Amazon Case Analysis

  • Category: Business
  • Words: 2612
  • Grade: 100


BMGT 495


STRATEGIC PROFILE                                                                P. 1
Synopsis of the Company's business and its current status

CASE ANALYSIS PURPOSE                                                        P. 2
Statement of the problem

SITUATIONAL ANALYSIS                                                        P.
External Environment (5 Forces)

Internal Environment

SWOT                                                                                P.
External Environment

Internal Environment

STRATEGY FORMULATION                                                        P.
        Evaluation of alternatives

CONCLUSION                                                                        P.

APPENDIX                                                                        P.

BIBLIOGRAPHY                                                                P.

"“Synopsis of the Company's business and its current status is an online company that started its venture into the business world July 1995. Its founder, Jeffrey Bezos, had a vision to create an Internet company that would take advantage of the high Internet usage. He reacted to the Internet growth by creating; a company whose main focus at the time was to sell books. Since then he has managed to create a brand name recognition in, has become a very serious competitor for the bricks-and-mortar portion of book retailing, and has managed to survive the rough world of e-commerce.       's current main business focus is to expand and acquire new markets. Bezos says that product extension and geographic extensions is better late than early because had to first focus on the book business and grow till they were comfortable with it. (pC99).
" CASE ANALYSIS PURPOSE                                                        
"“Statement of the problem
        The current problem that is facing is that it would like to find creative ways to fend off formidable new competitors, leveraging the firm's brand name to expand beyond just books, and meaningfully integrating the new acquisitions made by the firm (pC95).
" SITUATIONAL ANALYSIS                                                
"“External Environment (5 Forces)
        The external environment is composed of 3 different environmental elements, which include: General Environment, Industry Environment, and Competitor Environment.'s general environment is composed of elements in the broader society that influence the commerce industry and the firm within. The general environment indicates that Internet use is a large growing phenomenon. In the last decade technology has grown tremendously (appendix C5).'s industry environment is made up of the five forces in the model of competition: Threat of new entrants, Rivalry among competing firms, threat of new substitutes, bargaining power of buyer, and bargaining power of suppliers.'s biggest rivalry exists with bricks and mortar bookseller Barnes and Nobel and now most recently it has had new competition and rivalry with and (Appendix C6).       's competitor environment includes outside forces that are composed of the rivalry in the industry. There are still opportunities in this industry, with the expansion of offering more than books is tapping into a new type of e-commerce selling. The threats that it has had so far have been legal threats by Barnes and Noble when declared to be the biggest book store. The industry competition is growing because more people are trying to start up Internet books stores. Many fail yet their attempts to start a internet book stores still threaten the market segment that has already been captured by The competitor analysis is an important step in trying to understand current rival companies or firms and future competitors in the industry in order to be able to respond adequately to the threat that they may impose. (appendix C7).
"“Internal Environment
The internal environment is composed of resources, capabilities and core competencies. Amazon,com has many powerful strengths that have helped it become the company that it has become. Their resources, capablities, and core competencies are demostrated in their strengths. Their ...........

        See appendix B

" STRATEGY FORMULATION                                                        
"“Alternatives (p.154)
        Cost Leadership

        Focused Cost Leadership

Differentiation Strategy

        Focused differentiation

"“Evaluation of alternatives
        -To always to External Analysis, including scanning, monitoring, forecasting and assessing. Through environmental analysis a firm identifies opportunities and threats useful to help determine the next step the firm should adequately take. (p.54)
Competitive Advantage
                Constantly anticipate frequent changes in customer preferences and serve those needs. Adapt rapid technological changes. Identify, emphasize and effectively manage what a firm does better than competitors. Continuously structure a firm's operations so objectives can be achieved more efficiently. Successfully manage and gain commitments from a culturally diverse world.
        Sustained completive advantage- occurs when a firm implements a value creating strategy of which other companies are unable to duplicate the benefits or find it too costly to imitate.
        To always have customers in mind in every strategic decision because customer service is a critical success factor for online merchants. If you make customers unhappy in the physical world, they might tell a few friends. If you make customers unhappy on the Internet, they can each tell thousands of friends with one message to a newsgroup. About 63% of the book orders at come from repeated customers (pC93)

                 Business people and business analysts alike consider's growth to be phenomenal. has "defined e-commerce as we know it" (p76). This small venture has turned out to be one of the most recognized e-commerce company.'s Internet based strategy has put traditional brick-and-mortar businesses such as Barnes & Noble at a significant cost disadvantage (p142).

Amazon and Wal-Mart: best of friends?
A strategic alliance between and supermarket giant Wal-Mart is said to be in the pipeline. Such an alliance would provide Amazon with a presence in physical retail stores, whilst allowing Wal-Mart to outsource its e-commerce operation.

