Exploring the value of digital business infrastructure
Case presented by:
Amani Anas A/Alla
ElRawda Hassan Dai
Iman M.Ahmed Ibrahim
Roweda Ahmed Abdel Rahman
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,
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.
History and background
• Jeff Bezos founded Amazon.com in July 1994;
• Launched the web store in July 1995 out of a 400 square foot
• 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.
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: Amazon’s 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)
Despite the numerous strengths that Amazon possessed, few
weaknesses have been identified, hence Amazon strengths
and weaknesses can be listed as follow:
- Wide range e-commerce operations.
- Impressive horizontal portal infrastructure.
- Flexible business model i.e. horizontal portal.
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
- Qualified management team.
- Well known e-commerce brand name.
- 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.
- Free shipping that negatively impacted its financial
-Uncertain time for Amazon’s overall profitability.
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
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;
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 customer’s expenditure, resulting in
competitive pressure within an industry and generating
opportunities to expand operations globally. This had
enhanced Amazon’s business opportunities and when the
$ declines it reduced threats from its overseas
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
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.
Medium to HIGH
Risk of entry by
Rivalry among existing
firms in the industry
Threats of substitutes
Extensive community of buyers;
Suppliers’ low bargaining power;
Growth of internet users, predominantly in the
E-commerce global expansion;
Several product categories with high penetration
of retail on-line sales.
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
Buyers’ low switching cost and high bargaining
Availability of substitutes;
Lack of internet access leads to not targeting some
population segments to on-line sales.
• 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
• Future opportunities: growth of internet users
(in overseas markets), the prospects of ecommerce global expansion, and the potentiality
of penetrating the online market through
• The maximum utilization of these opportunities
can be correlated to Amazon’s 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).
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.
Sustaining Amazon’s strengths in its
internal operating environment the
external future opportunities can be
easily grasped and utilized to its
• In addition, correcting what are
considered as weaknesses in internal
operating environment Amazon will be
well prepared for facing the external
Online book music and video retailing (1995);
Consumer online shopping portal (1998);
Online auction (1999);
Equity partnership with brand name online retailers
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.
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
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 company’s procurement, requirement
planning and stock control system.
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
Amazon.com adopted an aggressive growth
strategy as the earth’s biggest most consumer
centric online store. Therefore, Amazon
corporate level strategies are:
• market development
• product development
• organization restructure
• marketplace restructure
• positioning and differentiation
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.
• 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
• Re-visit its financial policies regarding free
• To slow down future expansion (e.g. set-up &
advertisement) to generate some profit.