Case Study: Amazon.

com, 2019
Group No 2
Group Members
Pavithra Paulsamy Nadar (21)
Pradumna Sanjay Kulkarni (59)
Saikarthik Anantharaman (89)
Aishwarya Balasubramanian (101)

Summary
This case talks about how Amazon came into picture , the history , the process and
everything that went behind Amazon Inc (Amazon) becoming the most valuable company in
the world, above Microsoft, Apple, and Alphabet (Google). It starts with Bezos beginning his
career as a programmer for Wall street trading firms and hedge funds. After working for
hedge fund DE Shaw he started exploring the idea of founding an internet retailer. Bezos
began Amazon out of his garage. Amazon was focused on making E commerce attractive ,
secure and easy All you need is an email id , password and a credit card , he wanted it be a
secure easy process for first time online buyers. In 1997 Amazon went public at 18$ a share
and Amazons IPO was a success.
They then moved beyond books and entered into toys , electronics , home improvement,
tools , furniture and a lot more . There were many ups and downs as any business faces but
Amazons growth did not stop. In 2005 Amazon launched Amazon Prime a two delivery
service which we all know how famous it is now . With adding and entering many categories
Amazon also launched Digital devices – The kindle , alexa , the fire TV stick which was a
huge hit .
In January 2019, Amazon.com Inc (Amazon) became the most valuable company in the
world, above Microsoft, Apple, and Alphabet (Google). Jeff Bezos, Amazon’s founder and
CEO was now the world’s richest man. On January 31st, 2019, Amazon announced 2018
operating profits of $12.4 billion, up from $178 million in 2014, on sales of $232 billion, up
from $89 billion four years earlier. The shareholders expressed their satisfaction, but not all
were happy with Amazon’s meteoric rise. Many traditional retailers in the United States
were going bankrupt, while major competitors such as Walmart and Best Buy were forced
to invest aggressively in online retailing to prevent their market share from eroding. Every
retail sector appeared to be under threat, fueling anxieties that Amazon and America’s
other tech giants were becoming too big and powerful. In the United States, Amazon was
drawing criticism from across the political spectrum, with calls for it to be broken up.
Despite the criticism Amazon was very popular within the customers. It was clear that the
criticism won’t stop neither the rouble but Amazon was making through. The question was –
Was Amazons dominance becoming a threat for its very existence) What was the path
ahead?
Q,1) Briefly expain the learning of the case study ?
Amazon had a clear vision from the beginning of making e-commerce attractive, secure and easy for
first time online buyers. Any business should be well versed about its focus and what it plans to
provide their customer.
• Product over promotion: Product and service of a company speaks more in the long run than
creative and heavy promotion mixes. Amazon had less focus on marketing. It majorly depended on
user experience and customer reviews to build a loyal customer base.
• Capturing different markets: As Amazon grew it tapped into different target segments, introduced
different product lines as per the target audience right from kids to elders. Designing alternative
ways to make the product line profitable.
• Amazon tapped into new markets in the introductory stage where the competition is relatively
less as that of the growth phase. And further as the product progressed, it improvised to make the
product or service better. Other learnings include risk taking, innovations, future vision, and
providing consumer oriented services.

