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Case Study On Amazon

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Case Study MG495

TO: Jeff Bezos, Founder & CEO, Amazon.com

DATE: 04/06/08

SUBJECT: Amazon.com Analysis

EXECUTIVE SUMMARY

Amazon.com was founded as an online bookstore in July, 1995 and went public in May 1997. In June, 1998 Amazon.com launched its music store. Since then Amazon.com has become the most prominent Internet retailer. Over time Amazon.com has added several products including electronics, health and beauty products, house wares, kitchenware’s, music, tools, toys, videos, and several services such as auctions, 1-Click ordering, and zShops. Amazon.com has expanded nationally and internationally and now operates several customer service and distribution centers in the United States and international web sites that serve customers around the world.

One problem that founder and CEO, Bezos faced, was how to turn Amazon.com into a consistent moneymaker in the immediate, intermediate, and long-term time frames, while also continuing to pursue the corporate objective of expansion at reasonable costs.

In order to overcome the hurdles currently facing Amazon.com, I offer the following recommendations:

1. Develop and implement a B2B exchange for supplier’s manufacturers, distributors, and retailers to use.

2. Amazon should expand its online auctions.

3. Develop an effective differentiating enterprise wide strategy to survive and prosper over the competition for the long-term future.

4. Amazon should use a web-based model to personalize service.

5. Increase advertisement to have brand awareness.

I. The Company’s Current Objectives and Current Strategy

The company’s oft-stated goal is sacrificing short-term profits for building long-term growth, market share, and increased shareholder value. Amazon’s internal goals were to focus on increased market share, expand product offerings, and overall sales growth. Promotional activities, including promotional alliances and advertising, were important devices employed early on by Amazon in their attempt to attract visitors. The strategic factors facing Amazon are the management strategy. The focus is on proving the viability of the business model. Bezos attempted to produce an operting profit by cutting expenses, in particular advertising.

II. The Company’s Current Strengths and Weaknesses

Strengths

Amazon has entered into contracts with numerous retail partners, like The Gap and Eddie Bauer, to sell their goods through Amazon.com’s website. This type of partnership is known as the powered by Amazon and allows companies to use the technology, which in turn creates more business for the website. Another strength of Amazon is the number of households with internet access is expected to increase as time passes world wide. The company identifies keys to success and uses them to gain a advantage over their competitors by partnering with other online retailers because of their technology and distribution centers. Also they partnered with brick-and-mortar retailers who did not have the e-commerce expertise. This helped them take advantage of the competition because of the stock market collapse and internet stocks, most .com company’s cumulated losses and ended up going bankrupt.

Weaknesses

Pressure from the stock market as well as decreased customer confidence levels and an increase in the unemployment rate were weaknesses the company faced. Another weakness is the lack of face to face customer service. The goal of Amazon is to gain market share and not to produce a profit. From a financial position, this could be a weakness for the company at the time.

III. The Company’s Current Environmental Opportunities and Threats

Opportunities

The company reacts to opportunities and threats by building a place where people can come to discover anything they might want. They realize they can’t sell everything people want directly, so they do this in partnership with third party sellers in different ways. Due to low overhead, the more sales that Amazon.com had, the greater increase in profit margin on the items sold, and was able to pass savings on to the customers. This is due to Amazon being able to collect payments immediately for sales, therefore generating a large amount of working capital. Amazon made use of the partnerships and affiliation agreements to supplement its own product lines, with retailers like The Gap, Target, Eddie Bauer, Nordstrom, and Toys “R” Us. The company’s competitive market position within its industry

Threats

One of the environmental threats facing Amazon was the overall economic malaise of the U.S. and world economies, the Internet Tax Moratorium law was up for renewal, with no assurance of its being extended and online stalwarts EBay and Yahoo were expanding into Amazon.com’s markets. The Founder of Amazon was faced with the task of developing an effective differentiating enterprise wide strategy to prosper against the competition over the intermediate and long-term futures. The stock market pressured the company to produce consistent operating profits and to prove that its business model worked financially over the long term.

IV. Stakeholder Analysis

A. Government Agencies вЂ" The Federal Communications Commission, is a commission that defines the broadband to meet customer broad communication needs and desires.

B. Labor Unions вЂ" Since Amazon is an online buying center, there are no labor unions. These unions exist when there are enough in center employees to need protection as an employee.

C. Completing Organizations вЂ" In the technical products and systems market, competitors are looking towards opportunities

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