!

Corporate Strategy
! E-Retailing Industry Analysis

! Business Level Strategy

! SWOT Analysis

! Strategic Alternatives

! Action Plan
Began as one of the first
major companies to sell
goods over the Internet

Started as solely as
an Online Bookstore

Due to success diversified

into many other product
lines and services

Multinational e-
commerce
company

Worlds Largest
online Retailer
RETAIL NON-RETAIL

Books, Music & Movies

!
! Referrals/Commission
! Consumer Electronics
! Computer & Office
based selling
! Tools & Automotive ! Amazon Web Services (AWS)
Food & Household
Fulfillment by Amazon
!
!
! Home Improvement
! Toys & Video Games
(Services to businesses)
! Sports & Fitness
! Clothing and Jewelry
! Kids and Baby
! Kindle
! IMBD Helps Amazon to
compete with
! Exchange.com Google, Ebay,
Apple
! Bibliofind.com
Absorb
! Musicfile.com Technologies and
employees into
! Planetall.com Amazons IT
operations
! Junglee.com Improve retail
software
services
 Sellers Enterprises

Content
Consumer
Creators
Amazon
! Customer Obsession: We start with the customer and work
backwards.
! Innovation: If you don't listen to your customers you will fail.
But if you only listen to your customers you will also fail.
! Bias for Action: We live in a time of unheralded revolution and
insurmountable opportunity--provided we make every minute
count.
! Bezos Goal is to be a Cost- Leader
! Committed to leveraging Amazons core competencies in
whatever ways they can find to realize the value of the
companys assets

Mission statement: Earths most customer centric

company
Providing high value using technology to offer low cost
solutions to the customer
! Common technology and channel is what makes the
businesses fit
! Amazon can use its core competencies to full effect in
all areas of business
 Concentric
Diversification

Creating value for customers by using their

technology expertise

The Lowest cost customer centric online

marketplace
! The strategy performs well, and is appropriate for
the business
! There is a high potential for long term success
! Economies of scale (high)
! Differentiation (high)

! Total Capital Requirements (high)

! Access to distribution (high)

! Government policy (medium)

Barriers to entry = high

! Specialized assets (medium)
! Fixed cost of exit (medium)

! Management commitment (medium)

! Contractual commitment (low)

Barriers to exit = medium

! Concentration (high)
! Growth rate (high)
! Fixed costs (high)
! Storage costs (high)
! Differentiation (high)
! Switching costs (low)
! Capacity additions (medium)
! Diverse competitors (medium)
! Exit barriers (medium)

High Rivalry
! Relative industry concentration
! Importance of what is sold to the quality and
success of final product (supplier)
! Switching costs (buyer)
! Threat of vertical integration (supplier)
! Product differentiation (buyer)
! Availability of substitutes (buyer)

High buyer power

! Brick and mortar retail stores (high)
! Catalogs (low)

! Rental services (high)

! Content creators
! Shipping industry: FedEx, UPS

! Internet service industry

! Computer industry
 Amazon
Sales revenue

eBay
Target.com
Walmart.com
Overstock
.com

B&N.com

Range of products offered

! Economies of scale (global)
! Customer needs (global)
! Competition (global)
! Channels (global)
! Transportation costs (global)
! Product standards (global)

Industry globalization = high

! Technology
Expertise in technology
One-Click System

! Economies of Scale
! T alented workforce
Company Culture
! Marketing
Brand name and reputation
! Extensiveproduct offerings
! xtremely low prices
E
Shipping/deliveryadvantages
Manufacturing of Kindle as lowest-price e-reader
! Most sustainable competitive advantages
include:
Economy of Scale
Expertise in Technology

Talented workforce and culture of company

! Difficult to differentiate products
! Copying the business model

! Cant offer instant gratification

 Competitive
Advantages

Be Better Than
Avoid Competitors Competition

Attractive Industry Attractive S.G. Attractive Niche

Cost
Differentiation
Advantage

Entry Barriers Isolating

Mobility Barriers
Mechanisms
! Lowest possible prices
Amazon prime members
Customers can avoid state sales tax

Free shipping offers

Small companies and individual sellers

Selling Kindle at a deficit

Amazons Price Check App

 Consolidated Net Sales (millions)
25,000

21,372

20,000

15,497
15,000

11,681

10,000

5,000

2009 2010 2011

Overall net sales increased 41%, 40% and 28% in

2011, 2010, and 2009
 North American Net Sales (millions)
25,000

21,372

20,000

15,497
15,000

11,681

10,000

5,000

2009 2010 2011

North American sales growth rate was 43%, 46%, and 25% in
2011, 2010, and 2009
 International Net Sales (millions)
25,000

21,372

20,000

15,497
15,000

11,681

10,000

5,000

2009 2010 2011

International sales growth rate was 38%, 33%, and 31% in

2011, 2010, and 2009
! New skills through acquisitions
! Strong IT system

! Extensive product lines at low prices

! Strong brand image

! No product differentiation
! Low profit margins

! Lose Focus
! Global expansion
! Online movies

! Expand the technology service market

! Growth in Cloud computing

! Dependence on vendors
! Fierce competition

! Government
! Findnew areas of growth
! ow to maintain long term profitability
H
 Consistency Consistency
Growth with Amazons with
Strategy Marketplace

Consistency Short and

Competitive
with Long Term
Advantages
Resources Profitability
 1. Eliminate Kindle Fire

2. Expansion to Scandinavia

3. Expansion of AWS
Discontinue the the Kindle Fire, in favor of
the Kindle and licensing media content to
existing devices.

