1. Case presented by: Amani Anas A/Alla ElRawda Hassan Dai Iman
M.Ahmed Ibrahim Reem Tambal Roweda Ahmed Abdel Rahman 10/29/2013
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2. This presentation will report the analysis of: Amazon.com
case, prepared by e-business fellow Collura & Prof. Applegate
in 2000. Amazon.com is an American multinational e-commerce company
with headquarters in Seattle, Washington, United States. It is the
world's largest e-retailer; recognized by 60% as number 1 brand and
57th most valuable brand worldwide. Despite that, it faces pressure
for not making high profit. This analysis will come up with
recommendations expected to contribute to serve its stakeholders
concern. 10/29/2013 2
3. History and background Jeff Bezos founded Amazon.com in July
1994; Launched the web store in July 1995 out of a 400 square foot
warehouse; September 1995 the company was selling $20000 /week; By
1998 aggressively launched new retail categories including music,
DVDs, videos, electronics, software, toys, video games, home
improvement and grass and courtyard products.; By 1999 launched two
online auction stores and an online marketplace for small merchants
(zShop). By 2000 it started entering into a number of equity
partnership with brand-name online retailers such as Drugstore.com
and it was estimated that these would generate $1 billion in
co-marketing by 2005. 10/29/2013 3
4. Vision: Bezos declared that: Our vision is to use our
digital business platform to build the earth most customer centric
company, a place where people can come to find and discover
anything and everything they might want to buy online. (2) Mission:
Amazons stated mission was to be the most customer centric and
convenient online shopping destination, allowing customers to buy
anything and everything at the Earth biggest store. (3) 10/29/2013
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5. 10/29/2013 5
6. Despite the numerous strengths that Amazon possessed, few
weaknesses have been identified, hence Amazon strengths and
weaknesses can be listed as follow: Strengths - Wide range
e-commerce operations. - Impressive horizontal portal
infrastructure. - Flexible business model i.e. horizontal portal.
10/29/2013 6
7. - Allowing outsourcing marketing, sales, order fulfillment
and physical logistic through small, medium, and large merchants. -
Its great customer relationship, which is regarded as one of its
core values. - Company culture that allows quick response to
customers. - Qualified management team. - Well known e-commerce
brand name. 10/29/2013 7
8. - Innovative advertising programme. - Reliability i.e.
fulfillment tight deadlines. - Distribution centers with storage
overcapacity. - Protected innovations. - Clean and easy-to-navigate
site. -The first to use syndicated selling. -Pricing policy with
discounts. Weaknesses - Free shipping that negatively impacted its
financial position. -Uncertain time for Amazons overall
profitability. 10/29/2013 8
9. 10/29/2013 9
10. Macro-environment The political- legal factor: deregulating
telecommunication industry in 1996 in USA creates an intense
competitive situation among companies in ebusiness industry: enter
each other markets, penetrated the market of wireless services and
meeting rapid demand growth; 10/29/2013 10
11. Macro-environment The Technological factor: The third era
of computer industry marked the first appearance of the Web as a
publicly available service on the Internet particularly on August
6, 1991. And the emergence of web-based applications that deliver
persuasive values to users including: email; e-commerce; 10/29/2013
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12. Macro-environment The economic Factor: the economy of the
United States is the world's largest national economy. Its nominal
GDP was estimated to be nearly $14.5 trillion in 2010. This lead to
expansion in customers expenditure, resulting in competitive
pressure within an industry and generating opportunities to expand
operations globally. This had enhanced Amazons business
opportunities and when the $ declines it reduced threats from its
overseas competitors. 10/29/2013 12
13. Industry life cycle Each of the three operating units of
Amazon represents certain stage in industry life cycle. First,
businesses at a mature stage level i.e. retail on books, music and
DVDs/Videos. Second, businesses at the early stage level, i.e. (a)
retailing on electronic, software, video game, toys, home
improvement (b) marketplace/exchange that include auction, zShop,
and Sothebys. Amazon (c) aggregator/ portal,- Amazon Commerce
Network. Third, businesses at an international level i.e. retail,
marketplace/exchange, aggregator/portal in UK and Germany.
