INTEGRATED ASSIGNMENT ON CONCEPT

APPLICATION
(Strategies of Amazon.com Inc.)

Submitted in partial fulfilment of the requirement for

Internal Assessment
Master of Business Administration (MBA)
Batch: 2016- 2018

By

Mr. Devesh Gautam

Mr. Jatin Goel
Ms. Shubhangi Goswami
MBA 4th Semester
1602570005
1602570007
1602570009
Under the Guidance of
Dr. Ruchika Yadav
K.R. Mangalam University
Sohna, Gurgaon

1
 DECLARATION

We hereby declare that the project report upon integrated assignment on concept
application submitted by us to K R MANGALAM UNIVERSITY, is a record of an
original work done by us under the guidance of Dr. Ruchika Yadav, Mentor, School
of Management and Commerce, and this project work is submitted in the partial
fulfilment of the requirements for the award of the degree of Master of Business
Administration. The results embodied in this project have not been submitted to any
other University or Institute for the award of any degree or diploma.

Devesh Gautam (1602570005) Date: March 9th, 2018

Jatin Goel (1602570007)

Shubhangi Goswami (1602570009)

2
 ACKNOWLEDGEMENT

“The pleasure that follows the successful completion of a project would remain
incomplete without a word of gratitude for the people and without whose cooperation
the achievement would remain a distant dream. It is not a mere formality to place a
record of the tireless efforts, caseless cooperation, constant guidance, and
encouragement of people closely associated with the project but a distant necessity for
the authenticity and readability of the project.”

We are using this opportunity to express our gratitude to everyone who supported us
throughout this project INTEGRATED ASSIGNMENT ON CONCEPT
APPLICATION. We are thankful for their aspiring guidance, invaluably constructive
criticism and friendly advice during this project work. We express our warm regards
towards Dr. Ruchika Yadav, for her advice, encouragement and scholarly guidance.

Finally, we are indebted to our family, friends and those people who helped us in
completing this project.

Devesh Gautam, Jatin Goel and Shubhangi Goswami

TABLE OF CONTENTS

3
DECLARATION ……………………………………………………….2

ACKNOWLEDGEMENT ………………………………………………3

CHAPTER 1 …………………………………………………………….8

 EXECUTIVE SUMMARY

CHAPTER 2 ……………………………………………………………10

 SECTOR INFORMATION

CHAPTER 3 ……………………………………………………………12

 COMPANY INFORMATION
 FINANCIAL STRTAEGY
 HUMAN RESOURCE STRATEGY
 MARKETING STRATEGY
 OPERATIONS STRATEGY

CHAPTER 4 ……………………………………………………………45

 RESEARCH METHODOLOGY
1) Significance of the Study
2) Objectives, Scope and Limitations of the Study
3) Research Design
4) Source of Data
5) Data Collection Instrument
6) Population & Sampling Method

CHAPTER 5 ……………………………………………………………53

 CONCLUSION & BIBLIOGRAPHY

LIST OF TABLES/GRAPHS

4
5
6
 CHAPTER 1

EXECUTIVE SUMMARY

Amazon.com, Inc., doing business as Amazon, is an American electronic commerce

and cloud computing company based in Seattle, Washington which was founded by
Jeff Bezos on July 5, 1994. The tech giant is the largest Internet retailer in the world
as measured by revenue and market capitalization, and second largest after Alibaba
Group in terms of total sales. The amazon.com website started as an online bookstore
and later diversified to sell video downloads/streaming, MP3 downloads/streaming,
audiobooks downloads/streaming, software, video games, electronics, apparel,
furniture, food, toys, and jewellery. The company also produces consumer electronics

7
—Kindle e-readers, Fire tablets, Fire TV, and Echo—and is the world's largest
provider of cloud infrastructure services (IaaS and PaaS). Amazon also sells certain
low-end products under its in-house brand Amazon Basics.

Amazon has separate retail websites for the United States, the United Kingdom and
Ireland, France, Canada, Germany, Italy, Spain, Netherlands, Australia, Brazil, Japan,
China, India, and Mexico. In 2016, Dutch, Polish, and Turkish language versions of
the German Amazon website were also launched. Amazon also offers international
shipping to certain other countries for some of its products.

In 2015, Amazon surpassed Walmart as the most valuable retailer in the United States
by market capitalization. Amazon is the fourth most valuable public company in the
world, the largest Internet Company by revenue in the world, and the eighth largest
employer in the United States. In 2017, Amazon acquired Whole Foods Market for
$13.4 billion, which vastly increased Amazon's presence as a brick-and-mortar
retailer. The acquisition was interpreted by some as a direct attempt to challenge
Walmart's traditional retail store.

8
 CHAPTER 2

SECTOR INFORMATION

Amazon uses the components of a database to create usable knowledge for people.
Amazon is moving away from being a just an online retailer and is competing with
Google and Microsoft through business to business transactions based in data storage
and data imagery. Many new components are used in Amazons Elastic Cloud
Computing application to create data images for multiple user interfaces.

The components of a of a database are a logical grouping of data, tables, fields,

values, query, forms, reports, modules and data base management system according to
Rainer and Turban (2008). Amazon provides data storage (S3), applications they call
elastic cloud computing (EC2), simple DB and Mechanical Turk to other businesses.
When businesses use S3 through Amazon special software extracts data from
businesses and sends it to a data warehouse in summary form.

Using EC2 users are able to design their own software applications (Myerson, 2008).
The database components of EC2 very by region but contain Images, Security
Groups, SSH Keys, Elastic IPs, EBS Volumes, EBS Snapshots that cannot be shared
between regions (Right Scale, 2009). All obtained from businesses for EC2 are an
image of the original. According to Amazon (2009) simple DB is a web application
that allows users to interact with data indexing and querying quickly because it does

9
not store the data in raw form. Amazon offers a service which it calls the Mechanical
Turk.

Information is processed by humans and converted to usable knowledge through this

service. The Mechanical Turk provides access to networks of people who process
information that can only be processed by the human mind. End users can see the
results of the EC2 service and the Mechanical Turk (Rainer & Turban, p. 26). Data,
information, and knowledge Amazon. Com: e-business and e-commerce for B2B and
B2C According to Rainer and Turban (2008) Business to business (B2B) entails all
transactions made between businesses.

Rainer and Turban (2008) also suggest that business to customer (B2C) entails all
transactions made between businesses and customers. Rainer and Turban (2008)
discuss transaction made over the internet as E-Commerce. E-business means all
online transactions including all Internet based interactions with B2B and B2C; E-
business transforms business processes for high efficiency (Rainer and Turban, 2008).
Amazon uses S3, EC2, Simple DB and the Mechanical Turk to create an even flow of
data that is converted into information for businesses by applications created by users
in the EC2 service.