A. STRATEGIC INTENT AND MISSION's strategic intent is to use its current resources to enhance its services so that it can move into other industries aside from the book selling industry (appendix C3).'s Internet intent strategy provides substantial customer service opportunities.
--'s strategic mission is to use the internet to transform buying a faster, easier, and most enjoyable shopping experience in order to attract new customers and to keep the current customers (p78)..

Strengths (Internal Environment)·        By the end of 1996, was one of the most successful Web retailers, with revenues reaching $15.6 million.·        Physical location: Physical location is very important for the success of a virtual business. choose Seattle because it met a rigorous set of criteria. They looked for a place that had lots of technical talent, where large number of books could be found, nice place to live for its employees (great people don't work in places they don't want to live), and it was a small state. A small state was one of the requirements because in the mail order business you have to charge sales tax to customers who life in any state where you have a business presence, and it made no sense to go to CA or NY. The main reason is that it is close to Roseburg, Oregon, which has one of the biggest book warehouses in the world (pC84).·        Expansion: By 1997 expanded its Seattle warehouse and built a second 200,000 square-foot, state of the art distribution center in New Castle, Delaware. With these additions successfully increased its stocking and shipping capabilities to nearly six times its 1996 level (pC84).·        Processing Method: Customer orders are processed immediately. Books in stock (mostly best-sellers) are packaged and mailed the same day. When their order has been shipped, customers are notified by e-mail. places orders for non-best sellers with the appropriate book publisher immediately (pC91).·        Web format: Instead of cluttering its website with elaborate graphics, loads up its customers with information instead. For many featured books it offers capsule descriptions, snippets of reviews, and "self-administered" interviews posted by authors (C91).·        Technology: The firm has found a way to use the technology to offer services that a traditional store or catalog can't match (C91). For example it allows customers to interact with one another if they choose to. also does 90% of their customer service by email rather than by telephone. There are not companies selling software to manage email centers, so developed their own tools. This is good because it creates barrier to entry for prospective competitors (p.93).·        Value Proposition- Almost all books are discounted. Best sellers are sold at a 30 to 40 percent discount and the other books at 10% discount. They can offer such discounts due to their lower cost structure compared to physical stores. turns their inventory 150 times a year. Physical bookstores turn their inventory only 3 or 4 times a year.·        Trust- offers services such as e-mail based services that request personal information in order to register their interests in a particular author or topic. These services are automated and are available free of charge and customer subscribing to these services have guaranteed rights (pC92 & appendix D).·        Employees- gives employees stock options that give each of their workers an equity stake in the company. They also have a variety of different types of workers. Their work force is composed of various employees that have master's degrees, some speak five languages, some have worked at high level corporations, some are figure skaters and some are racecar drivers. They contain a vast variety of employees (pC93).·        Focus- states that they are customer focused not competitor focused. They differentiate along the following dimensions: selection, ease of use, price, and discovery (pC95). also listens to its current customers. The music store was designed with the help of more than 20,000 customers who responded to their invitation to build the music store of their dreams. The customers told what it is they wanted and responds to their requests by giving them what they want (pC97). has redesigned their store to make it easier to find the books that are wanted. spends a substantial amount on Web advertising and marketing. The firm spent over $340,000 for the first half of 1996 and ranked 34th in Web ad spending. The costs of advertisements have gone up due to multi-year advertisement contracts with internet aggregators such as Yahoo!, Excite, and AOL (C94).·        Despite continuing losses, Wall Street's interest in the new venture has remained strong. The firm is currently acknowledged to be the largest online bookstore on the Web (95).        Weaknesses (Internal Environment)·        .None found in the article
Opportunities (External Environment)· is exploring the opportunity not to only be a book selling company but become the center of the e-commerce world by providing its customers with various other products (p.77).·        Even when Barnes and Noble entered city after city in 1993-1995, as many as 142 U.S. Metropolitan markets still did not have a book superstore (C88).·        Book Club sales have risen steadily. The growth was attributed to the increasing popularity of specialized book clubs that focus on favorite baby-boomer interests such as gardening and computers (pC89).        Threats (External Environment)· -It was established in 1997. Threat that it will use its national brand identity (p76) BUT -2 and a half years after came out, data showed that commanded 75% of the on-line bookselling market, while controlled only 15%. ·        Barnes & Noble sued for claiming to be the world's largest bookstore (p.C-84). (legal threat)·        Barnes & Noble in reaction to's techniques to use online commerce has enticed customers to visit their online store by offering deeper discounts but Bozes retaliated with a counter lawsuit (pC84).·        Despite industry skepticism and concern, a plethora of "virtual" bookstores are now selling books on the internet therefore creating more competition even thought many of these firms are relatively unknown compared to such online retailers as and Barnes & Noble. (pC90)·        Competitor: operates many music sites called channels. Cdnowcom claims it is the world's leading online music store by offering over 250,000 music related items. Cdnow and N2K signed an agreement in October to merge their two companies, making it stronger (p98).

