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Case Details

Case Code: BSTR486
Case Length: 22 Pages 
Period: 1996-2016  
Pub Date: 2016
Teaching Note: Available
Price:Rs.600
Organization : Amazon.com
Industry : E-commerce
Countries : US; Global
Themes:  Business Model Innovation /Blue Ocean Strategy
Case Studies  
Business Strategy
Marketing
Finance
Human Resource Management
IT and Systems
Operations
Economics
Leadership & Entrepreneurship

Amazon.com's Business Model and its Evolution

 
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EXCERPTS

 

BUILDING AND EVOLVING THE BUSINESS MODEL

Over the years, Amazon had disrupted the online retail industry and transformed itself from an e-commerce player to a powerful digital media platform focused on growth and innovation. It constantly reinvented its business model and found new ways to create value for its customers. According to analysts, Amazon’s business model was innovative because it combined the company’s online retail expertise with its ability to understand the needs of its customers. Amazon moved beyond books to foray into completely new product categories such as e-readers and enterprise cloud computing services...

 

 
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AMAZON’S GROWTH WHEEL

In 2001, Bezos and his employees outlined a virtuous cycle called the “Amazon Flywheel”, which they believed powered their business. Bezos once invited well-known author and business consultant Jim Collins (Collins) to participate in Amazon’s executive retreat in 2001 to discuss the company’s future. As part of the discussions, Collins told Bezos and his executives that they had to decide what they were best at. Drawing on Collins’s concept of a flywheel, Bezos and his executives drew their own virtuous circle placing customer experience at the core of Amazon’s flywheel. Internally, it was referred to as Bezos’ napkin diagram as he drew it on a napkin...

GROWTH NOW, PROFITS LATER

Amazon generated revenues by selling millions of products to customers through its retail website and by charging third party sellers who sold products on Amazon’s website. It also served as a platform for independent publishers to publish books on Kindle with a 35% or 70% royalty option. In addition, Amazon generated revenue from its cloud business by providing web technology infrastructure to developers and enterprises. It followed a high fixed costs and low marginal costs business model. According to Eugene Wei, a former Amazon employee...

RESOURCES AND PROCESSES THAT SUPPORT THE STRATEGY
 

Amazon was one of the most innovative companies in the US. From the beginning, it had been at the forefront of innovation, adding and refining technology and changing the way customers shopped. On invention being a second nature at Amazon, Bezos said...

CHALLENGES
 

According to industry observers, Amazon over the years had disrupted other online retailers and brick-and-mortar stores and leveraged its e-commerce operations to become a retail Goliath. However, some critics felt that Amazon was too ambitious as it had been growing alarmingly and investing heavily. They felt that the strategy could backfire and that Amazon needed to be selective about the opportunities it pursued as it could not take customers and the competition for granted...

THE ROAD AHEAD
 

Going forward, the company planned to launch new digital products and service categories, build more fulfillment centers, power AWS, and expand the Kindle Fire Ecosystem. The company also planned to hire 100,000 people in North America for the holiday season...

EXHIBITS
 

Exhibit I: Most Valuable S&P 500 Companies (As of July 2015)

Exhibit II: Market Value of Amazon.com

Exhibit III: Amazon.com Consolidated Income Statement

Exhibit IV: Amazon’s Business Model Evolution

Exhibit V: Amazon Core Values

Exhibit VI: Features Offered to Consumer Customers

Exhibit VII: Amazon Quarterly Results

Exhibit VIII: Amazon – Net Sales-Amazon - Net Income

Exhibit IX: Stock Price Chart of Amazon (2015)