The information is converted into knowledge for customers and businesses by the
Mechanical Turk. Amazon uses both e-business and e-ecommerce to service its
customers, collaborate with partners and perform electronic transactions between
organizations. Amazon sells products to businesses and organizations electronically
from an e-marketplace. Amazon invites individuals to its site to view catalogues and
place orders.

Amazon is moving away from being a leading online retailer because of increasing
competition and overspending on infrastructure. According to Rainer and Turban
(2008), Amazon was not using up to 90% of its computing capacity and made the
good economical decision to increase profits by decreasing its expenses on unused
infrastructure and compete in the markets of data storage, computing, travel and
financial services, web hosting, and film and software development, which changed
the company’s overall direction. Amazon.Com is competes with Google™ and
Microsoft® and Google are offering products similar to Amazon’s S3 product and
EC2 product. Microsoft entered into the business of cloud computing on the back of

10
Amazon but has more money, fully developed relationships with third-party
developers and a superior background in building software platforms. The offering
that Google and Microsoft are supplying and Amazon is competing with is Simple
storage service. Microsoft’s cloud computing service is called Windows AZURE
(Reuters and New scientist, 2008).

Windows Azure features computer processing, storage hosting and web application
management from Microsoft data centres (Microsoft, 2009). Amazon is saving on
operating costs and putting its currently unused infrastructure to work by making it
available for rent to other companies and individuals who need it (Rainer & Turban,
2008). Conclusion Amazon has proven that its business decisions are sound, safe,
reliable and profitable. Amazon remains profitable because it continues to discover
new ways to enhance the stability and growth of its business

11
 CHAPTER 3

COMPANY INFORMATION

Amazon.com Inc. doing businesses as Amazon, is an American electronic commerce

and cloud computing company based in Seattle, Washington that was founded by Jeff
Bezos on July 5, 1994. The tech giant is the largest internet retailer in the world as
measured by revenue and market capitalization, and second largest after Alibaba
Group in terms of total sales. The Amazon.com website started as an online bookstore
and later diversified to sell video downloads/streaming, MP3 downloads/streaming,
and audiobook download/streaming, software’s, video games, electronics, apparel,
furniture, food, toys, and jewellery. The company also produces customer electronics
– Kindle e-readers, Fire tablets, Fire TV, and Echo and is the world’s largest provider
of Cloud Infrastructure Services. Amazon also sells certain low end products under
it’s in – house brans Amazon Basics.

Amazon has separate retail websites for United States, the United Kingdom, Ireland,
France, Canada, Germany, Italy, Spain, Netherlands, Australia, Brazil, Japan, China,
India and Mexico. In 2016, Dutch, Polish, and Turkish language versions of the
German Amazon websites were also launched. Amazon also offers international
shipping of some of its products to certain other countries.

12
In 2015, Amazon surpassed Walmart as the most valuable retailer in the United States
by market capitalization. Amazon is the fourth most valuable public company in the
world, the largest company by revenue in the world, and the eight largest employer in
the United States. In 2017, Amazon acquired Whole Foods Market for $13.4 billion,
which vastly increased Amazon’s presence as a Brick- and- Mortar retailer. The
acquisition was interpreted by some as a direct attempt to challenge Walmart’s
traditional retail stores. The domain Amazon.com attracted at least 615 million
visitors annually by 2008. Amazon attracts over 130 million customers to its US
website per month by the start of 2016. The company has also invested heavily on a
massive amount of server capacity for its website, especially to handle the excessive
traffic during the December Christmas holiday season.

FINANCIAL STRATEGY (TILL 2017)

13
Balance Sheet (all values USD millions)

Assets

14
Liabilities

15
Income Statement

16
17
Cash Flow

Operating Activities

18
Investing

Financing

19
A comprehensive financial model, often also called operating model, which is the
fundamental building block of investment valuation. Essentially, the goal of financial
modelling is to analyse a company’s historical performance and to make accurate
predictions of its future performance, which can subsequently be utilized in valuation
analysis. Given that one already understands the basic concepts of the three major
financial statements, which are the income statement, balance sheet, and cash flow
statement, the first step is to understand and model the flows between those three
statements. Based on that, one can then analyze the historical financial statements and
use own assumption to make projections of future financial statements (Pignataro,
2013).

Regarding the structure and complexity of a financial model, many different designs
are possible. Koller, Goedhart and Wessels (2010), for example, suggest using an
explicit forecast period of 10 to 15 years, which allows a company to reach a steady
state. The tradeoff behind these considerations is simple: If the explicit forecast period
is too long, it might become difficult to forecast individual line items. On the other
hand, a too short explicit forecast period either results in significant undervaluation or
requires unrealistically high long-term growth assumptions in the steady state.
Therefore, they suggest a detailed forecast, which develops complete financial
statements for the earlier years, and a simpler forecast, focusing only on the most
important variables for the remaining years.

To add even more complexity, a financial model can be based on quarterly or annual
financial statements. While most finance textbooks, like Koller, Goedhart and Wessels
(2010), Kaplan 7 (2014a), or Pignataro (2013), describe financial modeling on an
annual basis, practitioners often also incorporate quarterly financial statements.
Jefferies Equity Research (2014) and Deutsche Bank Markets Research (2014), for
example, use quarterly data for their historical statements and the first two years of
their explicit forecast period, and annual data for the rest of the explicit forecast
period of 10 years. The most likely explanation for this is that companies report on a
quarterly basis and therefore equity analysts also have to adjust their short-term
estimates on a quarterly basis. However, it should be noted that such quarterly
estimates only make sense in the short term, since is questionable whether it is
possible to accurately predict quarterly financial data 10 years ahead.

20
Besides different time horizons, there are also various approaches to forecasting
individual line items in the financial model. As shown in the following sections, cost
of goods sold, for example, can simply be modeled as a percentage of sales, or more
complex by forecasting significant input prices based on the competitive environment
of input producers. Nevertheless, one always has to weigh the benefits of a more
complex approach, since a more complex financial model or more complex estimation
methods do not automatically result in better forecasts or valuations (Kaplan, 2014a).
Koller, Goedhart and Wessels (2010) support this point by noting that instead of
becoming engrossed in forecasting individual line items, it is more important to focus
on the aggregate results and the proper context. For example, it makes more sense to
analyze whether a company’s future return on invested capital (ROIC) is in line with
the company’s expected competitive position, than to precisely estimate its accounts
receivable 10 years from now.

As mentioned above, a basic financial model consists of the three major financial
statements. However, depending on the degree of complexity, one could add
additional components to allow for more detailed forecasts and support the flows
between the major statements. For example, one could add a separate depreciation
schedule, working capital schedule, or debt schedule, and it is also not uncommon to
add even more supporting schedules to the financial model (Pignataro, 2013). To
further improve the predictive ability of a financial model, one could also use a
company’s reported segment information to create separate segment forecasts. This
becomes especially important when different business or geographic segments are
expected to exhibit different revenue growth rates, cost structures, and profit margins.
Finally, sensitivity or scenario analyses could be used to result in ranges of forecasted
line items instead of only using point estimates. On top of that, one could also
incorporate probabilities for various scenarios to model uncertainty.

