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AMAZON.COM Inc. 2004

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Bus 411, April 2006. Case-Study Overview. Existing Condition. Amazon overview. Industry overview ... in the US, the UK, Germany, France, Japan and Canada ... – PowerPoint PPT presentation

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Title: AMAZON.COM Inc. 2004


1
AMAZON.COM - Inc.2004
  • Dustin Nadeau, Donatas Sumyla, David Deprey and
    Jaime Rodriguez
  • Bus 411, April 2006

2
Case-Study Overview
  • Existing Condition
  • Amazon overview
  • Industry overview
  • History, Key Facts, Goals and Objectives and
    Stock Information
  • Amazon Proposed Vision and Mission
  • External opportunities and threats
  • CPM
  • EFE
  • Financial Ratios
  • Internal strengths and weaknesses
  • IFE
  • Analysis
  • SWOT Matrix
  • SPACE
  • BCG
  • IE matrix
  • Grand Strategy Matrix
  • QSPM
  • Possible strategies
  • Recommendations
  • Strategic implementation and desired results
  • Show Cost
  • Annual objectives (goal) and polices
  • Evaluation Procedure
  • Current Update

3
Amazon Overview
  • Founded in 1994 Started selling books online and
    now operate Web sites that offer various products
    and services, which include music, DVDs, videos,
    electronics, camera and photography, clothing
    apparel, shoes, etc.
  • Features include one-click shopping, customer
    review and e-mail order verification.
  • The company is in coalition with other retailers
    and offer various new, refurbished, and used
    items in categories.
  • Headquarters is in Seattle (Washington) with an
    additional office in Coffeyville, Kansas. It has
    six global websites to serve domestic customers
    in the US, the UK, Germany, France, Japan and
    Canada

4
Key facts
  • Index Membership SP 500, SP 1500, Super Comp
    NASDAQ 100
  • Sector Technology
  • Industry Internet Software Services
  • 2002 Number 492 in the Fortune 500 list
  • Full Time Employees7,800
  • The 57th most-valuable brand worldwide
  • 2002 31 millions active customers
  • Sales
  • First seven years 0 3.2B
  • 2002-2003 3.93B 5.26B
  • 2004 revenues of 6.9 billion (growth of 31.5
    from 2003 to 2004)

5
History
  • November 1994 CEO Jeff Bezos and two associates
    set up shop in a converted garage.
  • Founder and Bezos opened the virtual doors of
    Amazon.com's online store in July 1995 and began
    selling public.
  • In May 1997 Amazon.com completed its initial
    public offering (IPO).
  • April 1998 the company acquired online bookstores
    in U.K. and Germany (Bookpages and Telebuch)
    first international expansion
  • In 1999 the company launched its own auction site
  • In 2000 Amazon.com launched amazon.co.jp and
    amazon.fr (Japan and France)
  • In 2002 e-commerce strategic alliances were
    performed with Virgin and Office Depot.
  • In January 2003 announced the Free Super Saver
    Shipping
  • September 2003 launched new Sporting Good store.

6
Acquisitions/Partnerships
  • Acquisitions
  • Bookpages (April 1998, Amazon.co.uk)
  • Telebuch (Telebook) Inc. (April 1998,
    Amazon.co.de)
  • Paid 200M to acquire e-Niche, Inc., Music Find,
    Accept.com, and Alexia Internet Company (1999)
  • Introduced zShops Amazon.coms online mall
    (1999)
  • Partnerships
  • Bought 46 of Drugstore.com (1999)
  • Bought 50 of Pets.com (1999)
  • Gained a 1.7 stake in Sothebys Holdings and
    formed a joint online auction site (1999,
    sothebys.amazon.com)
  • Bought 35 of Homegrocer.com (1999)
  • Bought 49 of Gear.com (1999)
  • Offered a co-branded credit card with Nextcard
    (1999)
  • Annouched plans to open a Target store at
    www.amazon.com (2001)
  • Others partnered with BabiesRUS, ToysRUS, and
    Borders Group (2001)

7
Historical Product Introduction and Geographical
Diversification
8
Company Structure
9
Amazon Stock (AMZN) Info
  • Trading on NASDAQ, ticker symbol AMZN.
  • IPO 1997 (18 per share)
  • Dividends have never been declared or paid on the
    common stock.
  • Reason Earnings are retained to finance future
    growth and therefore do not anticipate paying any
    cash dividends in the foreseeable future.
  • The Company currently does not offer a Direct
    Stock Purchase Plan.

