You are on page 1of 51

Executive Summary

This paper briefly examines and analyse the internet retailer Amazon.com Inc by critically analysing the companys operation within e-retailing. Amazon is the leading global e-retailer an industry that registered a compounded annual growth (CAGR) of 24.6% for the period spanning 2004-2009 while the forecasts indicate the industry to grow at CAGR of 13.5 %. The external and internal analysis of the report reveals that there are numerous opportunities from which Amazon has been already profiting. It has performed well in the past year while strategically penetrating to Chinese market where it is forecast to register a growth of around 25% of revenue to $ 1 billion in 2012. Current strategies of the company are mainly based on growth and build strategies through more penetration in Chinese market and through Product development. The possible strategies that can be adopted without departing from current core strategies are also recommended at the end of this report.

Introduction ............................................................................................................................................. 1 Organisational Vision, mission statement and values ......................................................................... 2 Significant and Impact ........................................................................................................................ 2 External Environmental Analysis ........................................................................................................... 3 PEST Analysis .................................................................................................................................... 3 The Porters Five Force Model ............................................................................................................ 4 The SWOT analysis ............................................................................................................................ 5 Competitors Analysis .......................................................................................................................... 5 Market Survey..................................................................................................................................... 6 EFE matrix .......................................................................................................................................... 7 Internal Environmental Analysis ............................................................................................................ 7 Core competencies of Amazon ........................................................................................................... 7 Porters Value Chain ........................................................................................................................... 8 IFE Matrix........................................................................................................................................... 8 BCG Matrix ........................................................................................................................................ 8 Financial Position of the company ...................................................................................................... 9 Goals and Objectives .............................................................................................................................. 9 Corporate Objectives .......................................................................................................................... 9 Business Objective ............................................................................................................................ 10 Functional Objectives ....................................................................................................................... 10 Current Strategies.................................................................................................................................. 10 Market Penetration strategies ............................................................................................................ 11 Acquisition Strategy: ........................................................................................................................ 12 Market Development ........................................................................................................................ 12 Product Development........................................................................................................................ 12 Diversification strategies: ................................................................................................................. 12 Problem and Issues ............................................................................................................................... 12 Recommendations ................................................................................................................................. 13 Option 1. Product development of e-books by taking spoil of vacancy that will be created by Borders bankruptcy ........................................................................................................................... 14 2- Product Development of e-books segment by launching Kindle tablet ........................................ 14

3 Market Development through Social Networks ............................................................................. 15 Option 4: Market Development by forming strategic alliances with Chinese e-retailers ................ 16 Option 5. Market development by entering to the market of India and Middle East: .................... 16 Selection of strategies ....................................................................................................................... 17 Operational and Strategic objectives................................................................................................. 17 Implementation and controlling of Strategies ................................................................................... 18 Strategic Annual Action Plan ........................................................................................................ 19 Conclusion ............................................................................................................................................. 19 References ............................................................................................................................................. 21 Appendix 1 ............................................................................................................................................ 23 Appendix 2 PEST Analysis...................................................................................................................... 25 Appendix 3 ............................................................................................................................................ 28 The bargaining power of consumers: ............................................................................................ 29 The bargaining power of suppliers: .............................................................................................. 29 The threat of new entrants:............................................................................................................ 29 Threat of Substitutes: .................................................................................................................... 30 The intensity of Rivalry: ............................................................................................................... 30 Appendix 4 ............................................................................................................................................ 31 Appendix 5 EFE Matrix ......................................................................................................................... 32 Appendix 6 IFE Matrix ........................................................................................................................... 33 Appendix 7 Porters Value Chain of Amazon ......................................................................................... 34 Appendix 8: Quarterly Income Statements of Amazon ........................................................................ 38 Appendix 9 Ansoff Matrix ..................................................................................................................... 40 Appendix 10 Space Matrix .................................................................................................................... 41

Introduction

History, Background and Development Only a handful of people can recall a company named Cadabra.com. Cadabra.com is nowhere to be seen now. However the company that began its operation in a garage with few desks built out of doors under this name, Cadabra.com, is now the largest internet retailer (eretailer) in the world. Cadabra.com renamed as Amazon hinting the voluminous of the company. The amazon.com Inc was founded by Jeff Bezos in 1994 and the online web site was launched on 1995. An online book store was a new idea he proposed to his former employer who ridiculed the proposal. But Jeff Bezos was convinced of the potential of such a business with the pace of internet growth which was at 2300% a year at that time and being as opportunist, with high entrepreneurial skill, he sat the perfect company by his own. The company started strategically with the vision of Bezos that it had used tactics to enjoy economies of scale from the initial stages of the company. Its cost of sourcing, transporting and selling were reduced from strategic location it chose by settling at Seattle where worlds largest wholesalers of books were based. It also enjoyed lower sales tax in the Seattle which was translated to lower prices of books it sold. For the last 16 years the company has evolved at a high growth pace to become a mega company by adopting product development by horizontal and conglomerate diversifications. developments, and acquisitions of the Amazon. Figure 1 shows the historic growth,

Figure 1; Development of the Amazon.com Inc; the company had been carrying strategic acquisitions while developing own additions (spinoffs) to the product portfolio. The company has invested in Livingsocial as part of its strategic interest in this company.

Page 1

The company made another strategic move from very start of its diversification strategy by establishing partnership with wholesalers. This strategy enabled it to lower costs further as it allows the company to maintain physical stocks minimal. The diversification strategy brought new business lines to make the company an online superstore with products ranging from DVDs, music CDs, computer software, hardware, video games, electronics, and even groceries. The company has grown at tremendous pace in the past few years to which large credit has to be given for the customer-trusts-lead growth achieved through high quality services. The company has been enjoying customer base growth and increase in repetitive purchases by same customer. Much of these high quality services have to do with the companies vision/mission and goals Organisational Vision, mission statement and values Amazon.com vision and mission is combined to be earths most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online. In order to achieve this it has set goals of being innovative on behalf of customers and to build a store for each and every customer by offering personalized products. Amazon has set standard values for customers and employees. That is it believe employees are Amazon leaders whether an employee is an individual contributor or a manager of a large team in the organisation. The company has leadership principles that every Amazonian has to adhere. Appendix 1 provides the details of these principles which include Customer Obsession, Ownership, Invent and Simplify, Are Right, A lot, higher and Develop the Best, Insist on the Highest Standards.

Significant and Impact Amazon has been and is the largest e-retailer in the world and in US by taking advantage of first mover to e-retailing. It has been one of innovative company with a large investment in Information Technology research and development which has been the key to be successful to maintain the customers loyalty and maintain winning strategies in a largely dynamic market. The innovation of the company has made the company to survive from dot.com bubble and grow at unbelievable pace. It grew from nowhere to register nearly 100 billion year turnover in barely 16 years. The company has given the reasons for traditional retailers to introduce internet retailing to the portfolios.