21
 HUMAN RESOURCE STRATEGY

Amazon isn't the only company using data on employees to improve productivity.

A New York Times article over the weekend portrayed Amazon's work culture as
"bruising" and "Darwinian" in part because of the way the company uses data to
manage its staff. The article depicted a work culture where staffers are under constant
pressure to deliver strong results on a wide variety of detailed metrics the company
monitors in real time — such as what gets abandoned in people's shopping carts and
what videos people stream — and encouraged to report praise or criticism about
colleagues to management to add to more data about worker performance. The story
led to an outcry on social media.

Amazon CEO Jeff Bezos said in a memo to staff over the weekend that the article
doesn't accurately describe the company culture he knows and asked employees to
report to human resources any "shockingly callous management practices."

“The article goes further than reporting isolated anecdotes. It claims that our
intentional approach is to create a soulless, dystopian workplace where no fun is had
and no laughter heard,” Bezos wrote. “Again, I don't recognize this Amazon and I

22
very much hope you don't, either.” The full text of Bezos's memo was posted by the
Times and tech news site GeekWire.

But experts say the kind of data-driven staff management Amazon uses is set to
become more common as technology continues to transform the American
workplace."Every company is somewhere in the process toward using data to get a
better handle on who their top performers are and to understand where people stand,"
said John Challenger, CEO of outplacement consultancy Challenger, Gray &
Christmas, Inc.

Companies large and small have been moving away from traditional human resources
reviews that rely on annual performance evaluations. They're moving toward a more
data-driven approach with more frequent feedback, check-ins and other metrics.

According to Sims (2002), incorporating the top management’s goals to the HRM
practices and policies will bring out and reward the types of behaviour necessary for
achieving an organizations’ strategy. Effective HRM practices can enhance an
organization’s competitive advantage by creating both cist leadership and
differentiation. The HRM function focuses its activities on ways to help the
organization achieve corporate goals like growing through recruiting and hiring
employees, orienting and training them and making their initial and future job
assignments. HRM contributions to a cost leadership strategy focus on recruiting and
retaining employees who can work as efficient and productive as possible. HRM
contributes to the successful use of differentiation strategy by recruiting and retaining
employees who can perform high quality work and who can provide exemplary
customer service (Sims 2002).

Human Resource Management is a source of Amazon’s competitive advantage

because:

1. It provides the right kinds of talent to the organization at the right time. HRM is
expected to assure that a supply of qualified labour in a timely fashion.

2. It ensures that the organization is properly staffed. When done effectively, the

23
staffing, recruitment, and selection process provides a flow of qualified individuals
for filling open positions within the organization on a timely and efficient basis.

3. Using appraisals, the employees are assesses and evaluated. Employee appraisals
have very profound implications for both the employees and for the future success of
the organization.

4. Using effective pay systems, the management can focus employees’ efforts toward
desired organizational goals.

5. Ensures that the employees are properly skilled to perform their tasks and supports
the organization’s growth through career development. The goal of training as part of
the human resources management processes is to create cost-effective programs that
build the skills to perform effectively.

Communication

Miscommunication across cultural lines is usually the most important cause of cross-cultural
problems in multinational companies. Miscommunication can have several sources,
including:

• Differences in body language or gestures.

The same gesture can have different meanings in different parts of the world. For example,
Bulgarians shake their heads up and down to mean no. In addition, the way people count on
their fingers is not universal: The Chinese count from one to ten on one hand, and eight is
displayed by extending the thumb and the finger next to it. The same gesture is interpreted as
meaning two in France and as pointing a gun in North America.

• Different meanings for the same word

like gestures, words can have different meanings or connotations in different parts of the
world. The French word "char" means Army tank in France and car in Quebec. The word
"exciting" has different connotations in British English and in North American English. While
North American executives talk about "exciting challenges" repeatedly, British executives use
this word to describe only children’s activities (children do exciting things in England, not

24
executives).

• Different assumptions made in the same situation.

The same event can be interpreted many different ways depending on where one comes from.
For example, although the sight of a black cat is considered a lucky event in Britain, it is
considered unlucky in many other countries. Dragons are viewed positively in China, but
negatively in Europe and North America.
These examples illustrate dissimilarities between cultures that are both large and simple in the
sense that they focus on a single cultural aspect that keeps the same meaning regardless of
context. As a result, such variations in communication will often be identified on the spot. By
contrast, subtle or complex differences are often identified much later in the communication
process, when corrective action requires considerable effort and money. Sometimes, this
realization takes place so late that there is not enough time to address it, resulting in a missed
deadline.
In extreme cases, miscommunication can lead to casualties. For example, a few years ago, a
plane crash in the north-eastern United States was caused--at least in part--by
miscommunication between the pilot and air traffic controller. The plane was running short on
fuel. But somehow the pilot did not manage to communicate the urgency of the situation to
the air traffic controller, who put the plane on a holding pattern because of airport congestion.

Approaches to Problem Solving

The approaches used by engineers of different cultural backgrounds to tackle the same
technical problem are likely to differ widely. The type of approach used to solve
engineering problems is often a reflection of what is emphasized in educational
curricula leading to engineering degrees in various countries. In France and Greece,
for example, engineers tend to emphasize theoretical or mathematical approaches over
experimental or numerical ones. Other countries, such as Canada and the United
States, tend to favour experimental or numerical approaches.

Although there is no absolute "right way" to approach technical problems, issues are
likely to arise when engineers with different inclinations work together to solve them.
On a practical basis, the approaches used by engineers in different countries can also

25
depend on the types of resources available. For example, high labour costs and the
availability of skilled workers make process automation and the use of heavy
equipment valuable in developed countries, while using large numbers of unskilled
workers may be a preferred approach in some developing countries.

Cross-cultural Differences & Engineering Firms

Cross-cultural issues also arise at the organizational level, because companies in

different countries organize their daily business differently. Some of the most
noticeable differences include the:

• Relative hierarchy of departments.

The relative power of the various departments within a corporation is often a function
of the country where the corporation has its headquarters. For example, the
manufacturing departments of German-based companies have influence over their
marketing and sales counterparts that many Canadian and American manufacturing
departments can only dream of. German manufacturing departments are often able to
limit the number of products offered to a few options, thereby optimizing production
and improving the quality of the products offered. By contrast, Canadian and
American manufacturing departments tend to follow the lead of marketing and sales
departments, which tend to favour a larger number of product options since this
increases the probability of attracting a broader group of customers.
These differences in the way products are manufactured and marketed create the need
for different approaches to selling products and services. The same type of argument
cannot be used to win customers in North America and Germany – whether through
sales presentations or general marketing efforts. While North American customers
look for flexibility and response speed in the products and services they purchase,
German customers want durability, reliability, and quality.

