Pere  Joan  Ribas  Barceló  

Amazon.com Competitive advantages

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CIEE Study Center in Palma de Mallorca Entrepreneurship and Innovation Course

Pere Joan Ribas Barceló perejoanribas@gmail.com

Competitive advantages

The AMAZON COCKTAIL!

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§  Customer focus!§  Long term goals!§  Innovation!

Competitive Advantage

Competitive Advantage

The network dynamics effect: products or services become increasingly valuable as more

people use them (critical mass).

Competitive Advantage

“There are two kinds of retailers: those folks who work

to figure out how to charge more, and companies working

to figure out how to charge less.

We are going to be the second,

full-stop”

Jeff Bezos

Competitive Advantage

§  Lower prices led to more customers´ visits.

§  More customers increased the volume of sales and attracted more commission-paying third-party sellers to the site.

§  This situation allowed Amazon to get more out of fixed costs like fulfilment centers or the servers running the website.

§  This greater efficiency then enabled to lower prices further down.

Brad Stone, The everything store (2013)

Competitive Advantage

Source: http://www.amazon.com/Locations-Careers/ (2014)

Amazon’s Logistics Network

Amazon Fulfilment Centers

During the early years of frenetic growth, Amazon logistics network had to adapt to new categories. The system was not prepared to handle so many different categories of products and not well suited to deal with small orders. It was a long and complex learning process. Amazon started to develop its own software and create its owns solutions to increase the accuracy and reliability of their logistics network. They invested heavily in innovation and applied mathematical algorithms to better distribute products on Amazon’s fulfilment centers. In addition, to reduce carrier costs, they improved the packaging systems to pack different products in a single box in the most effective way possible. At some point, Amazon was able to tell the customer when exactly they would receive their package. When a customer places an order, Amazon examines the address of the customer, the location of the requested products within Amazon logistics network and calculates both the fastest and cheapest way to ship the items.

Amazon Fulfilment Centers

The system was so precise and convenient than other sellers started to used it, giving Amazon a competitive edge over its rivals. “We built such a good service that other companies were willing to pay to use it” In early 2001, Amazon signed a deal with the book chain Borders, which had blundered by building a massive distribution facility outside Nashville for online orders before realizing it needed smaller, geographically dispersed warehouses to get books to customers quickly and inexpensively. 1999: websites of rivals like Toys “R” Us and Macy’s barely survived their first major holiday season and were plagued by customer complaints, bad press, and even an investigation by the Federal Trade Commission into unfulfilled promises made to shoppers.

GET BIG FAST

Jeff Bezos

Amazon Success

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$400

$350

$300

$250

$200

$150

$100

$50

Turnover 2008-2012

Amazon is the

global leader in e-commerce

Assets 2008-2012

8,3 billion in 2008

32,5 billion in 2012

workforce 2008-2012

20.700 in 2008 88.400 in 2012

Source: Yahoo finance & Management: Les 50 plus grands patrons de l’histoire (2013)

200 million active customers worldwide

§  The Everything store: Jeff Bezos and the age of Amazon, Brad Stone (2013)

§  One Click: Jeff Bezos and the Rise of Amazon.com, Richard L. Brandt (2011)

§  The Age of the Platform: How Amazon, Apple, Facebook, and Google Have Redefined Business, Phil Simon (2011)

§  Inside the Giant machine: An Amazon.com Story, Kalpanik S. (2011)

§  Amazon.com: Get Big Fast, Robert Spector (2002)

§  Amazon Top Seller Secrets: Insider Tips from Amazon's Most Successful Sellers(2009)

Bibliography

Videos

§  Amazon's Truth Behind the Click BBC Documentary

§  Amazon.com Full Story - World Biggest Online Retailer Revealed

§  Exclusive Interview with Jeff Bezos - Founder & CEO of Amazon

§  Amazing Amazon Story - Jeff Bezos Full Speech

§  TED: Jeff Bezos: The electricity metaphor

§  Amazon's Jeff Bezos looks to the future

§  Four Peaks: My interview with Jeff Bezos

§  Inside Amazon: Secrets of an Online Mega-Giant

§  Amazon's Truth Behind the Click

§  Jeff Bezos at the Stanford Graduate School of Business

§  Jeff Bezos on Amazon, Innovation, Customer Service, Kindle

§  Jeff Bezos discusses Amazon Business Model and Mission

Internet companies series!