A REPORT ON THE

BUSINESS POLICY & STRATEGIC MANAGEMENT OF

AMAZON.com

SUBMITTED BY
APARNA P JAYAN
ROLL NO: 37118021
MBA C BATCH

TABLE OF CONTENTS

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SL. NO TITLE PAGE NO

1 CHAPTER 1 4

1.1 INTRODUCTION 4

1.2 ORGANIZATION PROFILE 4

1.3 ORGANIZATION HISTORY 6

1.4 FORM OF OWNERSHIP 8

1.5 CORPORATE STRUCTURE 9

2 CHAPTER 2 12

2.1 STRATEGIC ELEMENTS 12

2.2 CSR 18

2.3 STRATEGIC ASSESMENT 20

2.4 STRATEGIES ADOPTED 28

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3 CONCLUSION 32

List of Charts, Graphs and Tables

SL. NO TITLE PAGE NO

1 Jeff Bezos’s tissue paper doodle. 5

2 Top 10 owners of Amazon 10

3 IFE Matrix 20

4 EFE Matrix 21

5 SWOT Analysis 25

6 Competitive Advantage 27

7 Amazon’s acquisition timeline 30

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 CHAPTER 1
1.1 INTRODUCTION
Amazon is the world’s largest online retailer and is indeed a pioneer in the online retailing space.
Though it started as an online bookstore, its success in its venture spurred it to diversify into
selling anything that can be sold online. Further, Amazon has also expanded globally and now
operates around the world through a combination of localized portals and globalized delivery and
logistics platforms. The way in which Amazon has leveraged technology as a source of
competitive advantage and reaped the benefits of the economies of scale in addition to leveraging
the synergies between its internal resources and external drivers has spawned many rivals who
aim to imitate and better its business model.

1.2 ORGANIZATION PROFILE

1.2.1 About Amazon.com, Inc.

Amazon.com began as Earth's biggest bookstore, but has become Earth's biggest everything
store. Its website still offers millions of books, as well as other media, home furnishings,
clothing, pet supplies, office products, and hundreds of other product categories (with items often
ordered and delivered the same day). The company is also the dominant cloud services provider
(through Amazon Web Services, or AWS), an influential entertainment company through its
video streaming operations, a force to be reckoned with in grocery with its ownership of natural
foods chain Whole Foods, and a leader in digital personal assistant devices with Alexa and its
Echo product line.

1.2.2 Operations

Amazon.com organizes reporting of its operations into three segments: North America (about
60% of revenue), International (nearly 30%), and Amazon Web Services (AWS, about 10%). Its
North America segment includes retail sales and subscriptions sold via North American-focused
websites, as well as through Whole Foods grocery stores, while the International segment
includes the operations of internationally-focused websites such as Amazon sites serving the
UK, Brazil, Japan, and other countries. AWS includes global revenue from its cloud, storage,
database, and other services. Stepping back from the geographic reporting, online sales,
including products sold on behalf of third-parties, account for about 70% of Amazon's total
revenue. Whole Foods physical stores generate just under 10% of revenue, with the company's
subscription services -- annual and monthly fees associated with Amazon Prime membership, as
well as audiobook, e-book, digital video, digital music, and other services -- contributing about
5%.

1.2.3 Geographic Reach

The US is by far Seattle-based Amazon.com's largest market by sales (about 70%), with
Germany, the UK, and Japan the top three international markets. The company has a host of
fulfillment, delivery, data, and other facilities in North America, Europe, and Asia.

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1.2.4 Sales and Marketing

Amazon.com serves consumers through its online and physical stores. Its AWS segment targets
businesses of all sizes, government agencies, schools, and other entities; customers include
General Electric, Kellogg's, Hess, CapitalOne, and Workday.

1.2.5. Financial Performance

It is a bit of an understatement to call Amazon.com's recent revenue growth strong. Amid a boon
in online shopping, the company's sales have rocketed more than 160% since 2014. Net income
had been slightly more volatile amid heavy investments, but that figure has exploded in the past
three years. After a 31% jump in revenue in 2017, the company reported another 31% increase in
2018 to $232.9 billion. All three segments grew that year, with North America adding about $35
billion in new revenue from increased unit sales and a full year's ownership of Whole Foods.
AWS continues to be the fastest-growing segment with a growth rate of 47%. Amazon posted
record net income for the third consecutive year with profit of $10.1 billion, up from $3 billion
the prior year. The strong performance is powered by the high margins of AWS, which had
operating income of $7.3 billion in 2018, slightly higher than profit from the much larger North
America segment and more than enough to offset a $2.1 billion loss from the International
segment, where Amazon is investing in its fulfillment network and technology. Cash at the end
of 2018 was about $32.2 billion, an increase of $10.3 billion from the prior year. Cash from
operations contributed $30.7 billion to the coffers, while investing activities used $12.4 billion,
mainly for property and equipment. Financing activities used another $7.7 billion as Amazon
made principal repayments of capital lease obligations.

1.2.6 Strategy

Amazon.com's strategy seems simply to be more. More industries, more products, more services,
more (and faster) delivery options that lead to more customers, more revenue, and more profit.
Perhaps most important is more information. Amazon uses artificial intelligence throughout its
systems to collect data on how the systems are used and how they can be improved. The
information is also used to improve the customer experience. Machine learning drives the
company's algorithms for demand forecasting, product search ranking, product and deals
recommendations, merchandising placements, fraud detection, translations, and more. Visible
applications are autonomous drone delivery, the Alexa digital assistant, and AWS.

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 Amazon also wants to make it easier to consumers to buy products from it. Its $119-a-year
Prime service provides free two-day delivery as well as next day delivery when products are
stocked in a nearby fulfillment center. Owners of the Echo products can order products through
Alexa. To get shipment to customers faster, Amazon has been on a fulfillment center building
binge. The company also offers same-day delivery for some products in some cities for a price.
Amazon has ventured into brick-and-mortar locations too, primarily with the purchase of Whole
Foods. Operating some 500 grocery stores not only gives the company a foothold in the huge US
grocery market, but furthers its overall fulfillment strategy, allowing more same-day delivery and
pickup in more markets. In early 2019 Amazon announced plans to close its nearly 90 pop-up
stores as it rethinks its physical stores strategy; reports indicate it invest even more in physical
stores such as bigger Amazon-branded stores and possibly a new sister grocery chain for Whole
Foods. AWS has been Amazon's turbocharged growth engine, attracting customers that range
from startups that need minimal amounts of computing power to companies like Netflix that
stream millions of hours of video a day around the world from AWS servers. Following the
Amazon philosophy, AWS continues to add functionality and reduce prices to attract more users
and figure out how to run more efficiently to make it work financially. Lastly, the company is
making moves into the health care industry. In 2018 it announced plans for a health care alliance
with Berkshire Hathaway and JPMorgan Chase (details are sparse, although 2019 saw the
announcement of a name: Haven). Amazon is also bulking up its medical supplies inventory as it
looks to better serve hospitals and other medical facilities through its business-to-business
offering.

