Strategies adopted by amazon during the recession along with generic business strategies

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1.0 Introduction
Fortune 500 companies are the world's largest and leading companies-based revenues. And
Amazon is the 5th
largest company according to this list. Amazon.com is an American
multinational technology company based in Seattle, Washington, that focuses on e-commerce,
cloud computing, digital streaming, and artificial intelligence. It has gained enormous expansion
within a few years of its foundation by the charismatic personality-Jeff Bezos. It becomes the
leading giant of the retail industry within 10 years and achieved the 5th
position among Fortune
500 companies in the world. Certainly, it has adopted some unique strategies to reach such a
skyrocketed position. It acquires a wide array of differentiation and offers its premium products
and services at the most reasonable price. During the financial recession of 2007 to 2009, the
performance of Amazon was comparatively better others in the industry. During that downturn,
they devised certain distinct strategies that guaranteed their long-term performance.
The entire report has been arranged into seven sections. The first section includes the
introduction itself. The second section covers the business profile and a succinct description of
Amazon.com. The sui generis strategies of Amazon to become the leading tech giant and
financial performance of Amazon during and post-recession have been designed in the third
and fourth sections respectively. The fifth section eloquently represents the strategies adopted
by Amazon to turn around the downturn of the recession. And finally, the sixth and the seven
sections have been formed by the lessons for a manager and conclusion respectively.

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2.0 Business Profile and a Succinct Depiction of Amazon.com
2.1 Amazon.com: The King of Online Retail and It’s Not Even Close
Amazon.com is an American multinational
technology company based in Seattle,
Washington, that focuses on e-commerce,
cloud computing, digital streaming, and
artificial intelligence. It is considered one of
the Big Four technology companies along with
Google, Apple, and Facebook.
Amazon is known for its disruption of well-established industries through technological
innovation and mass scale. It is the world's largest e-commerce marketplace, AI assistant provider,
and cloud computing platform as measured by revenue and market capitalization. Amazon is the
largest Internet company by revenue in the world. It is the second-largest private employer in the
United States and one of the world's most valuable companies. Amazon is the second-largest
technology company by revenue.
Amazon is guided by four principles: customer obsession rather than competitor focus, passion for
invention, commitment to operational excellence, and long-term thinking.
2.2 Vision Statement
The vision of Amazon 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.
2.3 Mission Statement
When Amazon.com launched in 1995, it was with the mission “to be Earth’s most customer-
centric company, where customers can find and discover anything they might want to buy
online, and endeavors to offer its customers the lowest possible prices.”
In its annual report for 2019, Amazon highlights its mission as to “serve consumers through
online and physical stores and focus on selection, price, and convenience.”
Image 2.1: Logo of Amazon.com Source: (Amazon.com, 2019)

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2.4 Products and Services
Amazon.com's product lines available at its website include several media (books, DVDs, music
CDs, videotapes and software), apparel, baby products, consumer electronics, beauty products,
gourmet food, groceries, health and personal-care items, industrial & scientific supplies, kitchen
items, jewelry, watches, lawn and garden items, musical instruments, sporting goods, tools,
automotive items and toys & games. In August 2019, Amazon applied to have a liquor store in
San Francisco, CA as a means to ship beer and alcohol within the city. Amazon has separate retail
websites for some countries and also offers international shipping of some of its products to certain
other countries.
Amazon.com has a number of products and services available, including:
• Amazon Fresh
• Amazon Prime
• Amazon Web Services
• Alexa
• Appstore
• Amazon Drive
• Echo
• Kindle
• Fire tablets
• Fire TV
• Video
• Kindle Store
• Music
• Music Unlimited
• Amazon Digital Game Store
2.5 A Snapshot of Amazon’s Journey towards the Excellence
The following table eloquently demonstrates the brief history of tech giant-Amazon.com
Table-2.1: A Snapshot of Amazon’s Journey
Year Description
In 1994 Jeff Bezos incorporated Amazon. He chose the location Seattle because of
technical talent as Microsoft is located there.
In May 1997 The organization went public. The company began selling music and videos in
1998, at which time it began operations internationally by acquiring online
sellers of books in the United Kingdom and Germany.