Page 2

External Environmental Analysis Environmental analysis is the study of the organisational environment to pinpoint environmental factors that can significantly influence the organisational operations (Samuel & Certo, 2009). The External environment mainly consists of General Environment and Operating environment. The General Environment for Amazon will be Global Political, Economical, Social, Technological, Ecological and Legal Environment as it operates globally every major corner of the world. The PEST analysis model is used to analyse the

environment and the Operating Environment is analysed using Porters Five forces.

PEST Analysis PEST factors are generic factors that will usually affect all business across industries. In the process of PEST analysis it is important to explore and understand the relationship between the forces at work. (Campbell, Stonehouse, & Houston, 2007) Changes in the components of these factors may have varying affect to different industries depending on the association with those components to a particular industry. Changing components of these factors that have direct impact on internet will be more influential to e-railing businesses like Amazon.com than other firms which are not directly engaging in e-business. I want to discuss the possible components in these factors that would influence the Amazon.com among others in e-retailing. The appendix 2 provide a summarised PEST factors components which will affect Amazon.com. The factors outlined here represent general PEST forces summing up all the regional market factors where Amazon has its presence.

Political Factors : Operating in internet globally covering customers in more than 150

countries mean the company has to deal with many stable and unstable political conditions including developed and developing countries. Changing regulations and policies towards internet influence the Amazon.com success in these regions.
Economical conditions: With the unstable economy, factors like economic downturn and

growth, exchange rates, unemployment in many parts of the world affect the purchasing power of potential consumers of Amazon and effect firms cost of capital. The table in the

Page 3

appendix 2 explains these factors. These are never stable, so this is another problem that Amazon needs to look at being the Global leading e-retailer.
Social conditions:

The gender religious, ethnic and other aspect of social factors representation amongst internet users will guide Amazon on strategic portfolios it has to develop in order to capture more market share. The Appendix 2 gives the gender and other social factor representations in American internet users. It is also important take advantage of increasing use of social networking as mean of interacting with friends and family, phenomena most of America Europe and Asia Pacific region has been experiencing in the past 5 years.
Technological conditions: Technological factors can reduce the barriers for new entrants,

and also will affect outsourcing decisions of Amazon. These factors can include R&D activity, rate of technological change like increase in growth of internet technologies and mobile networking throughout the world. In terms of these factors Amazon need to be on top to make difference as most of IT R&D has been the major factor responsible in growth of internet business which is a key success factor of Amazon in the past.

We also need to understand the industrys environment which Amazon is operating. For this we can user Porters Five Force to understand immediate implications to the company.

The Porters Five Force Model

The global e-retailing sector will be analysed here considering internet retail market players in this case. The growth of the e-retail industry increasing and sales remained significant despite growth deceleration amidst the recent economic recessions in major markets in the world. Porters Five Force model suggest that an industrys attractive will be determined by five alternative forces and its the relative power of those forces that will determine the success of a business organisation. The table below is a summary of the threat level of Porters Five Forces to Amazon. Power of these factors are analysed in detail in Appendix 3 for the Amazon to understand its power relative to other forces in the industry.

Page 4

Five Forces Bargaining power of supplier Bargaining power of consumer Intensity of Rivalry Threat of new Entrants Threat of substitutes

Threat level Moderate Moderate Moderate High Moderate

The SWOT analysis SWOT analysis is a planning method which is strategic and which also helps to assess the strengths, weaknesses, opportunities and threats involved in an organisation. It projects the internal and external factors that are favourable or unfavourable for a future project. Amazon.com objectives need to align with the SWOT in making sure that the objectives we set are attainable and realistic. The Appendix 4 analyse the SWOT of Amazon which highlight the position of the company both internally and externally.

Competitors Analysis Due to the shift of focus for Amazon, and with diversification of its product line it has become the "Earth's biggest anything store". The competitors have expanded from just online book retailers from the start to top audio retailers CDNOW.com and online auction house ebay.com. Amazon has an overall lead of 40% market share against the other online retail firms in the United States. Meanwhile the international business in the last two years has more than doubled. The following are the major industries that Amazon conducts its operations.

Internet Retail Business Services Advertising & Marketing Commercial Printing Copy Centres & Online Printing Services Media

Page 5

One thing in common in all of these industries is that all these business are related to internet in the way it is conducted. But for the purpose of this assignment I will consider the Internet Retail industry and as it is closely related to all other services it is offering. For example although retail business is not the same as internet retailing it is a competing industry to internet retailing industry. Thus major global firms in retail industry with substitute product lines become direct rivals. The main competitor of Amazon thus includes Wal-mart, Dell, e-Bay, Barnes and Nobles and Borders, and other traditional retailers. Being the leader in e-retailing market is not satisfying given the fact the traditional retailers remain major competitors as the presence of shops in every corner in larger cities create huge challenges to the businesses in internet business and vice versa.

Market Survey The Datamonitor a global research firm has done a market survey in 2009 on internet retail industry. According to this research the global internet sector has generated total revenue of 352.5 billion in 2008 which represented compound annual growth rate of 24.6% for the period of 2004-2008. The research used the total revenues generated through sale of retail goods via online channels value at retail selling price excluding the ticket book and online corporate purchasing and online auction transactions using an exchange rate constant at annual average exchange rate. According to the research global i (Duryee, 2011) internet retail sector was forecast to have value of $613.3 billion in 2013 an increase of 88.6% from the value of 325.2 . (Datamonitor 2009). Of this value by product segmentation the market for electrical and electronic

segments accounted for 24.6% of the global internet retail sector value and by geographic segmentation USA was accounted for more than 59.5 % of the internet retail sectors value. Amazon.com Inc as the largest e-retailer globally shared up to 5.5% of the global sales during that time which is forecasted to be maintained throughout this same period. The future of the internet retail market is promising even though the growth is forecasted to be decelerated anticipated CAGR of 13.5% until 2013. China is another potential market for Amazon which according to a analyst from Goldmen Sachs Amazon will increase market shares by recording a growth of more than 25 in the next three years.(newsweek.com, 2010)

Page 6

EFE matrix The External Factors Evaluation matrix is used to audit the current business external conditions. It is used to visualize and prioritize the opportunities and threat that the Amazon.com is facing. The factors in this matrix are found from SWOT analysis and this tool helps us to rank the factors that have been identified in the SWOT analysis in Appendix 5. The EFE matrix for the Amazon has calculated value of 2.82 as shown in the Appendix 5 which is above the average meaning the companys ability to respond to external factor is above average or can say strong in other terms.