1.2.7 Mergers and Acquisitions

One of the ways Amazon has achieved unprecedented growth and moved into new areas is
through acquisitions. In 2019 Amazon agreed to buy eero, a company that makes devices to
blanket a home with Wi-Fi signals, for an undisclosed amount. The deal could help Amazon in
its quest to put devices like its Echo digital assistant, Ring doorbells, and Blink security
systems in customers' homes. The routers made by euro could ensure that voice-enabled
assistants would work throughout a house, allowing the residents to turn lights and appliances on
and off with voice commands. In 2018 Amazon bought PillPack, an online pharmacy, for a
reported $1 billion. PillPack ships medications in pre-sorted dose packaging, coordinates refills
and renewals, and ensures timely shipments.  The company has pharmacy licenses throughout
the US and is authorized to deliver in 49 states and is an in-network pharmacy for major
Medicare Part D plans. The purchase adds a valuable consumer category to Amazon's warehouse
of goods and increases its presence in health care. Amazon broke into the grocery business by
buying Whole Foods Market for $13.7 billion in August 2017. The deal is a long-term bet by
Amazon on a brick-and-mortar business. While the grocery business is a big part of the US
economy, it remains a small percentage of online sales.

1.2.8 Company Background

Jeff Bezos founded Amazon.com in 1994. After months of preparation, he launched a website in
July 1995 (Douglas Hofstadter's Fluid Concepts and Creative Analogies was its first book sale);
it had sales of $20,000 a week by September. Bezos and his team kept working with the site,
pioneering features that now seem mundane, such as one-click shopping, customer reviews, and
e-mail order verification. Amazon went public in 1997.

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1.3 HISTORY
Jeff Bezos founded Amazon in July 1994. He chose Seattle because of technical talent
as Microsoft is located there. In May 1997, the organization went public. The company began
selling music and videos in 1998, at which time it began operations internationally by acquiring
online sellers of books in United Kingdom and Germany. The following year, the organization
also sold video games, consumer electronics, home-improvement items, software, games, and
toys in addition to other items.
In 2002, the corporation started Amazon Web Services (AWS), which provided data on Web site
popularity, Internet traffic patterns and other statistics for marketers and developers. In 2006, the
organization grew its AWS portfolio when Elastic Compute Cloud (EC2), which rents computer
processing power as well as Simple Storage Service (S3), which rents data storage via the
Internet, was made available. That same year, the company started Fulfillment by
Amazon which managed the inventory of individuals and small companies selling their
belongings through the company internet site. In 2012, Amazon bought Kiva Systems to
automate its inventory-management business, purchasing Whole Foods Market supermarket
chain five years later in 2017.
1.3.1 E-tail expansion

Bezos had chosen books as his diving board from a list of several promising e-marketing
products, including compact discs, computer hardware, computer software and videos. In the
long run Amazon would go on to include all of these and more to its product line-up. The
company currently sells everything from apparel, baby products, grocery add health & personal-
care items, to musical instruments, sporting goods and even toys. The diversification of its
products came partly through acquisitions and partly via forays. Amazon Fresh and vine are
prominent instances in the latter category.

1.3.2 Acquisition binge

Within four years of its start, Amazon was acquiring major internet domains, such as the Internet
Movie Database (IMDb) and PlanetAll. In the years to come, it would go on to acquire a vast
range of e-commerce sites, e-book developers and music and movie databases, such as the
Chinese e-commerce site Joyo.com (2004); e-book software developers Mobipocket.com 
and Bookfinder.com (2008); rival e-book readers Stanza (2009), Woot (2010), Goodreads
(2013); and Double Helix games and comiXology (both 2014).

1.3.3 Digital diversification

While Amazon had been enabling customers to donate and buy digital content with its Honor
system since 2001, it launched its first major digital content store in the form of Amazon Music
in September 2007, selling downloads exclusively in the MP3 format without digital rights
management. This was also the year of Kindle and the Amazon’s e-book library. By 2010,
Amazon was claiming that its e-books sold more than hardcover books

1.3.4 Readers and speakers

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Amazon’s range of consumer electronics is of course headed by its e-book reader Kindle. The
Amazon Kindle enables users to shop for download, browse, and read e-books, newspapers,
magazines, and (more recently) play games and watch movies. The new kid on the block,
however, is Amazon’s coming voice assistant and Bluetooth loudspeaker, the Echo. While the
device had been available to select Amazon users on an invitation-only basis since last
November, the e-tail major would ship it widely starting next week. Built to respond to voice
commands, it can answer fact-based questions, play music and podcasts, and even stream albums
from services like Spotify and Pandora.

1.4 FORM OF OWNERSHIP

1.4.1 Merchant Ownership
In 2000, U.S. toy retailer Toys "R" Us entered into a 10-year agreement with Amazon, valued at
$50 million per year plus a cut of sales, under which Toys "R" Us would be the exclusive
supplier of toys and baby products on the service, and the chain's website would redirect to
Amazon's Toys & Games category. In 2004, Toys "R" Us sued Amazon, claiming that because
of a perceived lack of variety in Toys "R" Us stock, Amazon had knowingly allowed third-party
sellers to offer items on the service in categories that Toys "R" Us had been granted exclusivity.
In 2006, a court ruled in favor of Toys "R" Us, giving it the right to unwind its agreement with
Amazon and establish its own independent e-commerce website. The company was later
awarded $51 million in damages. In 2001, Amazon entered into a similar agreement
with Borders Group, under which Amazon would comanage Borders.com as a co-branded
service.  Borders pulled out of the arrangement in 2007, with plans to also launch its own online
store. On October 18, 2011, Amazon.com announced a partnership with DC Comics for the
exclusive digital rights to many popular comics, including Superman, Batman, Green
Lantern, The Sandman, and Watchmen. The partnership has caused well-known bookstores like
Barnes & Noble to remove these titles from their shelves. In November 2013, Amazon
announced a partnership with the United States Postal Service to begin delivering orders on
Sundays. The service, included in Amazon's standard shipping rates, initiated in metropolitan
areas of Los Angeles and New York because of the high-volume and inability to deliver in a
timely way, with plans to expand into Dallas, Houston, New Orleans and Phoenix by 2014. In
June 2017, Nike confirmed a "pilot" partnership with Amazon to sell goods directly on the
platform. As of October 11, 2017, AmazonFresh sold a range of Booths branded products for
home delivery in selected areas. In September 2017, Amazon ventured with one of its sellers JV
Appario Retail owned by Patni Group which has recorded a total income of US$ 104.44 million
(₹ 759 crore) in financial year 2017–18. In November 2018, Amazon reached an agreement
with Apple Inc. to sell selected products through the service, via the company and selected Apple
Authorized Resellers. As a result of this partnership, only Apple Authorized Resellers may sell
Apple products on Amazon effective January 4, 2019

1.4.2 Top 10 Owners of Amazon.com Inc.

Shares Shares Total
Stockholder Stake owned Total value ($) bought / sold change

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The Vanguard Group, Inc. 6.32% 31,343,562 62,960,439,861 +188,523 +0.61%

BlackRock Fund Advisors 3.57% 17,675,174 35,504,475,517 +96,913 +0.55%

SSgA Funds Management, Inc. 3.41% 16,906,057 33,959,534,817 +200,105 +1.20%

Fidelity Management & Research Co... 3.03% 15,029,728 30,190,515,228 -1,047,056 -6.51%

T. Rowe Price Associates, Inc. (I... 3.03% 15,000,013 30,130,826,113 -638,035 -4.08%

Geode Capital Management LLC 1.19% 5,901,043 11,853,543,095 +188,730 +3.30%

Northern Trust Investments, Inc.(... 0.98% 4,842,269 9,726,762,586 -10,515 -0.22%

