...In the first years, Amazon intentionally kept its website systems separate from its order-fulfillment system. The separation was partly due to the fact that they did not have the technical ability to connect them, and partly because the company wanted to improve security by keeping the order systems off the Web. By 1997, Amazon‘s sales had reached $148 million for the year. Their databases were being run on servers while applications were being written in house. By early 2000, the company had over 100 separate database instances running on a variety of servers. These servers were handing terabytes of data. In 2000, Amazon decided to overhaul its entire system. The company spent $200 million on new applications, including analysis software from Epiphany, logistics from Manugistics, and a new DBMS from Oracle. The company also signed off on deals to work with SAS for data mining and analysis. However, the biggest deal was with Excelon for business-to-business integration systems. The system enables suppliers to communicate in real time, even if they do not have sophisticated IT departments. It provides a direct connection to Amazon‘s ERP system either through programming connections or through a Web browser. About the same time (May 2000), Amazon inked a deal with HP to supply new servers for IT department. The new systems ran the open-source Linux operating system. The return on investment was seen in 2001. Amazon was able to cut their IT costs by 24 percent in 2001 when...
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...1. Problem Statement Since Amazon was established in 1994 it has focused on growth – “get big fast”. This focus on growth of number of clients was based on the assumption that to establish Amazon as the biggest internet retailer in the world secured long term profitability instead of short term profitability. The growth had been carried out through expansion in markets and an aggressive acquisition strategy. In 2000 the investors started to change focus and while they had been willing to support the expansion for market share they now started to focus on profitability. Amazon therefore needed to change strategy and adapt to the need for running a profitable business with the new watchwords “march towards profitability”. But the question is whether Amazon can change the company around and become profitable and how they can achieve it. Some of the questions which need to be answered is: • What should Amazon do next? • Should it continue its international expansion, or perhaps retrench to allow for more profitable operations? • Should it add product categories or cut back to its Books, Music and Video core? • Could Amazon use its brand strength and sophisticated personalization algorithms to individually price its way into the black? • Could Amazon steal a page from Wal-Mart and focus on supply chain management to part the sea of red ink? • Alternatively, should Amazon return to its virtual roots and outsource...
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...1] Will Amazon become cash flow positive by end of 2001? We believe that Amazon will be cash flow positive by end of 2001. Our insights are based on the facts that upward trends in sales will far exceed the operating expenses. Income from operations depends upon net sales, cost of sales, and operating expenses. A close analysis of Amazon’s operating expenses from 1997 to 2000 indicates that the company has experienced significant increases in fulfillment, marketing, technology, and restructuring costs. The overall operating expenses increased from about $61M in 1997 to about $1520M in 2000. These expenses were necessary for Amazon’s growth. In 1998 and 1999, Amazon spent $429M to build “a state-of-the-art digital business infrastructure and operations that linked nine distribution centers and six customer service centers located across the US, Europe, and Asia” (pp. 148). The company now has about 70-80% excess capacity. This suggests that Amazon’s operating costs (especially technology and restructuring costs) are likely to level off in the future and the excess capacity should be able to accommodate growth. As for net sales, Amazon has experienced a positive growth over the last 4 years and the upward trend is likely to continue in 2001. The company has almost 30M customers in 2000. In order to increase sales, we recommend that the company executives focus on improving the online buying experience for their customers and increasing marketing efforts (especially for the international...
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...25, 2012 EBay and Amazon are two companies who offer online retail. EBay is an auction site; whereas, Amazon is a retail website with various prices set by the different sellers. When you compare the net revenue from the two companies you can see both companies have had positive growth in the net revenue from 2000-2008. Although, EBay has had a positive change in revenue each year, the change in net revenue has been decreasing since 2003. In 2003, EBay had 78.33 percent change in net revenue, but in 2008 it had declined to only 11.33 percent change. Amazon, on the other hand had a spike in annual change in net revenue from 2001 to 2002. Since this spike Amazon’s annual change in net revenue has been in the range of 25-35 percent each year on average. Comparing earnings per share, you see both companies followed a similar trend. EBay and Amazon both rose originally and reached a peak and then both had a huge decline, but then both started increasing again. Amazon went through this pattern before EBay would. Also, when Amazon went through this trend, after their decline, once they started increasing again, their EPS in 2008, was only slightly higher than it’s previous peak in 2004. In contrast, in 2008, EBay’s EPS was almost double from what the previous peak was in 2006. Next, when you compare the share price you will see Amazon is doing much better than EBay. EBay was originally doing well and increasing at a much fast rate than Amazon until 2004, when it peaked...
