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Submitted By hskafte
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Amazon.com : Marching towards profitability

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 order fulfillment, allowing it to focus on its front-end Electronic Commerce Platform?

2. Pestel Analysis

Political

• Continuous political focus on globalization and deregulation of global markets will continue and trade barriers will be removed for the benefit of Amazon.com.

Economic

• In 2000 the IT bubble

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