistakes. If a customer misspells the author’s name Fitzsimmons as Fitzsimons, for example, Amazon still displays the book Service Management.

MORE THAN JUST FRIENDLY TECHNOLOGY
Amazon’s technology has helped to create loyal customers who not only visit the site, but, as we have noted, also interact with it. Amazon is an active virtual community that involves the customer.
As noted, the company encourages visitors and customers to post reviews of any book or product on the site. This review process involves the customers in developing the content on the website and creates an information tool for other website visitors. To help its Kindle users, Amazon hosts a customer forum website where customers can ask and answer questions and participate in online discussions. 
Amazon employees go to great lengths for the customers and consider them as part of a community. One customer reported with joy that a copy of his father’s book, 20 years out of print, had been located for him by Amazon.
The Associates Program expands this “community” beyond the websites under Amazon’s direct control. Amazon allows registered websites, such as Yahoo.com, Drugstore. com, and Zappos.com, to recommend specific books, CDs, videos, and other Amazon products to their visitors using a hyperlink. If customers follow the hyperlink and purchase the product on Amazon.com, these associates receive a modest commission.
Amazon claims “tens of thousands” of associates are participating in its programs, which expands Amazon’s presence and publicity on the web, but it also means that Amazon could lose some control of its brand and image. Amazon has encountered some other problems in the past. A reporter once revealed that Amazon was selling space to publishers on a list of favorite books. Amazon also was accused of selling authors extra e-mail support on the website for various titles. 14 The company was flooded with outraged e-mails and stopped all paid promotions in response to the outcry. This incident raises the question: Will the loyal customer base of Amazon or any other electronic service tolerate being used for financial gain?
The ability to provide the broad spectrum of services for millions of customers seamlessly and consistently depends on very sophisticated technology, much of which was pioneered by Amazon engineers and architects. The highly personalized page that greets a returning customer contains hundreds of bits of software logic, and is a testament to their work. Referring to software and technology capabilities, Bezos says in a 2010 letter to shareholders issued in early 2011, “Many of the problems we face have no textbook solutions, and so we—happily—invent new approaches.”15

NOT JUST A BOOKSELLER ANYMORE
Amazon Web Services (AWS) is a pivotal addition to the company’s offerings. This program, which began about 10 years ago as a simple cloud storage system, supplies other businesses with a web-based platform for all of their operations. In fact, Amazon is the single largest supplier of cloud support technology for businesses, large and small. The company’s cloud computing services are available in 2015 in 12 geographic regions of the world. In addition to basic infrastructure technology, Amazon’s 2015 Annual Report says that the company offers more than 70 related services. Among these services are a new database engine, Aurora, and Redshift, a managed data warehouse service. Other new offerings include Quick Sight, a new Business Intelligence computing capability; EC2 Container Service; and Lambda, a pioneering server less computing service.16 Amazon states that “developers and systems administrators can . . . collect and track metrics, gain insight, and react immediately to keep their applications and businesses running smoothly.”17 
An alliance with Viacom, a company that provides online access to many entertainment venues, was announced in early 2012. 18 This alliance allows Amazon Prime members to stream movies and television programs instantly and commercial-free. 19 Amazon has gone beyond this service and is producing its own video programming for customers to stream.
In accordance with his firm belief that successful entrepreneurs must take a long-term view of their businesses and the world, Bezos founded Blue Origin, a company dedicated (and determined) to provide affordable suborbital and orbital space travel. 20 Early in 2016 Bezos predicted that the company might be taking paying tourists for short trips as early as 2018. 21 In its short life thus far, Blue Origin has enjoyed the taste of success and failure, and researchers look forward—and upward—to matching Amazon’s achievements.

IT’S A BIRD, IT’S A PLANE, NO—IT’S AMAZON
Amazon has been a leader in retailing and customer service from its very beginning. Since those early days it has pioneered a host of services, most recently its Amazon Web Services (AWS) that provides cloud technology for businesses and some brick-and-mortar stores. What more can it possibly do? Think drones. We can chuckle at the idea of a drone delivering a book or dog food to our doorstep, but Amazon is not laughing about that possibility. Shipping is the backbone of Amazon’s retail success, so it is not surprising that much attention goes into facilitating that part of the company’s operation. Amazon now has its own fleet of delivery trucks, robot-powered warehouses, and the first of a fleet of transport planes. These new capabilities might represent a threat to UPS’s long-time dominance in the field of home delivery. And, the company really is exploring ways to use drones, also.