Baillie Gifford & Co. 0.91% 4,493,110 9,025,399,919 +56,178 +1.27%

Norges Bank Investment Management 0.88% 4,347,574 8,733,058,845 +300,693 +7.43%

Capital Research & Management Co.... 0.87% 4,287,220 8,611,824,558 +50,365 +1.19%

1.5 CORPORATE STRUCTURE

Amazon.com Inc.’s corporate structure enables extensive control on global e-commerce
operations. An organizational or corporate structure establishes the design and system of
interactions among members of the firm. For example, Amazon’s corporate structure determines
how managers direct and influence operational activities in various business areas. As a leading
online retail business, Amazon.com must maintain an organizational structure that adequately
supports its expanding market reach. An evolving corporate structure also benefits Amazon as
the company adds more products and gradually diversifies its business. The design of this
structure complements the technological foundation of the business. Such complementation
makes Amazon’s corporate structure a determining factor in the company’s ability to withstand
the effects of competitors, such as Walmart, Apple, Google, Microsoft, and many other
businesses with online and non-online operations. Considering the aggressiveness of
competition, it is essential that structural characteristics strengthen the company to ensure
continuing e-commerce success. Amazon’s organizational structure enables managerial control.
Strategic management initiatives are comprehensively implemented through such control. The
characteristics of this structure also provide support necessary for Amazon.com Inc.’s new
product launches in the e-commerce market, as the corporation diversifies its operations. Future

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elements of the corporate structure are expected to capture business necessities based on new
organizational components that represent a more diversified corporation.

1.5.1 Features of Amazon.com’s Corporate Structure

Amazon.com Inc. has a functional organizational structure. This structure focuses on business

functions as bases for determining the interactions among components of the organization. The
following characteristics are the most significant in Amazon’s corporate structure:

1.5.1.1 Global Function-Based Groups.

Function-based groups are the strongest characteristic of Amazon’s organizational structure.

Each major business function has a dedicated group or team, along with a senior manager. The
strategic objective in having this structural characteristic is to enable Amazon.com to facilitate
successful e-commerce operations management throughout the entire organization. Considering
its ongoing global expansion, the company grows through this feature of the corporate structure
in terms of ease of establishing operations in new markets, as shown in Amazon.com Inc.’s
Generic & Intensive Growth Strategies. The following are the major function-based groups in
Amazon’s organizational structure:

● Office of the CEO

● Business Development
● Amazon Web Services (AWS)
● Finance
● International Consumer Business
● Accounting
● Consumer Business
● Legal and Secretariat

1.5.1.2 Global Hierarchy.

Hierarchy is a traditional organizational structural characteristic. In the case of Amazon.com

Inc., such characteristic is expressed in terms of a global system of vertical lines of command
and authority that influence the online retail firm. For example, senior managers’ directives are
applied throughout the organization, affecting all relevant offices of the company worldwide.
The strategic objective of this feature of the corporate structure is to facilitate managerial control
of Amazon’s entire organization.

1.5.1.3 Geographic Divisions

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Amazon’s organizational structure also involves geographic divisions. In this structural
characteristic, groups are based on geographic regions and related business goals. For example,
Amazon.com Inc. uses geographic divisions to make it easier to manage the e-commerce
business based on economic conditions of certain regions. The strategic objective in having this
characteristic of the organizational structure is to enable the company to address issues or
concerns relevant to each geographic region, considering differences among regional markets.
Amazon has a simple approach for this structural feature, involving the following geographic
divisions in its operations:

● North America
● International

1.5.2 Amazon.com’s Corporate Structure Advantages & Disadvantages

Amazon’s corporate structure is effective in supporting international growth in the e-commerce

market. The company’s continuing success in expanding its business is an indicator of the
suitability of this organizational structure. An advantage of function-based groups and hierarchy
is that they enable Amazon.com Inc. to rapidly and effectively implement managerial directives.
Also, geographic divisions are advantageous in supporting focus on online retail market concerns
and related economic conditions in certain regions, such as North America.

A disadvantage of this organizational structure is that it has limited flexibility and

responsiveness. The dominance of the global function-based groups and global hierarchy
characteristics reduces the capacity of Amazon to rapidly respond to new issues and problems
encountered in the e-commerce business. Thus, a recommendation is for the company to
consider reducing the dominance of these structural characteristics.

CHAPTER 2

2.1 STRATEGIC ELEMEMTS

2.1.1 VISION
The mission statement of Amazon.com has always centered around its primary focus—the online
Amazon.com customer.  Since it began in 1994, Amazon.com has had a clear focus and a
solitary mission. Founder Jeff Bezos has publicly referred to the Amazon.com mission statement
as the guiding force behind his leadership decisions many times in the company's history. It can
be concluded that the success of Amazon.com as the top internet retailing company in the world

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is due at least in part to its unwavering commitment to this mission and the daily execution of it.
The vision of Amazon.com is:

“Our vision is to be earth's most customer-centric company; to build a place where people can
come to find and discover anything they might want to buy online.”
This vision statement underscores the business organization’s main aim of becoming the best e-
commerce company in the world. In this regard, the following characteristics are identifiable in
Amazon’s corporate vision statement:

1. Global reach 2. Customer-centric approach 3. Widest selection of products

The “global reach” component of Amazon.com Inc.’s vision statement is all about international
leadership in the e-commerce market. For example, in stating the “Earth” as the market, the
company shows that it aims to continue expanding globally. Thus, a corresponding strategic
objective is global expansion, especially through market penetration and market development,
which are included in Amazon.com Inc.’s generic strategy and intensive growth strategies. The
customer-centric approach in Amazon’s corporate vision statement shows that the company
considers customers as among the most important stakeholders in the online retail business. This
consideration agrees with Amazon.com Inc.’s corporate social responsibility strategy for its
stakeholders. Moreover, the corporate vision indicates continuing efforts to broaden the product
mix. These efforts contribute to business growth and to making the company’s services more
attractive to target consumers.

2.1.2 MISSION

Amazon’s mission statement is “We strive to offer our customers the lowest possible prices, the
best available selection, and the utmost convenience.” This corporate mission promises
attractive e-commerce services to satisfy target customers’ needs. The company focuses on the
variables of price, selection, and convenience. In this regard, the following characteristics are
identifiable in Amazon’s corporate mission statement:

1. Lowest prices 2. Best selection 3. Utmost convenience

The “lowest prices” component of the mission statement guides the pricing strategies included
in Amazon.com Inc.’s marketing mix or 4P. Low prices are a selling point that makes the
company’s e-commerce website and services attractive. A corresponding strategic objective is to
reduce operational costs to enable the business to minimize prices. Amazon’s corporate mission
statement also points to having the best selection. For example, the wide array of products on the
company’s website is a factor that attracts customers. Moreover, Amazon.com Inc.’s corporate
mission emphasizes convenience, such as in accessing the company’s products via the Internet.
This characteristic is a response to consumers’ use of “convenience” as a criterion when
evaluating the quality and attractiveness of online retail services.
2.1.3 LONG TERM OBJECTIVE

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Amazon.com is the largest online retailer in the US, it’s a definite leader of web commerce trade
category. The major focus of Amazon’s business strategy is customers’ satisfaction. People may
find and order virtually anything they search for. The most attractive sides of Amazon’s business
strategy are low prices, vast selection, and of course absolute convenience for the consumer.
Therefore, thanks to these strong sides and advantages for the world audience, the company
continues to evolve as a world-class web commerce giant. Currently, this company has a
different websites for such countries as UK, Canada, France, Germany, Italy, Japan, and China.
It should be emphasized that despite the high level of diversity, the company has kept its strong
brand name. Taking into account the mentioned above information, I would recommend
Amazon using the following corporate strategies for next five years of operations: concentrated
growth, markets and product’s development and innovation.

