Amazon.com, Inc. is a retailer site that uses a sales-revenue model. It receives a small percentage from the sale of every product sold via its website. Its revenue is recorded to be approximately 135.98 billion dollars with an operating income of 4.186 billion dollars. It has 83.402 billion total assets and 19.285 billion dollars in total equity. Acquisitions have enabled the company to diversify and reach a broader market. However, with the increased competition from companies like Apple, Alphabet, Microsoft, Alibaba, and Walmart, the company must be managed well in order to be more profitable.
Frank T. Rothaermel
Harvard Business Review (MH0053-PDF-ENG)
May 25, 2017
Case questions answered:
Case study questions answered in the first solution:
- Evaluate the macro and micro-environments of Amazon Inc.
- Evaluate its growth and business strategies.
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- Analyze the business level strategies for the corporation you chose to determine the business-level strategy you think is most important to the long term success of the firm and whether or not you judge this to be a good choice. Justify your opinion.
- Analyze the corporate level strategies for the corporation you chose to determine the corporate level strategy you think is most important to the long term success of the firm and whether or not you judge this to be a good choice. Justify your opinion.
- Analyze the competitive environment to determine the corporation’s most significant competitor. Compare their strategies at each level and evaluate which company you think is most likely to be successful in the long term. Justify your choice.
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Amazon.com, Inc. Case Answers
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Executive summary – Amazon.com, Inc.
Amazoncom, Inc. is an international company recognized for its e-commerce services. Amazon was founded in 1994 by Jeff Bezos in Washington.
In July 1995, it sold its first book and quickly developed to be the world’s most prominent online retailer (Shaughnessy, 2012). Amazon extended its services and products via a succession of an alliance, exclusivity agreements, partnerships, and acquisitions.
Despite its success, Amazon encounters several challenges, including high competition and state government regulation in taxation. It has attracted significant attention due to its increasing population. The use of internet traffic and platforms to capture a broad market is a substantial advantage for the company.
What attracts consumers to Amazon online shopping is the convenience, ease of use, low prices, appropriate customer services, safe/easy transactions, fast-accurate search for products, numerous products available for selection, and fast, dependable deliveries. Amazon is dedicated to improving the customer experience.
Amazon.com, Inc. is a retail site that uses a sales-revenue model; the company receives a small percentage from the sale of every product sold via its website.
Its revenue is recorded to be approximately 135.98 billion dollars, with an operating income of 4.186 billion dollars. It has 83.402 billion in total assets and 19.285 billion dollars in total equity.
It has become a high-technology company due to its investment in innovation and partnership. Acquisitions have enabled the company to diversify and reach a broader market.
History of Amazon
Amazon is an e-commerce organization located in Seattle, Washington, United States. Its distinction is that it is among the first establishments to sell products via the Internet.
The company was founded by Jeff Bezos in 1994. It began as an online bookstore but later diversified into a retailer of many products (Shaughnessy, 2012).
Amazon accomplished its first public offering, which resulted in its common stock being included in the Global Select Market (NASDAQ). The success of Amazon in becoming a global online retailer has been attributed to a series of acquisitions, partnerships, and alliances.
Shaughnessy (2012) explains that 43 percent of Amazon’s net sales in 2010 were obtained from the media market, including but not limited to music, magazine subscriptions, video/DVD products, video games, and digital downloads.
Currently, more than 50 percent of company sales come from industrial supplies, mobile devices, general merchandise, and outdoor equipment. Amazon has developed significantly from its original beginnings as a bookstore to a superior online retailer dominating the global market.
Amazon’s core competencies have been recognized as accessibility and consumer convenience, customized services, unlimited selection options, and the high-quality and efficient search tool to locate products and services via the internet (Shaughnessy, 2012).
The company has three primary strategies that result in a competitive advantage: customer differentiation, focus, and cost-leader strategy. It offers different products and service selection options to customers, including beauty products, electronics, health, home appliances, and others. Amazon’s financial goal was to realize long-term profitability and sustainable growth.
To achieve this goal, the online retailer upheld a thin culture concentrated on enhancing the operating income via efficiently managing capital expenditure and working capital and constantly increasing revenue while tightly regulating operating costs (Forbes. 2013).
By 2009, the company had already developed into an international brand with websites in Germany, Japan, Canada, France, the United Kingdom, and China. Besides, it fulfilled orders from more than 200 nations. According to Shaughnessy (2012),
By 2013, Amazon.com, Inc. had hired over 56,200 employees worldwide working in customer services, software development, and order fulfillment centers in Asia, Europe, Latin America, and North America.
The Amazon name was evocative of Jeff Bezos, the founder who visualized the company as a massive natural phenomenon. After its expansion to different locations, Amazon organized its operations into principal segments of international operations and North America.
Amazon.com, Inc. has over 306,800 part-time and full-time workers (Forbes. 2013). In 2017, the company acquired a high-end supermarket chain for Whole Foods. Since 1998, it has acquired many companies, including (Amazon.com. 2010):
- 1998-Telebook, Intenet Movie Database, Junglee and PlanetAll
- 1999- HomeGrocer.com, Gear.com, Ashford.com, Leep Technology, Drugstore.com
- 2002- online music ( CDNow.com)
- 2004- Joyo.com
- Smallparts.com
- Createspace.com
- 2010- BuyPIV, Amie Street, Touchco, Woot, and Quidsi.
- 2015- Elemental Technologies, Annapurna Labs, and 2lemetry.
- 2017- Harvest.ai, Do.com, GameSparks, Wing.Ae, Body Labs, and Thinkbox Software.
Corporate governance
Jeff Bezos owns a 19.4 percent share of the company, and he is the Chief Executive Officer and the Board Chairman (Amazon.com, 2017). Amazon.com, Inc. has eleven boards of directors. The company has three board committees. The governance and audit committee are standard.
The Compensation and Leadership Development Committee is the third category. The stability of proficient management, such as executive officers’ succession plans, is periodically monitored and assessed by the third committee.
According to Amazon.com (2017), CEOs do not populate the corporation’s board, but they comprise several senior-level executives from different industries, venture capitalists, non-profit sector representatives, and eminent scientists.
This board has served together for an extended period, implying Amazon.com, Inc. has excellent corporate governance. Amazon’s organizational structure is identified as hierarchical. The figure below shows the governance structure of the company (source: Amazon.com, 2017).
The Corporate Governance Committee oversees board membership candidates’ selection. The committee reviews the contribution, performance, and tenure of the present members to determine whether they qualify for re-election.
Among the skills and qualifications considered of a candidate considered crucial include long-term commitment to represent the shareholders’ interests, internet savvy, customer experience skills, leadership ability, value, and integrity (Amazon.com, 2017).
External environment
Several factors influence Amazon’s operations. The economic climate is continually changing, which demands the company to be more innovative. The e-retailer sector is developing at a rate of 10%, but the company’s growth rate is higher (Jobber, 2007). Social aspects play a significant role in the success of…
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