AS AMAZON LOOKS TO THE FUTURE—WILL IT BECOME THE WALMART OF THE INTERNET?
Amazon has been very successful turning a profit since 2004. Amazon’s personalized customer service and online community strategy work well. The company claims its sales of electronic books have surpassed the sales of its printed books, and it is the largest seller of videos and music on the web. 22 Early skeptics suggested that price-sensitive buyers would constantly search the net for the lowest prices and leave companies without any pricing power or brand loyalty. Amazon has not suffered this predicted pattern in part because it has taken a long-range view of the business and invested heavily in creating a loyal customer base.
Fast expansion into a variety of retailing areas reinforces Amazon’s goal to be a one-stop shopping site on the Internet. In 2012 some sources suggested that Amazon might venture into the brick-and-mortar arena by establishing Apple-type stores to sell its Kindle e-readers, and, also, might introduce a smartphone. 23 This prediction has come true. Amazon’s first brick-and mortar store is located in Seattle, WA, and a second store will be opened in San Diego, CA. The Seattle store sells books and electronic devices including Kindles and Echo, which is sort of a home companion who can answer your questions, make dinner reservations at your favorite restaurant, but who doesn’t need care or watering. Future stores might sell other types of products.24 As for the smartphone, the Amazon culture values failures as well as successes. 


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> 11. Serving complimentary drinks on a delayed flight is an example of empathy being shown by the service personnel to the irate customer. 12. In the service quality gap model, GAP1 arises because of the management’s lack of understanding about how custom

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> 1. Who are Goodwill’s customers and how have their demo-graphics changed over time? 2. How should the introduction of for-profit thrifts affect Goodwill’s decisions about the role of customer service? 3. How can Goodwi

> 1. Marketing analysts use market position maps to display visually the customers’ perceptions of a firm in relation to its competitors regarding two attributes. Prepare a market position map for Alamo Draft house using “food quality” and “movie selection

> 1. For the Burger Palace example, perform a complete analysis of efficiency improvement alternatives for unit S2, including determination of a composite reference unit. 2. For the Burger Palace example, perform a complete analysis of efficiency improveme

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> 1. Assume that you are part of the management staff whose task is to develop this sketch plan. Using Microsoft Project, develop the PERT network as outlined above, identify the critical path, and determine the expected time to reach basic operational sta

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> Located in a major southwestern U.S. city, Elysian Cycles (EC) is a wholesale distributor of bicycles and bicycle parts. Its primary retail outlets are located in eight cities within a 400-mile radius of the distribution center. These retail outlets gene

> 1. Assuming that the cost of stock out is the lost contribution of one dessert, how many portions of Sweet Revenge should the chef prepare each weekday? 2. Based on Martin Quinn’s estimate of other stock out costs, how many servings sho

> A.D. Small, Inc., provides management consulting services from its offices located in more than 300 cities in the United States and abroad. The company recruits its staff from top graduates of recognized MBA programs. Upon joining A.D. Small, a recruit a

> Gnomial Functions, Inc. (GFI), is a medium-sized consulting firm in San Francisco that specializes in developing various forecasts of product demand, sales, consumption, or other information for its clients. To a lesser degree, it also has developed ongo

> Oak Hollow Medical Evaluation Center is a nonprofit agency offering multidisciplinary diagnostic services to study children with disabilities or developmental delays. The center can test each patient for physical, psychological, or social problems. Fees

> Computer simulation provides management an experimental laboratory in which to study a model of a real system and to determine how the system might respond to changes in policies, resource levels, or customer demand. A system, for our purposes, is define

> 1. Describe Xpresso Lube’s service package. 2. How are the distinctive characteristics of a service operation illustrated by Xpresso Lube? 3. What elements of Xpresso Lube’s location contribute to its success? 4. Given the example of Xpresso Lube, what o

> On a hillside in Rolling wood, a community just southwest of Austin, Texas, the Renaissance Clinic provides dedicated obstetric and gynecological services. The medical treatment at this facility is wrapped in an exclusive-feeling physical environment tha

> Let us revisit the Automobile Driver’s License Office Example 5.2 and model the proposed process improvement shown as Figure 5.6 (b). Recall that the improvement consisted of combining activities 1 and 4 (Review Application and Eye Test

> Renaissance Clinic is a hospital dedicated to the health care of women. It is located in the hill country surrounding Austin, Texas, and offers an environment that is unique in the city. At the time of a visit, a patient of Dr. Margaret Thompsonâ&#

> 1. During periods of bad weather, as compared with periods of clear weather, how many additional gallons of fuel on aver-age should FreeEx expect its planes to consume because of airport congestion? 2. Given FreeEx’s policy of ensuring that its planes do

> The Houston Port Authority has engaged you as a consultant to advise it on possible changes in the handling of wheat exports. At present, a crew of dockworkers using conventional belt conveyors unloads hopper cars containing wheat into cargo ships bound

> Go forth armed with clipboard and stopwatch and study an actual waiting experience (e.g., post office, fast-food restaurant, retail bank). Begin with a sketch of the layout noting the queue configuration. Describe the characteristics of the calling popul

