Final answer:
Amazon uses its innovative production model and cost-efficient structure to maintain low average costs and undercut competitors. Its use of linear programming likely aids in optimizing warehouse and distribution management. The scale and efficiency of Amazon's operations provide a competitive edge in pricing and service.
Step-by-step explanation:
The question, 'How does Amazon use linear programming?' relates to how Amazon's production model and cost structure have allowed it to dominate the book selling industry. Amazon's approach has been fundamentally different from traditional bookstores. Unlike these stores, which relied on high-rent retail spaces, Amazon capitalized on an online-only model with warehouses in low-rent locations. The massive scale of Amazon's operations, with a highly computerized distribution system using robots and relatively low-skilled workers, results in low average costs per sale.
When it comes to linear programming, although the question does not touch on the specifics, it can be assumed that Amazon utilizes linear programming in its warehouse and distribution management. This advanced optimization technique helps to determine the most efficient ways to allocate resources, manage inventories, and streamline logistics to further lower costs and improve customer service - critical factors in outcompeting rivals. By selling a wide array of products, offering convenient purchasing, and ensuring prompt delivery, Amazon uses economies of scale to provide lower prices, often even after including shipping costs, thereby undercutting competitors.