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In 1998 The organization also sold video games, consumer electronics, home-
improvement items, software, games, and toys in addition to other items.
In 2002 The corporation started Amazon Web Services (AWS), which provided data on
Web site popularity, Internet traffic patterns and other statistics for marketers
and developers.
In 2006 The organization grew its AWS portfolio when Elastic Compute Cloud (EC2),
which rents computer processing power as well as Simple Storage Service (S3),
that rents data storage via the Internet, were made available. That same year, the
company started Fulfilment by Amazon which managed the inventory of
individuals and small companies selling their belongings through the company
internet site.
In 2012
Amazon bought Kiva Systems to automate its inventory-management business,
purchasing Whole Foods Market supermarket chain five years later in 2017.
Source: (Jordan, 2013)
3.0 Sui Generis Strategies of Amazon to Become the Leading Tech
Giant
3.1 Amazon's Differentiation Strategy
The following subsection presents the unique features of the differentiation strategies adopted by
Amazon to become the tech giant and obtain enormous market share and popularity.
❖ Amazon Stresses the Importance of Customer Satisfaction Instead of the Competitor
"Each year the University of Michigan calculates a customer-satisfaction index for 225 of
Americans largest companies. Amazon has led the online retailing category for years and has
repeatedly placed in the top 10 among all companies."

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Bezos adopted an approach to help never
lose the importance of customer
satisfaction and Amazon narrows in on
eliminating the risk of unsatisfied
customers. As you can see from the
quotes above, Amazon walks the talk in
being successful in maintaining customer
satisfaction. Amazon strives for excellence in customer satisfaction, perhaps one could say a strive
for perfection. Bezos states that “We’re not satisfied until it’s 100%.” It is noted that Bezos would
have an empty chair to remind staff in the meeting to imagine a customer present and to consider
what they would want. He called the customers "the most important person in the room. Bezos
describes the importance of knowing your customer and things that will not change. He notes
customers want "selection, low prices, and fast delivery." He shares how these three
consumer desires are likely not going to change.
❖ Amazon Focuses on The Long Term Not the Short Term
How Amazon focuses on the long term instead of the short term that is clearly echoed in the voice
of its founder which as follows:
“We don’t focus on the optics of the next quarter; we focus on what is going to be good for
customers. I think this aspect of our culture is rare.”
A perfect example of the long-term focus is Amazon
Web Services (AWS) and how it started with
startups and developers and has now expanded to
millions of customers. Companies of all sizes use
AWS such as Pinterest, Airbnb, GE, Capital One,
Johnson & Johnson, McDonald's and Time Inc.
“We are comfortable planting seeds and
waiting for them to grow into trees,”
-Jeff Bezos
“If you're competitor-focused, you have
to wait until there is a competitor doing
something. Being customer-focused
allows you to be more pioneering.”
Jeff Bezos

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❖ Amazon Builds Its Strategies on Things That Don't Change
"Base your strategy on things that won’t change.... Whereas if you base your strategy first and
foremost on more transitory things—who your competitors are, what kind of technologies are
available, and so on—those things are going to change so rapidly that you’re going to have to
change your strategy very rapidly, too."
Bezos notes customers want "selection, low prices, and fast delivery". He shares how these three
desires of the consumer are likely not going to change.
❖ Amazon Sees Opportunities and Not Failures
Instead of focusing on setbacks, Jeff Bezos the founder of Amazon sees opportunities and
solutions. This is evident in how Bezos talks about failure and planting seeds. "If you invent
frequently and are willing to fail, then you never get to that point where you really need to bet the
whole company. [Amazon Web Services] also started about six or seven years ago. We are planting
more seeds right now, and it is too early to talk about them, but we are going to continue to plant
seeds. And I can guarantee you that everything we do will not work. And, I am never concerned
about that. We are stubborn on vision. We are flexible on details." Bezos made risky moves early
on in the establishment of Amazon that helped in the long-run. It is noted that Bezos invested in
warehouses, which caused the stock prices to drop significantly at first, but this contributed to their
journey to become the leader in online retailing.
❖ Amazon's Marketing Strategy is Providing Great Service that Creates Positive Word
of Mouth and Focusing on SEO & PPC
“If you make customers unhappy in the physical world, they might each tell six friends. If you make
customers unhappy on the Internet, they can each tell 6,000.”
Amazon focuses on making the customers happy. Their budget for advertising is small for the size
of the company, but they focus on word-of-mouth being an essential part of their success. "If you
do build a great experience, customers tell each other about that. Word of mouth is very
powerful." Amazon spent 2.8 billion dollars on digital marketing. If you look at their sales from
2014-2015, it was $71.84 billion in sales.

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Figure-3.1: Brick and Mortar Retailers Way behind Amazon
Source: (Fortune, 2019)
❖ Amazon Trains Employees to Understand the Customer Experience to Get All
Employees to Understand the Customer
Jeff Bezos ensures managers and all staff understand the experience of the customer. He arranges
for them to take a two-day training at a call center to allow them to understand what the customer
goes through and to ensure humility. Bezos not only encourages his managers to be sensitive to
the customer experience, but he also has role modeled this in his interactions with the consumers.
This can be seen when Bezos showed humility to his consumers when Amazon made a mistake of
deleting e-books of their customers and he sent out a personable apology. The apology is noted to
make customers remain loyal and quickly forget about the issue.
❖ Amazon Achieves Excellent Customer Satisfaction Through Speedy Service
It is noted that Amazon is very focused on preventing any delays (in products, delivery, web page
loading). Amazon has metrics showing that a 0.1-second delay in page rendering can translate
into a 1% drop in customer activity. Amazon stresses the importance of fast delivery for the
consumer. In addition to fast delivery, they also value efficiency within the operations of the
company and affordability for the consumer.