> 1. In this chapter, we referred to Maister’s First and Second Laws of Service. How do they relate to this case? 2. What features of a good waiting process are evident in Dr. X’s practice? List the shortcomings that you see. 3. Do you think that Mrs. F is

> Thrifty Car Rental (now part of Hertz) began as a regional business in the southwest, but it now has more than 470 locations across the country and almost 600 international locations. About 80 percent of its U.S. locations are at airports, and the rest a

> 1. For the forecast period (i.e., July–December), determine the number of new trainees who must be hired at the beginning of each month so that total personnel costs for the flight-attendant staff and training program are minimized. For

> On the morning of November 10, 2002, Jon Thomas, market analyst for the Mexico leisure markets, canceled more than 300 seats “illegally” reserved on two flights to Acapulco. All of the seats on Jon’s Acapulco flights were booked by the same sales represe

> 1. How is SSM different from Deming’s PDCA cycle? 2. Prepare a cause-and-effect or fishbone diagram for a problem such as “Why customers have long waits for coffee.” Your fishbone diagram should be s

> 1. Assume that you are the assistant to the manager for operations at the FAA. Use the techniques of work shift scheduling to analyze the total workforce requirements and days-off schedule. For the primary analysis, assume that a. Operator requirements w

> River City National Bank has been in business for 10 years and is a fast-growing community bank. Its president, Gary Miller, took over his position 5 years ago in an effort to get the bank on its feet. He is one of the youngest bank presidents in the sou

> Securing a mortgage often is a time-consuming and frustrating experience for a homebuyer. The process involves multi- ple stages with many handoffs to independent organizations providing specialized services (e.g., property survey and title search). The

> 1. What features of the 7-Eleven Japan distribution system illustrate the concept of the bidirectional service supply relationship? 2. Does the 7-Eleven Japan distribution system exhibit scalability economies? 3. How does the 7-Eleven example of B2C e-co

> 1. How does the Boomer Technology Circle illustrate the concept of the bidirectional service supply relationship? 2. How has Boomer Consulting, Inc., made the client a coproduce in the service delivery process? 3. How is the concept of â€&#156

> 1. Utilizing a spreadsheet version of the Huff location model (with λ = 1.0), recommend a store size and location for AFI. Assuming that AFI does not wish to consider a store that is smaller than 10,000 square feet, assess the store sizes (b

> Joan Taylor, the administrator of Life-Time Insurance Company, which is based in Buffalo, New York, was charged with establishing a health maintenance organization (HMO) satellite clinic in Austin, Texas. The HMO concept would offer Austin residents an a

> 1. Briefly summarize the complaints and compliments in Dr. Loflin’s letter. 2. Critique the letter of Gail Pearson in reply to Dr. Loflin. What are the strengths and weaknesses of the letter? 3. Prepare an “improved” response letter from Gail Pearson. 4.

> 1. Prepare an -chart and R-chart for complaints, and plot the average complaints for each crew during the nine-month period. Do the same for the performance ratings. What does this analysis reveal about the service quality of CSI’s

> 1. Describe Village Volvo’s service package. 2. How are the distinctive characteristics of a service firm illustrated by Village Volvo? 3. How could Village Volvo manage its back office (i.e., repair operations) like a factory? 4. How can Village Volvo d

> 1. How do the environmental dimensions of the services cape explain the success of Central Market? 2. Comment on how the services cape shapes the behaviors of both customers and employees. Central Market5 The original Central Market grocery store, locat

> 1. Use CRAFT logic to develop a layout that will maximize customer time in the store. 2. What percentage increase in customer time spent in the store is achieved by the proposed layout? 3. What other consumer behavior concepts should be considered in the

> 1. Identify the bottleneck activity, and show how capacity can be increased by using only two pharmacists and two technicians. 2. In addition to savings on personnel costs, what benefits does this arrangement have? Health Maintenance Organization (B) Th

> 1. Beginning with a good initial layout, use operations sequence analysis to determine a better layout that would minimize the walking distance between different areas in the clinic. 2. Defend your final layout based on features other than minimizing wal

> 1. How has Enterprise Rent-A-Car (ERAC) defined its service differently than that of the typical national car rental company? 2. What features of its business concept allow ERAC to compete effectively with the existing national rental car companies? 3. U

> 1. Describe the service organization culture at Amy’s Ice Cream. 2. What are the personality attributes of the employees who are sought by Amy’s Ice Cream? 3. Design a personnel selection procedure for Amy’s Ice Cream using abstract questioning, a situat

> 1. Prepare a service blueprint for Commuter Cleaning. 2. What generic approach to service system design is illustrated by Commuter Cleaning, and what competitive advantages does this design offer? 3. Using the data in Table 3.5, calculate a break-eve

> 1. Describe the growth strategy of Federal Express. How did this strategy differ from those of its competitors? 2. What risks were involved in the acquisition of Tiger International? 3. In addition to the question of merging FedEx and Flying Tigers pilot

> 1. Prepare a service blueprint for the 100 Yen Sushi House operation. 2. What features of the 100 Yen Sushi House service delivery system differentiate it from the competition, and what competitive advantages do they offer? 3. How has the 100 Yen Sushi

> 1. Prepare a run chart on each of the incident categories. Does she have reason to be concerned about burglaries? What variable might you plot against burglaries to create a scatter diagram to determine a possible explanation? 2. What is unusual about th

> Conduct a Google search on “project finance” and find employment opportunities in project finance. What is the role of finance in projects?