• The way information is shared and distributed.

The way information moves within a company varies significantly from country to
country. For example, in Germany, the flow of information tends to be fairly

26
compartmentalized. Information flows within departments along hierarchical lines,
and does not flow easily within a given hierarchical level or from department to
department. In addition, Germans tend to share information with only those people
they believe need to know the information. In Canadian companies, information tends
to move within departments and to cross departmental boundaries more freely. It also
tends to flow along the lines of communication networks used by individual
employees. As a result, when working with German engineers as suppliers, partners or
customers, Canadian engineers are likely to receive less information than they would
generally expect. A Canadian engineer supplying products or services to a German
company may not receive all of the information he or she believes is necessary to
fulfil orders or complete projects on time, resulting in either missed deadlines or
incomplete orders.

• Hiring process.

Cross-cultural differences are fairly significant in this area. For example, people
interviewed for positions in France will be asked personal questions that are
considered illegal in Canada, such as their age, marital status and number of children,
while German interviewers routinely ask candidates for the profession of their
parents.
More importantly, there are significant differences in the types of skills that
companies in different countries look for in candidates. In France, for example, large
corporations expect their engineers to work for them throughout much of their
careers. They therefore tend to hire graduate engineers who appear to have long-term
potential and create jobs for these engineers. As a result, large French companies tend
to emphasize specific technical knowledge less and soft skills more than Canadian
ones.

Amazon has adopted several practices that show its changed direction in terms of HR
management. Its attitude towards under-performing employees has changed.
However, while Microsoft has been more open to embrace diversity practices,
Amazon is still far from being as open and diverse. In terms of gender and ethnic
diversity, Amazon is still an under-performer. However, its step towards supporting

27
its under-performing employees could mean that Amazon is ready to take next steps
towards managing diversity and other aspects of HR.

Amazon’s record has not generally been very good in terms of HR management. It is
known to be a white male dominated organization. Despite trying its best Amazon has
not been able to control the high turnover rate. There are other difficulties too that
arise from poor HR management. The focus has to be on keeping the employees
happy and satisfied to retain them longer. The problem with the management styles of
Microsoft and Amazon has been that while they are well known companies, they have
been very stiff in terms of performance management. This often leads to employee
disengagement. Both the organizations have followed a performance oriented strategy
which also used to be the norm at Apple.

Such cultures and cultural norms inside the organizations become a source of
dissatisfaction for employees leaving them feeling demoralized. If Amazon employees
do not remain long with it, then it is mainly because of the ruthless culture and
management practices. However, it seems pressure from external and internal sources
has worked. While it cannot be called a giant step, still Amazon may have taken the
first step towards managing its employees better.

Rather than using the rank and yank system, Amazon has invested in performance
improvement plans that are going to help it better manage its under-performing
employees. Rather than throwing them out, Amazon is now helping them perform
better with a new training program called Pivot. However, this could be an attempt
to manage it employees and its reputation. As an employer, Amazon has been known
for maintaining an environment that favors only the best performers.

Pivot is actually a retraining program that is aimed to provide struggling employees

with a lifeline before they decide to quit. The program assigns such employees to
inside counselling and in-house career counselors who assist them manage their jobs
and career better. This can be considered a wise step by Amazon for pressure is
sometimes higher than the customers can imagine inside the technological companies.
Their task is not straightforward and so the employees need support to manage the

28
rest affairs. Apart from it, Amazon has also focused on improving HR management
by using cloud based services to better its HR management capabilities.

This is a positive step by Amazon which has been known for rewarding the best
performers and firing under performers. The wisest thing to do for such big employers
is to take a balanced approach. If they subject their employees to high pressure
situations, they must also care for their well-being and career. This will reduce the
turnover rate. Setting too tough performance measures might be profitable financially,
but in terms of HRM, it has always led to disengagement. Still, Amazon may need to
take more efficient steps like Pivot to support its employees. It is because Amazon
still has a poor reputation in terms of diversity. It is known for being a male
dominated organization. To change its image as an employer, Amazon would need
to focus upon encouraging diversity, relaxing performance standards and using better
employee engagement and retention techniques. Programs like Pivot just mark a start.
For companies like Amazon which have always extracted performance from
employees, there is a need to create a culture that fosters both performance and
satisfaction. While the pressure level inside technological organizations is not a
hidden fact, you also know somewhere too much of stress can make companies lose
their reputation. Apart from paying their employees well organizations can also use
strategies that can help them flush out pressure. Google has since always roved it
more open minded and that could also be the right direction for Amazon. Bezos is not
interested in coercing performance from his employees but he knows that the culture
he has created is tough but employees are not unbreakable.

Amazon has developed a retraining program called Pivot designed to offer

underperforming employees a chance to improve their performance, leave the e-
commerce giant voluntarily with severance or appeal a manager’s decision to
place them in the program, according to Business Insider , which obtained an
internal Amazon email on the matter.

Pivot provides opportunities that Amazon's existing “performance improvement

plan” (essentially a warning of impending firing rather than an actual
improvement plan) lacks: The program assigns struggling Amazon staffers to so-

29
called "Career Ambassadors," described by Business Insider as "subject matter
experts" who offer guidance and support.

Amazon has declined to comment, although a job listing posted a week ago on its
Amazon Jobs page calls for a “Career Ambassador” to “[help] Amazon transform
the employee experience.” The ad seeks “an innovator with expertise in coaching,
facilitation, employee relations and HR to help us launch a game-changing project
for helping employees reach their full potential.”

30
 MARKETING STRATEGY

Global e-commerce giant Amazon said it would continue to focus on every

geographic segment of India's online retail market just days after home grown
rival Flipkart earmarked the country's vast rural hinterland and smaller cities as its
future growth markets.

"Our ambition in India is to become everything for everyone," said Amit Agarwal,
head of Amazon in India. "We don't think that way (whether the time has come in
India's ecommerce market to target particular segments of customers). We believe
customers, wherever they are in India, should be able to buy and get products

31
delivered to them."

ET had reported last week that Bengaluru-based Flipkart witnessed a spike in orders
from Tier II cities in the second half of 2016, with that segment currently accounting
for about two-thirds of total sales. The online retailer had also said the company
would ramp up its network of delivery hubs to service the increasing number of orders
from smaller towns.

"Ecommerce is no more a large city phenomenon: Our strategy is focused on middle

India," Nitin Seth, chief operating officer at Flipkart had told ET. Seth estimates that
around 65% of new customers who shopped on the platform, after the end of its mega
annual sale in October, are from non-metro areas.

