Amazon’s Merge with Whole Foods

Abstract

In today’s society, what the consumers want, consumers get. According to an article from Compass.com, consumers are focused on easy returns or exchanges, multiple options for checkout and delivery, and mobile opportunity when it comes to online shopping (Compass).  These expectations are taken into consideration when companies are planning on their next moves on whether it should increase or decrease in prices, a merge with another company, or if it is time to upsize or downsize the company. Amazon saw a need for more structure concerning their Amazon Fresh business unit, and created an alliance with Whole Foods Market to ensure consumers would be able to shop online on Amazon.com and their deliveries for food would be delivered in the shortest time possible to ensure the freshness and quality of the products. Amazon also sought a way for consumers who live a healthy lifestyle and prefer organic and natural foods, would be able to shop and save money when purchasing their items. The vision turned into a reality with the merge between Amazon and Whole Foods Market.

Introduction

A recent merge occurred on August 28, 2017. Amazon and Whole Foods joined forces, creating a vision of making Whole Foods Market’s high quality, natural, and organic foods affordable for consumers. According to Business Dictionary, Amazon was founded in 1995 by Jeff Bezos, and is based out of Seattle, Washington, and is one of the largest online shopping websites in the world. The website is popular and well known for its wide selection of books. Amazon not only sells books, but the company also sells electronics, music, furniture, and apparel. Amazon is also known for creating businesses, since users are able to purchase and sell items using Amazon's online marketplace system (Business Dictionary). According to Whole Foods Market website, Whole Foods Market was founded in 1980 by four local business people who were ready to create a supermarket format for selling organic and natural foods (Whole Foods Market). The company became the first certified organic grocer in the country, according to the Daily Meal, with meat that is antibiotic free and hormone free, and only sells products that are certified organic or enrolled in the Non-GMO Project (Daily Meal). Why is this information important? Amazon was generating income in food products being sold under the Amazon Fresh business unit, but realized this area needed more growth. Amazon made the decision to grow this business unit by merging with a company known for selling fresh, whole foods each day to consumers.  This is not the only reason Amazon took on the merger. Amazon also saw a need for organic and natural food to be lower in price and more appealing to the consumer. This way, the consumer is happier with their purchase, and over time, will buy more and more of the same products each time they shop. This in return will create a rapport between the company and the consumer if the consumer is able to purchase their items and the products are fresh and low price. At the end, Amazon Fresh will grow in revenue each year if consumers are satisfied.

Analysis

The approach taken by Amazon to move forward with this vision was a merge with Whole Foods Market. According to the book Managing Organizational Change, written by Ian Palmer, Richard Dunford, and Gib Akin, mergers and acquisitions make way for an organization to grow at an accelerated rate. It allows consumers to enjoy the “best of both worlds” while shopping online. According to the book, the type of merger between Amazon and Whole Foods Market is considered “leveraging to create new industries.” This means two firms are put together to construct a new industry by leveraging the acquired firm’s altered capabilities to create a redefined industry (Palmer p.66). This merger has included a “new product or market investment” approach which means the two firms want to explore the other’s advantages in relation to extending product lines and global scope (Palmer p.104). The focus is on delivering the consumer a better experience on purchasing organic and natural foods online. The culture challenge that Whole Foods Market and Amazon faced when merging centered around the CEO of Whole Foods Market. According to Forbes, John Mackey, the CEO of Whole Foods Market admits he was never able to create the mission of putting the client first, which is why he and his team struggled with the merger. Amazon takes pride for value and putting the customer first (Forbes). Culture plays a big role in this merger, which is, the entire team on both sides must now focus on a main goal and plan that will suit them and the consumer. According to the book Managing Organizational Change, cultural systems involve beliefs, values, and artifacts, is circled around thoughts of “this is how we run things” are present (Palmer p.163) The change is this situation is considered a first order, incremental change. This change involved adjustments in the process of how Amazon is going to start delivering foods, which means a change in strategy that will support the company continuity and order (Palmer p. 86). The method for implementing this change for both companies was put both companies together and let each side do what each side does best. The vision for the merger was to have an easier way for consumers to shop and receive fresh natural products when shopping online. This change was communicated through business meetings and the media for the world to hear about.

