Problems in Management
March 12, 2003
Amazon.com: Expanding Beyond Books
1. Analyze the company's history, development, and growth.
çAmazon.com founded in 1994 in Seattle by Jeff Bezos
çVirtual store front on the internet -No physical store
çAs of now, 2 warehouses and 1600 employees
ç$30 million cumulative customers
ç1996 -$340,000 in the first half spend on advertising and marketing
çEnd of 1997, Amazon had found its millionth customer
çIn 1998 Amazon.com added music
çIn July 1998 profits at the 400% level
çIn 1998- $26.5 million on marketing -equivalent to 23% of sales.
çSales in 1998 were $587.6 million with operating margin of 10%
çIn February 1999, stock at the 1000% profit level
çMore than 3.1 million titles in 2000
çIn 2000, stock dropped 80%
çOn January 28, 2000, Amazon.com cut 150 employees
çServices unit contributed $225 million in revenue during 2001
2. Identify the company's internal strengths and weaknesses.
Strengths
çLeader in e-commerce
çStrong in-house internet technology
çExcellent offline customer service
çA huge database of loyal customers - base of over 12 million shoppers
çWide variety of products and services
çDistribution facilities to handle growth and fulfillment
çBuilding international presence in markets outside of the USA
çHas moved away from being a low price supplier of books toward a focus of delivering outstanding service and price.
çOne-click purchase patent
çLow inventory and overhead cost (inventory turnover 26 times)
çCurrent alliances with ToysRUs, Circuit City, Yahoo!
çWell established web brand
çLeader in use of technology to deliver targeted content
çLow price
çConsumer notification of shipping
çDatabase- five times bigger
Weaknesses
çHigh advertisement cost
çHigh delivery cost
çLow bargaining power on suppliers
çInternet only
çAmazon.com brand has been diluted by entering a wide number of product segments, increasing competition.
çNeed to restructure business to drive toward profitability has meant upward...