Flipkart and Amazon, the two largest ecommerce players in the country, are running
neck and neck in the South Asian nation's promising online retailing market that is
expected to swell to $103 billion by 2019-20 from $26 billion at present, according to
Goldman Sachs. In the crucial Diwali sales during October, Flipkart announced that it
had sold 15.5 million units, compared with Amazon's 15 million units.

Segmentation, targeting, positioning in the Marketing strategy of Amazon

E-commerce giants like Amazon uses demographic & psychographic segmentation to

segment the markets. Amazon’s segmentation is based on actual purchase behaviour:
not what people might have expressed interest in, but what they actually did.
Amazon’s micro-level segmentation targets each customer individually, allowing the
company to convert visitors into long-term, high-value customers.

32
E-commerce segmentation often involves creating personas who will buy in a certain
way & certain products. Similarly Amazon targets the middle class & upper class
people who have got hands on experience in the basic technology but don’t have time
or prefer convenience over shopping from the physical outlets.

Amazon has successfully positioned itself as a Glocal (Go global Act local) e-
commerce giant where one can buy anything & get it delivered at any remote
locations. Using the catchphrase #AurDikhao in its most recent campaign in India, it
has further helped them carve a distinct space in the consumer’s mind.

Competitive advantage in the Marketing strategy of Amazon

In order to differentiate itself, company acquired many IT & e-commerce start-

ups like pets.com, audible.com, Junglee.com, IMBD.com, Zappos.com, Woot etc.
which helped them in providing high value to their customers using existing
technology of the acquired partners at low cost. Amazon has also achieved economies
of scale through extensive product offerings which include electronics, toys and
games, apparels, DIY and many more.

These offerings help Amazon to keep its prices low thereon passing on the benefits to
the consumers. Amazon’s robust customer centric approach to analyse the customer

33
buying behaviour based upon preferences has helped them to have competitive edge
over their competitors. More than 50% of the consumers are the repeat buyers at
Amazon.com. Furthermore, Amazon is one of the longest players to be present in the
online sector and has a solid hold in European countries and US. This bottom line is
helping the company to expand in new market.

BCG Matrix in the Marketing strategy of Amazon

On BCG matrix Amazon have certain businesses which are cash cows while others
are stars & question marks.

E-books, movies on demand & Amazon prime are practically cash cows giving the
maximum margins to Amazon. In fact, Amazon was a book store before it started
electronics.

Kindle, VOD (Video on demand) & Amazon web services are question marks because
with the advent of technology these services have become obsolete & have low
demand.

Electronics and other consumer durable products are stars for Amazon because these
products have high growth rate but the market share of Amazon is also high for these
products.

Distribution strategy in the Marketing strategy of Amazon –

Amazon realizes that the most important thing that customers want is the quick
delivery of products they order. This is where Amazon’s extensive distribution
system has come into play. Amazon now has more than 55 fulfilment centres
exceeding 43 million square feet.

This does not include Amazon’s new “under-the-tent” strategy of using existing
vendor warehouse space for consumer-packaged goods to more quickly serve
customers. Their aggressive strategy of infiltrating warehouses and improving their
distribution lines brings Amazon to new areas and customers.

34
Amazon had created a deep & structured network in order to make
the product available at remote locations that too free of cost delivery charges up to
certain limit. Amazon has developed an extensive global distribution network that
continues to grow at frenzied rate.

Brand equity in the Marketing strategy of Amazon

From being merely an e-book provider to emerging as the 2 ndlargest e-commerce

company in the world, Amazon.com has steadily increased its spending on advertising
and promotion to make its brand stronger and have a higher brand equity.

By April 2015, the brand of Amazon.com was worth US$ 176 billion. “A brand for a
company is like a reputation for a person. You earn reputation by trying to do hard
things. With more than 55% repeat buyers, the numbers tells everything about the
brand. It is among 13 world’s most valuable brand” (Forbes list).

Competitive analysis in the Marketing strategy of Amazon

Short listing the competitors of Amazon depends on what business sector of Amazon
is being considered. Apple would be the largest competitor when considering book or
content related delivery such as books, movies, magazines, and audiobooks.
The iTunes store will always be a threat to the amazon store because of Apples
devices like the iPad, iPhone, and MacBook. When considering web
services Google would emerge as the largest competitor.

Walmart is the biggest threat to Amazon in US as reports roll in of various attempts to

compete with the large online retailer. Reports of Walmart testing a locker system for
consumers where shoppers can order and pay online and pickup at their convenience
are surfacing.

Walmart is also still testing same-day delivery in four cities and remains the fourth
largest online retailer. Walmart rakes in about $9 billion in Internet sales, which
Amazon more than doubles in a quarter. However, Amazon does not have the
physical structure base that Walmart has to start with.

In developing countries as well as in developed, there are many local portals which
give tough competition to Amazon. For example – Snap deal, Flipkart are some of the
competitors of Amazon. Similarly, group on, first cry (targeted towards moms) are

35
specialised e-commerce portals which take away traffic from Amazon. Thus, these
local competitors of each country also react strongly to Amazon’s presence.

Market analysis in the Marketing strategy of Amazon

The global E-commerce market is still in the evolving phase. With the adaptation of
technology in the developing economies customers are now becoming more
comfortable with online shopping. Fierce competition from Biggies
like Alibaba, EBay, start-ups & local ecommerce players like Flipkart, Snap deal is
more of resulting into overall growth of the industry which is good for the industry.

Customer analysis in the Marketing strategy of Amazon

Amazon customers consist of upper & middle class social groups who have
inclination towards using E-commerce portals and are comfortable with online
shopping. Majority of the customers are professionals or businessmen who are busy
with their business/Job & find it convenient to purchase anything online rather than
visiting the physical outlet in order to save time & money.

Furthermore, the customers might also be the ones who are searching for deals. Due
to this, the portal is known to have specific days where they give massive discounts to
their buyers.

36
 OPERATIONS STRATEGY

In the wake of the 4th annual Amazon Web Services (AWS) user conference, AWS
has finally emerged as a leader in cloud infrastructure and platform services. AWS
now has over 1 million active customers and year-over-year growth in EC2 instances,
data transfer, and database use that is close to 100% as of 2015 Q2. AWS did $4.6
billion in revenue in 2014 and expects to see $7.3 billion by the end of 2015 which is
close to 60% growth. Amazon is now adding over $1 billion in new revenue per
quarter. It’s rare to see these kinds of growth rates in a business that is closing in on
10 years old. This shows the transformative effect that cloud services are having on
the IT business.

