AMAZON.COM: MARCHING TOWARDS PROFITABILITY

Case Study

Rebecca Dustman | April 29, 2013 | BUS 550 The Contemporary Firm

CASE BACKGROUND July 2001

Could Amazon become profitable? 1997 Annual Report - letter to shareholders

1999 2000Customers 14 million 20 millionSales $1.64 billion $2.76 billionNet Profit / Loss $720 million $1.4 million

2012180 million$61 billion$39 million

COMPANY BACKGROUND 1994 founded

Web usage - 2300% growth per year 20 products Books

Jeff P. Bezos 32 years old President, Chief Executive Officer and Chairman of the Board

HQ Seattle, WA "Fluid Concepts & Creative Analogies: Computer

Models of the Fundamental Mechanisms of Thought"

ORGANIZATION - BUSINESS PROCESSES 2001

1-Click Shopping, Advantage Program, In-store pick up, fulfillment centers

Free Super Shipping Over $100 - Nov 2000 Over $25 - Aug 2001

2012? 2012 Amazon Prime Bill Me Later Frustration-Free Packaging Free shopping for Android Local Express Delivery Fulfillment centers

MANAGEMENT DECISIONS - EXPANSION

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Music UK & Germany

DVD/Video

AuctionsConsumer Electronics

And Toys & GameszShops

KitchenFrance & Japan

Camera & PhotoToys “R” UsMarketplace

Borders & Target

CanadaOffice Products

Apparel & Accessories

NBASports & Outdoor

Gourmet FoodHealth &

Personal Care

JewelryBombay

Paris Hilton JewelryBeautyTheaterChina

Diane Von Furstenberg Wedding, Hollywood Rx

New Gift Exp

Timex Benefit CosmeticsGroceryUnbox

Endless.comGo Indie, MP3Askville.com

Kindle

Currency ConvTextBuyIt

Office SupplyTV Show

Motorcycle & ATV

Kindle 2Xbox LIVE

Outdoor RecBasics

WheelsAmazon Studios

Italy

Sports Collectibles

SilkAmazonLocalMyHabit.com

Spain

AmazonSupply

Game CollectGameCircle

Textbook Rental

WineBrazil

Enter. Collectibles

MANAGEMENT DECISIONS – EQUITY INVESTMENTS AND ACQUISITIONS

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Internet Movie Database

Alexa InternetTool Crib

Joyo.com Limited

BookSurge LLCCustomFlix Labs,

Inc.

Shopbop.comAudible

Fabric.comAbeBooks

Zappos.com.

BuyVIP.com

LOVEFILM International LtdMarshall Cavendish US Children’s Book Titles

$175M investment LivingSocial

Kiva Systems, Inc.Avalon Books

IVONA Software

Note: only shows US acquisitions

TECHNOLOGY THEN…

TECHNOLOGY NOW…

TECHNOLOGY NOW… Amazon Services, Inc & Subsidiary Search Inside The Book A9.com, Inc Subsidary Presidential Candidates Feature A9.com new website and A9 Toolbar Alexa Internet data A9 toolbar for Mozilla Firefox A9.com Yellow Pages Election 2008 CloudFront Daily Text Alerts Holiday Toy List AmazonWireless Kindle for iPhone, iPod Touch, PC,

Blackberry, Mac, iPad, Android, Web Amazon WebStore Shopping on iPad Price Check Amazon Deal App AWS CloudFormation Prime – videos, Original Series

A9 Cloud Kindle Prime

BUSINESS IT SOLUTIONS 1997 – it’s always Day 1 2001 – collaborative filtering 2012:

Invention is in our DNA Technology is the fundamental tool

AMZN

PROFITABILITY

Music UK & Germany

DVD/Video

AuctionsConsumer Electronics

And Toys & GameszShops

KitchenFrance & Japan

Camera & PhotoToys “R” UsMarketplace

Borders & Target

CanadaOffice Products

Apparel & Accessories

NBASports & Outdoor

Gourmet FoodHealth &

Personal Care

JewelryBombay

Paris Hilton JewelryBeautyTheaterChina

Diane Von Furstenberg Wedding, Hollywood Rx

New Gift Exp

Timex Benefit CosmeticsGroceryUnbox

Endless.comGo Indie, MP3Askville.com

Kindle

Kindle 2Xbox LIVE

Outdoor RecBasics

WheelsAmazon Studios

Italy

Sports Collectibles

SilkAmazonLocalMyHabit.com

Spain

AmazonSupply

Game CollectGameCircle

Textbook Rental

WineBrazil

Enter. Collectibles

Currency ConvTextBuyIt

Office SupplyTV Show

Motorcycle & ATV

Alexa InternetTool Crib

BookSurge LLCCustomFlix Labs,

Inc. Zappos.com.

LOVEFILM International LtdMarshall Cavendish US Children’s Book Titles

$175M investment LivingSocial

IVONA Software

Internet Movie Database Joyo.com LimitedShopbop.com

AudibleFabric.comAbeBooks

BuyVIP.com

Kiva Systems, Inc.Avalon Books

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

$(2,000)

$(1,500)

$(1,000)

$(500)

$-

$500

$1,000

$1,500 In millions

MARCHING TOWARD PROFITABILITY…AGAIN 2012 risks identified

Competition Expansion strain Fluctuation in operating results and growth rate Optimization of fulfillment centers Seasonality, inventory

Remain customer driven focus Prime, AWS, Kindle, digital medial, customer

experience

MULTIPLE CHOICE QUESTIONS

MULTIPLE CHOICE #1 Why did Jeff Bezos from Amazon.com

choose books to sell online? A. There were too many online CD sellers B. There are far more items in the book

category than any of the other categories C. He always wanted to be a writer D. He owned 450 books

MULTIPLE CHOICE #2 Why is the 1997 shareholders letter

included in every annual report? A. Reminder of the worst year they had B. The best technology year for Amazon C. Reminder it’s day 1 every day D. The most Amazon stores launch that

year

MULTIPLE CHOICE #3 What is amazon’s focus?

A. Customers B. Profitability C. Largest inventory D. Increase stock