Amazon

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Introduction of Amazon. History Mission & vision Competitors Internal external assessments. Matrixes Strategies Conclusion Recommendations

Amazon.com, Inc. is an American-based multinational electronic commerce company. Headquartered in Seattle, Washington, it is America's largest online retailer. Jeff Bezos founded Amazon.com, Inc. in 1994. It started as an online bookstore, but soon diversified to product lines of VHS, DVD, music CDs and MP3s, computer software, video games, electronics, apparel, furniture, food, toys, and so on. Amazon.Com is a leading online retailer company, offering for sale different items such as books, music, DVDs, videos, toys, electronics, software, video games etc. Serving almost 22.5 million customers over 150 different countries.

Amazon.com's headquarters in the PacMed building in Beacon Hill, Seattle Washington.

The company began as an online bookstore. The first book Amazon.com sold was Douglas Hofstadter's Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought. Amazon.com issued its initial public offering of stock on May 15, 1997, trading under the NASDAQ stock exchange symbol AMZN , at an IPO price of US$18.00 per share.

“ Restlessly focus on customer experience by offering our customers low prices, convenience and a wide selection of merchandise”

“ Our vision is to be Earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online”

We seek to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavor to offer customers the lowest possible prices.

The company’s six core values: customer obsession, ownership, bias for action, frugality, high hiring bar, and innovation. The company motto: ‘Work Hard, Have Fun, and Make History’.

To continue expanding in all countries with Internet access, while maximizing total commitment in becoming the number one company in Internet transactions.

Penetration Pricing: Amazon does an excellent job in offering low prices to its customers. As with many online retailers the company reserves the lowest prices for the most popular products and assigns higher prices to less popular products. This pricing strategy helps keep Amazon competitive in the online market. Another way the company meets its objective of low prices is through offering free shipping. If a certain amount is spent with the company in any one purchase, the customer will receive free shipping for their order.

Amazon has steadily branched into retail sales of music CDs, videotapes and DVDs, software, consumer electronics, kitchen items, tools, lawn and garden items, toys & games, baby products, apparel, sporting goods, jewelry, watches, health and personal-care items, beauty products, musical instruments, clothing, industrial & scientific supplies, groceries etc.

The company launched Amazon.com Auctions, its own Web auctions service, in March 1999. However, it failed to chip away at industry pioneer eBay's juggernaut growth. Amazon.com Auctions was followed by the launch of a fixed-price marketplace business called zShops in September 1999, and a failed Sotheby's/Amazon partnership called sothebys.amazon.com in November.

Marketplace service launched in 2001 that let customers sell used books, CDs, DVDs, and other products alongside new items. Today, Amazon Marketplace's main rival is eBay's Half.com service.

The domain amazon.com attracted at least 615 million visitors annually by 2008 according to a Compete.com survey. This was twice the numbers of walmart.coms . According to the Internet audience measurement website Compete.com, Amazon attracts approximately 50 million U.S. consumers to its website on a monthly basis.

In April 1998, Amazon bought the Internet Movie Database (IMDb). In June 1999, Amazon bought Alexa Internet, Accept.com, and Exchange.com in a set of stock deals worth approximately $645 million. In 2003, Amazon purchased the rival online music retailer CD Now. In 2004, Amazon purchased Joyo.com, a Chinese e-commerce website. It also debuted A9.com, a company focused on researching and building innovative technology. In March 2005, Amazon acquired BookSurge, a print on demand company, and Mobipocket.com, an eBook software company.

In January 2007 created Endless.com, a separate e-commerce brand focusing on shoes. In January 2008, Amazon announced that it would acquire audiobook provider Audible.com for $300 million in cash. In June 2008, Amazon announced that it had acquired Fabric.com, an online fabric store.

The most important competitors for Amazon.com are E-Bay (on-line auctions and retail sales), Barnes and Noble (books sales and other products) and CDnow (on-line music retailer). In general, financial results for the Internet Company’s sector are like Amazon’s with some exceptions. One of the main characteristics of this sector is that almost all companies show strong revenues and increasing losses.

