Amazon Case Study

The main concern for Amazon in 2001 was to achieve profits. Amazon in its quest for
growth, which it successfully achieved, neglected the costs involved for the same.
Therefore losses were reported across its segments.

Positives:
Innovation at the core.
Strong Technology Team
Brand Recognition
State-of-the-art digital infrastructure
Good customer retention
The company had ventured into different partnerships

All the positives helped Amazon achieve record growth in sales and revenue.
Customers held the brand in high recognition. It garnered revenue from most of its
new ventures. Therefore they had customers, technology, innovation, backend
processes in place.

Amazon had a very good IT strategy using which it leveraged the technology at all
places. It had a first-mover advantage for the e-commerce initiative.
It used IT effectively to create Patent 1click shopping and Bid-click auction
Major use of IT in the state-of-art distribution centers.
IT was majorly used to create a very personalized experience for the customer which
made the customer attached to Amazon and this was evident from the high number of
repeat sales.

Amazon used the E-vantage of the internet not only for books which it had started
with, but also kept on adding product/ service offerings to this e-channel in which
they had the technological advantage.
They took a lot of things that were bought in the brick and mortar stores to the
internet store. As this channel is independent of the geography they expanded in
different countries.
It used the internet to venture into new businesses like the Auctions and markets.
Tying up with online retailers of different products for the market place ensured
sufficient traffic and revenue for Amazon.
Amazon in its journey so far (till 2000) had built a very strong capability of e-retailing
which was evident from its sales figures and brand acceptance over the world.
It had built a strong platform of brand, customers, technology, innovation,
distribution, e-commerce and a customer centric workforce. And it had this ability to
leverage the platform across different products.
What Ahead?
The aggressive expansion strategy of Amazon seemed to have worked very well, with
Amazon being the market leader with a large market share in e-retailing.
The major problem that lay ahead of them was to go profitable. On one side the
company’s client base and revenues were increasing but profits were not in sight. And
therefore there was a question of sustainability.
And this could be made possible only with reduction in costs, thereby increasing the
contribution per order.
The platform should be used in an operationally effective manner in order to bring
down the costs.
Amazon had, until 2000, expanded both in terms of products/services as well as
geography. It had tied up with several e-retailers, the ROI of which was due in 3yrs –
5yrs (Exhibit 1). Therefore before the benefits of these tie-ups could be received the
company had to sustain for that much duration.

The contribution of the three business segments below should be monitored and
analyzed for their sustainability (esp. the early stage) :-
- Mature Business
- Early Stage:
- International

The mature business being the core of Amazons business, the operational efficiency
should be concentrated on that segment, the BMV(books, music, videos). Amazon
still being the market leader in e-retailing it has a large chunk of the market share.

The immediate short term target of Amazon should be to stop expanding and try to
sustain in the market in the highly competitive market. And they can leverage upon
the existing loyal clientele by offering them more services and refining features on the
offerings.
The tie-ups with the local e-retailers can be re-assessed to evaluate which products of
these are expected to be more in demand especially in the e-retailing scenario. As
already two of Amazons partners had gone bankrupt thus writing off that value from
its future cash flows

For the long term, the company can look upon its innovative capabilities to come up
with unique products/services within the existing categories complementing the same
with the emerging technologies.
Amazon should also keep a check on the competitive scene and have a look at its
business model as the traditional stores had leveraged the power of the internet along
with partnering with web portals for advertising. So the offline/online model of these
retailers increased the competitive scene.