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Lourdes Chica B.

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Amazon.com from start-up to 2004
Amazon started it business in 1995, at the beginning the amount of the profit was only modest.
Jeff Bezos, the CEO of Amazon.com, in 2003 had a strategy for Amazon.com it consisted in
maintain a strategy emphasis of widening the reach within its business model by expansion and
customer innovation. In this year Amazon had an important growth for the history of it business
model, at that time Amazon was one of the most recognized brands in the world and was the
number one global online service.
The macro environment of this Amazon growth stage was a very important fact that determined
the Amazon success. PESTEL aspects were support in a positive way the business model of Amazon
and as consequence create this phenomenal growth rate. For example new customers come
online every year as connection rates to the internet grow and economies develop, the social fact
of the increases of customers were related with the develop of technology resources and the mix
with the good economy situation of the customers environment.
Amazon business model implied to buy online, so the customers need to be confident with the
web site and feel that it was safe to shop online, the transactions were a key step in the
operational level of the business, and they managed this stakeholders expectation it in a efficiency
way.
Amazon main strategy was focused differentiation, Jeff Bezos argues by building new
technologies ourselves, we get to offer a better customer experience for millions of people. Does
that give us an advantage? Absolutely [But] you have to continue to innovate. This is something
that has to be refreshed every day, every week, every year.
The business had been customer focused innovation designed to improve the convenience of the
online shopping experience, they know who should organization serves, and they had the
compromise to always give the best service in order that the customers were completely satisfied;
these had included offering the worlds biggest collection of goods and services where customers
can find and buy anything they want online. Amazon.com lists millions of products and services in
a vast array of categories. Importantly, filtering this choice, finding products, services and
information content as well as providing transaction safety for customers had been driven through
technology development.
Bezos was the youngest senior vice-president of D.E. Shaw, running a Wall Street hedge fund but
he decided to quite Wall Street when he came up with the statistic that the electronic world,
known as the World Wide Web, would grow at the incredible rate of 2,300 per cent monthly;
Bezos had the vision to obtain benefits about this fact.
In terms of strategy position, Amazon were improving unique resources, they started selling books
online, and developed original resources as the first bookstore online, they promotes the books
through links in others web sites and give to these stakeholders a commission for each sale,
through this alliance they accomplished an increase of the sales.
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Amazon were using core competences in order to obtain an advantage between competitors,
through a very personalized service as examples, they created a personal notification service
consisting of an email notification when a book you want comes out in paperback or when your
favorite author releases another book; the recommendations section exceeding 20 categories; an
awards section where books that have won various prizes are listed.
In 1997 Amazon received a huge amount of money into investment, which enable a more
aggressive expansion of the business, this was important because the first mover advantage that
Amazon.com had been able to exploit so far was now being met with increasing competition.
With a growing full-time employee base (151 in 1996, to 614 in 1997) Amazon focused on
establishing their executive team, which included the recruitment of Richard Dalzell, a former Wal-
Mart Vice President. Dalzell joined Amazon as Chief Information Officer and brought with him
expertise in merchandising & logistics systems, supply chain systems, international retailing and
merchandising systems, and commercial decision support and data mining systems.
Amazon lowered prices and it transformed into the company that offered the lowest book prices
anywhere in the world, online or off, with this low cost strategy, Amazon increases the number of
customers accounts.
By the end of 1998, Amazon had served a cumulative 6.2 million customers, exceeded the
cumulative US$750m revenue level, had more than 60,000 members in their Associate
Programmed, launched music, video and gift stores in the US, and expanded operations into the
UK and Germany. Sales grew from US$148m in 1997 to US$609m and new customer growth was
complemented Amazon.com from with repeat customer orders that grew to 64 percent of sales.
Staff increases from 614 in December 1997 to around 2,100 in December 1998 included the
strengthening of the management team with the appointment of Jimmy Wright who joined as Vice
President, Chief Logistics Officer. A former Wal-Mart senior manager, Jimmy Wright had more
than 25 years of experience in logistics management. He took over the responsibility for all global
supply-chain activities at Amazon.com, including product purchasing, distribution centers and
shipping.
The expansion program also included acquisitions and strategic relationships with other dominant
internet players, reinforcing Amazons number one position, they made and strategic alliances
with Yahoo, that is a known website famous around de world; Amazon made strategic alliances
too with well recognized companies that will give the support of the business through financials
software, marketed software, etc.
Amazon were increasing its product lines, creating new strategy business units, the economies of
scale and scope of the online business model was changing the nature of retailing and the
company received top honors in the prestigious Computerworld Smithsonian Award com-petition,
taking first place in Business and Related Service at the beginning of 2000, Amazon suffered a
bubble burst, and its share price started to fall in March and by the end of 2000 over 75 per cent
of shareholder value had been wiped out as the stock price fell from $64.56 to $15.56; an
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additional data in this time was that US companies acquired and shutdown between 20002003 as
well as Amazon.com share price comparisons 19992000. Instead this situation Amazon was focus
to continued improvement the business, one of its main purposes was that customers could find
and discover anything they want to buy online on Amazons web site.
A large number of initiatives were introduced in 2000, both within the US as well as in Amazons
global operations; they were applying organizational knowledge through making strategic choices
that they had proved as positive solutions. While some were new, others were additions to
existing services and features.
During this year, Amazon.com announced strategic investments in Ashford.com and eZiba.com.
These investments were different in that the products being sold online were not traditional
discount items. Ashford.com was an online retailer of luxury and premium products offering new
and vintage watches, fragrances, leather accessories, sunglasses and writing instruments, while
eZiba.com was a leading online retailer of handcrafted products from around the world. However,
Amazon.com believed the fit was good because both these businesses had a desire for bringing
customers value through selection, service and convenience. At the end of 2000, net sales were
$2.76bn with a gross margin of 23.7 per cent. Income losses from operations were $864m, and
total net losses exceeded $1.4bn, which represented over 50 per cent of the net sales figure.
These losses combined with the aftershocks from the April tech wreck continued to wipe value
from investors portfolios and in response Amazon.com began cutting costs in 2000.
The cost-cutting response to losses continued in 2001 but on a much larger scale, but they were
forced to close warehouses in Georgia that was the Seattle center service, The Hague, Netherlands
would also be closed. However, the lower stock prices did not deter the ongoing rollouts of
categories, products and innovation.
In 2002 Amazon, repositioning the organization, the company announced numerous deals that
extended or renewed its marketing and alliance relationships with key players. In 2003 the
amazons success continued with more strategic alliances and the increases of the strategic
business units through the internationalization of the company, for example they create a new
center in Canada.
Amazons main strategy since 1995 had focus on customers by constantly improving customer
innovation. As such, the company had developed key competencies in technology development,
computer science and software. It had also shown a willingness to form strategic alliances, invest
or acquire other companies that offered developed technology, applications, products or services
that fitted its existing business model.
For Amazon organization they have a lot of challenges to face, they are in a hyper competition
environment, the technology are developing every day, so they need to upload the software in
order to be compatible with the new and famous computer devices that their customers use. They
need to maintain the great experience that involves shopping online, improving their services and
creating advantages that give a differentiation between competitors. The stakeholders are a very
key part in their successful and enable Amazon to maintain their cost efficiency.

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