Amazon case study

Quiz about Amazon
• What was the first name for the company (before Amazon)?
– Cadabra Inc.
• Where does the ‘Amazon’ name come from?
– The name reflected the vision of Jeff Bezos, to produce a large scale
phenomenon like the Amazon river.
• How much money has Amazon spent on real state
(headquarters, warehouses, etc)?
– Amazon owns zero real estate!
• In 2003 Amazon passed the $5 billion sales mark – it took
Wal-Mart 20 years to achieve this. Amazon has only 13,900
employees (2006) , Wal-Mart has 1.9 million employees
(2007).

Amazon's first
office building

Who want to
buy products
on Amazon
Who want to
buy products
on Amazon
Who want to use
Amazon
developing
services
Who want to use
Amazon
developing
services
Who want to
sell products
on Amazon
Three Customer Sets
Consumers
DevelopersSellers

Ten Reasons to Choose Amazon Over eBay for Selling:
1.Elegance and simplicity
2.Absolute best price for your items
3.You're a small seller and want better visibility.
4.You don't want the fulfillment hassle (inventory, packing, and shipping) on your
own. Or just send everything to Amazon, at no cost)
5.Your margins are tight and you need to minimize fees (you do not pay for listing and
maintenance if you are with Amazon)
6.You want to be where the industry growth is (Amazon's marketplace platform is
growing much more quickly year-over-year than eBay's)
7.You want to reduce overhead
8.You prefer to sell on a platform that changes rarely and slowly
9.You like integration
10.You've had trouble with eBay suspensions or feedback.

Knowledge management principles in Amazon
1. One portal, one interface, one-stop shopping.
2. Outstanding content management
3. Modular content
4. Distributed upstream content creation
5. Almost magical personalization
6. Crowdsourcing
7. Insanely easy and consistent transactions
8. Feedback
9. Reduced servicing
10. Great online help

Why is Amazon so popular ?
 Competitive Prices
 Quick Delivery
 No fuss returns policy
 Huge choice

CoreCore
competenciescompetencies
Jeff Bezos
Culture
Openness
Tech.
Infrastructure
Software
Development
Training
Negotiation
Skills
LogisticsCustomer Analysis

CoreCore
competenciescompetenciesJeff Bezos
Tech. Infrastructure
Logistics

• Barrier of entry – Medium
– Kindle Fire vs. Apple iPad
– Kindle Apps vs. Apple Apps
• Potential Entrants– Medium to low
– eBay
• $3.38B in revenue (Dec. 2011), 19.3% of Amazon’s Revenue
• Threat of substitute – Low
– Innovated Service
– High Brand Recognition
– High Customer Satisfaction
– Well Recognized and Trusted Service
• Bargaining power of suppliers – Low
– Sales Medium for Third Party Sellers of books, audio, technology
– Pay suppliers quickly (35 days after item has been sold)
• Bargaining power of customers – Low
– Cost Leadership
Industry Profitability Analysis – 5 forces

• Key Successful Factors
• Efficient Supply Chain and Logistics
• Product availability, extensive product line
• Low prices
• Innovative new offerings
– Kindle, Cloud, Web Services, etc.
• Ease of shopping
• Strategic acquisitions and investments
– Woot.com, IMDB.com, Zappos.com, etc.
Competitiveness sources

 E-Book
(Kindle)
 Music
downloads

 Online Book Sales
 Online
consumer
goods
 E-Book
(Kindle)
 Music
downloads

 Amazon On
Demand
 Online Book Sales
 Online
consumer
goods
 E-Book
(Kindle)
 Music
downloads

Sources of competitive advantage
• Maintaining and improving operational efficiencies
• The ability to offer shopping convenience, ease of purchase,
speed and decision-enabling information.
• A wide selection, discounted pricing, and reliability of order
fulfillment
• Purchasing of large volumes of products directly from
suppliers
• Amazon.com aims to ship 95% of products on the day they
are ordered.
• The company invested also heavily in warehousing and
material handling systems to achieve multifold improvement
in throughput.

Amazon’s Cooperative Strategy
• Partnerships: Drugstore.com, Living.com, Pets.com,
Wineshopper.com, HomeGrocer.com, Sothebys.com(auction)
,Kozmo.com etc - Amazoning a sector
• Alliances: Amazon formed alliances with many portals, internet
search engines and Internet Service Providers (ISP’s)
• Acquisitions: The first acquisition started in 1998 from Bookpages
(one of the largest online bookstores in the United Kingdom),
Telebook (operating through its ABC Bücherdienst subsidiary,
was Germany’s number one online bookstore) and Internet Movie
Database (largest repository for information on movies and
television) on April 27, 1998. Recent acquisition was in August 2008
AbeBooks,

“We don’t make money when we sell things; we make money when we help
customers make purchase decisions”
- Jeff Bezos, Founder and CEO

Amazon case study

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