Internal Environmental Analysis Core competencies of Amazon Every retailer does understand that selling is all about product and good value, something all retailers are providing. For this reason providing good value has ceased to qualify as a differentiator. Amazon understands that offering a great product at a great price no longer suffices to gain and keep customers. The core competency of Amazon lies in its ability to provide good value services with unique and addictive experience. Amazon has enhance this value by creating synergy with the acquisition of Zappo, a company like Amazon which has been providing superior customer services, delivering guaranteed long term satisfaction to customers. Amazon customer can undoubtedly for any reason, for a one-year period, without any hustle and shipping cost, return any purchase to get a full refund. (ebcohost, 2010) Amazon has been able to turn its mammoth selection and super-rapid delivery into unique experience. Amazon has ability to manage for changes in the tastes of customers providing customers anything they might want to buy online. Amazon has data base where customers histories are being kept from records of past purchases and trends of customers purchases. Amazon has super customer intelligence systems to identify customers requirements based on the browsing histories and searches of the customers. This allows Amazon to understand customer needs by analyzing the data in business intelligence systems allowing the company to be ahead of customers. These core competencies are the result of its internal Strength which is analyzed in the SWOT in the Appendix 4

Page 7

Porters Value Chain The value chain of the Amazon consists of Purchasing or sourcing, marketing, distribution and after-sales Services. The company has been able to reduce external failure rate which is one of core in forming Amazons value chain. This is shown in the Appendix 7. The focus of the company is sourcing and distributing the products to consumers and thus the investments are geared towards warehousing in key high demanding geographical locations. This has been paying off to the company by forming an efficient delivery and distribution system of products to the consumer around the world.

IFE Matrix The Internal Factors Evaluation matrix is used to assess the internal strength of the company. It is used to visualize and prioritize the strengths and weakness the Amazon.com is facing. The factors in this matrix are found from SWOT analysis and this tool helps us to rank the factors that have been identified in the SWOT analysis in Appendix 6. The IFE matrix for the Amazon has calculated value of 2.98 as shown in the Appendix 6 BCG Matrix

The

Boston

Consulting

Group Matrix has been used to analyze the main business position of the Amazon.com in main eretailing markets. The

market of United States which has the highest

growth and in fact the highest highest competition requirement and for

innovations is categorize as

Page 8

the STAR where the company has been enjoying greater market share than the nearest rival in the market. in Europe mainly in France, Germany and united kingdom it has been also maintaining highest market share but the growth is not up to the level it requires dynamic changes in the way of competing in the industry unlike in US. These categories therefore fall into CASH COW. Chinese market on the other hand which is dynamic and has large growth pace is considered in a position of question mark. According to Business Week (2010) the electronics sales in China has raised forecast for Amazons compounded annual growth rate for revenue in 2010-2013 to 25 from 22 percent. Japanese and Canadian market share and the market itself are growing, thus Amazon can still rely on those markets to convert them to Cash Cow in future. Financial Position of the company The company financial position has been strong despite its high gearing ratio. Appendix 8 shows the Amazons Quarterly Income Statement which shows strong performance despite fluctuation in revenue in the past four quarters the company published. This has been due to the fact that it has becoming a strong player in Chinese market (newsweek.com, 2010)

Goals and Objectives The term Objective is defined by (Campbell et al, 2007) as the state of being to which an organisation aims or purpose and it is the end to which strategy aims. Objective of a business can be both short term and long term. But in this appraisal I will concentrate more on longer term objectives of Amazon as they are the strategic objectives of the company. Strategic or long term objectives of Amazon will represent the most important level of decision making which need to be set by senior management or board of Directors of Amazon. The long term objectives of the Amazon will derive its strategies in the future where the general corporate objectives which need to be set by the top management have to be broken down to Functional and Operational levels in order to achieve those objectives. Corporate Objectives The company currently has the following Objectives. Increase global market share to 10% by the end of 2013 Increase revenues by 30 % every year.

Page 9

Decrease cost of selling per customer by 5% by the end of 2012. Become major player in Chinese market by the end of 2013. Pricing Objective; earn customer trust through low prices, vast selection of product and ; Fast, convenient delivery

Amazon report its financials with two divisions the USA and the International. International chain has been extended to six countries. They are United Kingdom, France and Germany from Europe, China and Japan from Asia and the neighbouring Canada. In order to achieve corporate level objectives each individual location has to set their own targets and objectives. Likewise all the functional departments and operational department need to set own goals and benchmarks and make sure to attain that target which will ultimately lead company to fulfil its corporate level targets. The short term objectives are derived from long term objectives, which should be translated into immediate or current actions and targets. Thus with the level of hierarchy the lowest level of objectives becomes short term objects. Business Objective To introduce at Kindle tablet to offer services of Kindle more than just video, music and books. To acquire Borders books store chain which is under huge financial burden Functional Objectives Provide marketing mix that enables to sell the new Kindle at a price in the range of 500 to $830 depending on Wifi, 3G and Memory Amazon aim to achieve 80% and 60% of customer awareness of Kindle tablet in United States and international (other global) markets respectively

Current Strategies

Page 10

The long term Goals and Objectives of Amazon is the key to formulate the business strategies. Different writers have put forward different definition of the word strategy. Professor Chandler of Harvard Business School in 1962 has defined Strategy as: ...the determination of the basic long-term goals and Objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. As shown in IE matrix the company should focus on strategies for the growth of the company. The

calculated result of EFE and IFE Matrix is 2.82 IFE 2.98 respectively. (see Appendix 5 and 6) The result suggests Amazon to hold and maintain its position. This suggests the company should focus on in increasing market penetration and product development. Ansoff Matrix in Appendix 9 indicates that the

Amazon can focus on all four type of strategies growth, product development, market development and product diversification. Similar strategies are the result of SPACE matrix (calculation is shown in Appendix 10). This matrix is an analytical tool to determine the type of strategy the company should undertake. The matrix identifies the competitive positions of the company. Amazon in past year or so has been developing key strategies that will keep its market share and maintain competitiveness in the market. Market Penetration strategies Amazon focuses on selling more of existing products in USA and China with innovation and cost effective methods which can be risky. The current different focus areas of Amazon include Advertising programs, Loyalty programs and expanding products and serives with existing clients.

Page 11

Acquisition Strategy: Amazon has been one of the few companies which have been growing at the same pace as market growth by taking advantage of its position of the industry as leader. The company has been able to maintain this market growth through Acquisition of innovative companies.

Market Development The focus has been on selling existing products to India and Middle East via strategic alliances. This is riskier than penetration which includes new channels new packing and new area development programs. Product Development This strategy concentrate on developing and introducing new products in existing markets which is more disadvantageous to Amazon due risks associates with introducing new products to market where there is high intensity of rivalry.

