!     Corporate  Strategy!     E-Retailing Industry Analysis!     Business Level Strategy!     SWOT Analysis!     Strategi...
Began as one of the firstmajor companies to sell goods over the Internet                   Started as solely as           ...
RETAIL                       NON-RETAIL     Books, Music & Movies!                             !    Referrals/Commission! ...
!    IMBD                Helps Amazon to                          compete with!     Exchange.com        Google, Ebay,     ...
Sellers   Enterprises                               ContentConsumer                               Creators                ...
!     Customer Obsession: We start with the customer and work    backwards.!      Innovation: If you dont listen to your c...
Providing high value using technology to offer low costsolutions to the customer!   Common technology and channel is what ...
ConcentricDiversification  Creating value for customers by using their             technology expertise   The “Lowest cost...
!     The strategy performs well, and is appropriate for    the business!      There is a high potential for long term suc...
!    Economies of scale (high)!     Differentiation (high)!      Total Capital Requirements (high)!       Access to distri...
!    Specialized assets (medium)!     Fixed cost of exit (medium)!      Management commitment (medium)!       Contractual ...
!    Concentration (high)!     Growth rate (high)!      Fixed costs (high)!       Storage costs (high)!        Differentia...
!     Relative industry concentration!      Importance of what is sold to the quality and    success of final product (sup...
!    Brick and mortar retail stores (high)!     Catalogs (low)!      Rental services (high)
!    “Content creators”!     Shipping industry: FedEx, UPS!      Internet service industry!       Computer industry
AmazonSales revenue                                                    eBay                                      Target.co...
!    Economies of scale (global)!     Customer needs (global)!      Competition (global)!       Channels (global)!        ...
!    Technology      Expertise in technology      One-Click System!    Economies of Scale!     Talented workforce      ...
!    Extensive product offerings!     Extremely low prices      Shipping/deliveryadvantages      Manufacturing of Kindle...
!     Most sustainable competitive advantages    include:      Economy   of Scale      Expertise in Technology      Tal...
!    Difficult to differentiate products!     Copying the business model!      Can’t offer “instant gratification”
Competitive                                             Advantages                                                        ...
!    “Lowest possible prices”      “Amazon   prime” members      Customers can avoid state sales tax      Free shipping...
Consolidated Net Sales (millions)25,000                                        21,37220,000                         15,497...
North American Net Sales (millions)   25,000                                             21,372   20,000                  ...
International Net Sales (millions)25,000                                                     21,37220,000                 ...
!    New skills through acquisitions!     Strong IT system!      Extensive product lines at low prices!       Strong brand...
!    No product differentiation!     Low profit margins!      Lose Focus
!    Global expansion!     Online movies!      Expand the technology service market!       Growth in Cloud computing
!    Dependence on vendors!     Fierce competition!      Government
!    Find new areas of growth!     How to maintain long term profitability
Consistency   Consistency  Growth      with Amazons      with                 Strategy    MarketplaceConsistency          ...
1. Eliminate Kindle Fire2. Expansion to Scandinavia   3. Expansion of AWS
Discontinue the the Kindle Fire, in favor ofthe Kindle and licensing media content to             existing devices.       ...
Cost perCost more to                 Highly          shareproduce for                                    High Cost        ...
Would                  Amazon                                       Want to  Engage        High       would               ...
Inconsistent with                          Consistent with the      Consistent withStrategy because we                    ...
Expand E-Commerce Globally into the       Scandinavian Market
Modern ICT                                Sophisticated                   and ITHigh Use of                     Infrastruc...
!    Complex Road System        Bridges to connect         Denmark and Sweden!     Port of Copenhagen in    the Baltic Se...
ExperiencedNot as High                    Online              4 DifferentGrowth as                    Shoppers            ...
!     Result in 5-20%    Adverse Change                         $50          $220                        Million       Mil...
Consistent with        Consistent with      Consistent with Strategy because       the Market Place         Resourcesit fa...
Expanding Amazon Web Services (AWS)   to Meet the Needs of Developers
OffersBusinesses low                   Offers Broad                 Pay As You Go fixed capital                   Function...
Short-Term                           Long-TermProfitability is Low                       Profitability is Highbecause of L...
Expanding                                   Large   Our      Market   Available                                 IndustryCu...
