Amazon.Com: An E-Commerce Retailer

Amazon.com: An E-Commerce Retailer

A case report prepared for

MG 495 Business Policy

Fall 1 2012

August 25, 2012

AMAZON.COM: AN E-COMMERCE RETAILER

1. INTRODUCTION

A. EXECUTIVE SUMMARY

1. Summary statement of the problem: Amazon.com is a company that was founded by Jeff Bezos several years ago. A very educated and determined man with a vision and idea of what he wanted his company to be. In the second quarter of 2003 he realized that he would have to address some of his concerns about Amazon.com. The first being that the Internet Tax Moratorium law was going to be up for renewal, with no assurance of it being extended. Another issue at hand was that eBay and Yahoo! were starting to expand into Amazon.com's markets.

2. Summary statement of the recommended solution: The issues facing Amazon.com are issues that are real and need to be addressed as quickly as possible. With the financial situation of the individual state budgets, taxation on e-commerce was a huge target for recurring revenue streams. With eBay and Yahoo! Expanding into Amazon.com's markets, they needed to formulate new strategies that would help them remain competitive, such as offering online auctions, and a B2B (business to business) exchange. Both of these would offer Amazon.com a way to remain competitive and increase sales.

B. THE SITUATION

Amazon.com became a worldwide retailer in the early 1990s by Jeff Bezos. After resigning form his job Bezos's first concern was to find a location that would best suit his online business. He needed to make sure that the location he chose had to have the necessary programming talent to develop the software, closeness to a major book wholesaler, and a state with little or no sales tax(Collins, P., Mockler, R, & Gartenfeld, M, 2003, p.2). Bezos left with better option decided to settle on Seattle, Washington to start his business. At this time the internet was becoming more accessible to everyone, to be exact in 1995 sales through the web site had begun to take off. One theme had always remained a contestant for Amazon.com: to get big fast, at all costs (Collins, P., Mockler, R, & Gartenfeld, 2003, p 1). With its low overhead the more sales that made the bigger the increase in profit margin on the items it sold Amazon.com was able to "generate a large amount of working capital by learning that they could float vendor payments from 30 to 40 days" (Collins, P., Mockler, R, & Gartenfeld, M, 2003, p.3).

Amazon.com's had to formulate a corporate strategy creating and enhancing its exclusive business software, or purchasing a commercially developed software for other applications, where the customer was allowed to receive one or more shipments status and track the progress of a single order(Collins, Mockler, & Gartenfeld, 2003, p. 10). In the same token, the SSL technology transmitted over the internet in a secure way helped elevate the skepticism in customers when using their credit and information online.

II. ANALYSIS

A. Analysis of the situation

1. Management - Bezos vision was to be the best in the industry he made sure that amazon.com's management strategies were flexible, focusing on increasing market share, presenting higher customer service and producing a profit. Bezos focused on making his online market available to all no matter the location in the world. In developing this new

strategy, Bezos first had to determine what products to offer for sale and the best way to incorporate them into Amazon.com's sales model. Rather than investing and running web sites in addition to its own, as it had done in the past, Amazon.com decided to form partnerships with other retail companies to cross sell their products on either Amazon.com's own web sites or on the partners' web sites". (Collins, Mockler, & Gartenfeld, 2003, p. 14). Bezos philosophy was to offer everything to everyone became successful with such strategy, earned Amazon a percentage of sales and management fees as well. This management strategy is competitive with the current market and economy. Products such as books, music and movies are the "stars" of Amazon.com according to BCGG Share Matrix, as they are the most selling products compared to the rest of the products sold by or through Amazon.

2. Operations - Amazon.com business was solely on-line so it was able to reduce its overhead, by doing so the business was passing the savings to customers through offering low prices. In other to gain customer's confidence both its employees and external product

experts were allowed to post product reviews online, giving customers the leverage to make informed buying decisions, in this same token customers were also allowed to include their reviews. Through its affiliates like UPS and Fedex, the company was able to offer shipping and guarantee these goods for their customer. To actually give its customer's peace of mind Amazon.com also posted links to shipping companies, so its customers could easily track their orders. Through the zShop program called the A-to-Z Guarantee, customers were could make returns if needed, even when it was through one of its affiliates ( p. 6). By charging monthly management fees and commissions on completed purchases, Amazon.com developed a steady revenue stream without incurring much expense ( p. 6).

3. Marketing - Amazon.com had to set a competitive edge, this was reflected in the statement that "In order to be the most complete retailer possible, Amazon.com realized that it needed to expand beyond offering its own products for sale. The best way to accomplish this was to use the Amazon.com selling platform as a basis to offer additional goods and services for sale". (Collins, Mockler, & Gartenfeld, 2003, p. 5). As stated earlier the company then partnered with retailers and invested in other online retailers, offered the zShops program to both small and medium-sized businesses as an e-commerce platform. In early 1999, Amazon.com decided to invest in other online companies that could profit from selling their products thru the website. This program allowed both Amazon.com and its partners to profit by requesting a months fee, merchants could advertise several products while reaching a wide range of customers online.

4. Finance - Amazon.com was a fast growing