                COST        UNIQUENESS
COMPETITIVE SCOPE        BROAD TARGET        Cost Leadership        Differentiation
        NARROW TARGET        Focused Cost Leadership        Focused Differentiation

Strategic Alternatives

1.        Above average returns are earned when the firm locates an attractive industry and successfully implements the strategy dictated by the characteristics of that industry.
2.        Above-average returns are earned when the firm uses its valuable, rare, costly-to-imitate, and no substitutable resources and capabilities advantage over its rivals.
3.        A strategic intent suggests how resources, capabilities, and core competencies will be leveraged to achieve desired outcomes in the competitive environment.
4.        A strategic mission is an application of strategic intent. The mission is used to specify the product markets and curtomers a firm intends to serve through the leveraging of its resources, capablitites, and competetencies.
5.        General environment is composed of elements in the broader society that influence an industry and the firms within. This area contains six environmental segments: demographics, economic, political/legal, socio-cultural, technological and global. The first three focus on the Industrial environment, which incorporates threat of new entrants, power of suppliers, power of buyers, product substitutes and intensity of rivalry. The last three environmental segments focus on the competitor environment.
6.        Industry environment is made up of a set of factors which include: the threat of new entrants, suppliers, buyers, products substitutes, and the intensity of rivalry among competitors that directly influences a company and its competitive actions and responses. The five forces in the Model of competition include: Threat of new entrants, Rivalry among competing firms, Threat of new substitutes, Bargaining power of buyers, and Bargaining power of suppliers. Threat of new entrants: economies of scale, product differentiation, capital requirement, switching costs, access to distribution centers, cost disadvantages independent of scale, and government policy.
7.        Competitor environment includes outside forces that are composed of your rivalry in the industry. It incorporates a competitor analysis, which includes: future objectives, current strategies, assumptions, and capabilities (p.83).

D. AMAZON.COM'S CUSTOMER SERVICE BILL OF RIGHTS's Bill of Rights claims that as a customer there is:
1.        No Obligation. Eyes & Editors Personal Notification Services are provided free of charge and you are under no obligation to buy anything.
2.        Unsubscribing. You can unsubscribe or change your subscriptions at any time.
3.        Privacy. We do not sell or rent information about our customers. If you would like to make sure we never sell or rent information about you to third parties, just send a blank email message to

C. COMPANY REPORT (, Inc.: Company Report
What started, as Earth's biggest bookstore is rapidly becoming Earth's biggest anything store.'s main site offers millions of books, CDs, DVDS, and videos (which account for about 70% of sales), not to mention toys, tools, electronics, health and beauty products, prescription drugs, and services such as film processing. Expansion is propelling the company in many directions; it owns stakes in online sellers of prescription drugs, wine, wedding services, and more. Long a model for Internet companies that put market share ahead of profits and make acquisitions funded by meteoric market capitalization, is now focusing on profits. Founder Jeff Bezos and his family own about 34% of the firm.
Stock Activity
fyi         Last        6.08                        
        52 Week High        40.87                        
        52 Week Low        5.51                        
        Volume        100                        
        Average Daily Volume (13wk)        6.47 Mil                        
Detailed QuoteFinancial data in U.S. dollars
Stock Price History
                  Change          Relative Strength                 
        3 Month        -60.2%        7                
        6 Month        -27.4%        25                
        12 Month        -80.7%        11                
Historical Charts
                  Last 12 Months         5 Year Growth                 
        Sales        3.0 Bil        NC                
        Income        -1.2 Bil        NC                
        Dividend Rate        NA        NC                
More Financials - as of 6/01

Quick Facts
Location        1200 12th Avenue SouthSeattle WA 98144-2734Phone: (206) 266-1000Fax: (206) 622-2405
Web Site
Industry        Internet Software & Services
Employees         9,000
Exchange         NASDAQ

Fundamental Data         
Current P/E        NE
Earnings/Share        -3.32
Dividend Yield        NA
Debt/Equity Ratio        NS
Net Profit Margin        -39.50%
Shares Outstanding        362.7 Mil
Market Capitalization        2.2 Bil
More Financial Ratios
Earnings Estimates
Qtr(9/01) EPS Estimate        -0.16                                
FY(12/01) EPS Estimate        -0.61                                 
PE on FY(12/01) EPS Estimate        -10.00                                
FY(12/02) EPS Estimate        -0.29                                
Next Earnings Release: N/A                                        
More Analyst Estimates
Analyst Recommendations         
Consensus        Hold
More Analyst Ratings
50 Day Moving Average        9.79
200 Day Moving Average        13.64
Institutional Ownership        44.30%
Beta        3.3


Hitt, M.A., Ireland, R.D. & Hoskisson, R.E. (2001) Strategic Management:
Competitiveness and Globalization. Minneapolis/St. Paul, MN: South-Western Publishing Corporation (4th edition. Chapters 1-5 & C83


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