Diversification strategies: This includes changing current marketing mix of 4 ps place, price, package and product. This strategy has been the most risky in the past given the fact that it requires good market intelligence in determining right techniques.

Problem and Issues From SWOT and the PEST analysis I have discussed number of problems Amazon face in the current business environment. Amazons value chain analysis indicates that its operating margin has been very low while it has been continuously lowering the prices or offering free shipping to its customers to maintain the competitiveness in the market. Free shipping to strengthen business could be a major problem in the long run. Declining operating margins reflects a weak cost structure and ineffectiveness in Amazons pricing strategy. The company operate in rapidly evolving and highly competitive segments where competition from physical world retailers is one of the major forces against the Company. The major competitors also include indirect competitors like media companies, web portal and search engines in web. The digital media industry is most volatile in industry in terms of technological changes the company is required to carry on continuously which could affect

Page 12

the operations of Amazon. That is some digital cable providers and internet providers are offering Video on Demand and technologies have been developed by other companies such as Apple with iPad and Apple TV allows alternative means for consumers to receive and watch movies. Smart phone has never been better with different applications via internet that is adversely affecting the Amazons business worldwide.

Company needs to tackle the competition from Barnes and Noble and Borders with strategic moves to overcome disadvantage it faces in dealing with traditional method of selling books. Globally competition from Chinese vendors and e-retailer has been one of key area Amazon needs sorted out in order to settle in the e-retailing for the long run . It is a segment which Amazon does not have the first mover advantage and the reputation of Chinese counter parts are quite positive due to cultural influence in this part of the world.

Recommendations Amazon has been enjoying strong market share in e-retailing. The core competency of the company and its external market and internal environment has been positive and it is where it can address key issues and the problems. In this section I suggest strategies that Amazon need to follow in building the company larger. The SPACE model in Appendix 10 suggests the company to undertake strategies that are aggressive in nature. Amazon.com inc is moving towards right direction and should aggressively adopt development of market and product strategies that are currently being formulated by the company. This is also supported by the IE matrix which suggests growing and building. From Porters Generic Model the company can adopt Differentiation by emphasising on delivering completely unique product to the consumers. Product differentiation is the process and where a product is converted to more appealing to consumer through addition or creation of new features. The following strategies are the available options for Amazon base on the IE Space and Ansoff matrix that were discussed in preceding chapters.

Page 13

Option 1. Product development of e-books by taking spoil of vacancy that will be created by Borders bankruptcy The Borders book store is under huge financial burden and has already filed for bankruptcy to close 200 stores on 22nd of July 2011. This leaves good growth opportunity for other book retailers in market especially for Amazon to increase market for e-books. As it was highlighted by Borders President Mike Edward, the reason for his chains bankruptcy was due to insufficient capital resources to be a viable competitor. (Borders files for bankruptcy, to close 200 stores , 2011). He said the bankruptcy was essential to restructure its debt. Arguments for adopting this strategy. This will help gain more competitive advantage over traditional sellers like Barnes and Nobles and Borders itself. Amazon can expect to give more problems to Borders remaining shops and may effectively take over Borders in the future at the same time generating a product notoriety and brand loyalty Arguments Against: It Increase costs for the company to maintain the competition within the market place, and will require further investment when it already have high gearing that is going to be costly as price of raising new debts will be higher.

2- Product Development of e-books segment by launching Kindle tablet Kindle has been successful in the past years with different stage of developments since 2007. Even after the introduction of new tablets and book readers from competitors like Apple, Sony, Nobles and Barnes, Amazons Kindle, the highly rated unique book reader, has maintained its popularity for real look of a book with intensity and crispness of its screen. Argument for: With the SWOT strength of being largest retailer of e-book Amazon can emerge successful from the competition by keeping as many books as possible out of competitors hand through existing publishers network.

Page 14

It is a major risk that if Amazon builds its own platform for the new tablet as there may not be enough applications from developers as there is already quite a competition from Apples iOS and Googles Anroid OS applications developers. Kindle can look forward for Anroid Operating System for this new tablet instead of building its own. (New York Times, 2011)

Argument Against: Affiliating with a company like Google for OS can be dangerous in future as it would expose some of the weakness of the Amazon in e-retail market to a indirect competitor who can have possible concentric diversification to compete Amazon in future. 3 Market Development through Social Networks Google+ is the last addition of the social network market which is currently under construction. The beta version of this network has 6 million member in 6 months even with the restriction it has places on new users to become member. Amazon has been working on strategy of developing its presence of digital media in social networks including facebook and twitter. This would involve creating applications for the social networks where digital media such as film mp3 and e-books could be sold. Arguments for: Social Networking is new way of social gathering which has been changing the way people socialise in highly changing cultural attitudes nowadays. The PEST analysis in Appendix 2 explains this changing trend in every corner of the world. User profiles in these networks could be used for to advertisements and with a click of a button can be directed to the applications from which purchase can be made and users can comment on the products being sold in Amazon market place. Amazon can allow users to create list that they would wish to buy from online retailer where these would be shared among social network. Arguments Against: To use social network facilities already existing could be boost for these companies to indirectly and directly compete with Amazon at the end as for these social networks Amazons core businesses are areas where these companies can make centric diversifications.

Page 15

Option 4: Market Development by forming strategic alliances with Chinese eretailers

Chinese market is the segment which Amazon need to exploit in order to maintain and grow current market share which has high prospectus of growing in the future. (newsweek.com, 2010) Arguments for: The PEST analysis has shown that the external environment indicates ever increasing attractiveness of the Chinese market which Amazon can take advantage out of careful and strategic alliances. Ability With strategic alliances and investment on human resources from China Amazon can penetrate more into Chinese market. Argument Against: Traditionally Chinese consumers have proven to have different preference and tastes of products which could easily be met by Chinese vendors. Amazon at the moment does not have technical to match Chinese counterparts in marketing products to China. Chinese have different culture and socio-political environment where internet contents are filtered by authorities. Option 5. Market development by entering to the market of India and Middle East: Affter the crash of Nasdaq on 2000 which ended an era of high growing Indian internet companies that begun in late 1990s the new ways of e-retailing shows sign of resurging internet businesses in India. Lately the internet usage in India has been rapidly growing while business. when Indian companies hit hard during dot.com bubble burst this was the main cause funding sources which is no longer a problem and Indian e-commerce is playing catch up and already has positive signs of growth in e-retailing (Dharumakumar, 2011) Arguments for:

Page 16

In the PEST analysis it has revealed that the new e-retail market can be develop in the Middle East countries where as Indias economy has been growing even when the recession were hit in most of the countries in past two year

Indian government has been targeting to increase number of users of internet users to 3 million from 2007 onward, a project that has increased number of service provides and reduced the price of internet (datamonitor, 2009)

Arguments against: Internet contents are highly filtered in Middle Eastern countries where as Indian companies like Letsbuy.com has been enjoying first mover advantage in Indian market after initial starters collapsed during dot.com bubble in 2000. (Dharumakumar, 2011) Selection of strategies Since all of these are mutually exclusive for Amazon.com due to its high gearing ratio of 69% the company need further assessments on choosing the best strategy amongst these five options. These strategic options can be evaluated against a set of criteria including suitability, feasibility and acceptability. These criteria help us to justify why some strategies might succeed better than others (Johnson et al, 2006). The Appendix 11 shows the evaluation table from which the option two has the highest score. Therefore it is selected amongst all others for the reason all of these strategic investments are mutually exclusive given the financial constraints of the Amazon.