E-retailing is a growth industry because consumers are familiar
with the technology and their demand is expanding rapidly, prices
fall and distribution channels develop. Threats from potential
competitor are high, but they can be absorbed. 10/29/2013 13
14. Porters five Industry forces Low Suppliers Bargaining power
Opportunity Complimentors 10/29/2013 Medium to HIGH Risk of entry
by potential competitors Threat HIGH Rivalry among existing firms
in the industry Threat HIGH Buyers Bargaining power Threat Medium
HIGH Threats of substitutes Threat 14
15. Opportunities Extensive community of buyers; Suppliers low
bargaining power; Growth of internet users, predominantly in the
international market; E-commerce global expansion; Several product
categories with high penetration of retail on-line sales.
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16. Threats Intense of rivalry between established firms in the
industry; Strong competitors eg.: eBay, Barnes & Nobles, and
Wal-Mart; Competition will increase due to the low barriers to
entry in the market: offline companies are coming online; Buyers
low switching cost and high bargaining power; Availability of
substitutes; Lack of internet access leads to not targeting some
population segments to on-line sales. 10/29/2013 16
17. 10/29/2013 17
18. Capitalizing on its internal strengths Amazon can make the
best use of the future opportunity of having potential community of
buyers (i.e. extensive community of buyers); Being one of the first
e-businesses that used syndicated selling Amazon can take advantage
of having suppliers with low bargaining power; 10/29/2013 18
19. Future opportunities: growth of internet users (in overseas
markets), the prospects of ecommerce global expansion, and the
potentiality of penetrating the online market through diversified
product; The maximum utilization of these opportunities can be
correlated to Amazons strengths: its impressive horizontal portal
infrastructure, its flexible business model (it facilitated its
evolution from online retailer to having equity partnership with
brand-name online retailers), its well know brand name, and having
qualified management team, innovation, reliability (fulfillment
orders in a timely manner). 10/29/2013 19
20. Amazon has few weaknesses (i.e., lean financial position
resulted from the free shipping, and uncertain time for its overall
profitability) in its internal operating environment, corrective
actions should be undertaken against it. As a result of correcting
these weakness , it will be prepared for facing any future threats
of the intense rivalry in the industry as a result of low barriers
to entry (high shift from offline to online business operations),
tough competitors, availability of substitutes, losing wide range
of segments in developing countries for not having appropriate
internet access and knowledge. 10/29/2013 20
21. Sustaining Amazons strengths in its internal operating
environment the external future opportunities can be easily grasped
and utilized to its maximum limits. In addition, correcting what
are considered as weaknesses in internal operating environment
Amazon will be well prepared for facing the external future
threats. 10/29/2013 21
22. 10/29/2013 22
23. 10/29/2013 23
24. E-Business model: Online book music and video retailing
(1995); Consumer online shopping portal (1998); Online auction
(1999); Equity partnership with brand name online retailers (2000).
Values: Provide better-quality retailing services at low cost;
making business process more efficient; creating new reality for
innovation. Objectives: generate and develop revenue from global
markets. Achieve high revenue contribution. 10/29/2013 24
25. E-business Channels Decisions: Chanel priority: Click: all
transactions and customer services are undertaken online; Revenue
model: Gross margin on products in inventory and shipped to retail
customers; commissions through market place exchanges; slotting
fees received from strategic equity partnership. Organization
restructuring: Strategic partnership Market place restructuring:
disintermediation CRM (sell-side e-marketing) strategies: fully
interactive site supporting the whole buying process, providing
relationship marketing with individual customers and facilitating
the full range of marketing exchanges. SCM (buy-side) strategies:
orders placed electronically with full integration of companys
procurement, requirement planning and stock control system.
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26. occupies the highest level of strategic decisionmaking and
covers actions dealing with the objective of the firm, acquisition
and allocation of resources and coordination of strategies of
various SBUs for optimal performance. 10/29/2013 26
27. Amazon.com adopted an aggressive growth strategy as the
earths biggest most consumer centric online store. Therefore,
Amazon corporate level strategies are:
28. market development diversification product development
organization restructure marketplace restructure positioning and
differentiation acquisition
29. In conclusion Amazon.com as leading company in e- retailing
managed to successfully create it strong brand name, invest in
internet and soft-ware services and create its own patent, and
adopted different strategies that allow it to move further
globally. Nevertheless, these successes may not always lead to
success. Therefore, Amazon.com needs to revisit its strategic
direction especially those design toward its stakeholders interest.
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30. Retain customer by introducing quality services that raise
the cost of switching to others. Continuous improvement and
innovation in software and technology as it main protector so as
not to be invade/imitate. Exploiting other international emerging
market make use of prevalence of internet access and usages.
Re-visit its financial policies regarding free shipment. To slow
down future expansion (e.g. set-up & advertisement) to generate
some profit. 10/29/2013 30