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❖ How Does Amazon Respond to Failures and Setbacks?
Amazon has been known for having a high turnover rate with staff, which is an expense for the
company. The constant demand for resources for hiring new employees and training would be
inefficient and costly. Amazon has attempted to alleviate the employee loyalty concern by offering
employee stock options as compensation (which increases the amount the longer you are with the
company). They also try to entice workers to stay longer by requiring the employee to pay back a
portion of their signing bonus if they leave early. Some describe the workplace as "Darwinism."
One writer discusses how Jeff Bezos "brags" about his failures (Auctions and zShops). The major
difference between Amazon is that the company embraces its failures and tries learns from them
3.2 Amazon’s Low-Cost Strategy
✓ Amazon Achieves Excellent Customer Satisfaction Through Competitive Prices
Bezos tries to keep all costs low within the business to allow him to provide low prices. Frugality
is one of eight official company values. This will align for how Bezos operates the company and
ensures unnecessary expenses are not occurring which would result in the consumer having to pay
more. For example, he is known for keeping old black-and-white printers and other office
equipment at low cost, no one in the company flies first class and keeping the size of the teams
small. He also has a "two pizza rule" which essentially is that if you require more than two pizzas
to feed a team, it is too big. Bezos restricts his salary to $81,840 as well as his management team's
salary to help keep costs low. It appears that employees get some ownership in the company (stock
options) to counter the lower salaries.
4.0 Financial Performances of Amazon during & Post-Recession
The Great Recession was the economic decline of 19 months (December 2007 - June 2009) due
to a subprime mortgage crisis in the U.S. It was the worst global recession since World War II.
The U.S. unemployment rate had almost reached 9.4% in May 2009. Hundreds of companies
faced several financial dismal during this period.
The financial performance of Amazon during & post-recession period has been analyzed in the
following subsection on the basis of financial ratios.

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✓ Profitability Ratios
The Profit margin (also referred to as the rate of return on sales) is a measure of the % of each
dollar of sales which results in net income. The formula of profit margin ratio is net income/net
sales. Amazon’s profit margin was 3.37% in 2008; 3.21% in 2007. At the spur of that moment,
the Industry average was 2.72% which was lucidly lower than that of Amazon. The following
figure eloquently shows the net margin ratios of Amazon during the recession period.
Figure-4.1: Net Margin of Amazon from 2007 to 2016
Source: The data adopted from International Data Corporation (IDC) and website of Amazon.
✓ Liquidity Ratios
The current ratio is current assets/current liabilities. The current ratio for Amazon in 2008 was
1.30, which was 0.10 less than 2007’s 1.40 ratio. The ratio means that for every dollar of current
liabilities Amazon has, it has $1.40 of current assets. The average current ratio of the Online Retail
Sales Industry is 1.37. So, Amazon’s average current ratio was slightly better than that of the
industry trend. The following figure shows the current ratios of Amazon during the recession
period.
3,21
3,37
3,68
,373
1,31
-0 ,06
,370
-0 ,27
0,56
1,74
-0 ,5
0
50,
1
1,5
2
2,5
3
3,5
4
2007 2008 2009 2011 2012 2013 2014 2015 20162010
Net Margin %

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Figure-4.2: Current Ratio of Amazon from 2007 to 2016
The quick ratio (also known as acid –test ratio) measures Amazon’s immediate short-term
liquidity. It can be measured by dividing the sum of cash + short-term investments + net
receivables by current liabilities. In 2008, the ratio was 0.96, and in 2007, it was 1.03; but, the
industry average acid-test ratio was 1. So, Amazon had kept up with the industry trend.
Figure 4.3: Quick Ratio of Amazon from 2007 to 2016
,391
1,3 ,331,331
,171 ,121 1,07 1,12 1,08 1,04
0
,0 2
4,0
60,
0 8,
1
1,2
1,4
1,6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Current Ratio
1,03
,960 1 1
,820 0,78 0,75
,820
0,77 0,78
0
0,2
,40
,60
0,8
1
1 2,
2007 2009 2010 2011 2012 2013 2014 2015 20162008
Quick Ratio