Large            Short Life   InvestmentUntested             Span of       in Fixed Market           Technology       Capi...
Consistent with         Consistent with   Consistent with                          Marketplace because       Resources bec...
Discontinue the            Global Expansion             Expansion of AWS                                   Kindle Fire    ...
Expanding Amazon Web Services (AWS)   to Meet the Needs of Developers
Moving from Simply         Moving from Infrastructure to     Infrastructure as a Offering Platform    Service to Platform ...
Offering aFree Package                Promoting to meet the                 Freeware vs               AWS through   needs ...
Expanding Data  Centers Globally to   Necessary to Keep UpIncrease Data Storage      with Increasing   and Throughput     ...
• Develop and Implement a Platform (PaaS) for Developers    • Create basic version of AWS and offer as Freeware1    • Refi...
DEPARTMENTS    Year 1   Year 2   Year 3   Total (Million of $)R&D            $30      $20      $20      $70Marketing      ...
!     Strong competition in PaaS offering from    Microsoft Azure!      Losing paying customers with basic needs to    the...
!     Liquidating un-needed data centers to an IT    competitor (Azure)!      Modifying the Freeware offering of AWS to   ...
questions?
Budget for Alternative 2- Expansion into ScandinaviaDEPARTMENTS               Year 1            Year 2            Year 3  ...
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
Amazon.com Strategic Analysis
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Amazon.com Strategic Analysis

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A strategic analysis of Amazon.com with recommendations for future endeavors and possible expansion.

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  • In reference to direct competitors – online retailers, E-bay, Overstock.com, etc.Amazon has achieved its competitive advantage through developing its technology internally and with a significant investment in this which may not be available to other organisations without the right focus on the online channels.As Amazon explains in SEC (2005) ‘using primarily our own proprietary technologies, as well as technology licensed from third parties, we have implemented numerous features and functionality that simplify and improve the customer shopping experience, enable third parties to sell on our platform, and facilitate our fulfillment and customer service operations.
  • In reference to direct competitors – online retailers, E-bay, Overstock.com, etc.
  • Maintaining higher profits than competitors over long periods of time- Difficult for competitors to enter at a large enough scale to be cost competitive and it will take them a lot of time to move down the “Learning Curve”“Many of the problems we face have no textbook solutions, and so we — happily — invent new approaches”… All the effort we put into technology might not matter that much if we kept technology off to the side in some sort of R&D department, but we don’t take that approach. Technology infuses all of our teams, all of our processes, our decision-making, and our approach to innovation in each of our businesses. It is deeply integrated into everything we do”.The quote shows how applying new technologies is used to give Amazon a competitive edge
  • Easier to copy tangible assets – can’t really differentiate products being sold
  • In reference to direct competitors – online retailers, E-bay, Overstock.com, etc.
  • Industry-wide cost-leader – lowest price offerings and kindle lowest cost e-readerMain focus is on giving their customers VALUE no matter what they do.Consumers look to amazon.com for lower costs over bricks-and-mortar retailers as well as other online retailers.
  • Amazon endeavours to offer its customers “the low- est possible prices” 190, as they consider low prices as a strategic factor for future success.191 Amazon’s pricing strategy also includes free shipping offers, and since 2005, members of the “Amazon Prime” program can benefit from free two-day shipping and discounted overnight shipping.The app allows consumers to scan bar codes in local stores and compare prices directly with Amazon. Many have argued that the app gives the online giant an unfair advantage over its smaller competitors.Unlike brick-and-mortar shops, online retailers don’t pay sales tax unless they have a physical presence in a state, and they don’t have to staff an actual store either. The lower overhead allows them to undercut the competition.
  • “Creating value for the consumers”Net SalesNet sales include product and services sales. Product sales represent revenue from the sale of products andrelated shipping fees and digital content where we are the seller of record. Services sales represent third-partyseller fees earned (including commissions) and related shipping fees, digital content subscriptions, and non-retailactivities. Net sales information is as follows:Year Ended December 31,2011 2010 2009(in millions)Net Sales:North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,705 $18,707 $12,828International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,372 15,497 11,681Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,077 $34,204 $24,509Year-over-year Percentage Growth:North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43% 46% 25%International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 33 31Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 40 28Year-over-year Percentage Growth, excluding effect of exchange rates:North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43% 46% 26%International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 34 33Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 40 29Net Sales Mix:North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56% 55% 52%International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 45 48Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% 100%North American sales growth rate was 43%, 46%, and 25% in 2011, 2010, and 2009International sales growth rate was 38%, 33%, and 31% in 2011, 2010, and 2009Sales growth in each year primarily reflects unit sales.Increased unit sales were driven largely by our continued efforts to reduce prices for our customers, including from our shipping offers, by a larger base of sales in faster growing categories such as electronics and other general merchandise, by increased in-stock inventory availability, and by increased selection of product offerings.