The long term objectives of Amazon.com:

– Satisfaction of the existing customers and attracting the new customers. The customers are
divided into three groups: consumers, sellers and enterprises. The strategic advantages of the
company for the customer are: selection, price, and convenience.

– The increasing of the market share and growth of the revenue by: improving and
diversification of Amazon services; introducing other marketing and promotional services, such
as online advertising, and co-branded credit card agreements; developing Amazon Web Services
(access to technology infrastructure that developers can use to enable virtually various type of
business). Current sales of Amazon consist of 55.4%, that are made in the North America and
44.6% of sales is made by the international market.Other business objectives of Amazon.com
include:

– Introducing innovations and developing new acquisitions

– Developing the international markets
– Development of the relations with partnering companies.

2.1.4 STRATEGIES

2.1.4.1 Amazon Focuses On the Long Term Not the Short Term
“We are comfortable planting seeds and waiting for them to grow into trees,” says Bezos. “We
don’t focus on the optics of the next quarter; we focus on what is going to be good for customers.
I think this aspect of our culture is rare.” A perfect example of the long-term focus is Amazon
Web Services (AWS) and how it started with startups and developers and has now expanded to

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millions of customers.  Companies of all sizes use AWS such as Pinterest, Airbnb, GE, Capital
One, Johnson & Johnson, McDonald's and Time Inc. 
 2.1.4.2 Amazon Builds Its Strategies on Things That Don't Change
"Base your strategy on things that won’t change....Whereas if you base your strategy first and
foremost on more transitory things—who your competitors are, what kind of technologies are
available, and so on—those things are going to change so rapidly that you’re going to have to
change your strategy very rapidly, too." Bezos notes customers want "selection, low prices, and
fast delivery".  He shares how these three desires of the consumer are likely not going to
change.  
2.1.4.3 Amazon Sees Opportunities and Not Failures
Instead of focusing on setbacks, Jeff Bezos the founder of Amazon sees opportunities and
solutions. This is evident in how Bezos talks about failure and planting seeds. "If you invent
frequently and are willing to fail, then you never get to that point where you really need to bet
the whole company. Amazon Web Services also started about six or seven years ago. We are
planting more seeds right now, and it is too early to talk about them, but we are going to continue
to plant seeds. And I can guarantee you that everything we do will not work. And, I am never
concerned about that. We are stubborn on vision. We are flexible on details."  Bezos made risky
moves early on in the establishment of Amazon that helped in the long-run.  It is noted that
Bezos invested in warehouses, which caused the stock prices to drop significantly at first, but
this contributed to their journey to become the leader in online retailing. 
2.1.4.4 Amazon Has Strong Values & Company Culture
The values of Amazon have impacted their leadership and success in Online Retailing.  The
website lists Amazon's principles and values for working at the company and they are listed
below: 

● Customer Obsession (Starting with the customer)

● Ownership (Looking at the long-term results and what is the best for the company)
● Invent and Simplify (Expect innovation from the team)
● Are Right, A Lot (Have good instinct, strong business judgment) 
● Hire and Develop the Best (Leaders develop leaders, hiring exceptional talent)
● Insist on the Highest Standards (Raising the bar, ensuring high quality)
● Think Big (bold direction, thinking differently)
● Bias for Action (Speed, and calculated risk-taking)
● Frugality ("There are no extra points for growing headcount, budget size, or fixed expense")
● Learn and Be Curious (Always exploring and improving)
● Earn Trust ("Leaders listen attentively, speak candidly, and treat others respectfully")
● Dive Deep (Look at details, audit regularly, work at all levels)
● Have Backbone; Disagree and Commit (Respectfully challenge others, don't compromise for
social cohesion)
● Deliver Results (Timely fashion, deliver quality)

2.1.4.5 Amazon Stresses the Importance of Customer Satisfaction Instead Of the

Competitor
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"If you're competitor-focused, you have to wait until there is a competitor doing something.
Being customer-focused allows you to be more pioneering." 
"Each year the University of Michigan calculates a customer-satisfaction index for 225 of
America’s largest companies. Amazon has led the online retailing category for years and has
repeatedly placed in the top 10 among all companies." 
Bezos adopted an approach to help never lose the importance of customer satisfaction and
Amazon narrows in on eliminating the risk of unsatisfied customers. As you can see from the
quotes above, Amazon walks the talk in being successful in maintaining customer satisfaction
(See Michigan Study for further details). Amazon strives for excellence in customer satisfaction,
perhaps one could say a strive for perfection. Bezos states that “We’re not satisfied until it’s
100%.” It is noted that Bezos would have an empty chair to remind staff in the meeting to
imagine a customer present and to consider what they would want.  He called the customers "the
most important person in the room. Bezos describes the importance of knowing your customer
and things that will not change.  He notes customers want "selection, low prices, and fast
delivery." He shares how these three consumer desires are likely not going to change.  
2.1.4.6 Amazon Achieves Excellent Customer Satisfaction by Offering an Ever Expanding
and Large Selection of Products and a Personalized Experience
Amazon focuses on customer service and waits to see where opportunities present to sell them
personalized products. "We’ve had three big ideas at Amazon that we’ve stuck with for 18 years,
and they’re the reason we’re successful: Put the customer first. Invent. And be patient."  Amazon
observes the actual purchase behavior of the customer. They take an individual approach to each
customer. They are noted to target middle and upper-class customers that are comfortable with
basic technology and look to save time by purchasing online. 6 Amazon implements customer
reviews and showcases items that would be personalized for the customer based on their
previous purchase behavior. 

2.1.5 POLICIES

2.1.5.1 Insider Trading Policy

Federal and state laws prohibit trading in securities by persons who have material information
that is not generally known or available to the public. Employees of the Company may not a)
trade in stock or other securities while in possession of material nonpublic information or b) pass
on material nonpublic information to others without express authorization by the Company or
recommend to others that they trade in stock or other securities based on material nonpublic
information. The Company has adopted guidelines designed to implement this policy.

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All employees are expected to review and follow the Amazon.com Insider Trading Guidelines.
Certain employees must comply with trading windows and/or preclearance requirements when
they trade Amazon.com securities.

2.1.5.2 Discrimination and Harassment

Amazon.com provides equal opportunity in all aspects of employment and will not tolerate any
illegal discrimination or harassment of any kind. For more information, see the Amazon.com
policies on Equal Employment Opportunity

2.1.5.3 Health and Safety

Amazon.com provides a clean, safe and healthy work environment. Each employee has
responsibility for maintaining a safe and healthy workplace by following safety and health rules
and practices and reporting accidents, injuries and unsafe conditions, procedures, or behaviors.
Violence and threatening behavior are not permitted. Employees must report to work in a
condition to perform their duties, free from the influence of illegal drugs or alcohol.