Q 2) What are the challenges faced by Bezos in setting Amazon? How did he overcome the
same?
Ans: In the 1990s, the book retailing business was highly fragmented, complicated, and
prone to inventory and return problems. The traditional book retail market was composed
of national chains and independent booksellers. For an author’s book to reach a retail store,
the book typically had to go through four intermediaries: agents, publishers, distributors,
and wholesalers. In 1994, Bezos quit his job at D.E.Shaw and started Amazon from his
garage. Although the company started its operations without facing any challenges, but as
time passed by, there were some difficult ones that Bezos had to face.
Financial strain
In February 2000, Amazon signed a five-year agreement with Living.com that guaranteed
the company as the exclusive supplier for the Amazon.com Home Living store. Through this
agreement, Amazon acquired an 18% stake in Living.com for $10 million. Amazon made
similar deals with numerous other new, high-potential start-ups.In August 2000, Living.com
filed for Chapter 7 bankruptcy and closed its website. Other e-retailers were also in trouble.
Many renegotiated contracts with Amazon that had been signed only months before.By the
end of 2000,the company’s share price fell below$20, down from a high of over $100 at the
beginning of the year. Many in the industry had a notion that Amazon won’t be able to
survive the financial strain.
Despite the 2000 dot com collapse, Amazon expanded its customer base from 13million to
25million and its operations into Japan and France. Bezos started to expand Amazon’s
operations by launching Amazon Marketplace and also strengthened its management team
by brining in top level people in positions like CEO, President and Chief logistics officer. The
new team began structuring operations. In early 2001, Amazon laid off 1,300 employees
(around 15% of its workforce), closed a distribution facility, and initiated a policy of “Get the
Crap Out.” This was designed to cut unprofitable products. In order to overcome the
financial pressure the company also started to reduce the discounts it was providing on
books.
Increased competition as Amazon ventured into new businesses
Amazon as a company post the year 2004 ventured into other business domains as part of
brand extension.In 2005,Amazon launched AmazonPrime, a two day delivery service for
1million eligible products for an annual flat fee of $79, with a one day delivery upgrade for
$3.99.
In 2006, Amazon partnered with all of Hollywood’s major film studios except Walt Disney
and released a service called Amazon Unbox that old movies for download for $7.99 to
$14.99. This offering included new releases and popular television shows.
In order to beat its competitors in December 2014, Amazon launched Prime Now in
Manhattan, New York, offering Prime members a range of 25,000 daily essentials for
delivery in two hours for free or one hour for a charge of $7.99. It was rolled out rapidly to
major cities around the world. By the end of 2015, it was offered in more than 30 cities.
Independent drivers made the deliveries using their own vehicles, summoned on a mobile
app in much the same way as Uber offered taxi ridesFree video streaming was added to the
Prime offering in 2011. Amazon’s entry into digital devices came in November 2007 with the
release of the Kindle. In 2011, Amazon introduced the Kindle Fire, a smart tablet that
offered video, gaming, and Internet capabilities, directly competing with Apple’s iPad. In Q1
2019, Kindle accounted for 8% of global tablet sales, behind Apple (27%), Samsung (13%),
and Huawei(10%).

Q.3) Briefly expalin the financial statements shown in exhibits of the case?
 Exhibit 1a Amazon financials, 1997-2004 ($ millions)
1. The financial statements of 1997-2004 shows the considerable increase in revenue i.e
$148 million in 1997 to $ 6,921 million in 2004 .
2. The gross income was also showing decent increase from $29 million in 1997 to $1602
million in 2004.
3. More notably was to focus on the operating profit and Net Income. The operating profit
was negative in 1997 was (29) till 2001 it was (231) . So the company was not getting
operating profit till 2001. The company reported first operating profit $106 million in 2002
as the company sales increased due to 3 rd party sales and increase in customer base.
4. Also to NET income till 2002 was negative and then from 2003 it recorded positive net
income.
 Exhibit 1b & 1c Amazon financials (2005-2011) (2012-2018)
1. The Total revenue and gross income over the years has been increased significantly $
8490 million in 2005 to $48,077 million in 2011 & also $ 61,093 million to $ 232887 million
in 2018 as the company has been major successful in various sectors of e-commerce , digital
media , AWS services.
2. The gross income is increasing as we can see the cogs is reducing
3. The company over the has recorded positive operating profits $472 million to $ 862
million in 2011. The company has recorded $676 million in 2012 to ,$12,421million in 2018.
  Exhibit 10a Amazon revenue and Operating Profit
The chart shows the the growth in the revenue and profit since 1995 to 2018
The major factor to be seen here except the growth in revenue the parabolic shift in the
nature of growth since 2005. This is due to the following reasons
1. The launch of Amazon prime service in 2005.
2. Launch of digital books,songs and movies in 2005.
3. Providing digital device i.e kindle
4. Category expansion Fashion, Grocery & Health care
5. Amazon Marketplace for helping third party supplier.
6. Amazon Web service (AWS) a digital service solution provider.
Operating profit:
In the operating profit graph most notable we have from 1995 the operating profit was
stable in most notably in 1998-2001 the operating profit was negative.
2. The most important factor from 2002 onwards was that company major invested in
developing online software service and acquisitions of physical distribution centers to lower
the shipping cost
3. So from 2002 onwards the company started recording positive operating profit.

 Exhibit 10c Amazon Net Income

The chart shows the net income from 1995-2017
1. The company was making the revenue from 1995 but it started getting profit from 2002-
2003 onwards
The due to the following factors :
1." Get the crap out policy" to cut unprofitable products"
2. Re-organizing into major revenue generating sectors.
3. More notably the launching of Amazon prime service in 2005 then kindle and Amazon
Web services AWS the company able to. Generate more revenue and significant profits.