AMAZON

Business Case Analysis

Prepared By
Saiyed M. Fauzan Ali

Table of Contents
Business 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, Amazons sales grew 14 percent to $4.65 billion in the second
quarter of 2009; the firms worldwide electronics sales grew 35 percent. CEO Jeff Bezos
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
Apples 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.

Amazons 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
Googles 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 planets biggest bookstore has rapidly become the planets biggest anything
store. The firms main Web site offers millions of books, music, and movies (which still account

for the majority of the firms 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
An Upsurge in sales worldwide

Company Weaknesses
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
Online Rival E-Bay Incurs declining revenues
E-books are a rapidly growing business

External Threats
Google enters as a competitor
Google Enters into Partnership with Sony to

segment
Huge Consumer Shift Towards Online

Compete against Amazon

Law Forcing Resellers to Collect Tax on online

Shopping During Recession

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 Earths 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
An Upsurge in sales worldwide
Lowest Prices on Everything
Less Fixed Assets
Low Fixed Cost
Largest Online Book Seller In U.S
Ended Business Relationships with
marketing affiliates in North Carolina,
Rhodes Island & Hawaii
Total

Weightage

Rating

Weightage Score

0.1
0.2
0.3
0.2
0.1

3
4
4
4
3

0.3
0.8
1.2
0.8
0.3

0.1

0.3

3.7

The Firm has Strong Internal Position

External Factor Evaluation Matrix (EFEM)

Weaknesses & Threats
Online Rival E-Bay Incurs declining
revenues
E-books are a rapidly growing business
segment
Huge Consumer Shift Towards Online
Shopping During Recession
Google enters as a competitor
Google Enters into Partnership with
Sony to Compete against Amazon
Law Forcing Resellers to Collect Tax on
online Sales
Total

Weightage

Rating

Weightage Score

0.1

0.4

0.2

0.8

0.3

0.9

0.2

0.4

0.1

0.3

0.1

0.3

The Firm has Excellent Level of Responsiveness

3.1