2.1.5.4 Price Fixing

Employees may not discuss prices or make any formal or informal agreement with any
competitor regarding prices, discounts, business terms, or the market segments and channels in
which the Company competes, where the purpose or result of such discussion or agreement
would be inconsistent with applicable antitrust laws. If you have any questions about this section
or the applicable antitrust laws, please contact the Legal Department.

2.1.5.5 Bribery; Payments to Government Personnel

Employees may not bribe anyone for any reason, whether in dealings with governments or the
private sector. The U.S. Foreign Corrupt Practices Act, and similar laws in other countries,
prohibit offering or giving anything of value, directly or indirectly, to government officials in
order to obtain or retain business. Employees may not make illegal payments to government
officials themselves or through a third party. Employees who are conducting business with the
government officials of any country must contact the Legal Department for guidance on the law
governing payments and gifts to governmental officials

2.1.5.6 Recordkeeping, Reporting, and Financial Integrity

Amazon.com's books, records, accounts and financial statements must be maintained in

appropriate detail, must properly reflect the Company's transactions and must conform both to
applicable law and to the Company's system of internal controls. Further, Amazon.com's public
financial reports must contain full, fair, accurate, timely and understandable disclosure as
required by law. The Company's financial, accounting and legal groups are responsible for
procedures designed to assure proper internal and disclosure controls, and all employees should
cooperate with these procedures.

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2.1.5.7 Questions; Reporting Violations

Employees should speak with anyone in their management chain or the Legal Department when
they have a question about the application of the Code of Conduct or when in doubt about how to
properly act in a particular situation. The Amazon.com Legal Department has developed and
maintains reporting guidelines for employees who wish to report violations of the Code of
Conduct. These guidelines include information on making reports to the Legal Department and
to an independent third party. Please see the reporting guidelines for information and
instructions. Amazon.com will not allow retaliation against an employee for reporting
misconduct by others in good faith. Employees must cooperate in internal investigations of
potential or alleged misconduct. Employees who violate the Code of Conduct will be subject to
disciplinary action up to and including discharge

2.1.5.8. Board of Directors

With respect to their service on behalf of the Company, Amazon.com's Board of Directors must
comply with the relevant provisions of this Code of Conduct, including conflicts of interest,
insider trading and compliance with all applicable laws, rules and regulations

2.1.5.9 Conflicts of Interest

In performing their job duties, employees are expected to use their judgment to act, at all times
and in all ways, in the best interests of Amazon.com. A "conflict of interest" exists when an
employee's personal interest interferes with the best interests of Amazon.com. For example, a
conflict of interest may occur when an employee or a family member receives a personal benefit
as a result of the employee's position with Amazon.com. A conflict of interest may also arise
from an employee's business or personal relationship with a customer, supplier, competitor,
business partner, or other employee, if that relationship impairs the employee's objective
business judgment. Because an employee's receipt of gifts or services could create a conflict of
interest, the Legal Department will develop and maintain guidelines for disclosure of gifts or
services received from customers, suppliers, competitors or business partners. Employees should
attempt to avoid conflicts of interest and employees who believe a conflict of interest may exist
should promptly notify the Legal Department. The Legal Department will consider the facts and
circumstances of the situation to decide whether corrective or mitigating action is appropriate.

2.2 CORPORATE SOCIAL RESPONSIBILITY

2.2.1 CSR ACTIVITIES

Amazon.com, Inc.’s ability to satisfy stakeholders supports organizational growth in the e-

commerce industry. In Archie Carroll’s model of corporate social responsibility (CSR),
stakeholders are individuals or groups linked to the organization based on their stake in what the
business does. The company affects its stakeholders, and vice versa. In the case of Amazon,

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stakeholders have widely varying interests, considering the global reach of the organization. This
condition requires a broad scope for the company’s corporate social responsibility strategy,
policies and programs. Satisfying stakeholders’ interests helps maintain Amazon’s market
position as the leading online retail company in the world. Amazon must respond to
stakeholders’ interests through a comprehensive corporate social responsibility (CSR) strategy.
While its CSR programs and policies evolve, Amazon.com Inc. needs to improve its efforts to
satisfy the changing interests and expectations of stakeholders in the global e-commerce
industry. Amazon.com Inc. maintains corporate social responsibility initiatives to target the
interests of its main stakeholder groups. In general, the e-commerce organization experiences
pressure from a variety of stakeholders and their interests. Nonetheless, Amazon’s corporate
social responsibility programs are designed to address and satisfy the interests of the following
stakeholder groups, arranged according to significance: -Customers (most important)
-Employees -Communities

2.2.1.1 CUSTOMERS

Amazon’s corporate social responsibility strategy gives the highest priority to customers as the
most important stakeholder group. The company considers customers as the primary determinant
of its e-commerce business success, especially because these stakeholders significantly affect
revenues. Such prioritization agrees with Amazon’s mission statement and vision statement,
which highlight the centrality of customers in the business and its development. The interests of
these stakeholders are fair pricing, convenience of service, and online security in transacting with
the company. Amazon satisfies all of these interests through emphasis on service and
technology. For example, the company uses advanced information and communication
technologies for secure transactions and for efficient purchase and delivery processes. Amazon
employees are also trained to maximize the benefits of these technologies and to ensure customer
convenience. In addition, fair pricing is maintained through competition among sellers on the
company’s online retail website and through the market-based pricing strategy. Thus, Amazon’s
corporate social responsibility approach effectively addresses the interests of customers as the
primary stakeholder group.

2.2.1.2 EMPLOYEES

Amazon.com Inc. values employees as significant determinants of organizational performance

and corporate social responsibility policies and programs. This stakeholder group is interested in
competitive compensation and career development. Employees are important because they
support competitive advantage based on Amazon’s organizational culture. The company’s
human resources facilitate the development of new ideas to increase business efficiency.
Amazon satisfies the interests of these stakeholders through leadership development and an
appropriate compensation policy based on the organization’s high growth potential. For example,
the company provides high compensation, especially for IT personnel directly involved in
developing and maintaining the technology assets of the e-commerce business. Amazon’s
continuing growth and global expansion also creates career advancement opportunities for
employees, especially in leadership and management positions. Thus, competitive compensation

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and organizational cultural support are the main thrusts in Amazon’s corporate social
responsibility strategy to address the interests of this stakeholder group.

2.2.1.3 COMMUNITY

Amazon maintains a corporate social responsibility program for communities. These

stakeholders are significant because they influence consumer perception on the company’s goods
and services. The interests of communities include development support, such as through
education, healthcare and environmental conservation. The company addresses these interests
mainly through its primary community support arm, Amazon Smile. For example, through
Amazon Smile, a percentage of sales revenues are donated to customers’ chosen charitable
organizations. This approach enables the broad reach of Amazon’s corporate social responsibility
strategy in satisfying the interests of communities as a significant stakeholder group in the online
retail business.