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...percent annual growth in web usage. He could see that the Internet, which was in its infancy in 1994, would soon become ubiquitous. Features of the book industry made it ideal to focus on selling books, at least initially. The book industry was fragmented, both in terms of the large number of booksellers and publishers. In addition, there were millions of titles and potential customers. The typical bookstore could house a small fraction of all published books, so Amazon.com could market itself as the earth’s largest bookstore. Amazon is the leading online book selling retailer in the USA. Amazon expanded from just a bookstore into selling general electronics, music, videos, toys, apparel, food, and furniture. Amazon has also established separate websites all over the world. (Amazon, 2011) Amazon also provides international shipping to certain countries for some of its products. Amazon focuses on customer satisfaction, and the efficiency of their website. Amazon now provides almost anything you can think of. When Bezos founded Amazon.com, he focused on hiring talented and unconventional managers and employees. Amazon.com had rigorous requirements for new employees and an obsession for customer service. Amazon.com told temp agencies ‘‘send us your freaks’’ (Spector 2002, 113). The hiring of talented employees was coupled with an austere culture, exemplified by the use of desks made of doors and 2X4s. These desks were initially used because they were inexpensive and later because they...
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...JANICE HAMMOND Amazon.com’s European Distribution Strategy In January 2003, Tom Taylor, Amazon.com’s Director of European Supply Chain Operations, sat in his office in Slough, United Kingdom, and pondered what changes Amazon needed to make to sustain its growth in Europe. Established in the fall of 1998 through the acquisitions of two on-line booksellers, Bookpages.co.uk in Britain and Telebuch.de in Germany, Amazon Europe had developed into three strong, independently run, country-based organizations in the UK, Germany, and France. Amazon International, comprising Amazon Europe and Amazon Japan, now represented 35% of Amazon revenues and was the fastest growing segment of the company (see Exhibit 1). To sustain its growth, Amazon Europe faced multiple expansion options: it could replicate the broad array of product lines Amazon offered in the US, launch new Marketplace1 activities, or expand into other European countries. In addition, Amazon Europe had to decide which of its activities it should coordinate or consolidate at the European level. Tom Taylor had been transferred from Amazon US to Europe in June 2002 to address some of these issues and, in the words of his then boss, Senior VP of Operations Jeff Wilke, help Europe “catch the US in five years.” Taylor felt that a lot had been accomplished since his arrival six months earlier. His team had managed to standardize and improve supply chain processes across Europe in the areas of vendor management, sales and operations...
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...Amazon.com the Hidden Empire Three digital engines to reshape and dominate retail Amazon.com: a digital shop around the corner… … and a digital colossus. Did you know: all these companies belong to Amazon… Did you know: Amazon is also… AmazonBasics Amazon-branded electronic products AmazonFresh sells and delivers groceries in Seattle AmazonStudios online social movie studio Amazon WarehouseDeals offers discounts on refurbished products Did you know: Amazon has had one of the fastest growths in the Internet’s history… Revenues reached within first 5 years $2,8 bn $1,5 bn $0,4 bn eBay Google Amazon Amazon and eBay results from 1995 to 2000, Google from 1998 to 2003. Even though Zynga and Groupon appear to have an even quicker growth, they haven‟t been compared because 1- sales have not been officially disclosed 2- they haven‟t reach their fifth year Did you know: Amazon Web Services drives these companies… Did you know: Amazon.com is a giant… Y/Y growth for Q1 2011 +38% Market cap $90 bn Customers 137 m 3 × growth of 2 × market cap 2 × # customers E-commerce market Employees 33,700 Annual revenue $34 bn Internet traffic rank 16th Retail brand 1st Paid out $1.2 bn 15 × more than 16% more than before before to buy Source: Amazon.com, Alexa, Brandz. Market capitalization as of April 2011. Why? A vision… From 1994, Jeff Bezos knew he could create a retail website that would not have the limitations...