10
Stock Price Performance
11
Industry Overview
  • The World Wide Web might have been built to
    support geek-speak, but today it is used to
    transmit information anyone can understand. Aside
    from possibly E-mail and instant messaging,
    accessing online content is the main reason most
    people use the Internet today. It is estimated
    that a billion people around the world have some
    kind of Internet access, either at work or at
    home, and most are going online to read the news,
    to get product information or for multimedia
    entertainment. Some of  the largest content
    providers are Yahoo, MSN, and America Online.
    Some other traditional media companies like Walt
    Disney Internet Group operate some of the top
    destinations on the Web, such as ESPN.com and ABC
    News. With Internet access continuing to grow
    and advertising rates stabilizing, online content
    is developing and expanding on several fronts. 
    One of the most exciting areas of development is
    streaming audio and video content, which has
    become increasingly popular with the rising use
    of broadband Internet connections. While sites
    run by online and traditional media companies
    will most likely continue to command the lion's
    share of audience and advertising revenue, there
    are some grass roots efforts that are beginning
    to challenge that dominance.

12
Compared to SP 500
13
Compare to Industry
14
Economic Performance
15
Top Internet Retailing Sites in terms of Unique
Visitors(Source Media Matrix)
16
Goals Objectives
  • We seek to be Earth's most customer-centric
    company, where customers can find and discover
    anything they might want to buy online, and
    endeavor to offer customers the lowest possible
    prices.

17
Vision Statement
  •  Our vision is to be Earth's most customer
    centric company to build a place where people
    can come to find and discover anything they might
    want to buy online.

18
Mission Statement
  • The companys six core values customer
    obsession, ownership, bias for action, frugality,
    high hiring bar, and innovation. The company
    motto Work Hard, Have Fun, and Make History.

19
Proposed Vision
  • To continue expanding in all countries with
    Internet access, while maximizing total
    commitment in becoming the number one company in
    Internet transactions.

20
Proposed Mission
  • To continue to offer quality products and
    services using the best technology available and
    at a reasonable price. This results in highly
    loyal customers, while maintaining shareholders
    interest and company profits in mind. We also
    want to expand geographically, increasing the
    number of customers and to keep improving our
    main competitive advantage - infrastructure. By
    working hard and having fun we seek to offer the
    best working environment to our employees,
    promoting career opportunities, and to increase
    our responsibility towards environment and the
    society.

21
External opportunities and threats
  • OPPORTUNITIES
  • Construction of an extensive community of buyers
  • Positive changes in the business model of the
    book market
  • Internet taxes prohibited by the Internet Tax
    Freedom Act (1998) and its extensions (2001 and
    2003)
  • Growth of internet users in the next five years,
    predominantly in the international market
  • E-commerce expansion in Asia and the Pacific
  • Several product categories with high penetration
    of retail on-line sales
  • 13 jump of Latinos going online in 2003 in the
    US since 2001
  • THREATS
  • eBay, Barnes Nobles, and Wal-Mart
  • Possible rejection to on-line sale in
    international markets if new taxes (Value Added
    taxes VAT) in products are levied
  • Population segment not targeted to on-line sales
    due to their lack of internet access
  • Weak economic performance of Germany and France
    in the last year
  • Competition will increase due to the low barriers
    to entry in the market offline companies are
    coming online
  • OPPORTUNITIES
  • Construction of an extensive community of buyers
  • Positive changes in the business model of the
    book market
  • Internet taxes prohibited by the Internet Tax
    Freedom Act (1998) and its extensions (2001 and
    2003)
  • Growth of internet users in the next five years,
    predominantly in the international market
  • E-commerce expansion in Asia and the Pacific
  • Several product categories with high penetration
    of retail on-line sales
  • 13 jump of Latinos going online in 2003 in the
    US since 2001
  • THREATS
  • eBay, Barnes Nobles, and Wal-Mart
  • Possible rejection to on-line sale in
    international markets if new taxes (Value Added
    taxes VAT) in products are levied
  • Population segment not targeted to on-line sales
    due to their lack of internet access
  • Weak economic performance of Germany and France
    in the last year
  • Competition will increase due to the low barriers
    to entry in the market offline companies are
    coming online

22
EFE Matrix
23
Direct Competitors Comparison (2006)
  • AMZN Amazon Inc.
  • BKS Barnes Noble Inc.
  • EBAY eBay Inc.
  • Industry Internet Software Services
    (Source http//finance.yahoo.com)