2.2.1.4 STAKEHOLDERS

Amazon.com Inc. integrates stakeholders’ interests in its corporate social responsibility (CSR)
strategy. The company considers these interests as significant influences on the e-commerce
business. Such strategy supports Amazon’s mission and vision, which affect organizational
development. It is appropriate for the company to prioritize customers as the primary stakeholder
group, considering the online retail nature of the business. The inclusion of employees and
communities is one of the strengths of the strategy. The company’s corporate social
responsibility approach is also flexible because customers are free to choose their charitable
organizations through Amazon Smile. However, the interests of governments and investors as
stakeholders are not clearly included in the strategy. For example, Amazon’s corporate social
responsibility efforts must consider investors’ interests on the financial performance of the e-
commerce business. The company must also address governmental interests regarding consumer
protection and international retail. These considerations show that Amazon’s corporate social
responsibility strategy is satisfactory, but has room for improvement.

2.3 STRATEGIC ASSESMENT

2.3.1 Internal Factor Evaluation Matrix

Internal factors evaluation matrix (IFE) is a tool that uses internal audit’s report to analyze a
firm’s internal strengths and weaknesses. An IFE matrix gives important information and helps
in strategy formulation. The main strengths of online retail market in which Amazon operates
is the strong brand names and recognition also corporate culture and sales and post sales services
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are of relative importance, too. The major weakness of this industry is the risk associated with
venturing into retailing of products that are unrelated and high shipping cost related to some
products. 

● To create an IFE matrix, List key internal factors as identified in the internal audit
process. Use a total of from ten to twenty internal factors, including both strengths and
weaknesses. List strengths first and then weaknesses. Be as specific as possible, using
percentages, ratios, and comparative numbers.
● Assign a weight that ranges from 0.0 (not important) to 1.0 (all important) to each factor.
The weight assigned to a given factor indicates the relative importance of the factor to
being successful in the firm’s industry. Regardless of whether a key factor is an internal
strength or weakness, factors considered to have the greatest effect on organizational
performance should be assigned the highest weights. The sum of all weights must equal
1.0.
● Assign a 1 to 4 rating to each factor to indicate whether that factor represents a major
weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a

20
 major strength (rating = 4). Note that strengths must receive a 4 or 3 rating and
weaknesses must receive a 1 or 2 rating. Ratings are thus company based, whereas the
weights in Step 2 are industry based.
● Multiply each factor’s weight by its rating to determine a weighted score for each
variable.
● Sum the weighted scores for each variable to determine the total weighted score for the
organization.

2.3.2 EXTERNAL FACTOR EVELUATION MATRIX

Success in business can be divided into two major categories: occasional and sustainable. The
first category includes all successful beginnings in various markets that lead to temporary
success and then to decay. A young, ambitious company has a brilliant, competitive idea that can
be implemented in form of a product/service, for example. They produce this product/service,
reach success, and then have no clear vision of what should be done next. Such lack of
development strategy is the consequence in case time was not spent on the development of
sustainable marketing strategy. Eventually, such companies disappear from the markets. The
second category of success is initially built on the right foundation, so the sustainability of the
successful development is not a surprise for the company’s top managers. This is the difference
between a quick but temporary success without a particular strategy and evolutional
development, according to the appropriate marketing strategy. External influences can be
explained rather simply, as they were described before. Every company operates in the business-
interconnected medium.

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2.3.2.1 Opportunities and Threats

There are no ways to influence the competitors directly in order to gain an advantageous position
in the targeted market segment. The only possible thing to do it is to evaluate the current
competitors’ positions and assess their strong and weak sides. Thus, the company with good
analysts on board will get an opportunity to use such weaknesses of competitors, as the problems
with product quality or lack of appropriate service, as an advantage to gain bigger share on the
market. However, it is very important to recognize potential threats and be ready to deal with
those. Threats can vary from new improved or revolutionary products offered by competitors to
the falling demand on the own products due to the economic situation in the country, for
example. Only timely and adequate reaction to the threats and weaknesses and prospective vision
of opportunities and strengths can make success possible for any company, in any targeted
segment of the market (Ferrell and Hartline). The EFE matrix presents the current situation of
Amazon.com in terms of opportunities and threats the company faces. Thus, the opportunities are
as follows: increasing number of the buyers over the internet; positive dynamics of electronic
book selling business and market; increasing number of internet users worldwide; E-commerce
activities in Asia and the Pacific region; and increasing number of product categories. These
opportunities influence company’s present and the future considering the response of
Amazon.com to each of them. Increasing number of buyers over the internet is one of the most
influential opportunities due to the extensive and steady impact on sales it has. Sales over the

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internet have become a common thing for the past decade, therefore, more and more people
entrust their money to the internet-based companies through electronic payments. The generation
of baby-boomers in the developed countries is being gradually replaced with new progressive
people that see nothing wrong in buying products over the internet. Therefore, it is one of the
opportunities Amazon.com should count on in the next decade, because the number the internet
users will only increase. Positive dynamics of electronic book selling business and market is
another modern trend that can provide Amazon.com with additional sales. Paper books are not
that popular anymore in masses due to the invention of more convenient electronic books that
can contain hundreds and thousands of books in one device. People, however, began paying
more attention to books when the attractiveness of the internet and TV based entertainments
decreased. In other words, people started to read more, therefore, the market of electronic books
increased. Amazon.com and its Kindle brand are the major players on the targeted market, so
growth of the market means increased revenues’ opportunities.

Increasing number of internet users on a worldwide scale may seem similar to the increasing
number of buyers over the internet. However, these terms are different and refer to different
trends. The number of users and buyers over the internet is very different – the first category still
outnumbers the second. The internet access and electronic means providing it become more and
more affordable across the world. Therefore, more and more people become internet users every
day – these users are potential buyers. It is one of the opportunities for Amazon.com to increase
its market share in different markets worldwide, providing reliable and trustworthy services. E-
commerce activities in Asia and the Pacific region are among the most promising opportunities
for Amazon.com due to the size of the Asian market. The Pacific market is more advanced, but it
does not have so many potential customers as the Asian has. China is one of the largest markets
for any company, so the increasing activity of e-commerce companies gives hope for
Amazon.com to get access to more than one billion of potential clients. This opportunity is
controversial because local markets in these regions are rather strong and there are many local
companies providing similar services. However, competition is not a new word for Amazon.com
executives; therefore, it is definitely one of the opportunities.

2.3.4 SWOT ANALYSIS

The Amazon SWOT analysis reveals how the largest online retailer used its competitive
advantages to become the dominant player in the retail industry. It identifies all the key
strengths, weaknesses, opportunities and threats that affect the company the most.

2.3.4.1 Amazon’s Strengths – Internal Strategic Factors

2.3.4.1.1 Strong brand name – As a global e-commerce giant, Amazon has a strong position
and successful brand image in the market.

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2.3.4.1.2 Customer oriented – Amazon caters to a large number of customers for everyday
needs at inexpensive prices. This has made it a customer-oriented brand.

2.3.4.1.3 Differentiation and Innovation – Amazon frequently brings creative ideas

and innovative additions to its product line and service offerings like Witlings Aura Smart Sleep
System.  This creates a differentiation from other companies.

2.3.4.1.4 Cost Leadership – Amazon doesn’t incur costs in maintaining physical retail stores by
selling everything online. With economies of scale, Amazon efficiently controls its costs and
lowers its inventory replenishment time. The company has formed numerous strategic
alliances with many companies like Evi Technologies, Thalmic Labs, Shoefitr, The Orange Chef
etc. It has a strong value chain system which also helps in maintaining a low-cost structure.