37
But the high growth of AWS is far more than a story about being in the right place at
the right time. Although AWS was a pioneer in the IaaS and PaaS market segments,
plenty of vendors, including storied names like Microsoft, IBM, and Oracle, now have
a strong cloud presence. Survey data also shows private cloud being a preferred path
forward which is a path that AWS doesn’t support. So what is it about AWS that sets it
apart from its competitors? We believe that it boils down to one factor: operational
excellence.

AWS and Amazon both hold the objective of high volume and low cost as core values
that are part of their DNA. While it’s easy for most vendors to make occasional
efficiency claims, the growing strategic importance of IT meant that enterprises have
been trained that they need to pay to play. This has been especially true since 2000 in
the highest growth area of IT, which was software. Much of this software revenue was
tied to proprietary products with high price tags and licensing policies that in today’s
world seem punitive. While open source software products have been successful as
low cost alternatives, they address a different target market due to their unique
business model, which impacts their scope and performance. The net result has been
an IT market that has grown weary of high prices and is ripe for disruption.

38
From the start, AWS has designed its data centers to deliver reliable services on
demand at a low price. AWS has now perfected the process of designing, building,
and operating data centers. AWS employs purpose-built servers, storage, and networks
which enables them to carefully control costs while ensuring delivery of reliable on-
demand services. AWS has also mastered how to manage their supply chain to make
sure they are well insulated from cataclysmic events given the rate at which they now
are bringing capacity online. This operational excellence also extends to how AWS
develops software services. These services often have their roots in open source but
are reengineered by AWS to improve performance. The result has been 516 new
services launched in 2014 and 487 so far in 2015. AWS has now reached a point
where from an IaaS and PaaS perspective they have comprehensive offerings with
significant depth in infrastructure, security & compliance, integration, analytics,
application services, mobile services, development, operations, and support.

Because all of this has been developed with a continual eye on delivering high volume
at a low cost, AWS pricing sets the bar to beat in the industry. While Microsoft and
Google monitor and adjust their prices to achieve parity or leadership in some cases,

39
AWS is driving margins of 17%, meaning that it would be hard for them to lose any
race to the bottom. Now that AWS has demonstrated that they can deliver reliable on-
demand services worldwide, enterprises are taking notice. The number of enterprises
now all in on AWS has exploded in 2015 and we see this largely as a recognition that
AWS’s focus on operational excellence is a winning strategy. However, while other
strategies such as product leadership and customer intimacy are also formulas for
success, AWS is pursuing a strategy that is new to the IT market where there is a vast
sea of pent-up demand for exactly what AWS is delivering

Impact on environment

Amazon has set a goal to host solar energy systems at 50 fulfillment network
buildings by 2020. Amazon will host solar energy systems on 15 fulfillment facility
rooftops across the US, with the capacity to generate 41 megawatts (MW) of power.
In April 2016, Amazon joined Apple, Google, and Microsoft in filing a legal brief that
supports the continued implementation of the U.S. Environmental Protection
Agency’s Clean Power Plan.

In September 2016, we announced Amazon Wind Farm Texas, our largest wind farm
to date – a new 253 MW wind farm that will generate 1 million megawatt hours
(MWh) of wind energy annually.

At Amazon, we are putting our scale and inventive culture to work on sustainability
not only because it is good for the environment, but also for the customer. By
diversifying our energy portfolio, we can keep business costs low and pass along
further savings to customers. It's a win-win-win.

Amazon has begun hosting large-scale rooftop solar systems on fulfillment centers
across the country. Our goal is to have more than 50 fulfillment centers with rooftop
solar installed by 2020; 15 sites are planned to be complete by the end of 2017. The
solar systems in the initial deployment could generate as much as 41 MW of power.

Our commitment to on-site solar is about more than clean, renewable energy – it also
reflects the strength of partnerships we develop with local utilities, clean energy
service providers, community leaders and building owners. Our commitment is also to
our associates – we expanded our innovative career choice offerings to include

40
funding for associates to earn the North American Board of Certified Energy
Practitioners (NABCEP) certification, which includes entry level knowledge
assessment and accreditation to become a photovoltaic installation professional.

This first deployment of rooftop solar systems is part of a long-term initiative that will
start in North America and spread across the globe. To date, Amazon has announced
or commenced construction on wind and solar projects that will generate a total of 3.6
million megawatt hours (MWh) of renewable energy annually. We were the leading
corporate purchaser of renewable energy in the United States in 2016.

In September 2016, we announced the plan to build our largest wind project to-
date, Amazon Wind Farm Texas. A 253 MW wind farm in Scurry County with more
than 100 turbines, the project will generate 1,000,000 MWh of wind energy annually
– enough to power almost 90,000 U.S. homes.

Our energy and environmental efforts are taking place across the company, and at our
locations around the world. We are retrofitting our existing buildings to improve
energy efficiency and reduce costs, including converting lighting systems to low-
emitting diode (LED) lighting. This change alone reduced our energy consumption to-
date by approximately 50,000 MWh per year and we are gaining additional energy
savings through low- and no-cost process and set point adjustments.

We are constantly looking for ways to build upon our best energy and environmental
practices and implement them across Amazon. Our new buildings are equipped with
energy efficient technologies such as LED lighting, advanced building management
systems, motor variable frequency drives, high efficiency heating and cooling
systems, and remote energy and power monitoring.

41
Amazon Web Services (AWS) Wind and Solar Farms

AWS has a long-term commitment to achieve 100% renewable energy usage for our
global infrastructure footprint. We've made a lot of progress on this commitment.
AWS exceeded its goal of 40% renewable energy by the end of 2016, and set a new
goal to be powered by 50% renewable energy by the end of 2017.

In 2015, AWS announced the construction of Amazon Solar Farm US East, Amazon
Wind Farm Fowler Ridge, Amazon Wind Farm US Central and Amazon Wind Farm
US East, located in Virginia, Indiana, Ohio and North Carolina respectively. Amazon
Wind Farm Fowler Ridge became operational January 1, 2016, and Amazon Solar
Farm US East went into operation in October, 2016.

In 2016, AWS announced the construction of Amazon Wind Farm US Central 2, a 189
MW wind farm in Hardin County, Ohio. We also announced five additional solar
farms: Amazon Solar Farm US East 2, Amazon Solar Farm US East 3, Amazon Solar
Farm US East 4, Amazon Solar Farm US East 5 each have a capacity of 20 MW and

42
are located in New Kent, Buckingham, Sussex, and Powhatan counties in Virginia.
Amazon Solar Farm US East 6 is a 100 MW facility in Southampton County, Virginia.

These ten renewable energy projects will deliver a total of 2.6 million MWh of energy
annually onto the electric grid powering AWS data centers located in the AWS US
East (Ohio) and AWS US East (N. Virginia) Regions. The electricity produced from
these projects is enough to power the equivalent of over 240,000 U.S. homes
annually, which is approximately the size of the city of Portland, Oregon.

