Amazon.

com
1.BACKGROUND AND HISTORY
• One of the first major companies to sell goods over the Internet .
• In 1994, the early year of the mainstream internet, Jeff Bezos
founded Amazon.com.
• Still had the advantage of being there first, But as it had moved
into new product lines like CDs, video games, pet supplies,
computer software, electronics, and provides services like auctions
and greeting cards, it had found itself up against dominant players
in their markets, either offline, online or both .
• Revenue for last financial year - US$10.71 billion.

1. OPERATIONS
Amazon has the unique ability to match specialized, niche, or
"hard-to-find" products with the customers most likely to purchase
them. And Amazon.com has a world renowned reputation for
service, reliability and security.

2. MISSION:

"To build a place where people can come to find and

discover anything they might want to buy online" and they are very
close to accomplishing that mission. They offer a wide range of
products at very competitive pricing and customer service
advantages.”

3. Value Proposition :

Values play an important role in Amazon.com's

succeeding. A value is like a goal and forms an ongoing objective.
Amazon.com's values and philosophy is at the center of the
organization and often determines the difference between success
and failure of the enterprise. There are two strong values that are
practiced by Amazon.com. These include customer satisfaction and
operational frugality. These two values complement Amazon.com's
operational strategies in achieving and maintaining an effective
 competitive advantage and encouraging employee and corporate
performance. For example, Amazon.com's employees are paid base
salaries that are obviously less than competitive rates. So, due to the
frugality value, Amazon.com spends much money on branding and
business expansion. However, Amazon.com sustains employee
loyalty through employees' ownership of company shares.
Amazon.com injects a message into the eomployee's minds - when
Amazon.com begins to show a profit, their shares will profit too.

5. Customer Service :
Amazon.com prides itself on customer service and aspires
to be the earths most customer centric company. A study shows that more
than half of Amazon.com's customers are repeat customers. This success
is based on customer-value proposition, which is conducted by Bezos.
For instance, in his customer-value proposition, he suggests that vistors to
the Amazon.com site must leave with a positive impression, while also
providing potential buyers with reasons to visit the virtual store again.
Besides that, he also expounds that Amazon.com needs to perform as
promised, such as punctual delivery. As a result, Amazon.com can
strengthen its customer satisfaction. With Amazon.com’s aim to make its
bricks-and-mortar™ competitors irrelevant. Three fundamental value
improvements are offered to their customers to achieve this: reduced
prices, a wider selection of titles, and a dramatically improved purchasing
convenience. Amazon.com also focuses on additional elements that
customers want, such as concentration of quality, reliability, security and
availability of product. Amazon.com's customer loyalty was established
from the beginning and continually improves due to the focus and efforts
made by Amazon.com in continual customer service improvements. In
short, Amazon.com always focuses on its customers and this is one of
reasons that has aided in its success.

Customers were of primary importance throughout the establishment of

the Amazon.com interface. Amazon.com’s customer interface was
developed to facilitate each users shopping experience and provide a
hassle free online shopping environment that encouraged their return.
Many elements of the customer interface contribute to the sites ease of
use. These include tailoring of the website for each individual user,
extensive links to other dimensions of the site as well as links to outside
internet content and the websites ability to perform financial transactions.
 6. STRATEGIES :

There are three strategies that have helped Amazon.com to

enhance its competitive advantage, including cost-leadership,
customer differentiation and focus strategies

 The first strategy, cost-leadership is pursued by Amazon.com

by differentiating itself primarily on the basis of price.
 Their second strategy is customer diffentiation. Amazon.com
provides current and prospective customers with differentiation
though design, quality or convenience and Amazon.com always
selects a differentiator that is different among the competitor .
 The last strategy is a focus strategy in this it takes one of the
two earlier strategies and applies it to a niche within the market.

FIGURE-: EXISTS A NEED FOR NEW ACCOUNTING RULES IN THE INTERNET

ECONOMY?

OLD ECONOMY NEW ECONOMY

Need for New

Traditional A ccounting Rules? E-Commerce
Business and
Increase Monitoring and Others
Develop New
Performance Standards?