2.3.4.1.5 Largest Merchandise Selection – Amazon owns extensive product mix which attracts
online customers to make their majority of purchases from it rather than other online retailers. As
of 2018. Amazon has sold 562.3 million products in its Amazon.com Marketplace. 

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2.3.4.1.6 Large number of third-party sellers – Due to the high traffic volume on Amazon’s
sites, a large number of third-party sellers has joined the platform of Amazon to sell their own
merchandises. The data from Fulfillment by Amazon (FBA) reveals that there are more than 2
billion items available from third-party sellers.

2.3.4.1.7 Go Global and Act Local strategy – This strategy has benefitted Amazon the most.
Amazon develops partnerships with local supply chain companies that help it in competing
against domestic e-commerce rivals. It understands the local needs and launches its services as
per the country’s culture. In India, for example, it has launched a market campaign “Aur Dikhao”
to encourage users to search more of its products.

2.3.4.1.8 Large number of acquisitions – The successful acquisitions of Whole Foods,

Zappos.com, woot.com, Junglee.com, IMBD.com, and many others have produced significant
revenues and profits for Amazon.

2.3.4.1.9 Involved into 3 key businesses – Amazon Marketplace, Amazon Web Services
(AWS), and Amazon Prime are 3 key businesses of Amazon which work and support each other.
As a whole, they generate massive profits and advantages for the company.

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2.3.4.1.10 High revenues in the industry – With over $778.39 billion market capitalization and
above $200 billion annual revenues, Amazon is the market leader with the highest revenues in
the industry.

2.3.4.1.11 Superior logistics and distribution systems – Amazon uses highly efficient logistics
and distribution systems. It even has fixed rates for different delivery time periods. Thus, it
executes reliable, secure, and fast delivery of goods and products to the customers.

2.3.4.2 Amazon’s Weaknesses – Internal Strategic Factors

2.3.4.2.1 Easily imitable business model – Online retail businesses have become quite common
in this digital world. So imitating Amazon’s business model for rival firms is not so difficult. A
few businesses are even giving Amazon a tough time. These include Barnes & Noble, eBay,
Netflix, Hulu, and Oyster etc.

2.3.4.2.2 Losing Margins in Few Areas – In few areas such as India, Amazon has faced losses.
It’s free shipping to customers can be one of the reasons that expose the risks of losing margins
in some markets.

2.3.4.2.3 Product Flops and Failures – Its Fire Phone’s launch in the US was a big failure
while its Kindle fire device didn’t even grow well.

2.3.4.2.4 Tax Avoidance Controversy – Tax avoidance in Japan, UK and US has sparked
negative publicity for Amazon. President Trump has recently criticized Amazon over taxes on
social media network.

2.3.4.2.5 Limited brick-and-mortar presence – Amazon owns very limited physical stores.
This sometimes hinders to attract customers buy things which are not sellable on online stores.

2.3.4.3 Amazon’s Opportunities – External Strategic Factors

2.3.4.3.1 Amazon can gain the opportunity to penetrate or expand its operations in
developing markets.

2.3.4.3.2 By expanding physical stores, Amazon can improve competitiveness against big box
retailers and engage customers with the brand.

2.3.4.3.3 Amazon has the opportunity to improve technological measures and organizational
policies to reduce counterfeit sales. One case of counterfeit sales came into light when Amazon
sold a fake My Critter Catcher. The product was sold for $1 less than the original product.   

2.3.4.3.4 Can do backward Integration by expanding its production of in-house brands such as

Amazon basics to differentiate its offerings and improve profit margins. 

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2.3.4.3.5 More acquisitions of e-commerce companies can increase the company’s market share
and reduce the competition level

2.3.4.4 Amazon’s Threats – External Strategic Factors

2.3.4.4.1 Few controversies have caused a dent in Amazon’s brand image. People critically
reacted and boycotted Amazon sites in 2010 when they found that it’s selling the book “The
Pedophile’s Guide to Love & Pleasure: a Child-lover’s Code of Conduct.”

2.3.4.4.2 Government regulations can also threaten the business proceedings of Amazon in

some critical countries. Amazon does not ship to Cuba, Iran, North Korea, Sudan, and Styria.

2.3.4.4.3 Increasing cybercrime can affect the network security system of the company.

2.3.4.4.4 Aggressive competition with big retail firms like Walmart and eBay can give Amazon
a tough time in the future.

2.3.4.4.5 Imitation is easy as many new entrants are coming up in the market usually with the
same business model of Amazon.

2.3.5 BCG ANALYSIS

When the management wants to examine its product portfolio and differentiate between cost-
effective and unprofitable business units, BCG Matrix is a useful tool to carry out this analysis.
The matrix comprises 4 quadrants, cash cows, stars, question marks and dogs. The identification
of a product in relation to these categories is based on the market share and industry growth
prospects. Amazon.com Inc. has been a part of the online market, using its website to access the
customers across the globe. Currently, the company has divided its operations into three units;
North America, International and Amazon Web Service. The range of products and services
offered by Amazon include merchandise as well as electronic, audio and other forms of content
that is purchased from the vendors and provided to the buyers. The following analysis presents
BCG Matrix of Amazon’s products.

2.3.5.1 Cash Cows

There are some product categories that bring in enough revenue for a business entity to regulate
its operations of different business units. These products are labeled as a cash cow and the
manager’s task is to take leverage of these products and utilize their high market share for
gaining high revenues. The industry is mature enough to support the high sales and the high
consumer demand further facilitates in positioning the product as a cash cow. There are limited
chances of gaining any massive growth in future, however the current profitable position of the
business unit communicates a positive outlook for the company. Amazon has generated a great
deal of cash through the sale of its e-books, making them a cash cow for the company. The
company has recognized the potential held by electronic books, and provided its readers with
low cost options for people seeking books. Kindle has supported the company to use the e-books
segment as a cash cow. Miller and Bosman (2011) have observed that the sale of e-books has

27
significantly increased over the years, supported by the increasing number of users of Kindle. It
has been further speculated that the number of e-book readers will increase in the coming years,
making the e-books a high value item for Amazon. Another product that is cash cow for Amazon
is its audio books which have also achieved significant sales. In addition, movie on demand has
also generated high amount of cash and holds a significant market share in the industry. The
example of IMDB is another case of cash cow as it helps the company to manage the sales of its
movie DVDs, along with lending support to the movie on demand business.

2.3.5.2 Stars
The second category of products that is a part of the BCG Matrix is star or rising star, which
holds a high market share. As the name reflects, these products are emerging as the leading
revenue generator for an organization. They do not yield the same financial return as cash cows,
but the future growth of these business units is promising, thus encouraging the management to
continue with the investment in them. Even though these products require high investment, they
are in a growing phase which suggests that these business units are likely to become cash cows
once the industry has reached maturity. The electronic items being sold at Amazon are in
demand, making this business unit a rising star for the company as the market share in this
domain is also increasing with time. The industry for electronic items is growing, creating vast
opportunities for further growth of Amazon. Griswold has asserted that the financial
performance of Amazon in consumer electronics category shows that it has achieved higher sales
as compared to brick and mortar retailers such as Best Buy. This trend is further expected to
increase due to increasing number of users of online shopping portals. In addition, the cloud
computing segment has shown positive growth prospects in the future, hinting at the product to
become a cash cow in future once a significant level of market share is established.