Operational and Strategic objectives

Operational objectives are detailed, costing and timely plans of what the organization will do to meet each strategic goal. They set out a work plan for the organization, usually for the short run over a twelve-month period. (David, 2005). With the selection of the strategic option 2, based on the selection process in Appendix 11 Amazon can set the following Operational Objectives.

Page 17

Release Beta version of Kindle Tablet in Chinese market with disguised as Chinese (reversed engineer) fake Kindle Tablet in the First quarter of 2012 to get market feed back

Break a deal with Google to establish a specific sub segment for Kindle tablet applications in googles application store, Anroid Market, before end of 2011.

Release Kindle Tablet to the Market in third quarter 2012.

Implementation and controlling of Strategies

In order to implement these and other strategies Amazon should manage the following factors properly that will be key in successful implementation of any business strategy. These include; Key component Amazonc's Approach

Implementing Strategy The organization structure Amazon has a flat structure

The system of allocation of Resources are centrally allocated resources: the The kinds and levels of have possession of best technology in the industry through technology available, The compensation R&D and Amazon has reputation of offering highest incentives in the industry coupled with a fair appraisal system Bezos has been excellent innovator who many consider as Entrepreneurial leader The work culture It is a go-go-go culture, dog eat dog world at Amazon interview process is gruelling but fun The managing change The Managing conflict Change management is part of Amazon culture Conflict Management is procedural

appraisal system The leadership

In order for the smooth implementation and achieving the targets one basic tool the company could have is SAAP among other thing like KPI, Financial Ratios etc.

Page 18

Strategic Annual Action Plan In order to achieve the operational objectives outline above and to achieve the objective of releasing the Kindle tablet in 2012 we have to formulate the Strategic Annual Action Plan giving time line for different actions to be achieve in the short-run. The appendix 12 shows the SAAP plan to implement and launch the product by end of 2nd quarter of 2012.

Conclusion Amazon, the Americas largest online retailer with three times the internet revenue of the runner up offers various product categories through its e-ecommerce website amazon.com and other regional web sites. With efficient management of downstream, operation and upstream through innovative technologies and marketing innovation the company has been able to offer cheaper price to consumers. The companys core competencies include innovation and customer centric quality services. This has enabled the company to enhance customer satisfaction as it offers customers with broader selection and greater access to information. Leading position in the e-retail market has also enabled Amazon to target customer base and has enhanced its top line (Datamonitor, 2010) The company targets to grow revenue by 30 percent each year. This includes targeting more investment in China which has already shown signs of growth by beating expectations. The company has improved forecasted growth rate in Chinese market of 25% from earlier rate of 22% this year from Goldmen Sachs ( Newsweek,2010) adding chinas revenue to $ 1 billion per year starting from 2011. The companys main strategies will remain as building the company through market penetration in China and Product Development by enhancing its products with new capacities like enhancing Kindle book reader to a tablet. The company is setting its sight for long term objective of entering to new markets like India and Middle East, the two segments that are forecasted to have significant impact in the long run in e-retailing industry. There have been also challenges to the Amazon.com. The company has been competing with free offerings of many services to consumers including free shipping. Coupled with low margins it needs strategies for improving future prospectus of the company. The company should in my view take full advantage of the downturn of Borders and prevent Barnes and Noble to take all the spoils from the failure of this Giant book retailer. What Amazon can do to prevent Barnes and Nobles taking advantage is to launch a bid to take over Boarders with

Page 19

all the remaining stores. It will not only prevent Barnes and Nobles to gain market shares of traditional book retailing but it also will pave new strategy of developing online books for Amazon. The traditional book market still has good future in United States and in other countries. The reasons behind the failure of Borders include insufficient capital resources, maintaining unsustainable level of debt, over investment, failures in concentric diversification. (quora.com, 2011). It is not due to any downturn of traditional retail book market. This is also backed from the fact that Barnes and Noble has been doing well in the market. (The Future of Barnes & Noble, 2011) The new strategy therefore can benefit Amazon like double edge sword by using these stores to grow selling of e-books with the help of traditional selling, a concept largely ignored by Borders which many blame for the failure of the giant and at the same time preventing Barnes and Noble increasing its market shares in traditional retailing.

Page 20

References Borders files for bankruptcy, to close 200 stores . (2011, 2 16). Retrieved 7 25, 2011, from msnbc.com: http://www.msnbc.msn.com/id/41536256/ns/business-consumer_news/ Bosman, J., & Michael. (2011, 2 16). Borders Files for Bankruptcy. Retrieved 7 25, 2011, from nytimes.com: http://dealbook.nytimes.com/2011/02/16/borders-files-for-bankruptcy/ Break the Rules the Way Zappos and Amazon Do. (n.d.). Retrieved from http://ehis.ebscohost.com.newdc.oum.edu.my/bsi/detail?sid=f25acff3-98fa-49f7-b022cc30c7896cba%40sessionmgr104&vid=1&hid=102&bdata=JkF1dGhUeXBlPWlwJnNpdGU9Yn NpLWxpdmU%3d#db=buh&AN=60438963 Campbell, D., Stonehouse, G., & Houston, B. (2007). Business Strategy. Oxford, Great Britain: Elsevier Butterworth-Heinemann. David, F. R. (2005). Strategic Management, Concepts and Cases. New Jersey: Prentice-Hall. Dharumakumar, R. (2011, 7 25). Ecommerce in India - Second Coming. Retrieved July 29, 2011, from business.in.com: http://business.in.com/article/boardroom/ecommerce-inindia-the-second-coming/27042/1 Duryee, T. (2011, 6 24). Amazon Taps LivingSocial to Enter Daily Deals Space For Now. Retrieved 7 22, 2011, from AllThingsd.com: http://allthingsd.com/20110624/amazon-tapslivingsocial-to-enter-daily-deals-space-for-now/ James, A. (2010, April 20). Amazon.com CEO Jeff Bezos says company goals not changed . Retrieved July 24, 2011, from SeattlePI: http://blog.seattlepi.com/amazon/2009/04/20/amazon-com-ceo-jeff-bezos-says-companygoals-not-changed/ New York Times. (2011, July 16). Retrieved July 25, 2011, from Amazons Tough Decisions on Its Android Tablet: http://bits.blogs.nytimes.com/2011/07/14/the-amazon-android-tabletconundrums/ quora.com. (2011, 2 16). Why is Barnes & Noble performing well as a business while Borders has filed for bankruptcy? Retrieved 7 25, 2011, from quora.com:

Page 21

http://www.quora.com/Borders-Books/Why-is-Barnes-Noble-performing-well-as-abusiness-while-Borders-has-filed-for-bankruptcy Samuel, C. C., & Certo, S. (2009). Modern Management, Concepts and Skills. New Jersy: Pearson Prentice Hall. Stock Picks: Amazon.com, Apple, Ford, Intuit. (2010, 6 7). Retrieved 7 25, 2011, from businessweek.com: http://www.businessweek.com/investor/content/jun2010/pi2010067_358691.htm The Future of Barnes & Noble. (2011, 2 16). Retrieved 7 25, 2011, from Frenstrategy: http://fernstrategy.com/2011/02/22/the-future-of-barnes-noble/

Page 22

Appendix 1
Amazon Principles and Values Customer Obsession Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.

Ownership Leaders are owners. They think long term and dont sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say thats not my job.

Invent and Simplify Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by not invented here. As we do new things, we accept that we may be misunderstood for long periods of time.

Are Right, A Lot Leaders are right a lot. They have strong business judgment and good instincts..

Hire and Develop the Best Leaders raise the performance bar with every hire and promotion. They recognise exceptional talent, and willingly move them throughout the organisation. Leaders develop leaders and take seriously their role in coaching others.

Insist on the Highest Standards Leaders have relentlessly high standards - many people may think these standards are unreasonably high. Leaders are continually raising the bar and drive their teams to deliver high quality products, services and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.

Think Big Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that Page 23

inspires results. They think differently and look around corners for ways to serve customers.

Bias for Action Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.

Frugality We try not to spend money on things that dont matter to customers. Frugality breeds resourcefulness, self-sufficiency and invention. There are no extra points for headcount, budget size or fixed expense.

Vocally Self Critical Leaders do not believe their or their teams body odour smells of perfume. Leaders come forward with problems or information, even when doing so is awkward or embarrassing. Leaders benchmark themselves and their teams against the best.

Earn Trust of Others Leaders are sincerely open-minded, genuinely listen, and are willing to examine their strongest convictions with humility.

Dive Deep Leaders operate at all levels, stay connected to the details and audit frequently. No task is beneath them.

Have Backbone; Disagree and Commit Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly. Deliver Results Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle. Source: Amazon.com

Page 24

Appendix 2 PEST Analysis PEST FACTORS Social Social Networking has been phenomenal in past 3-4 years beginning with Facebook and Twitters success. A new social network of Google, Google Plus, has already reached to 6 million users in 6 months. KEY COMPONENTS SIGNIFICANCE TO AMAZON.COM Amazon.com can use marketing strategies and can exploit new business opportunities through these social networks or can even seek for innovative social network of its own "the average American internet user is young, white, employed, well educated, affluent and Suburban. Gender is balanced equally among Internet users. Only 8 per cent of Internet users are black and 9 percent Hispanic, compared to 77 percent whites. Forty-seven percent of users are between 30 and 49 years old,29 percent between 18 and 29 years old , 18 percent between 50 and 64 years and 4 percent older than 65." (David, 2005). Can prioritize product development to market product portfolios according to proportion of internet usages in these groups. this can be key success factor in capturing more market share

Page 25

internet hackers pose significant threat and risk for the online shoppers (Datamonitor 2010)

this can be taken to advantage by building trust of consumers thereby enhancing market share

Political

In many countries including economic power house China has been restricting contents in internet.

certain type of products cannot be sold to China

some politically conservative countries has been changing leaderships like Tunisia and Eqypt leading in the process of changing their Previous Regimes who were in power for decades. The major force in toppling these leadership was the increase in voice of youths for liberalisations and changes meaning there is every possibility for telecom and internet liberalisation in these countries Economical the Global Economic Downturn has been affecting all business across globally but recovery has been started. According to Global Economic Outlook for quarter 2 of 2011 published by Deloitte the Euro zone has left the recession behind and has built momentum of recovery over the past three months. (Global Economic Outlook)

new e-retail markets will be emerging presenting new opportunities to tap into these markets

Increase in GDP would decrease current level of unemployment in EU, and increase spending power of consumer would lead to new growth opportunities for the company

Page 26

Currency fluctuation plays vital role in selling across borders. Recently the dollar slumped to 33 percent low against yen A weaker dollar will increase revenue to US companies as attractiveness of US products increases and such will have positive impact on US economy.

this will not only reduce prices of US merchandise but also transportation costs and could exploit non-US residents market

There have been major oil shocks in the past two years. An increase in oil prices will decrease disposable incomes of consumers, decrease consumptions and correspondingly will increase stockpiles. (Economics book)

possible slumps in demand for elastic goods may need to market maintain competitiveness in inelastic portfolio

Extreme weather conditions, the rise of bio-fuels, changes in diets,and government reactions to shortages have led to the rise of food prices. The relative price of

Disposable income of consumers will

food vis--vis other commodities has surely increased in effect demand of so much as food inflation is greater than headline inflation Global Economic Outlook 2011 Technological with wider use of internet technologies and with 3G, the internet users has been growing at a pace (datamonitor 2010) increase eretailing scope e-retailing

Page 27

Appendix 3

Lower fixed costs No natural barriers Small companies can develop niche markets Recession proof in last economic downturn Threat of new entrants High

Large Number of suppliers Publishers have exclusive rights of distribution Backward Interrogation with suppliers Bargaining Power of suppliers Moderate

Low cost of sales

Product diversification and product mix makes Amazon unique

Intensity of RivalriesModerate

Less elasticity of for Amazon products through brand loyalty Low switching costs to customers General Internet Security threat Diversification of products means more inelastic Bargaining Power of Consumers Moderate

The traditional bricks and mortar shopping Threat of hackers make customers to choose Amazon
Threat of Substitutes

Source: Datamonitor

Page 28

Appendix 3 The bargaining power of consumers:

There is variety of potential customers in this retail market since Amazon has diversified its business to number of sectors which has relatively less elasticity in demand. The inelastic nature of its products is explained from its own unique brand through high quality services it offers or to rephrase I could say its marketing mix is differentiated in terms of the style of merchandise it sells and attractive prices offered to customers. The diversification to different retail sectors itself has increased customer base of Amazon and it will generally be true for any company in this sector and will reduce overall buyer power. The security threats pose by the internet itself affects the loyalty of customers in this industry and it is at advantage to Amazon from the fact that it is trusted by many customers throughout the world. However, the nature of the e-business represents significant power to consumers as well as there is very low switching cost. Therefore I can say power of consumers is moderate.