To understand the structure of profit and loss accounts from Dot-Com companies as Amazon.com, we just have to see the main characteristics of e-commerce. The new economy is based in technology and marketing. The competition in Internet is mainly based on a strong technological platform able to maintain the business “on the air” and aggressive marketing promotions to create a brand name and let the Internet users to know your business.

Probably never in the history of financial markets a company has shown such an important market capitalization in shorter time as Amazon.com. This stock is indeed an “experiment” about the Dot.com Industry, an industry that never has made a single dollar in profits and has ever-increasing revenues. In Amazon.com case as in many others stocks in Wall Street, market analysts of important firms have a determinant role generating expectations in the market related to buy or not a stock.

Through extensive promoting and advertising of its products, Amazon.com, as well as any other online store, has determined its target market. Amazon.com accomplished this by segmenting the entire potential market. The potential market is segmented according to several variables that include, demographic, geographic, situation, and psychographic.

Demographically, Amazon.com appeals to customers that have access to the Internet. Scarborough Research found that 41 percent of online shoppers are between the ages of 35 and 49, 69 percent are college educated, 65 percent are white-collar, and 58 percent have an income over $50,000. About 55 percent men and 49 percent women using the Internet said that Amazon.com is their favorite site to make online purchases. Another demographic factor affecting online purchases is that of income.

Geographically, Amazon.com appeals to customers just about anywhere in the United States and through out the world that have access to the Internet. Currently, about 29 million people in over 160 countries use Amazon.com.

The situation and occasion of online shoppers also are used to segment the market. A survey done by CBD Research and Consulting found that 30 percent of online shoppers like the ability of shopping in their own homes and that 25 percent liked the fact of being able to shop at any time of the day. Price also was a reason why online shoppers like the Internet better, since the Internet is usually where the best prices are found.

Amazon attracts its customers by providing a satisfying experience so customers will return to the site often and interact with other customers. This personalization of each web page to the customer is what makes Amazon.com unique. One of Amazon’s strategies is to maintain long-term relationships with their customers so the customers will make repeat visits and purchases.

One of the techniques used is word of mouth. Amazon believes that this promotion tool is “effective in acquiring new customers and may also encourage repeat customers” Amazon’s product recommendation and search facilities are also another tool that the company uses to connect with consumers. The people not directly targeted by mass marketing or one-to-one marketing.

Since 2007, Amazon has made significant progress to reduce excess packaging in its shipments to customers and has introduced additional types of recyclable packing materials to protect items while in transit. As a result, the number of packages shipped in a wrong-sized box has decreased dramatically, significantly reducing packaging waste and transportation costs.

In 2008, Amazon also sent 35% of its larger-sized packages to customers without any additional packaging, further reducing packaging waste and transportation costs. In 2009, Amazon launched its Packaging Feedback program, which allows customers to provide direct feedback on the packaging.

Amazon is a profitable organization. In 2005 profits for the three months to June dipped 32% to $52m (£29.9m) from $76m in the same period in 2004. Sales jumped 26% to $1.75bn. Customer Relationship Management (CRM) and Information Technology (IT) support Amazon's business strategy. The company carefully records data on customer buyer behavior. This enables them to offer to an individual specific item, or bundles of items, based upon preferences demonstrated through purchases or items visited. Brand recognition: It was one of the original dotcoms, and over the last decade it has developed a customer base of around 30 million people. It was an early exploiter of online technologies for e-commerce, which made it one of the first online retailers. It has built on nits early successes with books, and now has different product categories.

As Amazon adds new categories to its business, it risks damaging its brand. Amazon is the number one retailer for books. Toy-R-Us is the number one retailers for toys and games. Imagine if Toys-R-Us began to sell books. This would confuse its consumers and endanger its brands. In the same way, many of the new categories, for example automotive, may prove to be too confusing for customers. The company may at some point need to reconsider its strategy of offering free shipping to customers. It is a fair strategy since one could visit a more local retailer, and pay no costs. However, it is rumored that shipping costs could be up to $500m, and such a high figure would undoubtedly erode profits.

