Amazon’s last annual report starts with describing the vision of their business: “We seek to be Earth’s most

customer-centric company” (Annual Report on Form 10-K, 2019). The vision is guided by four principles

customer obsession rather than competitor focus, passion for invention, commitment to operational

excellence, and long-term thinking. In 2018, the US e-commerce industry amounted $501,012 million in

revenues (Statista, 2019), with Amazon having 49% market share which was more than its three top

competitors combined E-bay (6.6%), Apple (3.9%) and Walmart (3.7%) (Dayton, n.d.). However, this

performance hasn’t always been the same.

Amazon started operating in 1995 as an online bookseller. When launched, the e-commerce industry was

still young. The annual report of Amazon in 1997, the company describes the online commerce market as

“rapidly evolving and intensely competitive” as well as “the unpredictability of its future revenues and the

evolving nature of its business model” (p. 11). Regarding its operations management the company describes

in the same report the use of internally developed system and the expectation to add new software and

hardware and further develop and upgrade its existing technology (p.11). The annual letter to shareholders

from the founder of the company Jeff Bezos has also provided insight to the company’s vision. In the first

letter from 1998, Jeff Bezos introduces the idea of the long-term goals to the detriment of short-term

achievements and the obsession over customer. These six pagers, as is now known among Amazon

employees, became the guide of the company for decades and it might have been the reason why Amazon is

the successful company it is today.

Led by Jeff Bezos and his long-term vision that brought market leadership and brand loyalty first before

financial performance, Amazon disrupted the e-commerce market through innovation. In 2000, Amazon

introduced Amazon Enterprise Solution that offered technology services and allowed retailers to use its

platform to sell their products. This segment brought new problems for Amazon when they realized they

don’t have the infrastructure to sustain it. In order to solve this problems, Amazon’s team started to develop

a centralized platform for third parties that was the precursor of Amazon Web Services lunched in 2002 and

relaunched several times with improvements. AWS became a cloud computing service that allowed any

company to run any type of business. This service initially developed to only help Amazon internally, has
proved a success over the years amounting $9 billion in revenues in the third quarter of 2019 (Statista, 2019).

In 2005, the company lunched Amazon Prime that offers customers free 2-day shipping for an annual fee.

This disrupted the e-commerce and competitors had a hard time catching up. In order to fulfill orders and

deliver them fast, Amazon had to rely on efficiency. The company collected data about the customer habits

and preferences. Using technology, that data was analyzed and used to forecast which products would sell.

This allowed Amazon to reduce maintaining costs of inventory while carrying goods in stock so the orders

would be delivered in days. Amazon relies and technology and innovation to keep their costs down and

maintain efficiency. In 2012, Amazon bought Kiva Systems that later becoming Amazon Robotics. This

robotic system enabled the company to fulfill orders quickly by allowing Amazon Robotics to pick and pack

(Leblanc, 2019). On its website, the company explains the automized operations and mentions the culture

“humans+robots not humans vs. robots (About Amazon, 2018). In November 2014 it released the first

Artificial Intelligence (AI) voice assistant, Alexa and the first-generation Echo device Alexa enabled. These

innovations were the creations of Amazon Lab126 and they fulfilled the improvement of customer

experience vision of the company. In 2013, Amazon announced researching drone technology named

Amazon Prime Air in hopes to use it for delivery services (D’Onfro, 2019).

Amazon has been named one of the most innovative companies of 2019, second after Google (Columbus,

2019). It comes as no surprise considering not only the investments in new products and services but also the

culture of innovation at all levels of employment. Day One staff describes the culture of innovation in an

article written for About Amazon website. Amazon empowers employees at every level to innovate by

encouraging them to write a working backwards plan called PRFAQ, a six-page press release that explains

the vision of launch and a FAQ about customer benefits and answers to theoretical customer questions. After

being analyzed, some of these ideas get funding and launch (Day One Staff, 2019).

After analyzing Amazon’s segments and internal processes, it can indeed be affirmed that technology is part

of everything that comprises the company. Innovation is carried by all Amazon employees, regardless of job

description. Innovation is fueled by new and disruptive technology, either the products and services offered

to customers such as AWS, Alexa and Kindle or the companies own operations, such as Amazon Robotics.
Bezos vision were introduced in his firs letter to the shareholders in 1997 where he explains his main pillars:

“It’s all about the long term” and “obsess over customer”. His vision wasn’t concerned with short-term

profits or negative Wall Street reactions, but with market leadership, customer growth, retention and brand

(CBInsights, 2019). In over two decades, Amazon’s direction has been the same. In 1997 the company

registered net sales of $81,747 thousands. Although the revenues increased at a fast pace, in the same year

Amazon reported a net loss of $18,253 thousands. The company’s gross profit of $15,921 thousands was

invested in marketing and product development which was in accordance with Bezos long term vision.

