Amazon.

com case study analysis

Jeff Bezos, founder of Amazon.com, named his organization "after the world's largest river, believing Amazon.com would become the biggest bookstore in the world" (Johnson, 2006, p. 648). Amazon.com had no significant competitors at the time, 1995, due to the fact that the other bookstores did not have online presence. In less than a year, it had over one million different book titles and was considered to be the largest retailer for books on the internet. Their competition was increasing as other companies, especially Barnes and Noble, identified Amazon.com's first mover advantage and rose to meet them. Jeff Bezos responded by focusing on establishing an executive team which included a former vice president from WalMart. Ever since then, the organization was constantly striving to obtain only the very best to add to the executive team. They increased customer sales by offering frequent discounts, and innovating with new technology features such as a recommendations center, different browsing sections for easier accessibility, and a gift center. "Extensive promotional relationships with emerging internet players reinforced Amazon.com's momentum as the leading online bookseller through the generation of substantial brand awareness and customer flow for the business" (Johnson, 2006, p. 650). Branding is essential in any business as a strong, clearly defined brand will give the organization a competitive advantage. A strong brand will create customer loyalty as they recognize the brand for its quality products or services. In the early years (1995-1997) they focused on retailing books online mainly in the US market. Later in 1997, by broadening the scope of the organization and increasing their subject areas on their website to 22, the growth rate increased quickly. Their net sales increased 10% from the previous year and they had established a customer base of over 1.5 million people. They formed alliances with other e-commerce organizations such as Yahoo, AOL and Alta Vista. "By 1999, the company had built a leading global brand with cumulative customer accounts exceeding 17 million in over 150 countries and repeat customer business representing 73 per cent of orders" (Johnson, 2006, p. 652). One of Amazon.com's prize features was their one-click purchasing feature which allowed customers to pay for their purchase using credit cards. They later licensed the system to Apple. This technology soon became a core competency of the company. Another innovative feature was their auctions which "allowed customers

Some of the companies were Drugstore. with a gross margin of 23. their efforts to reduce costs were not enough because they essentially created more costs by following through with their expansion plans. and total net losses exceeded $1. Income losses from operations were 864m. caused the financial market to be skeptical about whether or not Amazon. although it was only a modest $64m" (Johnson. 2006. in this case. These losses combined with the aftershocks from the April 'tech wreck' continued to wipe value from investors' portfolios and in response Amazon. and community" (Johnson. "At the end of 2000. 653). Innovating is a key factor in order to properly adapt to the society around the organization. the company discovered that small businesses were doing email fraud and Amazon.com began cutting costs in 2000" (Johnson. Amazon. they continued to branch out and innovate with new technology. they continued to increase the global expansion of the business.com personally guaranteed to cover all purchases up to $250 in the event that the bidder did not receive their order. Homegrocer. They continued to improve on their technology such as the "look inside the book" aspect designed to appeal to customers that preferred to skim through the books before buying them and soon recovered from their loss with their gross profit margin rising 25.6 per cent by the end of the year. despite their effort to reduce costs. p. their strategy should have been revised and better adapted in order to prevent problems like the decline in the stock market.com and Exchange.com had to .200. Amazon.com.com invested with companies "who they believed were aligned to offering customer value through selection. By 2000 losses in the company had increased in general which. By giving the customer the option to buy online and having the first-mover advantage.com. Della &James' wedding-gift registry.com was going to make it through this. 2006. p. Gear.com as the company made its first annual profit. in turn. It most likely would have been better if they had concentrated and focused on what they had in that moment and prevented this problem of over expansion. Despite all of this. Amazon. continued to fall. In this moment. 2006. In order to increase trust between the customer and the organization. 657).com was able to create a lock-in effect in this particular industry. convenience. 2006. The year 2002 "represented a turning of the corner for Amazon.7 per cent. Pets. They continued cutting costs in 2001 on a larger scale one of which was reducing the employees by 1. which represented over 50 per cent of the net sales figure.76 bn. service. However. p. net sales were $2.com among others.to discover and buy anything online with innovative and time saving features such as Bid-Click for hassle-free bidding" (Johnson. 655).com. 652). However. p.4bn. However. The company stocks.

com.file several lawsuits against this problem. whilst a giant in traditional retailing with revenues of $24bn and around 1. increased customer loyalty to the organization. By increasing the value of their products in the eyes of the customer.4m employees in 2003. In contrast. If Wal-Mart and Amazon. p. their website. had progressively developed an online presence. .com has no retail sales and Wal-Mart does not have very many online sales. they increased the high switching costs which. 2006. 662). In the letter Bezos wrote to the shareholders. Walmart might even possibly be able to reduce the marketing and branding costs of their company. the company had to wait almost eight years before seeing consistent profits coming in. some of the disadvantages of Ecommerce is the lack of trust when dealing with unfamiliar sellers. he said that there would be two different stages. Amazon. it could very well be beneficial for both of them. It was speculated that the average time before reaching the harvest phase would be approximately five years. However.com maintained the upper hand in the power/interest matrix by offering special products such as the debut of the Harry Potter books. www. easier to change and updates quickly online. and it is more difficult to communicate with customers. Another disadvantage is that technology is constantly changing therefore making it necessary for all E-commerce businesses to constantly innovate their technologies. "Wal-Mart. This was one of the apparent weaknesses of the E-commerce business model.com developed a partnership. Some of the key advantages of the E-commerce business model is that it has the ability to operate around the clock. the first being a growth phase which was later followed by a harvest phase. due to the technology set back in 2000. 24-7 therefore maximizing the possibility for sales. However.walmart. They had a successful business model in general although they should have maintained instead of expanded their business at some points. was supporting their physical stores rather than seeking to develop a dedicated stand-alone e-commerce site and the company did not separate its online sales in its financial reporting" (Johnson. not being able to try the product out before purchasing. This aspect is very interesting due to the fact that Amazon. in turn. The catalog is more eco-friendly. It also has access to global markets and there is an increased speed and accuracy of the exchange of information.

and a lack of focus and efficiency. This can be corrected by determining which of the SBUs are the most profitable and eliminating the ones that are not. Look for: Capability Analysis Strategic Options Diversification A well regarded brand name 33 The ability to suggest other products based on previous buying habits34 Amazon. CDs. decrease in the overall profit margin.com receives better rates from publishers 35 Leading market share in books.Conclusion: Amazon.com’s 38 customer base . However they diversified too much which resulted in an increase of costs.com started out by being very focused on the book selling industry in 1995 and by 1997 they gained even more competitive advantage by improving their services in general. and other items A 19-day inventory turnover compared to 5 months from brick-and-mortar retailers36 Time magazine named Jeff Bezos 1999 Man of the Year37 Repeat customers make up almost 2/3 of Amazon.

com holds the patent on the one-click ordering system39 Amazon.com increased operating income 212% and 58% year-over-year 2002 and 2003.Amazon. representing the highest score ever earned in an online or offline service industry41 .com achieved customer satisfaction score of 88 in 2003. respectively40 10 Amazon.

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