  • New skills through acquisitions– Strong IT system – We’ve been around for a long time and one of the first to operate the systemExtensive product lines at low prices – Amazon outsourced their activities to minimize costs, such as the datacenters in different countries that handle customer serviceStrong brand image -
  • No product differentiationLow profit margins – they are in the retailing business. With a wide variety of products at low prices, they must sell a lot to make a profitLose Focus – they have such a wide variety of products that they may lose focus of their core competencies
  • Global expansion – Go international in new areas. Already in some international markets such as Canada, China, Germany, UKOnline movies - Expand the technology service market – they have a strong IT system, so they can do more technology-wise to expand their businessGrowth in Cloud computing -
  • Dependence on vendors – Amazon’s main source of business are the companies and retailers that are acquired or merged with Amazon. These vendors are all on short term contracts that can negatively affect Amazon if they decide to leave usCompetition - There is a lot of competition online and in retail storesGovernment – the government is afraid is afraid that Amazon will become a monopolist in the United States. Legal issues in China due to government regulations. The government controls everything in China, so Amazon can face potential dangers from their authority.
  • Since we are becoming bigger and bigger, our e-market is becoming saturated. We need to find new areas of growth to help us maintain long term profitability.
  • providing a technology platform with broad functionality and global scal
  • lt
  • providing a technology platform with broad functionality and global scal
  • Spends 1.8B in AWS – spend another 2B
  • Amazon.com Strategic Analysis

    1. 1. !   Corporate Strategy!   E-Retailing Industry Analysis!   Business Level Strategy!   SWOT Analysis!   Strategic Alternatives!   Action Plan
    2. 2. Began as one of the firstmajor companies to sell goods over the Internet Started as solely as an Online Bookstore Due to success diversified into many other product lines and services Multinational e- commerce company Worlds Largest online Retailer
    3. 3. RETAIL NON-RETAIL  Books, Music & Movies! !  Referrals/Commission!  Consumer Electronics!  Computer & Office based selling!  Tools & Automotive !  Amazon Web Services (AWS)  Food & Household  Fulfillment by Amazon! !!  Home Improvement!  Toys & Video Games (Services to businesses)!  Sports & Fitness!  Clothing and Jewelry!  Kids and Baby!  Kindle
    4. 4. !  IMBD Helps Amazon to compete with!  Exchange.com Google, Ebay, Apple!  Bibliofind.com Absorb!  Musicfile.com Technologies and employees into!  Planetall.com Amazon’s IT operations!  Junglee.com Improve retail software services
    5. 5. Sellers Enterprises ContentConsumer Creators Amazon
    6. 6. !  Customer Obsession: We start with the customer and work backwards.!  Innovation: If you dont listen to your customers you will fail. But if you only listen to your customers you will also fail.!  Bias for Action: We live in a time of unheralded revolution and insurmountable opportunity--provided we make every minute count.!  Bezos’ Goal is to be a Cost- Leader!  Committed to leveraging Amazon’s core competencies in whatever ways they can find to realize the value of the company’s assets Mission statement: “Earth’s most customer centric company”
    7. 7. Providing high value using technology to offer low costsolutions to the customer!  Common technology and channel is what makes the businesses fit !  Amazon can use its core competencies to full effect in all areas of business
    8. 8. ConcentricDiversification Creating value for customers by using their technology expertise The “Lowest cost customer centric online marketplace”
    9. 9. !  The strategy performs well, and is appropriate for the business!  There is a high potential for long term success
    10. 10. !  Economies of scale (high)!  Differentiation (high)!  Total Capital Requirements (high)!  Access to distribution (high)!  Government policy (medium)Barriers to entry = high