Recycling Energy

Amazon's newest buildings in the Denny Triangle area of Seattle are heated using an
innovative approach to sustainability recycling energy from a nearby data center. This
"district energy" system works by capturing heat generated at a non-Amazon data
center in the neighboring Westin Building and recycling that heat through
underground water pipes instead of venting it into the atmosphere. This unique
approach is nearly four times more efficient than traditional heating methods and will
also enable the Westin Building data center to cut back on the energy it uses to cool its
building.

The district energy system came about from a collaboration among Amazon, Clise
Properties, McKinstry and the City of Seattle. Through it, Amazon will be able to heat
three million square feet of office space. This ability to recycle energy from a
neighbor is another big benefit of having an urban campus in the heart of Seattle.

43
 CHAPTER 4

RESEARCH METHODOLOGY

Significance of the Study:

It follows that the Amazon technology infrastructure must readily support this culture
of experimentation and this can be difficult to achieved with standardized content
management. Amazon has achieved its competitive advantage through developing its
technology internally and with a significant investment in this which may not be
available to other organizations without the right focus on the online channels.

As Amazon explains in SEC (2005) ‘using primarily our own proprietary

technologies, as well as technology licensed from third parties, we have implemented

44
numerous features and functionality that simplify and improve the customer shopping
experience, enable third parties to sell on our platform, and facilitate our fulfillment
and customer service operations. Our current strategy is to focus our development
efforts on continuous innovation by creating and enhancing the specialized,
proprietary software that is unique to our business, and to license or acquire
commercially-developed technology for other applications where available and
appropriate. We continually invest in several areas of technology, including our seller
platform; A9.com, our wholly-owned subsidiary focused on search technology on
www.A9.com and other Amazon sites; web services; and digital initiatives.’

Round (2004) describes the technology approach as ‘distributed development and

deployment’. Pages such as the home page have a number of content ‘pods’ or ‘slots’
which call web services for features. This makes it relatively easy to change the
content in these pods and even change the location of the pods on-screen. Amazon
uses a flowable or fluid page design unlike many sites which enables it to make the
most of real-estate on-screen.

Technology also supports more standard e-retail facilities. SEC (2005) states: ‘We use
a set of applications for accepting and validating customer orders, placing and
tracking orders with suppliers, managing and assigning inventory to customer orders,
and ensuring proper shipment of products to customers. Our transaction-processing
systems handle millions of items, a number of different status inquiries, multiple
shipping addresses, gift-wrapping requests, and multiple shipment methods. These
systems allow the customer to choose whether to receive single or several shipments
based on availability and to track the progress of each order. These applications also
manage the process of accepting, authorizing, and charging customer credit cards.’

According to founder and CEO, Jeff Bezos, technology is very important to

supporting this focus on the customer. In their 2010 Annual Report (Amazon, 2011)
he said:

“Look inside a current textbook on software architecture, and you’ll find few patterns
that we don’t apply at Amazon. We use high-performance transactions systems,
complex rendering and object caching, workflow and queuing systems, business

45
intelligence and data analytics, machine learning and pattern recognition, neural
networks and probabilistic decision making, and a wide variety of other techniques.

And while many of our systems are based on the latest in computer science research,
this often hasn’t been sufficient: our architects and engineers have had to advance
research in directions that no academic had yet taken. Many of the problems we face
have no textbook solutions, and so we — happily — invent new approaches”… All
the effort we put into technology might not matter that much if we kept technology off
to the side in some sort of R&D department, but we don’t take that approach.
Technology infuses all of our teams, all of our processes, our decision-making, and
our approach to innovation in each of our businesses. It is deeply integrated into
everything we do”.

The quote shows how applying new technologies is used to give Amazon a
competitive edge. A good recent example of this is providing the infrastructure to
deliver the Kindle “Whispersync” update to ebook readers. Amazon reported in 2011
that Amazon.com is now selling more Kindle books than paperback books. For every
100 paperback books Amazon has sold, the Company sold 115 Kindle books. Kindle
apps are now available on Apple iOS, Android devices and on PCs as part of a “Buy
Once, Read Anywhere” proposition which Amazon has developed.

Limitations of the Study:

Its business model— a Standard Oil like organization—which takes both the customer
and the competition for granted. For years, Amazon has been obsessed with growth, in
all directions, building warehouses and distribution centers, video stream services,
and mobile devices—to mention but a few of those directions. And in a big shift from
Amazon.com’s long-standing business model–which has relied on on-line sales and
remote warehouses to compete effectively against major discount retailers like Wal-
Mart—the company is to open its first physical store on 34th St in Manhattan, across
from the Empire State Building.

46
In the meantime, the company has been expanding its subscription customer base by
keeping the price for its products and services low. That’s how it amassed close to $82
billion in revenues at razor thin margins.

But a recent survey of Amazon’s prime customers showed a big decline in

membership would occur, should Amazon raise the price of its service.

Simply put, in spite of its size, Amazon.com cannot take the customer for granted. It
doesn’t have pricing power because it has pitted the company against giants in every
area into which the company expanded its presence.

In on-line retailing, for instance, where Amazon has been confronting Wal-Mart, Wal-
Mart has been fighting back.

In the last two years,Wal-Mart has expanded into the on line space by acquiring online
search technologies and building warehouses. In 2013, for instance, @WalmartLabs,
Wal-Mart’s e-commerce technology arm, acquired four start-ups: Torbit, a cloud-
based website accelerator service; Inkiru, a predictive intelligence platform; OneOps,
a cloud based automation technology; and Tasty Labs. More recently, it has acquired
Adchemy, a search engine marketer.

There are signs that Wal-Mart’s online strategy has been working. The company
scored a big win against Amazon.com, with online sales growth outpacing the sales
of Amazon.com for the period ended Dec.31.

Still, Wal-Mart has a long way to go before catching up with Amazon, which remains
the online leader, beating Wal-Mart by 7-1.

Nonetheless, the merging of on-line and physical retailing is changing the rules of the
game in the two industries. Bundling physical with on-line retailing seems to have
certain advantages over plain physical or on-line retailing.

At the same time, this new business model is expected to shave operating margins
across the new industry landscape—a big problem for Amazon.com, which has razor
thin margins to begin with.

47
Bottom line: Amazon’s business model, which in many respects resembles that of
Standard Oil during the late 19 th century, doesn’t work. Amazon.com operates in a
different industry at a different time, and cannot take customers and competition for
granted.

RESEARCH DESIGN

The research design refers to the overall strategy that you choose to integrate the
different components of the study in a coherent and logical way, thereby, ensuring you
will effectively address the research problem; it constitutes the blueprint for the
collection, measurement, and analysis of data.

A research design is the arrangement of conditions for collection and analysis of data
in manner that aims to combine relevance to the research purpose with economy in
procedure. In fact, the research design is the conceptual structure within which

48
research is conducted; it constitutes the blueprint for the collection, measurement and
analysis of data.