> Could firms in the “world-class service delivery” stage of competitiveness be described as “learning organizations’?

> Discuss the difference between time variance, cost variance, and schedule variance.

> Explain why the PERT estimate of expected project duration always is optimistic. Can we get any feel for the magnitude of this bias?

> Are Gantt charts still viable project management tools? Explain.

> Illustrate the four stages of team building from your own experience.

> Give an example that demonstrates the trade-off inherent in projects among cost, time, and performance.

> Identify dependent and independent demand for an airline and a hospital.

> Service capacity (i.e., seats on an aircraft) has characteristics similar to inventories. What inventory model would apply?

> How is a service level determined for most inventory items?

> How valid are the assumptions for the simple EOQ model?

> Discuss how information technology can help to create a competitive advantage through inventory management?

> Determine if the U.S. service sector currently is expanding or contracting based upon the Non-Manufacturing Index (NMI) found at ISM Report on Business on the Institute of Supply Management website: http://www.ism.ws/pubs/ismmag/.

> Compare and contrast a continuous review inventory system with a periodic review inventory system?

> How would one find values for inventory management costs?

> Discuss the functions of inventory for different organizations in the supply chain (i.e., manufacturing, suppliers, distributors, and retailers).

> What changes in (, (, and ( would you recommend to improve the performance of the trendline seasonal adjustment forecast shown in Figure 11.4? Figure 11.4: Profile of Operator Requirements and Tour Assignments Number of operators 25 20 15 10 5 0 12

> Why is the N-period moving-average model still in common use if the simple exponential smoothing model has superior qualities?

> Suggest a number of independent variables for a regression model to predict the potential sales volume of a given location for a retail store (e.g., a video rental store).

> The number of customers at a bank likely will vary by the hour of the day and by the day of the month. What are the implications of this for choosing a forecasting model?

> For each of the three forecasting methods (i.e., time series, causal, and subjective), what costs are associated with the development and use of the forecast model? What costs are associated with forecast error?

> What characteristics of service organizations make forecast accuracy important?

> Discuss how the M/G/( model could be used to determine the number of emergency medical vehicles that are required to serve a community.

> Give an example of a firm that began as world-class and has remained in that category.

> What are some disadvantages associated with the concept of pooling service resources?

> For a queuing system with a finite queue, the arrival rate can exceed the capacity to serve. Use an example to explain how this is feasible.

> Example 13.1 presents a naïve capacity planning exercise and was criticized for using averages. Recall the concept of a "bottleneck" from Chapter 5, "Supporting Facility and Process Flows," and suggest other reservations about this planning exercise.

> Discuss how one could determine the economic cost of keeping customers waiting.

> When the line becomes long at some fast-food restaurants, an employee will walk along the line taking orders. What are the benefits of this policy?

> Suggest ways that service management can influence the arrival times of customers.

> Select a bad and good waiting experience, and contrast the situations with respect to the aesthetics of the surroundings, diversions, people waiting, and attitude of servers.

> Suggest diversions that could make waiting less painful.

> Suggest some strategies for controlling the variability in service times.

> Go to http://en.wikipedia.org/wiki/Yield_Management and discuss the ethical issues associated with yield management.

> What is the value of self-service in an economy?

> Will the widespread use of yield management eventually erode the concept of fixed prices for any service?

> What possible dangers are associated with developing complementary services?

> Illustrate how a particular service has implemented strategies for managing both demand and capacity successfully.

> How can computer-based reservation systems increase service capacity utilization?

> What organizational problems can arise from the use of part-time employees?

> What explains the continuing trade surplus in services for the United States?

> What is the inherent conflict in a franchising arrangement?

> Chili’s, a United States based restaurant chain that offers Mexican food, has its largest establishment in Monterrey, Mexico. Why is Chili’s so successful in Monterrey?

> Recall that service operations can be classified as processing people, goods, or information. What challenges are faced in each category when globalization is undertaken?

> Conduct a Google search and find the definition of “location intelligence.” What use can be made of geographic information?

> For each of the three generic strategies (i.e., cost leadership, differentiation, and focus), which of the four competitive uses of information is most powerful?

> What are the benefits of using intermediaries in the service distribution channel?

> What are the characteristics of a service that would make communication a good substitute for travel?

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