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...Amazon.com the Hidden Empire Three digital engines to reshape and dominate retail Amazon.com: a digital shop around the corner… … and a digital colossus. Did you know: all these companies belong to Amazon… Did you know: Amazon is also… AmazonBasics Amazon-branded electronic products AmazonFresh sells and delivers groceries in Seattle AmazonStudios online social movie studio Amazon WarehouseDeals offers discounts on refurbished products Did you know: Amazon has had one of the fastest growths in the Internet’s history… Revenues reached within first 5 years $2,8 bn $1,5 bn $0,4 bn eBay Google Amazon Amazon and eBay results from 1995 to 2000, Google from 1998 to 2003. Even though Zynga and Groupon appear to have an even quicker growth, they haven‟t been compared because 1- sales have not been officially disclosed 2- they haven‟t reach their fifth year Did you know: Amazon Web Services drives these companies… Did you know: Amazon.com is a giant… Y/Y growth for Q1 2011 +38% Market cap $90 bn Customers 137 m 3 × growth of 2 × market cap 2 × # customers E-commerce market Employees 33,700 Annual revenue $34 bn Internet traffic rank 16th Retail brand 1st Paid out $1.2 bn 15 × more than 16% more than before before to buy Source: Amazon.com, Alexa, Brandz. Market capitalization as of April 2011. Why? A vision… From 1994, Jeff Bezos knew he could create a retail website that would not have the limitations...
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...Q&A Introduction CASE = AMAZON.COM IN YEAR 2000 Version: 4/12/10 This case analyzes Amazon’s growth strategies up to June 2000, and critiques Lehman Brothers’ credit analyst Ravi Suria’s report of that month. Suria report was one of the first to be publicly critical of the cash flow prospects Amazon and the dot com sector in general. He did this because he was a credit analyst and Amazon was rare among dot coms to have a lot of debt. The case provides a variety of learning opportunities: (1) an evaluation of a company’s strategy and performance from a credit analysis perspective; (2) an appreciation of the potential value of contrarian thinking in fundamental analysis; and (3) the analysis of the type of strategies and market conditions that fueled the dot com bubble. Q1. 1.1 Regarding the long-term viability of Amazon's business per the case: What was Amazon’s original business model? (2 pts) I shall define a for-profit firm’s business model as the set of plans and strategies for the future that the firm has in place for earning at least normal profitability in the long run. Viewed through the lens of a statement of cash flows, a business model requires: Plans for financing; strategies for converting the cash raised by financing into investments of tangible and/or intangible assets; and strategies for generating abnormal profits from those assets through operations. Note that in their investing and operating activities, firms are less likely to be price takers...
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...pursuing related diversification over a period of time have achieved superior performance than companies following an unrelated diversification (Palepu 1985). Amazon has started its business by selling books and music, soon after it incorporated online auctions for airlines tickets and hotel rooms, computer hardware, pet food and pet accessories, electronic cards, toys and consumer electronics. Whereas Amazon has achieved very high volume of sales and gained important market shares in the book industry, the company has never been profitable. As a result, in this essay, in order to determine if Amazon’s decision to diversify so extensively was a wise decision, we will firstly describe the firm business model and the reasons for its success. We will then try to determine if this business model is applicable to Amazon’s diversification strategy as well as the limit of diversification. And finally we will try to evaluate the limit of such strategy in an international context. I Is the business model designed for selling book on internet apply for different category of products? The success of Amazon Business Model In e-tailing, one can identify four kinds of business models: the channel supporter, the vertical portal and the category killer such as Amazon. In this regard, Calkins, Farello and Smith Shi (2000) identify three fundamentals of on-line...
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...••• THE HIDDEN EMPIRE Three digital engines to reshape and dominate retail mazon.com Amazon.com: a digital shop around the corner… … and a digital colossus. Did you know: all these companies belong to Amazon… Did you know: Amazon is also… AmazonBasics Amazon-branded electronic products AmazonFresh sells and delivers groceries in Seattle AmazonStudios online social movie studio Amazon WarehouseDeals offers discounts on refurbished products Did you know: Amazon has had one of the fastest growths in the Internet’s history… Revenues reached within first 5 years $2,8 bn $1,5 bn $0,4 bn eBay Google Amazon Amazon and eBay results from 1995 to 2000, Google from 1998 to 2003. Even though Zynga and Groupon appear to have an even quicker growth, they haven’t been compared because 1- sales have not been officially disclosed 2- they haven’t reach their fifth year Did you know: Amazon Web Services drives these companies… Did you know: Amazon.com is a giant… Y/Y growth for Q2 2012 +29% Market cap $105 bn Customers 152 m Employees 51,300 Annual revenue $48 bn Internet traffic rank 11th Retail brand 1st Paid out $1.2 bn Paid out $775 m Source: Amazon.com, Alexa, Brandz. Market capitalization as of the 5th of November 2012 2 × growth of 1,7 × market cap 4 × # customers 13 × more than 27% more than before before to buy to buy E-commerce market Why? A vision… From 1994, Jeff Bezos knew he could create a retail website...