Uncertainty Reallocation Costs

7.BUSINESS MODEL:
 A business model (also called a business design) is the
mechanism by which a business intends to specify a value proposition or
a value cluster for targeted customers, a financial model and a market
offering (Rayport, 2002). It is a summary of how a company plans to
serve its customers and identifies its product offering (Chaffey, Mayer,
Johnston & Chadwick, 2003). It involves both strategy and
implementation (Wikipedia, 2004). As Amazon.com was being
established, the delivery of information, goods, or services to end
customers employed one strong business model “ Online Retailers of
Physical Goods. This business model takes title to the newly
manufactured products that they sell and often rely on third party
providers. Like Amazon.com, it needed third party providers, such as
Borders and Barnes & Noble, to maintain its sufficient supplies.

When Amazon.com was first launched, Amazon.com was

heralded for its feel-friendly culture that drew talented young people to
apply for work there and insisted on hiring the brightest, most intelligent
and versatile people who could find, even for the packing room. He
wanted people whom could share his vision and were willing to work to
achieve it. He tried to establish a sense of community due to sharing both
hard work and fun with his employees. Although he was able to pay his
employees less than market salaries, he gave employees ownership in the
company and his employees were happy on that.

Values also plays an important role in Amazon.com's

succeeding. A value is like a goal and forms an ongoing objective.
Amazon.com's values and philosophy are at the center of the organization
and often determined the difference between success and failure of the
enterprise . There are two strong values that are practiced by
Amazon.com. These include customer satisfaction and operational
frugality. These two values complement Amazon.com's operational
strategies in achieving and maintaining an effective competitive
advantage and encouraging employee and corporate performance.

Triage is most thought in terms of medical practice and a good CEO

practices strategic triage. Bezos himself uses the term œtriage? to point to
the fact early in Amazon.com™ history that he often has to make tough
decisions about how to move the company for continuing growth and
ultimate profitability . There are four primary drivers for growth:

1. Product focus: Product focus is to make a products or line of

products
 that will be interest by customers.

2. Customer focus: Amazon.com tries to find a way to satisfy

customer’s needs and expectation through a variety of products
and services.

3. Technology focus: Amazon.com attempts to use technology

to solve real problems. Now, technology has been used for easy
ordering (e.g. One-Click System), securing customer credit card
numbers, speeding delivery and new and exciting offerings that
draw people to check it out.

4. Distribution focus: Amazon.com tries to expand its

business, so it needs to expand its products distribution. Now,
Amazon.com operates its retail websites not only in the US, but
also in Canada, UK, Japan, Germany, France and so on.

8. SWOT ANALYSIS :

• Strengths :
 Amazon.com stands not only as a supreme
leader of online shopping, but also as a
pioneer of Web.
 The success of Amazon.com's interface is
based on two strong models and they include
the conceptual model and structural model.
 To convince all online customers to use
Amazon as their search platform.
 Provides excellent customers personalize
services and discount profitable prices.
 Good customer services: The one-click
service function lets customers feel a sense
of immediacy when ordering online and
satisfied with the improved electronic
confirmations service.
 Fast access to supply. When customers find
the products and click the order key. The
data of order will be transferred to one of
Amazon's servers. Then inform the
 employee to take the product and pack them
by customer's desired.
 International recognition. Anyone who
wants to buy books online will first go to
Amazon. Amazon uses online
advertisements and referrals from their
customers to inform people of their services.
 Provide safe and convenient shopping
services. Credit card transactions can reduce
the risk of being robbed or losing cash.
Customers can avoid exchanging currency.
 Sociological factors - There is increased use
of the Internet. People more depend on
Internet daily whether searching information
or looking for entertainment.

• Weakness :
 Unmanageable operation: Amazon lost
money due to their operation policy.
 Bad investments: Amazon invested in an
unsuccessful wireless technology
company, and other failed e-commerce
companies. These lost enough value to
harm Amazon's operations.
 Hardware problems: Amazon's
decentralized servers often suffer from
hardware failures. When this occurs, the
entire system is affected and their services
can stall and they can lose data.
 Waiting for a product delivery is a
weakness of Amazon. Although the item
offered is immediately shipped and
instantly have the item they want.
• Opportunities :
 Increasing Internet markets: Amazon.com did
have a large group of customers that wanted
to shop online. Global Internet users are
increasing rapidly.
 New technology: Amazon.com Web Services
harnesses the vast product information
already available on its website and turns it
into a resource for developers as users.
Currently, over 800,000 sites have enrolled in
the Associates Program worldwide.
 Cooperation with other businesses:
Customers can buy products from other
vendors through Amazon's website. They
attract new customers through links on other
sites. Customers can access Amazon's
services from within partner websites.

