Amazon Case Study
Amazon Case Study
Incorporated in the Washington state in 1994, Amazon.com is one of the largest and widely known online shopping and e-commerce sites on the internet. Having sold its first book in 1995, the founder, Jeff Bezos, had accomplished part of his success. It constantly made news with the number of titles of books it had since it only started as an online bookstore. Having started with 11 employees, the company grew and within four years, it had more than 4 million customers and 1600 members of staff. It expanded its business by adding the number of products such as videos, CDs, games and DVDs (Noren, 2013). Through the series of alliances, partnerships, acquisitions and exclusive agreements, Amazon expanded its service offerings and covered a wide range of products including toys, power tools, softwares, online auctions, data center services and home improvement merchandise. Its main objective was to attain financial stability that would sustain long-term profitability and growth (Amazon.com, 2011). In order to achieve its objective, it had to focus on ways of increasing its growth by increasing its income and managing its expenditures and capital effectively while reducing operational costs. Amazon has hugely diversified over the last several years, and it has currently pursued a multiproduct strategy.
Amazon’s decision to diversify its products is one of its greatest evolutionary steps. It not only sold books but a wide range of products. Along with the numerous products, it launched the Kindle, an e-book reader in 2007 that costs $79 only. This offered its customers easier access to the million books, journals and newspapers on its site (Stone, 2013). With the introduction of iPad, the first tablet computer by Apple Company in 2010, the Amazon foundation profited due to the increase in number of e-book readers. Intrigued with the diversification of more products, Amazon introduced its own tablet, Kindle Fire, which was cheaper than the Apple iPad. This is an example of the techniques Amazon used to gain more profit and expand its business. Notably, approximately 43% of its net sales and profits were from video games, books, journals, magazines and digital downloads, whereas 57% of the profits were from its electronic appliances, mobile devices, computers, tablets, as well as other merchandise such as outdoor, sports equipment, industrial supplies, and health and beauty products (Johri, 2010). Furthermore, it created a credit card company that enabled its customers to pay for their products directly. Chase Bank profited Amazon since it is able to visualize the profits it is making on a daily basis. Amazon’s continual expansion and diversification has led to its growth.
Having started Amazon as the only CEO, Jeff Bezos decided to employ other members to assist him in managing his organization. He sold his shares to other members and remained with 19% of the company’s ownership. Some of the other corporate managers are Diego Piacentini who owns 1% of the company and other committee members. The company has three committees: governance, audit and compensation, and leadership development committee. The committees ensure the smooth running of the company and actualization of goals (Amazon.com, 2011). Additionally, the founder opted to reduce the number of CEOs over the years and replaced them with a scientist, several capitalists, several investors, a non-governmental representative and senior executives. This evolutionary corporation governance discourages objectivity and independent thinking and encourages the growth of the company.
Since Amazon depends on the internet for the displaying and selling of its products, it developed a series of web services. These included database, e-commerce, computing, billing, payment, and web traffic. This improved the developers’ access to various technological infrastructures thus improving its service delivery to customers. Most importantly, the web services were inexpensive, reliable and scalable. In 2012, it `resolved to replace the Amazon Web Services (AWS) with a cloud storage system, The Amazon Glacier (Amazon.com. c, 2011). The low cost resolution for backups, data archiving and other data storage projects that required long-term storage facilitated the company’s ability to acquire necessary information for future reference. Due to the massive profits acquired from the introduction of AWS, Amazon further decided to invest heavily on international technological infrastructure. This crucial step threatened the company’s capital, but the managers ensured it profited from the investment since it facilitates long-term growth (Wittekind, 2013).
Over the years, Amazon has continually increased its partnership with involved companies. At the beginning, it lacked partners and the managers alone who were the determiners of its business ran it. However, after numerous discussions and consultations, it developed partnerships with various retailers including Timex Corporation, Bebe Stores and Marks & Spencer whose websites it managed and hosted (Dean for Student Life& J. Bezos, personal communication, 2002). Not only the Amazon Company that benefited from this step but also the partners since it places third party’s links on its website allowing easier access of their products to customers. Conversely, Amazon accrued more profits because the third party companies had their products advertised, stored and sold by Amazon at a fee. This benefited the company since it did not have to account for its shipping.
Many companies including Amazon employ multiproduct strategies in order to compete in diverse merchandise markets. This action plan allows organizations to diversify their products in terms of types and numbers that ranges from low, to moderate and finally to high levels of diversification. Incorporating the multiproduct strategy increases the marketing grounds for Amazon. Currently, Amazon is pursuing the five levels of diversification that include both dominant and single business, related and unrelated links and related constraints (Amazon.com. e, 2011). This strategy encourages cost saving from shared activities and resources between businesses. Basing from its current challenge where it experiences great losses during shipment, the company has resolved to frustration free packaging (Amazon.com. a, 2011). This strategy enables it to reduce the carbon footprint and use of paper and plastic. Reduced sizes of boxes reduce the number of cargo and hence reducing costs. Furthermore, it has resolved to invest in the same day delivery in order to serve their customers effectively.
one of the few online companies whose success is visible over the evolution of
its diversification. Since its introduction into the marketing industry, Amazon
has diversified both its products and services to its customers. Notably, it
moved from selling books only to a wide range of products including
electronics, home appliances and games. In addition, the company invested in
different technological infrastructures such as cloud computing and other software
that help it in service delivery. Throughout the years, Amazon has developed good
relations with its partners, and this helps it save part of their profits. Most
importantly, Amazon employs multiproduct strategies that ensure its growth
while limiting its costs. Therefore, Amazon attributes its success to its
evolutionary diversification of both products and services and integration of
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Amazon.com. (2011). Corporate Governance: A Message to Shareowners. [Data file]. Retrieved from http://corpgov.net/2013/05/amazon-com-inc-amzn-proxy-score-64/
Amazon.com. (2011). Shipping and Deliver. [Data file]. Retrieved from http://www.amazon.com/gp/help/customer/display.html?nodeId=468520
Dean for Student Life. (Interviewer) & Bezos, J. (Interviewee). (2002). Earth’s Most Customer Centric Companies: Differentiating within Technology [Interview Transcript]. Retrieved from http://video.mit.edu/watch/earths-most-customer-centric-company-differentiating-with-technology-9877/
Johri, A. (2010). Business analysis. Mumbai, India: Himalaya Pub. House.
Stone, B. (2013). The everything store: Jeff Bezos and the age of Amazon.
Wittekind, E. (2013). Amazon.com: The company and its founder.