The bargaining power of suppliers: The inputs of e-retailing sector will include ICT equipments systems and merchandise that will be purchase for resale. The industry has large number of suppliers and thus reliance to particular supplier is not necessary for most of merchandise Amazon sells. However the specialist products such as books have higher bargaining power from the supplier as publishers exclusive rights of distribution makes books inelastic in supply. There is significant threat to Amazon and other e-retailers from suppliers of forward integration moves into online retail market as electronic format reduces costs to retail some products directly to consumers. Thus on overall the bargaining power of supplier is moderate. The threat of new entrants: Entry to the e-retail sector can be achieved either by extending an existing companys operation to include internet retail or by a new company entering with a whole e-business model of retailing or combining online retailing with traditional retailing. It has been trend in traditional retail industry for past few years to diversify business with e-retailing. The sector has become more price competitive by virtue of high sales achieved through online retailing. The high volume of sale is being translated into low costs via economies of scale. Amazon.com among others has been enjoying economies of scale in purchasing, inventory

Page 29

handling and customer service. The nature of e-retailing does not require heavy investment means smaller companies can compete in this industry. There are no natural-barriers in the industry and barriers to the market are minimal as there is little regulation and supplier accessibility is relatively easy. A small company may be successful in competing a company like Amazon with specialised or niche products. Further the growth in the sector has been dynamic which has proven somewhat recession-proof in the last economic downturn, making it attractive to new entrants with strong likelihood of new entrants.

Threat of Substitutes: The traditional bricks and mortar shopping and catalog shopping will not perish for all despite how opportunistic and profitable can e-retailing become in future. Many customers enjoy experience of traditional shopping specially in garments and clothing products. As I have mentioned before the threats of hackers accessing to personal information may lead many consumers to favour catalog and traditional shopping. Overall the threat of substitute can be said to be moderate to Amazon.

The intensity of Rivalry: The global e-retail market is home to large number of retailers. Though the size and location of these retailers vary the internet and mass mode of transportation has created borderless global industry. Number of competitors in the sector combined with minimal or zero switching cost and low cost of sale has intensifies competition in this industry with web search facilities providing price comparison intensifying the rivalries. However, product differentiation and marketing mix of Amazon combined with low fixed costs and larger revenue base alleviate the intensity of rivalries between other players in the industry. I consider intensity of rivalry to be moderate for these reasons.

Page 30

Appendix 4
STRENTHS Robust Brand Image Worlds Largest Online Retailer Strategic location Product Diversification Technological Advancement Service Oriented and Customer Centric Vision Strong Research and Development Facilities Enthusiastic Highly Skilled Workforce Customers Obsession and Loyalty WEAKNESS Price Competitiveness issue might arise from Free shipping offers Stakeholders confidence issues due to patent infringement Weaker presence in emerging markets like china and Middle East High dependency on debt for working capital management Profit Margin is lower for regional market segments which have no conglomerates

OPPORTUNITIES: Growth 3G internet Technologies Growth in Social Networking Rising Global internet literacy London Olympics 2012 Expansion with Takeover and Merger Lower costs of selling Internet Sales to grow at CAGR of 13.5% until 2013 Growth in usage of Gadgets and Smart Phones in emerging countries Economic Growth of India and China

THREATS: Changing social Trends High Dependency on strategic Alliances and Partnerships for Inbound and outbound logistics Fierce Rivalry Relationship with publishers hurt due to pricing model Enhancement to Apple iPad Fluctuation in Exchange rates Consumer Confidence in US and EU Change in Social Trends Increase in food prices erode consumer spending in Asia

Page 31

Appendix 5 EFE Matrix

Opportunities

Rating

Weight

Weighted Score

Growth 3G internet Technologies Growth in Social Networking Rising Global internet literacy London Olympics 2012 Expansion with Takeover and Merger Lower costs of selling Internet Sales to grow at CAGR of 13.5% until 2013 Growth in usage of Gadgets and Smart Phones in emerging countries Economic Growth of India and China Threats Changing social Trends High Dependency on strategic Alliances and Partnerships for Inbound and outbound logistics Fierce Rivalry Easy Entry Relationship with publishers hurt due to pricing model Enhancement to Apple iPad Fluctuation in Exchange rates Consumer Confidence in US and EU Change in Social Trends Increase in food prices erode consumer spending in Asia

4 3 2 4 4 3 3 4 4

9% 9% 5% 6% 8% 3% 5% 5%

0.36 0.27 0.10 0.24 0.32 0.09 0.15 0.20

8%

0.32

2 1 3 2 1 2 2 2 1

5% 7%

0.10 0.07

7% 7% 5% 3% 3% 3% 2% 100%

0.21 0.14 0.05 0.06 0.06 0.06 0.02 2.82

Page 32

Appendix 6 IFE Matrix

Strengths

Ratin g

Weight

Weighted Score

Robust Brand Image Worlds Largest Online Retailer Strategic location Product Diversification Technological Advancement Service Oriented and Customer Centric Vision Strong Research and Development Facilities Enthusiastic Highly Skilled Workforce Customer Obsession and Loyalty Weakness Price Competitiveness issue might arise from Free shipping offers Stakeholders confidence issues due to patent infringement Weaker presence in emerging markets like China and Middle East High dependency on debt for working capital management Profit Margin is lower for regional market segments which have no conglomerates

4 4 3 3 3 3 4 4 4

10% 9% 8% 7% 7% 7% 5% 7% 6%

0.4 0.36 0.24 0.21 0.21 0.21 0.2 0.28 0.24

2 2 1 2 2

10% 9% 5% 5% 5%

0.2 0.18 0.05 0.1 0.1

100%

2.98

Page 33

Appendix 7 Porters Value Chain of Amazon

Amazonhas created a data base through which a central planning is being done with the input of all business units and departments. This helps for the Amazon to reduce cost as well gain value by synching all its business activities toward same goals. Cost is derived down when repetetive works are eliminated when Infrastructure this data base is used the company wide With the unique benefits to employees attract highly skilled labour force who are ready to work in Support Activities warehouses located in economically cheaper areas. Value is being created from the skills of labour force who are highly competitive. The company has been able to source expertise from competitors' trained staff Human Resources who had proven to behind innovative ideas of Amazon investment in technology has turned into numerous opportunities in the past for example being able to quickly digitize media for direct online sales. "search the inside or contents of the book service" has been Technology Development one of the highly rated development in technologies in the past the strategic business create value with the efficient and timely on demand delivery system like the BookSurge which keep rich inventory of digital copies of books readily available for customers through printProcurement on-demand