• Threats :
 Government policy as barrier to establish
online retail website Amazon.com
perspective - moderate threat of entry.
 Suppliers are a threat when "they are able to
force up the price that a company must pay
for its inputs or reduce the quality of inputs
they supply, therefore depressing the
company's profitability.
 The buyers of online retails are becoming
more empowered because of the use of the
Internet. There have been several websites
that have entered the online retails business
by offering low price and good customer
services.
 Economic factors - Penetration of IT in the
household sector and business sector -
Customer become more prices conscious.
 They can search more information through
the Internet.

9. TECHNOLOGY DEPLOYMENT :

In the early years, the entire Amazon.com system was

written in "C", which is an open-source software program language most
commonly used on UNIX systems. C was supported by Perl, a computer
language that enables users to manipulate and edit the contents of text
files. The use of open source software was critical because it allowed
Amazon to develop and test its applications with the help of worldwide
programmers who played with code for fun and were not on Amazon's
payroll. But, now, Amazon.com used much more sophisticated programs
for its complex, ever-changing needs (Hamilton, D., 2004). By using
increasingly sophisticated software tools to improve back-end operations
and reduce mistakes, Amazon had slashed distribution costs from 15% of
revenue in 1999 to 7% in 2003.
In the early years, the entire Amazon.com system
was written in "C", which is an open-source software program language
most commonly used on UNIX systems. C was supported by Perl, a
computer language that enables users to manipulate and edit the contents
of text files. The use of open source software was critical because it
allowed Amazon to develop and test its applications with the help of
worldwide programmers who played with code for fun and were not on
Amazon's payroll. But, now, Amazon.com used much more sophisticated
programs for its complex, ever-changing needs. By using increasingly
sophisticated software tools to improve back-end operations and reduce
mistakes, Amazon had slashed distribution costs from 15% of revenue in
1999 to 7% in 2003.
Another top-secret technology for Amazon.com was
A9.com and it was focused on product search (like Google's Froogle),
since that was where the big money was in Web searching. According to
Business Week Online (December 22, 2003), A9.com would be as
powerful as Microsoft's Windows operating software in computing ... a
stack of software on which thousands or millions of others can build
businesses that in turn will bolster the platform in a self-reinforcing cycle.
10. FINANCIAL ASPECT :

Amazon grew at a steady pace in the late 1990s

while many other Internet companies grew at a blindingly fast pace.
Amazon's "slow" growth caused a number of its stockholders to
complain, saying that the company was not reaching profitability fast
enough. When the Dot-com bubble burst and many e-companies went out
of business, Amazon persevered and finally turned its first profit in the
fourth quarter of 2002: a meager US$5 million, just 1¢ per share, on
revenues of over US$1 billion, but it was important symbolically. The
firm has since remained profitable: net income was US$35.3 million in
2003, US$588.5 million in 2004, US$359 million in 2005, and US$190
million in 2006 (including a US$662 million charge on R&D in 2006).
Nevertheless, the firm's cumulative profits remain negative, since the
positive performance of recent years is not yet sufficient to wipe out the
losses of the past, as of 2005 the accumulated deficit stood at US$2.03
billion.
Amazon.com had its initial public offering on May
15, 1997, trading on the NASDAQ stock exchange under the symbol
AMZN at an IPO price of US$18.00 per share.

NET SALES :

The value of net sales is calculated including the sales

price of products sold, less returns and promotional gift certificates,
including as well outbound shipping costs charged to customers. In
addition to this, net sales includes Amazon Commerce Network (ACN)
revenues and commissions from auctions and zShops transactions. Net
sales in average from 1995 to June 2000 are 594 millions of US dollars.
The reported net sales at the end of September-2000 are 1.789 millions of
US dollars. Expected growth in net sales in year 2000 is due to the
increase in units sold due to the expansion in the customer base, repeated
purchases from existing customers and the introduction of new products
and services. At the end of June-2000, the number of customer accounts
reached 22.5 million, representing an increase in 110 percent compared to
the same date in 1999. Expected net sales at the end of 4Q 2000 are
between 950 million and 1.05 billion of US dollars, for 2001 the expected
yearly growth in sales is between 321 and 280 percent. As can be seen in
Figure-4, the annual change in sales has been decreasing steadily year by
year. They are betting that the introduced new line of products is going to
oxygenate net sales during 2001 in order to get the announced growth of
50% per year.