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Based on the ratios, it can be said that Amazon has liquidity on a par with its industry.
✓ Price Earnings Ratio
The price-earnings ratio is the market price per share of stock/earnings per share. It reflects an
investor’s assessment of a company’s future earnings. Amazon’s P-E ratio was 101.32 in 2008,
and 122.61 in 2007. The industry average was only 78. It can be praiseworthy to note that
Amazon’s P-E ratio reflecting a strong indicator of investor’s enthusiasm.
Figure 4.4: Price-Earnings Ratio of Amazon
So, in the punch line, it is crystal cleared that the financial performance of Amazon was good
enough then the industry. It is rational to state that there were certainly some unique strategies
adopted by Amazon during that period to move opposite of the industry. The afterward section
makes an attempt to shed light on that strategy undertaken by the Amazon during the recession
period.
122,61
101,32
78
0
20
40
60
80
100
120
140
2007 2008 Industry Average
Price-Earnings Ratio

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5.0 Strategies Adopted by Amazon to Turn Around the Downturn of
Recession
5.1 Amazon's Recession-Friendly Tablet Strategy: “Cheap Now, Pay Later”
The main selling point of the new Kindle lineup is its cheap price. In the long term, however, the
low barrier of entry to buying a Kindle will position Amazon, self-described as the world's largest
store, to sell more things to more people at lower prices. The strategy is both recession-friendly
and somehow democratic sounding. (Everybody gets a tablet!) It's the anti-Apple approach. But
Amazon is a business, and while it's pushing the low prices upfront, its bottom-line relies on a
long-tail of purchases from customers over time. In this regard, the saying of Bezos can be
mentioned to get the insights in short.
"What we are doing is offering premium products at non-premium prices," CEO Jeff
Bezos told BusinessWeek in the days before unveiling the new Kindles. "[Other tablet contenders]
have not been competitive on price [and] have just sold a piece of hardware. We don't think of the
Kindle Fire as a tablet. We think of it as a service.
The data indicates that the company grew sales by 28% in 2009, a tough year of deep dips in sales
for most businesses. So, what was the company's secret? Focus on the long term: Amazon looks
to innovate with products like its new Kindle 3 and strives to expand market share, forever
anticipating the next change.
5.2 Heavily Investment on Research and Development: “The Quest for What
Nobody Else was Thought”
Amazon spent almost $4 billion on R&D in the first decade after the millennium, while eBay
spent about $2.7 billion. This research and development resulted in new products, services and
innovative strategies as follows:
➢ Snapshot Widget: Amazon developers worked on an iPhone app that can tell product
prices of physical shops by snapshots taken of them. This service is particularly useful
when the people, going through an economic crisis, are more and warier.

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➢ Amazon Flexible Payments Service (Amazon FPS): Amazon FPS is the first payments
service designed from the ground up specifically for developers.
➢ Amazon DevPay: A simple-to-use billing and account management service that makes it
very easy for developers to get paid for applications they build on Amazon Web Services.
This particularly works when the people are more and more inclining towards stay-home
freelance online jobs in time or high unemployment.
➢ Free Shipping: Amazon decided to stop charging shipping costs for deliveries.
5.3 Amazon Following the Acquisition Strategy: “If you can’t beat 'em, it’s best
to acquire a company…"
During the recession period, Amazon acquired the leading iPhone eBook Reader Stanza, rival to
Kindle. They also acquired dpreview.com, Brilliance Audio, Audible.com, Fabric.com, Box
Office Mojo, AbeBooks, Shelfari, Reflexive Entertainment, Zappos, SnapTell.
6.0 Lessons for A Manager
The following points represent the lessons for a manager from the strategies of tech giant
Amazon.com.
The manager needs to be very sensitive to the changes in the environment.
The manager must design a pool of unique strategies in every sphere of the organization
than that of the competitors.
Giving utmost priority to customer retention through the best customer experience with the
company.
Focusing on Kaizen-a continuous improvement, in the products and services.
Investing an enormous amount to the research and development to give the customers
experiencing state-of-the-art technology.
Being so much customer-centric rather than the competitors.
Grasping the untapped opportunities rather than solely dealing with problems.
Trying to acquire emerging rivals.
It’s an emergent to be bold and strategic and yet careful at the time of crises.

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7.0 Conclusion
In fine, it can be concluded that Amazon has obtained a leading position within a few years of its
establishment through unique and mutagenesis strategies. Amazon has become the king in online
retail business by its versatile products and services to the customers. Amazon has adopted unique
differentiation strategies with a blend of low-cost leadership strategies. Amazon’s differentiation
strategy lies in the start-of-the-art technology to give the customer the best experience with the
Amazon. During the financial recession of 2007 to 2009, the performance of Amazon was
comparatively better others in the industry. During that downturn, they devised certain distinct
strategies that guaranteed their long-term performance.

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