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Amazon.com

Amazon.com. Case Analysis. Agenda. Background [Timeline] Strategy audit Capabilities audit Value audit Business model evolution Analyzing impact of IT Key issues Analyses Recommendations Implementation of recommendations Conclusions. Background [Timeline - Exhibit 1].

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Amazon.com

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  1. Amazon.com Case Analysis

  2. Agenda • Background [Timeline] • Strategy audit • Capabilities audit • Value audit • Business model evolution • Analyzing impact of IT • Key issues • Analyses • Recommendations • Implementation of recommendations • Conclusions

  3. Background [Timeline - Exhibit 1] • Inception of idea [1994] • Official launch [1995] • Focus on strategic enhancement[1996] • Public offering [1997] • Strategic expansion to Europe and new product offerings [1998] • Strategic explorations into auctions as an agent [1999] • Strategic expansions through equity partnerships [early 2000] • Strategic exploration as a logistics service provider [mid 2000] • Figure 1.4, pp. 51

  4. Analyzing Amazon’s Business Model • Exercise • As a group, you have 10 minutes to conduct a strategy and capabilities audit • Each group will then participate in providing their inputs to their audits

  5. Strategy Audit • Market positioning • Selling to customers using the Internet • Product positioning • BMV, toys, consumer electronics, software, kitchen/home improvement products, and infrastructure hosting services [Toys “R” Us] • Business network positioning • Retailing • Infrastructure hosting services • Boundary positioning • Only Internet commerce

  6. Capabilities Audit • Processes and infrastructure • Product acquisitions, warehousing, inventory management, distribution, and fulfillment using digital business infrastructure • People and partners • Book distributor, equity partnerships with online retailers • Talent hired from leading retailers and distributors • Organization and culture • Customer-centric focus • Leadership and governance • Clear vision and great leadership

  7. Value Audit • Exercise • Each group has 5 minutes to conduct a value audit. • Which component of the value audit is most useful? • Provide insights to analyze Amazon’s value from the strategy and capabilities audit.

  8. Value Audit [SWOT Analysis]

  9. Analyzing IT Impact: Where is Amazon? High ? CORE CAPABILITIES Low Low High STRATEGY

  10. Key Issues • Can Amazon become cash flow positive by end of 2001? • Each group has 5 minutes to discuss and respond • Will Amazon experience exponential growth? • Each group has 5 minutes to discuss and respond • When will it sustain value over time? • Each group has 5 minutes to discuss and respond

  11. Key Assets and Income [Exhibit 2]

  12. Key Operating Expenses [Exhibit 2]

  13. Income Statement [Exhibit 2]

  14. Addressable Market [Exhibit 3]

  15. Recommendations [Issue 1] • Positive cash flow by 2001? • Upward trends in sales [Exhibit 2] • Increasing customer base, decreasing customer acquisition costs [Exhibit 2] • Technology and restructuring costs might level off • Estimated increase in revenue from hosting [Exhibit 4]

  16. Recommendations [Issue 2] • Exponential growth • Long-term positive forecasts [Exhibit 3] • Focus on providing infrastructure services • Bezos believes that they have reached the “tipping point” [pp. 155]

  17. Recommendations [Issue 3] • Sustain value over time • Brand image will help sustain value • Comparison of performance metrics is favorable [Exhibit 3] • Tremendous opportunities, temporary threats [entry barriers are very high], few weaknesses

  18. Implementation of Recommendations • Positive cash flow • Conduct focus groups [pp.55] • Collect customer data [pp.55] • Target marketing efforts • Exponential growth • Infrastructure analysis [pp.57] to improve fulfillment • Build alliances for hosting services • Sustain value • Focus on core competencies and understand your business boundaries • Continue to improve capabilities • Maintain visionary leadership

  19. Conclusions • Amazon faced “teething” problems • The company has built high barriers to entry • Future forecasts are extremely positive • Excess capacity exists to accommodate future growth • The company should be able to sustain value over time for their stakeholders

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