(Annual Report, 1997) Amazon faced the same situation in consequent years as well.

1997 1998 1999 2000 2001

Net sales 147,787 609,819 1,639,839 2,761,983 3,122,433

Gross profit 28,818 133,664 290,645 655,777 798,558

Net loss (31,020) (124,546) (719,968) (1,411,273) (567,277)

Source: Amazon Annual Report (2002)

Amazon focused on constantly creating value for its customers by innovating: 1-Click purchases, Zshops,

Amazon Enterprise Solutions, Amazon Web Services. From 1.5 million active customer accounts in 1997,

Amazon had 40 million active accounts in 2003 (Statista, 2016). Starting 2003, the company starting

reporting profits for most years. From $35 million net profit in 2003 to $1,152 million in 2010 and $10,073

million in 2018. The market share exponentially grew as well to 49% in 2019. (Statista, 2016). Without

Bezos’ leadership style, Amazon wouldn’t have been the brand it is today with 353 million products, present

in 14 countries, shipping to more than 100 countries and 90 million prime members

SWOT Analysis

Strengths:
✓ Low cost leadership: Amazon has been using a low-cost strategy to position itself on the market; the

company is able to pass the savings to customer because it doesn’t incur costs to maintain physical stores;

another factor is economies of scale

✓ Wide merchandise selection; initially being an online bookstore, Amazon changed his strategy and

diversified the goods and products they offer; it is estimated that today Amazon offers about 353 million

products

✓ Differentiation and innovation: Amazon has a culture of innovation where all employees are encouraged to

propose ideas of new products and services; the company was able to differentiate from competitors by

pioneering services like 1-Click, Amazon Prime, Amazon Web Services, and goods like Amazon Echo;

along with the obsession over customer and low-prices strategies the company was able to rapidly grow

market standing and reputation.

✓ Global strategy: Amazon’s fast growth has been due to capturing successfully new markets, soon after

opening in 1995; today the company has a physical presence in about 14 countries and ships in over 100

countries.

Weaknesses:

✓ Product failures: Jeff Bezos named Amazon, the best place in the world to fail; over the years the company:

Amazon Dash, Tap, Instant pick up, Amazon Destinations

✓ Few physical stores: Amazon launched their physical store concept, Amazon GO, where the customers do

not go through a register; right now, there are only 25 stores in Seattle, San Francisco, New York and

Chicago (Our Stores).

✓ Low profit margins: Amazon operates at low profit margins, especially since the introduction of Amazon

Prime, basing its profit in high-volume sales.

Opportunities:

✓ Expand physical stores in US and globally: with only 25 stores, Amazon has an incredible opportunity to

expand this concept, especially in the emerging market.

✓ Develop its own line of products such as Amazon Basics as to not rely heavily on third-party sellers.

Threats:

✓ Intense competition: a high number of both physical and e-commerce stores is threatening Amazon’s market

share and alliances it has made.

✓ Government regulation: Amazon faces not only political risks especially in emerging markets, but also ever

evolving regulations, such as taxes and privacy laws.

✓ Cybercrime: the mostly online business model is heavily threatened by hacking and identity thefts; systems

must always improve to maintain customer privacy and security.

Value chain analysis

Primary Activites:

Supply chain & Distribution– one of the key factors for success of Amazon are the third-party sellers who

amounted 58% of the company’s revenues; the concept Fulfillment by Amazon (FBA), over 175 fulfillment

centers and a strong delivery network owned and contracted, Amazon meets the 2-day prime shipping; in

2018 it was estimated around 124 million square feet of active space; in the last few years Amazon worked

towards Amazon Flex concept, a step towards owning the delivery services instead of relying on UPS.

Operations – efficiency describes the fulfillment centers and the automation by using robotics helps the

company to become increasingly efficient;

Sales & Marketing: Amazon through the customer center obsession relied on word-of-mouth marketing from

existing customers as well as investing $7,233 million in 2016 and $13,814 million in 2018 in Marketing; the

company uses events such as Prime Day, Black Friday and Cyber Monday to heavily discount products as a

marketing strategy.

Service: a customer-centric company, Amazon implemented a generous refund policy and the options to

contact customer service by phone and e-mail .

Secondary Services: R&D, Human Resources and General administration.

The creative part of Amazon has always been its innovative disruptions. The company’s focus on the
customer and what it wants was the perfect and most creative marketing story. It is about scale and
availability, but that wouldn’t have been enough without word-of-mouth marketing due to innovation.
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