Page 34

Business Intelligence system with the help of data base infrastructure has been able to forecast inventory at fairly accurate level which also help to reduce cost by preventing unnecessary stock level and Return Inward costs substantially. the online format helps Amazon to rotate inventory rapidly and reduce it inventory Online Payment System has been never faster in the e-retailing as Amazon's database combined with the intelligence system allows customers to be credit rated Close Proximity to "Aids to trade" and transport infra structure facilities help Amazon to lower cost and also allows to aggregate order to minimise per unit cost of delivering goods achieving economies of scope and scale Amazon is able to create its free delivery and own producst through product mix it offers to customers. Various technique of product bundling and mixing that give maximum value to customers is identified from the past sales data where real time analysis are available from Market Intelligence systems for sales and marketing team. Price Comparison of new and used products is available return policy with in 30 days is possible to achieve by minimising External Failure costs Alliances and third pary sales

Page 35

management cost

Inbound Logistics

Operations

Outbound Logistic

Marketing and Sales

After sales services

Operation Activities

Page 36

Page 37

Appendix 8: Quarterly Income Statements of Amazon Revenue and Cost of Selling Expenses 31-1231-03-11 10 30-09-10 30-06-10

(000,000 (000,000) ) (000,000) (000,000)

12,947.0 Total Revenue 9,857.00 0 7,560.00 6,566.00

10,317.0 Cost of Revenue 7,608.00 0 5,786.00 4,957.00

Gross Profit Operating Expenses Research Development Selling General and Administrative Non Recurring Others Total Operating Expenses

2,249.00

2,630.00

1,774.00

1,609.00

1,927.00

2,156.00

1,507.00

1,338.00

Page 38

Operating Income or Loss Income from Continuing Operations Total Other Income/Expens es Net Earnings Before Interest And Taxes Interest Expense Income Before Tax Income Tax Expense Minority Interest Net Income From Continuing Ops Non-recurring Events Discontinued Operations Extraordinary Items Effect Of Accounting 201.00 416.00 231.00 206.00 89.00 85.00 78.00 89.00 307.00 507.00 291.00 298.00 12.00 11.00 12.00 9.00 319.00 518.00 303.00 307.00 (3.00) 44.00 36.00 36.00 322.00 474.00 267.00 271.00

Page 39

Changes Other Items

Net Income Preferred Stock And Other Adjustments

201.00

416.00

231.00

206.00

Net Income Applicable To Common Shares

201.00

416.00

231.00

206.00

Appendix 9 Ansoff Matrix

Existing Products

New Products

Growth
Exiting Markets Consolidation Market Penetration

Product Development
Marketing Mix New Brands New Portfolios

Market Development
New Markets Explore new segments New Customers New Countries

Diversification
Enhanced Marketing Mix New Brands New Portfolios

Page 40

Appendix 10 Space Matrix

Internal Strategic Position Competitive (CA) -1 Robust Brand Image -1 Worlds Largest Online Retailer -2 Product Diversification -2 Productivity -1.5

External Strategic Position industry (IS) 2 Barriers to entry 6 Growth of Industry 5 Accessibility of Finance 3 bargaining power of consumer 4 Total Axis X score 2.5

Financial 5 Return on Investments 3 leverage 3 liquidity 3 3.5 Cash Flow

Environmental -2 Inflation -1 Technological Advancements -2 Demand Elasticity -4 Taxation -2.25 Total Axis Y score 1.25

(See Space Chart in Main Text)

Page 41

Appendix 11 Evaluation of Strategic Options

Evaluative Criteria Sustainability Fit with capacity Fit with environment Acceptability pay-back period Risk Associates Return of capital employed Stake holders Reactions Consumers Shareholders Employees Feasibility Financially Technically Cost effectiveness Total Marks

Option 1 7 9 5 3 5 7 7 7 3 7 7 67

Option 2 10 10 8 5 9 7 5 6 7 10 10 87

Option 3 8 9 7 6 7 5 8 9 8 8 10 85

Option 4 4 6 5 6 7 6 5 4 6 6 6 61

Option 5 10 10 6 3 7 5 6 7 7 8 10 79

Page 42

Appendix 12 SAAP

Quarterly Objectives 1. Brain Storming

Strategic Actions Meetings with all Fuctional and Division head chaired by SVP of World wide architechture , Platform and Software, Rick Dalzel

Date assign

Date completion

Financial Resources

Non-Financial Resources 12 Business Unit

Man responsible

Man Accountable

15-Aug

25-Aug -

Sam Wheeler , Jeffry Blackburn , Director, Business Development Senior Vice President, Business Development

Heads

Page 43

2.Break a deal with Google to support OS of Kindle Tablet

Assign Taks for R & D head and three other staff to negotiate Google and agree on price with Marketing and Finance team To produce Financial apprisal of to determine maximum price afford to pay google -

1-Sep

15-Sep 25,000.00

10 Staff

Mr. Neil Roseman

Vice President, Engineering,Steven Kessel

16-Sep -

1 Mr. Neil Roseman

Vice President, Engineering,Steven Kessel

Page 44

3 Marketing Team to discuss marketing options to minimise financail outflows 4. Produce pilot batch to be evaluated for quuality assuarance Operation Department to do thourogh testing of first batch Release the pilot production in China disguised as" fake Kidle" 2-Oct 21-Sep

20-Sep -

3 Mr. Neil Roseman

Head of Marketing

30-Sep 25,000.00

10 Diego Placentini

Diego Placentini, SVP, World Wide Retailing and Marketing

Marketing Manager,

Diego Placentini, SVP, World Wide

China and Asia Retailing and Pacific region Marketing

Page 45

Review the results and feedbacks for the "fake Kindle" Compile and Submit the report of Product performance 5. Launch the product enhance the performance and Launch the product

1-Dec

31-Dec 100,000.00

12 Marketing Manager,

Diego Placentini, SVP, World Wide

China and Asia Retailing and Pacific region Marketing

1-Jan

31-Mar 25,000.00

5 Marketing Manager, US operations

Diego Placentini, SVP, World Wide Retailing and Marketing

1-Jul-12 1,000,000.00

25 Mr. Mark Peek

Jeffry Blackburn , Senior Vice President, Business Development

Total 1,125,000.00

Page 46

Page 47