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Amazon’s Retail Strategy Failures
Rita McGrath, Columbia Business School professor and author of the article, “Transient Advantage,” discusses several traps that can blind a company to the need for imminent changes to their strategy to preserve competitive advantage. These traps, discussed in the second half of the article, include: the first-mover trap, the superiority trap, the quality trap, the hostage-resources trap, the white space trap, the empire-building trap, and the sporadic-innovation trap.
Locate and post a link to an article in The Wall Street Journal, or another reputable source, about a company that fell victim to one or more of these traps.
- Identify the trap(s) and discuss why you believe the company’s management missed the warning signs.
- What were the impacts that resulted from falling for the trap(s)?
- Drawing on the guidance offered by Sherman in Chapter 6, what could they have done differently to avoid the trap(s)?
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Amazon’s Retail Strategy Failures
Identified Trap(s):
- First-Mover Trap: Amazon’s early entry into physical retail with Amazon Go stores exemplifies the first-mover trap. Despite pioneering cashier-less technology, Amazon faced challenges in scaling and achieving profitability in the physical retail space.
- Sporadic-Innovation Trap: Amazon’s inconsistent approach to physical retail, marked by the opening and subsequent closure of various store formats, reflects the sporadic-innovation trap. This lack of sustained innovation in physical retail led to operational inefficiencies and financial losses.
Management’s Missed Warning Signs:
Amazon’s management may have overlooked several critical indicators:
- Market Saturation: The physical retail market, especially convenience stores, is highly competitive and saturated, making it challenging for new entrants to achieve significant market share.
- Operational Challenges: Amazon’s expertise in online retail and logistics did not seamlessly translate to in-store customer service, highlighting the complexities of operating physical stores.
- Consumer Behavior Shifts: The rapid growth of e-commerce and changing consumer preferences towards online shopping may have been underestimated, affecting the viability of physical retail ventures.
Impacts Resulting from Falling into the Trap(s):
- Financial Losses: The closure of numerous Amazon Go stores and other physical retail formats resulted in significant financial losses and sunk costs.
- Brand Perception: Frequent changes in retail strategies may have led to consumer confusion and