    11. 11. !  Specialized assets (medium)!  Fixed cost of exit (medium)!  Management commitment (medium)!  Contractual commitment (low) Barriers to exit = medium
    12. 12. !  Concentration (high)!  Growth rate (high)!  Fixed costs (high)!  Storage costs (high)!  Differentiation (high)!  Switching costs (low)!  Capacity additions (medium)!  Diverse competitors (medium)!  Exit barriers (medium)High Rivalry
    13. 13. !  Relative industry concentration!  Importance of what is sold to the quality and success of final product (supplier)!  Switching costs (buyer)!  Threat of vertical integration (supplier)!  Product differentiation (buyer)!  Availability of substitutes (buyer)High buyer power
    14. 14. !  Brick and mortar retail stores (high)!  Catalogs (low)!  Rental services (high)
    15. 15. !  “Content creators”!  Shipping industry: FedEx, UPS!  Internet service industry!  Computer industry
    16. 16. AmazonSales revenue eBay Target.com Walmart.com Overstock .com B&N.com Range of products offered
    17. 17. !  Economies of scale (global)!  Customer needs (global)!  Competition (global)!  Channels (global)!  Transportation costs (global)!  Product standards (global)Industry globalization = high
    18. 18. !  Technology   Expertise in technology   One-Click System!  Economies of Scale!  Talented workforce   Company Culture!  Marketing   Brand name and reputation
    19. 19. !  Extensive product offerings!  Extremely low prices   Shipping/deliveryadvantages   Manufacturing of Kindle as lowest-price e-reader
    20. 20. !  Most sustainable competitive advantages include:   Economy of Scale   Expertise in Technology   Talented workforce and culture of company
    21. 21. !  Difficult to differentiate products!  Copying the business model!  Can’t offer “instant gratification”
    22. 22. Competitive Advantages Be Better Than Avoid Competitors CompetitionAttractive Industry Attractive S.G. Attractive Niche Cost Differentiation Advantage Entry Barriers Isolating Mobility Barriers Mechanisms
    23. 23. !  “Lowest possible prices”   “Amazon prime” members   Customers can avoid state sales tax   Free shipping offers   Small companies and individual sellers   Selling Kindle at a deficit   Amazon’s Price Check App
    24. 24. Consolidated Net Sales (millions)25,000 21,37220,000 15,49715,000 11,68110,000 5,000 0 2009 2010 2011 Overall net sales increased 41%, 40% and 28% in 2011, 2010, and 2009
    25. 25. North American Net Sales (millions) 25,000 21,372 20,000 15,497 15,000 11,681 10,000 5,000 0 2009 2010 2011North American sales growth rate was 43%, 46%, and 25% in 2011, 2010, and 2009
    26. 26. International Net Sales (millions)25,000 21,37220,000 15,49715,000 11,68110,000 5,000 0 2009 2010 2011 International sales growth rate was 38%, 33%, and 31% in 2011, 2010, and 2009
    27. 27. !  New skills through acquisitions!  Strong IT system!  Extensive product lines at low prices!  Strong brand image
    28. 28. !  No product differentiation!  Low profit margins!  Lose Focus
    29. 29. !  Global expansion!  Online movies!  Expand the technology service market!  Growth in Cloud computing
    30. 30. !  Dependence on vendors!  Fierce competition!  Government
    31. 31. !  Find new areas of growth!  How to maintain long term profitability
    32. 32. Consistency Consistency Growth with Amazons with Strategy MarketplaceConsistency Short and Competitive with Long Term Advantages Resources Profitability
    33. 33. 1. Eliminate Kindle Fire2. Expansion to Scandinavia 3. Expansion of AWS
    34. 34. Discontinue the the Kindle Fire, in favor ofthe Kindle and licensing media content to existing devices. VS Kindle Fire Kindle
    35. 35. Cost perCost more to Highly shareproduce for High Cost competitive decreased what it is Short Term Market since launch sold for of Kindle Fire
    36. 36. Would Amazon Want to Engage High would enter theConsumers expected make a lot tabletinto Online returns of money market Retailing on Media
    37. 37. Inconsistent with Consistent with the Consistent withStrategy because we marketplace since resources since new are favoring Short- we are subsidizing technologies areterm Profitability over our own product needed Long-term