Research Objectives:

1. To study the Financial Strategy of Amazon.com Inc.

2. To study the Human Resource Strategy of Amazon.com Inc.

3. To study the Marketing Strategy of Amazon.com Inc.

4. To study the Operations of Amazon.com Inc.

SOURCE OF DATA

Data collection is the process of gathering and measuring information on variables of

interest, in an established systematic fashion that enables one to answer
stated research questions, test hypotheses, and evaluate outcomes.

Data compilation is an intermediate stage between data collection and analysis. Data
compilation involves classification and summarization in order to make data

49
amenable to analysis.

In dealing with any problem, once the sample has been selected the data must be
collected from the sample population. There are several ways of collecting
appropriate data which differ considerably in context of money cost, time and other
resources. They can be broadly classified in to two categories.

Two sources to collect data are:

1. Primary Source
2. Secondary Source

In this project report the data were collected through secondary source, i.e. through
other reports, projects. Since the time was strict for the other source to pursue.

This project report is designed to be exploratory in nature, as the main purpose of this
project is to identify and study the marketing, finance and HR strategies of Earth’s
most customer centric company resources focusing on Amazon.com Inc.

DATA COLLECTION INSTRUMENT

Accurate and systematic data collection is critical to conducting scientific

research. Data collection allows us to collect information that we want to
collect about our study objects. Depending on project, methods of data
collection includes: documents review, observation, questioning, measuring,
or a combination of different methods.

50
 The source for the data collection is secondary. We have used the Survey
method to gather information. Some of the information has taken from the
website of Amazon and also it is studied that how Amazon itself uses the
Survey method to collect information from its consumers.
Amazon uses the online consumer survey method from which it can gather
information about the experiences of the consumers with its products and
services.
Amazon offers an online gift card as a sign of appreciation for customers who
receive an e-mail invitation, qualify for, and complete the survey, within two
week time period of completing the survey.

POPULATION & SAMPLING

A research population is generally a large collection of individuals or objects that is

the main focus of a scientific query. It is for the benefit of the population that
researches are done. However, due to the large sizes of populations, researchers often
cannot test every individual in the population because it is too expensive and time-
consuming. This is the reason why researchers rely on sampling techniques.

51
A research population is also known as a well-defined collection of individuals or
objects known to have similar characteristics. All individuals or objects within a
certain population usually have a common, binding characteristic or trait.

Questionnaire

The Secondary data is used for the sampling and population where a marketing
questionnaire was used already. These Questions were asked from the housewife
which included females who were generally 40-60 years. India is not a developed
country and it is not a place where everyone knows everything.

Results:

It was found that more than 20% females of the total population did not know about
Amazon. They did not know that what is the business of Amazon and what are the
products and services it offers.

It was found that more than 50% population did not know about who are the
competitors of Amazon and what is their strategy to capture the market share.

The Results of this questionnaire were found by us through some magazines,

Newspapers, and Internet.

CHAPTER 5

CONCLUSION

Amazon.com Inc. Chief Executive Officer Jeff Bezos can take a victory lap.
Years of investments in warehouses and robots and data centers and gadgets that have
often tested investor patience paid off big for Amazon over the holidays. Shoppers
threw their money at the e-commerce giant, giving the company its strongest fourth-

52
quarter sales growth in eight years and its most-profitable quarter ever. The shares
rose early Friday, bucking much of the rest of the tech sector and the broader markets.

The results on Thursday reassured investors that Amazon can spend money in areas
such as advertising, entertainment and groceries while maintaining its dominance in
online shopping and cloud computing. Revenue growth is accelerating even as the
company is expected to cross $200 billion in sales this year and make more money
from its original U.S. online retail business.

“They are on fire,” Forrester Research analyst Sucharita Kodali said. “It’s the hottest
company in the world right now hands down and they seem pretty unstoppable.”

Chief Financial Officer Brian Olsavsky said Amazon Web Services, the company’s
profitable cloud-computing unit, and its emerging advertising business were strong
contributors to sales growth and earnings. Revenue from AWS increased 45 percent to
$5.1 billion, the Seattle-based company said in a statement. Increasing efficiency in
its U.S. warehouses where products are stowed, packed and shipped to customers also
helped, Olsavsky said.

Revenue gained 38 percent to $60.5 billion in the fourth quarter, the biggest increase
in a holiday period since a 42 percent jump in 2009. Net income was $1.9 billion a
record for the company or $3.75 a share. Analysts projected earnings of $1.83 per
share on sales of $59.8 billion. Amazon said its profit included a $789 million benefit
as a result of the new U.S. tax law.

Shares rose 5.7 percent in early trading Friday to $1,468.50. The stock has leaped 67
percent in the past 12 months.

Amazon is the e-commerce leader in the U.S. with its $99-a-year Prime subscription,
which includes delivery discounts, music and video streaming. The program is
intended to keep shoppers engaged with the website. The company said it will
continue the global expansion of the Amazon Fresh grocery delivery service and
Prime Now, a one-hour delivery service, to strengthen Prime membership overseas.

53
Prime also helps Amazon sell services to independent merchants who want access to
the website’s most loyal and biggest-spending customers. More than half of the units
sold on the company’s website come from these merchants. Revenue from
warehousing, packaging and other logistics services for these third-party businesses
increased 41 percent to $10.5 billion in the holiday quarter. It has grown into a
profitable business because Amazon doesn’t take on the risks associated with owning
inventory, said Tom Forte, an analyst at DA Davidson & Co.

“Amazon is the pipe and they’re collecting commissions on all that volume,” he said.
“That’s their second-most profitable business behind AWS.”

Often the question for investors is how quickly Bezos will spend his company’s
money. Operating expenses in the quarter gained 37 percent to $58.3 billion about the
same pace as revenue growth. His latest target is tackling rising health-care costs,
which he intends to do in partnership with Berkshire Hathaway Inc. and JPMorgan
Chase & Co. Amazon’s voice-activated Alexa platform will also get more funding,
with Bezos pledging to “double down” on finding new uses for the technology that
supports the popular Echo home speakers.

BIBLIOGRAPHY

1. https://www.businesswire.com/news/home/20180201006454/en/Amazon.co
m-Announces-Fourth-Quarter-Sales-38-60.5
2. http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsother
3. https://economictimes.indiatimes.com/topic/Amazon-India
4. https://www.smartinsights.com/digital-marketing-strategy/online-
business-revenue-models/amazon-case-study/
5. http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDA
Q_AMZN_2016.pdf

54
6. https://www.slideshare.net/mahdialown/amazon-11486664
7. https://www.wikipedia.org/
8. https://www.investopedia.com/
9. https://www.amazon.com/

55