24
Competitive Profile Matrix (CPM)
25
Internal strengths and weaknesses
  • STRENGTHS
  • Strong brand name
  • Large product selection
  • Pricing policy with discounts
  • Corporate culture
  • High quality management team
  • Customer service support (Highest score in 2002
    American Customer Satisfaction Index)
  • Strong Infrastructure Effective automated
    distribution centers in the US and overseas
    (Competitive Advantage)
  • Developed and upgraded technology software and
    hardware
  • Pioneer in the syndicate selling on the Web
  • Two segments B2C and B2B e-commerce.
  • In the process of building efficiencies of scale
  • WEAKNESSES
  • Lack of Spanish website version (Latino and
    Hispanic Americans are the fastest-growing online
    ethnic group)
  • Low finance performance (high debt level)
  • Risk of introduction of wrong new categories
    which could damage companys brand
  • Companys offered free shipping might affect
    future financial outcome
  • Certain products (high volume/weight) have high
    shipping costs which could confront with local
    offline retailers

26
IFE Matrix
27
Amazon Key Ratios (2006)
28
Overall Key Ratios (2006)
29
SWOT Analysis
30
SPACE Matrix
  • Y axis - Financial Strength 3
  • - Environmental Stability - 2
    Y coordinate 1 STRATEGY AGGRESIVE
  • X axis - Competitive Advantage - 1
    X coordinate 5
  • - Industry Strength 6

31
Business Structure
  • Operating Segments
  • BMVD Books, Music, and Video/DVD Include
    retail sales from the different websites and
    commissions
  • ETK Electronics, Tools, and Kitchen Includes
    sales from www.amazon.com, mail-order catalog
    sales, and commissions
  • International segment Includes all retail sales
    from the international sites
  • Services segment consists of commissions, fees,
    and other amounts earned from other service
    business
  • Operating Results
  • North America www.amazon.com, www.amazon.ca, and
    mail-order catalogs.
  • International www.amazon.co.uk, www.amazon.de,
    www.amazon.fr, and www.amazon.co.jp

32
Business Structure
33
Sales Amazon vs eBay
34
BCG Matrix
INTNL 31
QUESTION MARKS
STARS
NA 69
CASH COWS
DOGS
35
IE Matrix
36
The Grand Strategy Matrix
  • Potential Strategies
  • - Market Development
  • - Market Penetration
  • - Product Development
  • - Backward Integration
  • - Concentric Diversification

37
Matrix Analysis
38
QSPM
39
Decisions
  • Primary Expanding to emerging Asian Markets
  • Alternative
  • Introducing new product categories
  • Expanding to Central and South American markets
  • Research and Development to increase the
    innovation and quality of customer services
    provided
  • Increasing marketing expenditures in order to
    reach new population segments and fastest growing
    trends and tendencies

40
Showing Cost EPS-EBIT Analysis
41
Implementation
  • Objectives
  • Increase net income by 5 in the first year and
    15 in the overall period of 3 years
  • Increase the net profit margin to 5
  • Increase total revenue in Asian market by 30
  • Decrease longterm debt
  • Use increased income to pay down long-term debt
  • Keep operating costs low (efficiencies of scales)
  • Create different website versions based on the
    five most common language in Asian region
  • Focus marketing strategies on customer feedback
    to find out what Asian customers tend to buy

42
Evaluations
  • Financial reports annually and quarterly if
    necessary
  • Customer feedback program
  • Top level management meetings to assure goals are
    achieved
  • Determine corrective actions after the first year
    if annual objectives werent accomplished

43
Update 2004-2005
  • 2004
  • Expansion in China (www.joyo.com) buying a
    Chinese e-commerce website
  • Debuted A9.com company focused in researching
    and building innovative technologies Search
    Inside the Book and Find It on the Block
  • Launched Presidential Candidates feature
  • Set up an online donation channel to American Red
    Cross (Tsunami in the Indian Ocean)
  • 2005
  • Set up an online donation channel to American Red
    Cross (Tsunami in the Indian Ocean)

44
References
  • http//finance.yahoo.com
  • 2004 Amazon Inc. Annual Report
  • Amazon.com a business history. To appear in
    e-commerce management text and cases by
    Sandeep Krishnamurthy (last updated on September
    27, 2002)
  • Strategic Management Concepts and Cases (10th
    Edition) by Fred David. Prentice-Hall
  • Strategia e Sistemi di Pianificazione
    E-strategy Il caso Amazon. By Prof. Cassia and
    Fattore. Universita di Bergamo
  • www.altavista.com (images)

45
Thank you!
  • Questions?
  • Comments?
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