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...Calculators, lemmings or frame-makers? The intermediary role of securities analysts Daniel Beunza and Raghu Garud Introduction As Wall Street specialists in valuation, sell-side securities analysts constitute a particularly important class of market actor.1 Analysts produce the reports, recommendations and price targets that professional investors utilize to inform their buy and sell decisions, which means that understanding analysts’ work can provide crucial insights on the determinants of value in the capital markets. Yet our knowledge of analysts is limited by insufficient attention to Knightian uncertainty. Analysts estimate the value of stocks by calculating their net present value or by folding the future back into the present. In so doing, they are faced with the fundamental challenge identified by Frank Knight, that is, with the difficulty of making decisions that entail a future that is unknown. These decisions, as Knight wrote, are characterized by ‘neither entire ignorance nor complete . . . information, but partial knowledge’ of the world (Knight, [1921] 1971: 199). The finance literature has not examined the Knightian challenge faced by analysts. Indeed, existing treatments circumvent the problem by adopting one of two extreme positions. In the first, put forward by orthodox economists, it is assumed that Knightian uncertainty is non-existent and that calculative decision-making is straightforward. Analysts are presented as mere calculators in a probabilistic world...
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...Director of European Supply Chain Operations, sat in his office in Slough, United Kingdom, and pondered what changes Amazon needed to make to sustain its growth in Europe. Established in the fall of 1998 through the acquisitions of two on-line Logistics Planning & Modelling Techniques booksellers, Bookpages.co.uk in Britain and Telebuch.de in Germany, Amazon.com’s European Distribution Strategy International, comprising Amazon Europe and Amazon Japan, now Amazon Europe had developed into three strong, independently run, country-based organizations in the UK, Germany, and France. Amazon represented 35% of Amazon revenues and was the fastest growing segment of the company (see Exhibit 1). Amazon.com’s European Distribution Strategy Amazon.com’s European Distribution Strategy Amazon.com’s European Distribution Strategy Amazon.com’s European Distribution Strategy To sustain its growth, Amazon Europe faced multiple expansion Taylor felt that a lot had been accomplished since his arrival six months options: it could replicate the broad array of product lines Amazon earlier. His team had managed to standardize and improve supply offered in the US, launch new Marketplacea activities, or expand into chain processes across Europe in the areas of vendor management, other European countries. In addition, Amazon Europe had to decide sales and operations planning, customer backlogs, and inventory which of its activities it should...
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...Case study eBay, Inc. And Amazon.com Introduction The case that we present concerns two of the most famous companies in the world: Amazon.com and eBay,Inc.. They have become so ubiquitous that probably there is not a household with a computer and internet connection in the world that hasn’t purchased at least one item from them or visited their websites at least once . In the following paragraphs we endeavor to analyze how these two companies have achieved this worldwide success and how they are defined by all as online giants and colossus. But above all, we will focus on how they differ from each other, what are their strengths and weaknesses, what their business model is and how it has changed over the course of time. We will discuss briefly the history of these two giants and explain how they deal and cope with this ever-changing market and business environment. We will start with the background of these two companies, and then analyze the differences in terms of business models, focusing on financial data, services provided, overall stakeholder value and customers’ perception. Background of eBay EBay was launched by Pierre Omidyar in 1995, and referring to his own words, his purpose was giving “ the power of the market back to individuals, not just large corporations”...and his goal was “pioneer new communities around the world built on commerce, sustained by trust and inspired by opportunities”. It is important for us to underline the words of Omidyar because...
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...Amazon is one of the few doc companies that managed to ride the wave of the doc.com bust and transformed itself from being on the brink of bankruptcy to a success. Amazon is a global leader in online-retail. From its birth in 1994 to 2000, Amazon.com implemented a number of changes to its business strategy in attempt to stay on top of the e-commerce industry. Amazon.com started in 1994 as a simple online book retailer. Under this initial strategy, Amazon was receiving all of its revenue from its book sales (sales revenue model), and was popular because it was the first online retailer to do so. Before the dot-com bust, amazon has gradually changing its business model from a simple online retail bookstore into an online superstore offering books, music, videos, toys, video games, consumer electrics, software and a full line of kitchen and home improvement products. In 2000, through a series of equity partnerships with leading online retailers, Amazon has expanded its marketplace model. Despite the company’s success in expanding and its growing popularity, Amazon faces a serious challenge of generating profits. One challenge was to achieve profitability before cash ran out and operations would have to cease or go bankrupt. Another more serious challenge is wheter the business model could develop into a competitive advantage that would be difficult to imitate by the competition. I would definitely partner with more non dot-come companies and entering more deals like this...
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