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