Amazon

Background Note
 Launched in 1995 as an online bookstore
 quickly expanded to other consumer goods
 continuously innovating its business model
 Consistently evaluating and experimenting with its business model
 started with "sell all, carry few" theory
 then moved to sell all, carry more model
 partnerships and affiliations with smaller websites and retailers
 Started offering technology services
 Acquiring online shoe retailer zappos and many other later
 four core competitive advantages
 Low price: they proactively cut prices and offered free shipping to attract customers
 Wide Selection
 Convenience:
o browser friendly website
o fast and reliable delivery
o timely customer service
o trusted transaction environment
 Customer Service: Customer service, loyalty and customer retention were three
important aspects of Amazon's service culture
 Growth now, profits later
 Always focused on long term growth and investment instead of short term profit
 investing its free cash flow back to its business
 continuously expanding and diversifying into new arenas
 continuously investing in new technology and customer service initiatives
 reported a loss in 2014 for spending in new product development
 in 2015, Amazon surpassed Wal-Mart in market value.

Resource and Process that support the strategy:

 Technology:
 Continuously adding and refining technology and changing the way customers shopped
 Highlights of the technological advancements: drone based delivery service- Amazon
Prime air, Fire Tv, Fire Phone, Kindle, amazon storyteller, amazon studios, amazon cloud
drive, 3D print
 in 2014, amazon spent $8.72 billion on research and development
 leveraged its big data resource to upgrade customer recommendation system
 Product development:
 always customer centric and focused on the value delivered to the customer
  "Working backward" philosophy while developing new products which is basically
thinking from the customer's perspective back to the product.
 It had fours steps:
1. writing a press release which contains prospective product outline
2. a FAQ document raised by the customers and answered and resolved by the
product team
3. a well defined customer experience
4. and a user manual
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 Digitally Driven Supply chain
 One of the most well-developed supply chains in the world
 included warehouse and transportation management, inbound and outbound shipping,
demand forecasts and inventory planning
 fast paced and tightly integrated, minimized the need for human intervention
 SC team focused on customer experience and vendor experience
 installed robots at warehouse
 one of the most advanced fulfillment networks with large storage capacity
 People
 "two-pizza team" : small team of 5-7 people to promote autonomy and accountability.
also for fast and effective communication.
 decentralized company where independent ideas dominated over group thinking
 always hired smart and innovative people
 Marketing
 Always focused on online marketing channels
 customers were directed to website primarily through sponsored search, portal
advertising, e-mail marketing campaigns etc
 used free shipping offers such as amazon price as marketing tool
 Partnerships
 partnered or acquired a number of companies such as Drugstore, Living.com, Pets.com,
wineshopper.com, HomeGrocer.com etc
 In most cases, amazon purchased an equity stake in these companies and also charged
them a fee for placement of their products on the amazon site.
 faciliated formation of partnerships with smaller companies through its associates
programme.
 offered its e-commerce platform to other retailers and sellers including technology
services, merchandising, customer service and order fulfullment

Challenges:
 Amazon needed to be selective in the opportunities it pursued.
 when amazon was trying to dominate online retail with aggressive strategies, its
competitors walmart, google shopping, alibaba were not behind
 One of the biggest challenge was to keep the prices low while it grew
 Amazon's shipping carriers (UPS, FedEx, US postal service) were considering increasing
their shipping rates
 avoided tax for a long time, when they did not have a physical presence. with tax, they
can't keep up the low prices
 Some of the investors were getting impatient for amazon's investment strategy