Case Study Rebecca Dustman | April 29, 2013 | BUS 550 The Contemporary Firm.

AMAZON.COM: MARCHING TOWARDS PROFITABILITY

Case Study

Rebecca Dustman | April 29, 2013 | BUS 550 The Contemporary Firm

CASE BACKGROUND

July 2001

Could Amazon become profitable? 1997 Annual Report - letter to shareholders

1999 2000

Customers 14 million 20 million

Sales $1.64 billion $2.76 billion

Net Profit / Loss $720 million $1.4 million

2012

180 million

$61 billion

$39 million

COMPANY BACKGROUND

1994 founded Web usage - 2300% growth per year 20 products Books

Jeff P. Bezos 32 years old President, Chief Executive Officer and Chairman of the Board

HQ Seattle, WA "Fluid Concepts & Creative Analogies: Computer

Models of the Fundamental Mechanisms of Thought"

ORGANIZATION - BUSINESS PROCESSES

2001 1-Click Shopping, Advantage Program, In-store pick

up, fulfillment centers Free Super Shipping

Over $100 - Nov 2000 Over $25 - Aug 2001

2012? 2012 Amazon Prime Bill Me Later Frustration-Free Packaging Free shopping for Android Local Express Delivery Fulfillment centers

MANAGEMENT DECISIONS - EXPANSION

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Music UK & Germany

DVD/Video

AuctionsConsumer Electronics

And Toys & GameszShops

KitchenFrance & Japan

Camera & PhotoToys “R” UsMarketplace

Borders & Target

CanadaOffice Products

Apparel & Accessories

NBASports & Outdoor

Gourmet FoodHealth &

Personal Care

JewelryBombay

Paris Hilton JewelryBeautyTheaterChina

Diane Von Furstenberg Wedding, Hollywood Rx

New Gift Exp

Timex Benefit CosmeticsGroceryUnbox

Endless.comGo Indie, MP3Askville.com

Kindle

Currency ConvTextBuyIt

Office SupplyTV Show

Motorcycle & ATV

Kindle 2Xbox LIVE

Outdoor RecBasics

WheelsAmazon Studios

Italy

Sports Collectibles

SilkAmazonLocalMyHabit.com

Spain

AmazonSupply

Game CollectGameCircle

Textbook Rental

WineBrazil

Enter. Collectibles

MANAGEMENT DECISIONS – EQUITY INVESTMENTS AND ACQUISITIONS

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Internet Movie Database

Alexa InternetTool Crib

Joyo.com Limited

BookSurge LLCCustomFlix Labs,

Inc.

Shopbop.com

AudibleFabric.comAbeBooks

Zappos.com.

BuyVIP.com

LOVEFILM International LtdMarshall Cavendish US Children’s Book Titles

$175M investment LivingSocial

Kiva Systems, Inc.Avalon Books

IVONA Software

Note: only shows US acquisitions

TECHNOLOGY THEN…

TECHNOLOGY NOW…

TECHNOLOGY NOW… Amazon Services, Inc & Subsidiary Search Inside The Book A9.com, Inc Subsidary Presidential Candidates Feature A9.com new website and A9 Toolbar Alexa Internet data A9 toolbar for Mozilla Firefox A9.com Yellow Pages Election 2008 CloudFront Daily Text Alerts Holiday Toy List AmazonWireless Kindle for iPhone, iPod Touch, PC,

Blackberry, Mac, iPad, Android, Web Amazon WebStore Shopping on iPad Price Check Amazon Deal App AWS CloudFormation Prime – videos, Original Series

A9 Cloud Kindle Prime

BUSINESS IT SOLUTIONS

1997 – it’s always Day 1 2001 – collaborative filtering 2012:

Invention is in our DNA Technology is the fundamental tool

AMZN

PROFITABILITY

Music UK & Germany

DVD/Video

AuctionsConsumer Electronics

And Toys & GameszShops

KitchenFrance & Japan

Camera & PhotoToys “R” UsMarketplace

Borders & Target

CanadaOffice Products

Apparel & Accessories

NBASports & Outdoor

Gourmet FoodHealth &

Personal Care

JewelryBombay

Paris Hilton JewelryBeautyTheaterChina

Diane Von Furstenberg Wedding, Hollywood Rx

New Gift Exp

Timex Benefit CosmeticsGroceryUnbox

Endless.comGo Indie, MP3Askville.com

Kindle

Kindle 2Xbox LIVE

Outdoor RecBasics

WheelsAmazon Studios

Italy

Sports Collectibles

SilkAmazonLocalMyHabit.com

Spain

AmazonSupply

Game CollectGameCircle

Textbook Rental

WineBrazil

Enter. Collectibles

Currency ConvTextBuyIt

Office SupplyTV Show

Motorcycle & ATV

Alexa InternetTool Crib

BookSurge LLCCustomFlix Labs,

Inc. Zappos.com.

LOVEFILM International LtdMarshall Cavendish US Children’s Book Titles

$175M investment LivingSocial

IVONA Software

Internet Movie DatabaseJoyo.com Limited

Shopbop.com

AudibleFabric.comAbeBooks

BuyVIP.com

Kiva Systems, Inc.Avalon Books

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

$(2,000)

$(1,500)

$(1,000)

$(500)

$-

$500

$1,000

$1,500

In millions

MARCHING TOWARD PROFITABILITY…AGAIN

2012 risks identified Competition Expansion strain Fluctuation in operating results and growth rate Optimization of fulfillment centers Seasonality, inventory

Remain customer driven focus Prime, AWS, Kindle, digital medial,

customer experience

MULTIPLE CHOICE QUESTIONS

MULTIPLE CHOICE #1

Why did Jeff Bezos from Amazon.com choose books to sell online? A. There were too many online CD sellers B. There are far more items in the book

category than any of the other categories C. He always wanted to be a writer D. He owned 450 books

MULTIPLE CHOICE #2

Why is the 1997 shareholders letter included in every annual report? A. Reminder of the worst year they had B. The best technology year for Amazon C. Reminder it’s day 1 every day D. The most Amazon stores launch that

year

MULTIPLE CHOICE #3

What is amazon’s focus? A. Customers B. Profitability C. Largest inventory D. Increase stock