Problems in Management
March 12, 2003
Amazon.com: Expanding Beyond Books
1. Analyze the company's history, development, and growth.
ÃÂ§Amazon.com founded in 1994 in Seattle by Jeff Bezos
ÃÂ§Virtual store front on the internet -No physical store
ÃÂ§As of now, 2 warehouses and 1600 employees
ÃÂ§$30 million cumulative customers
ÃÂ§1996 -$340,000 in the first half spend on advertising and marketing
ÃÂ§End of 1997, Amazon had found its millionth customer
ÃÂ§In 1998 Amazon.com added music
ÃÂ§In July 1998 profits at the 400% level
ÃÂ§In 1998- $26.5 million on marketing -equivalent to 23% of sales.
ÃÂ§Sales in 1998 were $587.6 million with operating margin of 10%
ÃÂ§In February 1999, stock at the 1000% profit level
ÃÂ§More than 3.1 million titles in 2000
ÃÂ§In 2000, stock dropped 80%
ÃÂ§On January 28, 2000, Amazon.com cut 150 employees
ÃÂ§Services unit contributed $225 million in revenue during 2001
2. Identify the company's internal strengths and weaknesses.
ÃÂ§Leader in e-commerce
ÃÂ§Strong in-house internet technology
ÃÂ§Excellent offline customer service
ÃÂ§A huge database of loyal customers - base of over 12 million shoppers
ÃÂ§Wide variety of products and services
ÃÂ§Distribution facilities to handle growth and fulfillment
ÃÂ§Building international presence in markets outside of the USA
ÃÂ§Has moved away from being a low price supplier of books toward a focus of delivering outstanding service and price.
ÃÂ§One-click purchase patent
ÃÂ§Low inventory and overhead cost (inventory turnover 26 times)
ÃÂ§Current alliances with ToysRUs, Circuit City, Yahoo!
ÃÂ§Well established web brand
ÃÂ§Leader in use of technology to deliver targeted content
ÃÂ§Consumer notification of shipping
ÃÂ§Database- five times bigger
ÃÂ§High advertisement cost
ÃÂ§High delivery cost
ÃÂ§Low bargaining power on suppliers
ÃÂ§Amazon.com brand has been diluted by entering a wide number of product segments, increasing competition.
ÃÂ§Need to restructure business to drive toward profitability has meant upward...