AMAZON

Business Case Analysis

Prepared By

Saiyed M. Fauzan Ali

Table of ContentsBusiness Case Study....................................................................................................................................2

SWOT ANALYSIS...........................................................................................................................................4

Case Summary.............................................................................................................................................5

Mission Statement Analysis.........................................................................................................................5

Internal Factor Evaluation Matrix (IFEM).....................................................................................................6

External Factor Evaluation Matrix (EFEM)...................................................................................................6

Business Case Study

Based in Seattle, Washington, Amazon’s sales grew 14 percent to $4.65 billion in the second

quarter of 2009; the firm’s worldwide electronics sales grew 35 percent. CEO Jeff Bezo’s

strategic plan for Amazon is to make the firm the “Wal-Mart of the Internet” through heavily

discounted prices and expansion into more and more product offerings as well as free shipping.

Amazon prides itself on offering the lowest prices anywhere on anything, and the firm is

charging ahead as brick and mortar retailers falter, declare bankruptcy, and even liquidate.

Amazon has no retail stores, just inventory warehouses. Therefore the firm has low fixed costs.

Its primary online rival, E-bay, is incurring declining revenues and profits. Amazon is the largest

online bookseller in the United States and is making its Kindle e-books available for reading on

Apple’s iPhone and iPod Touch devices. E-books are a rapidly growing segment of the

publishing business. Barnes & Noble recently acquired e-book firm Fiction wise for $15.7

million, and Google is getting heavily in the e-book business. Sony Electronics recently formed a

partnership with Google to compete against Amazon in the growing digital books market.

Amazon’s Kindle electronic book reader is under attack from the partnership that enables readers

to use the Sony Reader device to access more than half a million public domain books from

Google’s digital book library. Amazon sold about 500,000 Kindles in 2008 and expects the

Kindle could bring $3.7 billion in annual revenue by 2012. In July 2009, Amazon lowered the

price of its Kindle product from $359 to $299 in an effort to make kindle a blockbuster hit.

What started as the planet’s biggest bookstore has rapidly become the planets biggest anything

store. The firm’s main Web site offers millions of books, music, and movies (which still account

for the majority of the firm’s sales), not to mention auto parts, toys, electronics, home

furnishings, apparel, health and beauty aids, prescription drugs, and groceries. Customers can

also download books, games, MP3s, and films to their computers. In addition to Kindle, Amazon

provides other products and services too, such as self-publishing, online advertising, and a Web

store platform. The firm is capitalizing on a huge consumer shift toward online shopping during

a recession.

Some states are strapped for cash and are forcing retailers to collect taxes on online sales. New

York passed an Internet sales tax law in 2008. North Carolina, Hawaii, California, Maryland,

Minnesota, and Tennessee are close to passing similar laws. Amazon is fighting these laws.

Amazon collects sales tax only in the state of Washington, where it has offices and warehouses.

In mid-2009, Amazon ended business relationships with marketing affiliates in North Carolina,

Rhode Island, and Hawaii to avoid collecting sales tax in the state. A marketing affiliate can be

defined as a business that gets a sales commission by featuring links to outside e-commerce sites

on their own Web site. There are mounting tensions between online retailers and cash-strapped

states across the country. Amazon contends that it is unconstitutional to require sellers with no

physical presence in a state to collect sales tax on sales to buyers in that state.

SWOT ANALYSIS

Company Strengths Company Weaknesses

An Upsurge in sales worldwide

Ended Business Relationships with marketing

affiliates in North Carolina, Rhodes Island &

Hawaii

Lowest Prices on Everything

Less Fixed Assets

Low Fixed Cost

Largest Online Book Seller In U.S

External Opportunities External ThreatsOnline Rival E-Bay Incurs declining revenues Google enters as a competitor

E-books are a rapidly growing business

segment

Google Enters into Partnership with Sony to

Compete against Amazon

Huge Consumer Shift Towards Online

Shopping During Recession

Law Forcing Resellers to Collect Tax on online

Sales

Case Summary

Amazon being the biggest online book selling business in the United States has now turned

into the online store that offers everything around the world. Amazon has recently experienced

an upsurge in its sales with an overall growth of 35% in the electronics segment around the

world. Amazon has a long history of pride on offering the least costs on anything and anyplace.

Amazon possesses stock distribution centers and does not have any retail locations, therefore

having less fixed assets and less fixed cost when contrasted with its adversary firms. Amazon has

been charging ahead since its vital online rival E-Bay has been acquiring low incomes and

benefits. Amazon has been benefiting from the ascent in the customer movement towards web

offering after the recession, notwithstanding, Amazon may need to face intense rivalry by

Google since Google has gone into partnership with Sony to go up against Amazon in the

electronics business.

Amazon has also been confronting difficulties because of the laws forced by different states

obliging online businesses to collect tax on online sales. Amazon has been fighting these laws

and has a firm conviction that it is unlawful to oblige businesses to collect tax from purchasers

who have a place with the nation where the firm does not have physical vicinity.

Mission Statement Analysis

“To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices”

The choice of words when structuring the statement of mission is exceptionally critical and

Amazon had that as a top priority when adding to its mission statement in light of the fact that it

concentrates on the customer's need of having admittance to a variety of items online and at the

best conceivable rates. In this way, the organization has a reasonable statement of purpose that

best depicts its business.

Internal Factor Evaluation Matrix (IFEM)

Strengths & Weaknesses Weightage Rating Weightage ScoreAn Upsurge in sales worldwide 0.1 3 0.3Lowest Prices on Everything 0.2 4 0.8Less Fixed Assets 0.3 4 1.2Low Fixed Cost 0.2 4 0.8Largest Online Book Seller In U.S 0.1 3 0.3Ended Business Relationships with marketing affiliates in North Carolina, Rhodes Island & Hawaii

0.1 3 0.3

Total 1 3.7

The Firm has Strong Internal Position

External Factor Evaluation Matrix (EFEM)Weaknesses & Threats Weightage Rating Weightage Score

Online Rival E-Bay Incurs declining revenues

0.1 4 0.4

E-books are a rapidly growing business segment

0.2 4 0.8

Huge Consumer Shift Towards Online Shopping During Recession

0.3 3 0.9

Google enters as a competitor 0.2 2 0.4Google Enters into Partnership with Sony to Compete against Amazon

0.1 3 0.3

Law Forcing Resellers to Collect Tax on online Sales

0.1 3 0.3

Total 1 3.1

The Firm has Excellent Level of Responsiveness