VS

Kindle Fire Kindle

 Cost per
Cost more to
Highly share
produce for High Cost
competitive decreased
what it is Short Term
Market since launch
sold for
of Kindle Fire
 Would Amazon
Want to
Engage High would
enter the
Consumers expected make a lot
tablet
into Online returns of money
market
Retailing on Media
 Inconsistent with
Consistent with the Consistent with
Strategy because we
marketplace since resources since new
are favoring Short-
we are subsidizing technologies are
term Profitability over
our own product needed
Long-term
Expand E-Commerce Globally into the
Scandinavian Market
 Modern ICT
Sophisticated
and IT
High Use of Infrastructure
infrastructures High Income
Internet for Importing
to support
and Exporting
services
! Complex Road System
Bridges to connect
Denmark and Sweden
! Portof Copenhagen in
the Baltic Sea
24 hour ship handling
Short turnaround times
and some of the lowest
storage times in Europe
 Experienced
Not as High Online
4 Different
Growth as Shoppers
Exchange
the BRIC can find
Rates
Nations other
Alternatives
! Resultin 5-20%
Adverse Change
$50 $220
Million Million
for 5% for 20%

$110
Million for
10%
 Consistent with Consistent with Consistent with
Strategy because the Market Place Resources
it favors long term because there is because we have
profitability over growth in Global E- the Capital to
short term Commerce expand Abroad
Expanding Amazon Web Services (AWS)
to Meet the Needs of Developers
 Offers
Businesses low Offers Broad
Pay As You Go
fixed capital Functionality Reliable Data
Model Based
expenses in and Global Management
on need
exchange for Scale
variable cost
 Short-Term
Long-Term
Profitability is Low
Profitability is High
because of Large
because it is a high
Capital
growth market
Investments
Expanding
Large
Our Market Available
Industry
Customer Leader Capital
Growth
Base
 Large
Short Life Investment
Untested
Span of in Fixed
Market
Technology Capital
Assets
 Consistent with Consistent with
Consistent with
Marketplace because Resources because
Strategy because we
its a Proven Area of We are Expanding on
are favoring Long-
Future Growth Where Existing Data
Term Profitability over
we are Already a Centers, and
Short-Term
Market Leader Investing Free Capital
 Discontinue the Global Expansion Expansion of AWS
Kindle Fire into Scandinavia

Short-term 4 (.1) = .4 2 (.1) = .2 2 (.1) = .2

Profitability (.1)

Long-term 0 (.3) = 0 4 (.3) = 1.2 5 (.3) = 1.5

Profitability (.3)

Growth (.2) 0 (.2) = 0 5 (.2) = 1 5 (.2) = 1

Consistency with 3 (.2) = .6 4 (.2) = .8 4 (.2) = .8
Marketplace (.2)

Consistency with 2 (.2) = .4 5 (.2) = 1 5 (.2) = 1

Strategy (.2)
Totals* 1.2 4.2 4.5

*criteria weighted out of 1, alternatives scored from 1-5, for a possible score of up to 5 points total, 0 = no value,
5 = most value
Expanding Amazon Web Services (AWS)
to Meet the Needs of Developers
Moving from Simply Moving from
Infrastructure to Infrastructure as a
Offering Platform Service to Platform as
Services a Service (IaaSPaaS)
 Offering a
Free Package
Promoting
to meet the Freeware vs
AWS through
needs of Trial-ware
Freeware
Basic
Developers
 Expanding Data
Centers Globally to Necessary to Keep Up
Increase Data Storage with Increasing
and Throughput Demand
 Develop and Implement a Platform (PaaS) for Developers
Create basic version of AWS and offer as Freeware
1

Refine Platform offering based on user feedback

Based on Demand, invest in fixed capital asset IT infrastructure
2
Re-evaluate the current strategy
If strategy proves successful, allow for additional investment in
3 IT infrastructure
DEPARTMENTS Year 1 Year 2 Year 3 Total (Million of $)
R&D $30 $20 $20 $70
Marketing $15 $10 $5 $30
Data Centers $0 $100 $100 $200
Total $45 $130 $125 $300
! Strong competition in PaaS offering from
Microsoft Azure
! Losing paying customers with basic needs to
the free package of AWS
! Risk of losing large investments in Fixed
Capital Assets should demand not be as
expected
! Liquidating un-needed data centers to an IT
competitor (Azure)
! Modifying the Freeware offering of AWS to
Trialware
questions?
Budget for Alternative 2- Expansion into Scandinavia

DEPARTMENTS Year 1 Year 2 Year 3 Total (Million of $)

Acquire CDON $150 $0 $0 $150
Marketing $35 $25 $15 $75
R&D $50 $45 $30 $125
Total* $235 $65 $45 $350

*Cost of to Acquire CDON: 856 Billion Swedish Kronor = 150 Million US Dollars