The company is now increasingly cashing in on its credentials as an online retail pioneer by selling its expertise to major store groups. For example, British retailer Marks and Spencer announced a joint venture with Amazon to sell its products and service online. There are also opportunities for Amazon to build collaborations with the public sector. For example the company announced a deal with the British Library, London, in 2004. The benefit is that customers can search for rare or antique books. In 2004 Amazon moved into the Chinese market, by buying china's biggest online retailer, Joyo.com. Joyo.com has many similarities to its new owner, in that it retails books, movies, toys, and music at discounted prices.

All successful Internet businesses attract competition. Since Amazon sells the same or similar products as high street retailers and other online businesses, it may become more and more difficult to differentiate the brand from its competitors. International competitors may also intrude upon Amazon as it expands. Those domestic (US-based) rivals unable to compete with Amazon in the US, may entrench overseas and compete with them on foreign fronts. Joint ventures, strategic alliances and mergers could see Amazon losing its top position in some markets. The products that Amazon sells tend to be bought as gifts, especially at Christmas. This means that there is an element of seasonality to the business. However, by trading in overseas markets in different cultures such seasonality may not be enduring.

External opportunities and threats OPPORTUNITIES : Construction of an extensive community of buyers Positive changes in the business model of the book market Internet taxes prohibited by the Internet Tax Freedom Act (1998) and its extensions (2001 and 2003) Growth of internet users in the next five years, predominantly in the international market E-commerce expansion in Asia and the Pacific Several product categories with high penetration of retail on-line sales 13% jump of Latinos going online in 2003 in the US since 2001 THREATS : eBay, Barnes & Nobles, and Wal-Mart Possible rejection to on-line sale in international markets if new taxes (Value Added taxes: VAT) in products are levied Population segment not targeted to on-line sales due to their lack of internet access Weak economic performance of Germany and France in the last year Competition will increase due to the low barriers to entry in the market: offline companies are coming online

AMZN = Amazon Inc. BKS = Barnes & Noble Inc. EBAY = eBay Inc. Industry = Internet Software & Services

STRENGTHS : Strong brand name * Large product selection * Pricing policy with discounts Corporate culture High quality management team Customer service support (Highest score in 2002 American Customer Satisfaction Index) Strong Infrastructure: Effective automated distribution centers in the US and overseas (Competitive Advantage) Developed and upgraded technology: software and hardware Pioneer in the syndicate selling on the Web Two segments: B2C and B2B e-commerce. In the process of building efficiencies of scale WEAKNESSES : Lack of Spanish website version (Latino and Hispanic Americans are the fastest-growing online ethnic group) Low finance performance (high debt level) Risk of introduction of wrong new categories which could damage company’s brand Company’s offered free shipping might affect future financial outcome Certain products (high volume/weight) have high shipping costs which could confront with local offline retailers

* Y axis: - Financial Strength: + 3 - Environmental Stability: - 2 => Y coordinate: + 1 STRATEGY: AGGRESIVE * X axis: - Competitive Advantage: - 1 => X coordinate: + 5 - Industry Strength: + 6

Potential Strategies: - Market Development - Market Penetration - Product Development - Backward Integration - Concentric Diversification

Partnership with Best Buy or Wal-Mart Benefits to Amazon Benefits to Best Buy and Wal-Mart General Risks

Current Recommendations Increase prices by 2% Close Kentucky distribution center Public relation appearances Ease into International segment

Future Recommendations Re-evaluate price increases Modify web page B/M/V Tie-In Program Drop Electronics, Kitchen, and Tools segment

Reducing Expenses Distribution centers Fulfillment General and administrative Making a Profit

Amazon

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Amazon