The case Analysis Outline Introduction- Brief summary of the firm, officers, industry and location Problem identification: major problems to be resolved-use the 4ps model Swot Analysis: strengths: weakness: opportunities: threats Alternatives: strategic choices-solutions to the problems identified Analysis of alternatives: cost/benefit analysis of the solutions. Recommendation: best/optimal solution based on the cost/benefit analysis 1. Introduction Amazon began in 1994 created by Jeffrey Bezos a computer science and electrical engineering graduate from Princeton University.
Amazon was created to be an online bookstore that would be customer friendly, be easy to navigate, provide buying advice, and offer the broadcast possible selection of books at low prices and submit product reviews. Bezo operated from his garage in Seattle. Bezo launched his online venture in 1995 with 7 million in borrowed capital. Because Amazon was one of the first major Internet or dot com retailers, it received a huge amount of free national publicity, and the new venture quickly attracted more and more book buyers. Amazon has a 200,000-square-foot warehouse and distribution center.
Amazon employed a relatively small number of workers about 2500 worldwide. Amzon employees own over 10% of their company, a factor behind Amazon. com’s rapid growth. Amazon has pizza teams that are given considerable autonomy to develop their ideas and experiment without interference from managers. Those pizza teams come up with most of the innovation. 2. Problem identification Product- Amazon has a customer review section on its website so that a customer may display any problems that he or she has sustain with the Amazon product purchased. However maintaining the physical infrastructure to to obtain supplies of books from book publishers and then to stock, package and ship the books to customers were much higher than anticipated. Price- Amazon was at a competitive advantage with their low prices * Maintaining the physical side of amazon’s value chain was the source of the greatest proportion of its operating cost, which were draining profitability even though Amazon was at a competitive advantage with their low prices. *
Price competition was also heating up due to the other companies such as Barnes and Noble and Borders who were also selling books online. Place- Amazon place in the book selling market changed the industry forever since it was the first online book selling company. * People can purchase books from anywhere as long as they can use the internet. Promotion-Since Amazon was the first online book seller it received a lot of free publicity. * Amazon was able to capture customer’s attention and establish a first mover advantage. 3. SWOT Analysis Strengths- -First online Book selling website. -low pricing -purchase from anywhere -offers 1. 5 million books -product reviews * Weaknesses -operating costs * Oppurtunities -Global expansion -retailer -aquiring small companies -New software -Branching in new market segments * Threats -opposing companies -price wars Pressure on profit margins 4. Alternatives * Forging allies with other companies so that when customers wanted a purchase immediately they could pick it up from one of the alliance retailers such as office depot or circuit city. Continue being innovative with prices such as having buy one get one half off sales or reducing prices by certain percentages on particular days. 5. Analysis of Alternatives * Buy sharing profit with allies the high product stocking and distribution costs were avoided. * Profit sharing also turned the company from book seller to “leading internet product provider. 6. Recommendation Allow any small business that operate a website to become affiliated to amazon by putting a official Amazon hyperlink to Amazon’s website on its own website.