Overall Evaluation

The approach for Amazon merging with Whole Foods Market came from growth pressures and integration and collaboration pressures (Palmer p. 65-66). According to Managing Organizational Change, a book written by Ian Palmer, Richard Dunford, and Gib Akin, they describe growth pressures as a potential force that organizations use to grow. These pressures are the reason companies merge and collaborate (Palmer p. 66). Since Amazon is the largest online shopping retailer according to Business Dictionary, staying ahead of the competition is important. This means Amazon must maintain their growth from revenue they generate each year, while also thinking levels ahead of their competitors. This may come in the form of introducing another business side, taking away a business sector that isn’t doing so well, or merging with a company known by consumers for their quality of products. According to Wired.com, in this case, Amazon’s business unit, called Amazon Fresh, wasn’t doing so well, and the company realized this area needed to grow. Amazon’s merger with Whole Foods Market become a vision and ultimately a reality when Amazon realized they needed expertise in selling fresh foods and maintaining customer satisfaction (Wired).  Also, according to Managing Organizational Change, the authors describe integration and collaboration pressures. The book says these changes are made to integrate the organization or create economies of scale across different business units (Palmer p. 66). This is what Amazon did when merging with Whole Foods Market to create a better business unit for Amazon Fresh. Since the merge is recent and hasn’t completed a full year, the progress from this merge is good so far. The merge between the two companies has shown significant progress.  According to an article from The Atlantic, Amazon is projected to make $10 billion by the end of 2018 (The Atlantic).

Recommendations

One recommendation for this merger is making sure Amazon is aware that some consumers take living healthy and eating healthy to heart. Nowadays, people start protests and movements for society to adopt better eating habits. Amazon will need to not only think of consumers as dollar signs, but also make sure the consumers feel their needs are being met. Another recommendation is maintaining the low prices. Consumers may enjoy the low prices, which means any fluctuation in the prices may cause consumers to shop elsewhere.

Conclusion

The merger took place on August 28, 2017 and it is still within a year of making progress to see how far it has come. Amazon and Whole Foods Market merged together for a purpose, which was to create a better experience for consumers shopping online. Making sure the consumer received their products on time and fresh was the concern. With the merger, both companies faced pressures such as, growth and integration and collaboration pressures, culture changes, and they could implement a new concept. After evaluating the organizational change, the conclusion is yet to be determined, since time will tell on how successful the merger really was. Hopefully, both companies take the advice on tailoring their mindset to a bigger cause which is the movement for healthy living, and they continue to show this by decreasing their prices and keeping them lower, thus making healthy living affordable.

References

• Retrieved on February 26, 2018 from http://www.businessdictionary.com/definition/Amazon.html
• Retrieved on February 26, 2018 from http://www.wholefoodsmarket.com/company-info/whole-foods-market-history
• Dan, Meyers. (2015, October 26). 10 Things You Didn’t Know About Whole Foods 365 Products. Retrieved from https://www.thedailymeal.com/eat/10-things-you-didnt-know-about-whole-foods-365-products
• Palmer, I., Dunford, R., & Akin, G. (2009). Managing Organiational Change. New York: McGraw Hill Irwin. Page 65
• Davey, Alba. (2017, June 16). Amazon Is About to Transform How You Buy Groceries. Retrieved from https://www.wired.com/story/amazon-whole-foods-acquisition-grocery-shopping/
• Palmer, I., Dunford, R., & Akin, G. (2009). Managing Organiational Change. New York: McGraw Hill Irwin. Page 66
• (2013, June).New study reveals what online shoppers really want. Retrieved from https://compass.ups.com/new-study-reveals-what-online-shoppers-really-want/
• Derek, Thompson. (2018, February 8). The Amazon-ification of Whole Foods. Retrieved from https://www.theatlantic.com/business/archive/2018/02/whole-foods-two-hour-delivery-amazon/552821/
• Palmer, I., Dunford, R., & Akin, G. (2009). Managing Organiational Change. New York: McGraw Hill Irwin. Page 103-104
• Phil, Lambert. (2017, October 17). Whole Foods' John Mackey Is Struggling With Whole Foods' Amazon Culture. Retrieved from https://www.forbes.com/sites/phillempert/2017/10/17/whole-foods-mackey-versus-whole-foods-amazon-culture/#7c20a55e5e9d
• Palmer, I., Dunford, R., & Akin, G. (2009). Managing Organiational Change. New York: McGraw Hill Irwin. Page 163
• Palmer, I., Dunford, R., & Akin, G. (2009). Managing Organiational Change. New York: McGraw Hill Irwin. Page 86