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Amazon Business Model canvas

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  1. 1. Business Model Canvas
  2. 2. Strategy Strategy followed by Jeff Bezos to build the Amazon empire: • Be like the Godfather: Make them an offer they can’t refuse • Don’t give up information unless absolutely necessary • Keep teams small enough that members can be fed with two pizzas • Stop talking so much • Get adversarial Overall, Amazon follows a Dominant Strategy. Jeff Bezos’ critical insight when he founded Amazon was that the Internet allowed a retailer to have both (effectively) infinite selection AND lower prices. In other words, Amazon was founded on the premise of theirs being a dominant strategy: better selection AND better prices.
  3. 3. Leadership Strategy Amazon’s strategy is low cost leadership which is clearly reflected in this statement made by its CEO, Jeff Bezos: “There are two kinds of companies: Those that work to try to charge more and those that work to charge less. We will be the second.”
  4. 4. A napkin sketch by Jeff Bezos Note: No arrows pointing outwards labeled ‘take profits’; it’s a closed loop
  5. 5. Service Delivery Framework Amazon tries to close the service gaps in order to effectively meet consumer expectations. For that its service delivery framework comprises the following:- • Understanding customer needs • Customer defined standards • Service performance
  6. 6. Product Delivery Strategies Amazon has kept pushing the envelope with respect to delivery time and methods. Following are some illustrations: • One/two day delivery deals • Own logistics • Amazon Fresh, grocery delivery system • one-hour delivery • Online travel business • Prime Air • Automated warehouses and fulfillment centres
  7. 7. Logistics Partner Affiliates Authors and Publishers Merchandising Production and Design Low Cost structure Economies of Scale Individual Leverage Group Leverage Affiliates Application interfaces Physical warehouses Human : Web application & development Self service Automated Service Convenience Price E books and content Sale of Assets Acquisitions and Investment Prime monthly subscriptions fees Commission on reseller sales Network of sellers IT and fulfillment infrastructure Instant fulfillment with eReader Vast selection Global consumer market Amazon’s Business Model Canvas
  8. 8. IS and KM and Amazon IS in Amazon • Broadly Amazon uses 2 main systems: • AWS-Amazon web service • S3-Simple storage service • MIS is used for CRM. TPS is based on creating convenience for users. Each customer has to create an account in Advantages provided/ Features- • Shopping basket • Shopping cart • Wish List • One click • Online payment Systems • Recommender Systems
  9. 9. IS and KM and Amazon • Recommendation for Amazon • Improvement in web based IS to make it more user friendly which will be more revenue generating for the company. Customer KM in Amazon • Amazon operates on a  KM technology platform that allows customers to search using discreet ‘data’. This prompts the system to return contextual ‘information’ which provides value to the user in the form of knowledge. • Amazon has not only found ways to use KM practices to provide value to customers, but also to intrinsically motivate customers to share knowledge.
  10. 10. Five Forces Analysis Supplier Power Buyer Power Competitive Rivalry Threats of Substitutio n Threat of new entry
  11. 11. SWOT Analysis
  12. 12. Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Ops. Outbound Logistics Sales & Marketing Service and Support PRIMARY ACTIVITIES SUPPORT ACTIVITIES Custom erValue Custom erValue M argin Value Chain Analysis Maintenance and packaging of goods; assembling and customization of items Receiving products from partners, routing the items to a put-away location, picking up products from prime locations for order fulfillment, replenishing the products; Quality control Fulfillment of orders; order handling, dispatch, delivery, invoicing Customer tracking and management, order taking, promotions, market research, sales analysis Warranty, upgrades, maintenance, order tracking facilities, training Legal, accounting, financial management One click ordering, personalized recommendations, Warehouse Management Systems purchasing raw materials, and other items used in operations Recruitment, training, firing and compensating personnel
  13. 13. Product Existing New Market Ansoff Matrix Market Penetration  Loyalty program  Pricing NewExisting Product Development  Kindle  Echo Market Development  Expand internationally  Affiliates program Diversification  Acquisition of businesses like IMDB, Zappos  Horizontal diversification  AWS
  14. 14. Financial Analysis •Amazon is involved in different businesses at different stages of maturity. Some are profitable, some not. •Third party sales of products through Amazon’s own platform are now 40% of unit sales. The fees charged to these vendors are now 20% of Amazon’s revenue. •For close to half of the units sold on, Amazon does not set the price, it just takes a margin. •Amazon’s OCF margin has been very roughly stable for a decade, but the FCF has fallen, due to radically increased capex.
  15. 15. Revenue and Net income of Amazon
  16. 16. Where is the money going?  More capacity for more products, including 3P products  Proximity - as Amazon builds warehouses closer to customers, the shipping time goes down and so does the shipping cost  AWS • Amazon will have to stop investing at the point where marginal returns from these investments start diminishing
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Amazon Business Model canvas


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