    38. 38. Expand E-Commerce Globally into the Scandinavian Market
    39. 39. Modern ICT Sophisticated and ITHigh Use of Infrastructure infrastructures High Income Internet for Importing to support and Exporting services
    40. 40. !  Complex Road System   Bridges to connect Denmark and Sweden!  Port of Copenhagen in the Baltic Sea   24 hour ship handling   Short turnaround times and some of the lowest storage times in Europe
    41. 41. ExperiencedNot as High Online 4 DifferentGrowth as Shoppers Exchange the BRIC can find Rates Nations other Alternatives
    42. 42. !  Result in 5-20% Adverse Change $50 $220 Million Million for 5% for 20% $110 Million for 10%
    43. 43. Consistent with Consistent with Consistent with Strategy because the Market Place Resourcesit favors long term because there is because we have profitability over growth in Global E- the Capital to short term Commerce expand Abroad
    44. 44. Expanding Amazon Web Services (AWS) to Meet the Needs of Developers
    45. 45. OffersBusinesses low Offers Broad Pay As You Go fixed capital Functionality Reliable Data Model Based expenses in and Global Management on need exchange for Scale variable cost
    46. 46. Short-Term Long-TermProfitability is Low Profitability is Highbecause of Large because it is a high Capital growth market Investments
    47. 47. Expanding Large Our Market Available IndustryCustomer Leader Capital Growth Base
    48. 48. Large Short Life InvestmentUntested Span of in Fixed Market Technology Capital Assets
    49. 49. Consistent with Consistent with Consistent with Marketplace because Resources becauseStrategy because we it’s a Proven Area of We are Expanding on are favoring Long- Future Growth Where Existing DataTerm Profitability over we are Already a Centers, and Short-Term Market Leader Investing Free Capital
    50. 50. Discontinue the Global Expansion Expansion of AWS Kindle Fire into Scandinavia Short-term 4 (.1) = .4 2 (.1) = .2 2 (.1) = .2 Profitability (.1) Long-term 0 (.3) = 0 4 (.3) = 1.2 5 (.3) = 1.5 Profitability (.3) Growth (.2) 0 (.2) = 0 5 (.2) = 1 5 (.2) = 1 Consistency with 3 (.2) = .6 4 (.2) = .8 4 (.2) = .8 Marketplace (.2) Consistency with 2 (.2) = .4 5 (.2) = 1 5 (.2) = 1 Strategy (.2) Totals* 1.2 4.2 4.5*criteria weighted out of 1, alternatives scored from 1-5, for a possible score of up to 5 points total, 0 = no value,5 = most value
    51. 51. Expanding Amazon Web Services (AWS) to Meet the Needs of Developers
    52. 52. Moving from Simply Moving from Infrastructure to Infrastructure as a Offering Platform Service to Platform as Services a Service (IaaSPaaS)
    53. 53. Offering aFree Package Promoting to meet the Freeware vs AWS through needs of Trial-ware Freeware Basic Developers
    54. 54. Expanding Data Centers Globally to Necessary to Keep UpIncrease Data Storage with Increasing and Throughput Demand
    55. 55. • Develop and Implement a Platform (PaaS) for Developers • Create basic version of AWS and offer as Freeware1 • Refine Platform offering based on user feedback • Based on Demand, invest in fixed capital asset IT infrastructure2 • Re-evaluate the current strategy • If strategy proves successful, allow for additional investment in3 IT infrastructure
    56. 56. DEPARTMENTS Year 1 Year 2 Year 3 Total (Million of $)R&D $30 $20 $20 $70Marketing $15 $10 $5 $30Data Centers $0 $100 $100 $200Total $45 $130 $125 $300
    57. 57. !  Strong competition in PaaS offering from Microsoft Azure!  Losing paying customers with basic needs to the free package of AWS!  Risk of losing large investments in Fixed Capital Assets should demand not be as expected
    58. 58. !  Liquidating un-needed data centers to an IT competitor (Azure)!  Modifying the Freeware offering of AWS to Trialware
    59. 59. questions?
    60. 60. Budget for Alternative 2- Expansion into ScandinaviaDEPARTMENTS Year 1 Year 2 Year 3 Total (Million of $)Acquire CDON $150 $0 $0 $150Marketing $35 $25 $15 $75R&D $50 $45 $30 $125Total* $235 $65 $45 $350*Cost  of  to  Acquire  CDON:  856  Billion  Swedish  Kronor  =  150  Million  US  Dollars
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