2.3.5.3 Question Marks

The next quadrant included in BCG Matrix is question marks. These products have the chances
of growing into a profitable business; however the limited market share makes it impossible to
use these business units as prime revenue generator. The industry is still in growth phase, which
indicates that question marks may emerge as a rising star if the business is able to set the right
direction for these products. Moreover, environmental conditions that promote growth of these
items is also a key consideration in determining the future of question marks. The segment of
video on demand had some issues such as poor connectivity which has limited the growth of this
segment, making it a question mark. The business units of Zappos have faced similar issues of
low growth and return on investment after Amazon’s acquisition of Zappos (Stone, 2009). For
zappos and video on demand, the company will need to address the issues which have resulted in
low market share as it would help the company to tap into the needs of the market and position
these units as more profitable, taking benefit of the growing industry. There is a possibility that
the video on demand and zappos may move out of the question mark category in future.

2.3.5.4 Dogs
The last category in BCG Matrix is used to identify those products that are not generating high
sales and have not been able to establish a notable market share. The industry is slowly
progressing with little scope of further development, further adding to the complexity of the
external business environment. These products do not offer significant financial gain to the
company, instead they consume cash investment. Due to this attribute, dogs are recognized as

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cash traps, since they are not expected to help the business through high ROI. For Amazon mp3
has not been able to provide the company with any solid financial gains, therefore it can be
placed into the category of dogs. The mp3 business doesn’t have a high market share and the
industry is also growing at a slow pace.

2.4 STRATEGIES ADOPTED BY AMAZON

Amazon’s generic corporate strategy can be described as concentric diversification. This strategy
is based on leveraging technological capabilities for business success and following a cost
leadership strategy aimed at offering the maximum value for its customers at the lowest price in
addition to wrapping its business around the customers wherein they find Amazon to be the go-to
portal for their online shopping needs. Indeed, this strategy has paid off well as can be seen from
the fact that it is the world’s largest online retailer and has consistently been the leader in the
market segments in which it operates. Having said that, it must also be noted that cost leadership
can follow the law of diminishing returns wherein firms following this strategy find that they are
unable to sustain growth or increase profitability once the “low-hanging fruit” are plucked.

2.4.1 ACQUISITIONS
Amazon has a pretty big list of acquisitions which are condensed into this infographics. Whole
Foods is a prominent grocery store chain with the distinction of being the only USDA Certified
Organic grocer in the U.S. At the time of its acquisition by Amazon, Whole Foods had a market
cap of almost $10 billion and was ranked #176 in the 2017 Fortune 500 list. Since then, Amazon
29
has cheapened some key food items and has integrated aspects of its Prime service into the
Whole Foods customer experience. For Q4 2017, the quarter immediately following Amazon's
acquisition of Whole Foods, Amazon reported revenue of approximately $4.5 billion from
physical stores.

This figure is primarily a reflection of Whole Foods' revenue. One of Amazon's more recent
acquisitions is also one of its largest. While exact figures for the purchase price of home security
specialty company Ring have not been disclosed, analysts estimate that Amazon may have paid
as much as $1.8 billion, making it the second-largest acquisition in the company's history in
terms of the overall cost. Ring began as Doorbot in 2012. The company specializes in smart
home security devices, including its popular Ring Video Doorbell, which allows users to monitor
entry points to their home from a remote location. In 2017, Ring reported revenue of $415
million. Zappos is the leading footwear and apparel website in the world. The name comes from
the word zapatos, which means "shoes" in Spanish. Their big hook is that you can return your
shoes up to a full year after buying them, as long as they're in good condition. The company is
famed for its customer service, and its CEO Tony Hsieh released a bestseller, in
2010, Delivering Happiness, detailing how he runs Zappos with happiness in mind.

30
Amazon bought Zappos for $1.2 billion in July 2009. Alexa is a big data company that collects
information on people's browsing habits online and provides analytics on those habits. The
company is also the top way to rank the popularity of websites. Amazon acquired the
company in 1999 for $250 million in stock. The acquisition allowed Amazon to implement more
data insight into its daily operations. You also might notice the similarity to Amazon's smart
device AI, Alexa, though this isn't much more than a coincidence. One of Amazon's more recent
acquisitions is PillPack, Inc., an online pharmacy company. The move has been seen as an effort
on the part of the e-commerce giant to move into the online prescription business. Given
Amazon's powerful preexisting delivery infrastructure, the company's purchase of PillPack
allows it to ship prescription medications overnight to locations across the country. Like
Amazon's purchases of Whole Foods and Zappos, PillPack has so far retained its unique brand
within Amazon's larger umbrella of subsidiaries. PillPack generates an estimated $100 million in
annual revenue

2.4.2 VERTICAL INTEGRATION

Amazon has been obsessed with vertical integration since its inception. The company’s strategy
has been to develop products that meet its customers’ needs, optimize them to the limit, and then
offer them to third parties to make their development and operation profitable. It did this with its
warehouses, which initially it hoped it could avoid having: Bezos originally believed that he
could simply place orders with publishers and book distributors and get them to send books to
customers, but when he realized they couldn’t meet deliver on time had no choice but to set up
his own. After establishing very high levels of operational efficiency in its warehouses, Amazon
then offered companies the chance to store their products there, as well as using the company’s
picking and packing services. Finally, Amazon began working on delivering fresh products,
developing its own fleets of vans and personnel. Offering its own logistics services is simply
another logical step in Amazon’s vertical integration process. Once a company reaches a certain
level of activity and has acquired sufficient operational experience, integrating can make sense.
Providing this service to third parties is one way to try to boost volume in a business where scale
is practically everything. Amazon will now try to innovate faster than its competitors in an area
in which it has huge experience in issues such as drone deliveries, transoceanic and air
logistics and in-home deliveries. It also has registered patents for the robotization of
distribution, beehive drone towers, and even aerial warehouses to reduce drone journey times.
What could be more futuristic than a big blimp flying over our heads sending drones down with
our purchases? Not even the Jetsons had that!! And while Amazon is able to execute its
innovation plans brilliantly and quickly, traditional competitors such as UPS are faced with
immense difficulties due to strong opposition from its workforce, whose unions seem opposed in
principle to any kind of operational improvement. Amazon seems prepared to reinvent logistics
through a determined process of continued vertical integration, making it the preferred option for
more and more companies and customers. Essentially, this is what it did in other areas such as
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cloud computing: developing the services needed at the level it considered appropriate,
improving them through by scaling up, and then opening them to any user to improve the cost
structure and operational efficiency. Today, Amazon Web Services is a leader in cloud
computing and a fundamental profit maker for the company.

2.4.3 INTENSIVE STRATEGIES

Amazon has been and still is to this date a pioneer in the online retailing space and the world’s
largest online retailer. It started as an online bookstore, but it quickly expanded and started
selling anything that can be sold online. What is more, Amazon has slowly but surely expanded
globally and now operates around the world, through a combination of localized portals and
globalized delivery and logistics platforms. Amazon’s success is proof of its competitiveness,
and its growth & expansion are the result of the company’s intensive growth strategies. In his
article, Amazon.com Inc.’s Generic Strategy, Intensive Growth Strategies, Nathaniel Smithson
offers a very good example through which he illustrates Amazon’s success:

2.4.3.1 Market Development

Amazon’s primary intensive growth strategy. The main objective in this first strategy focuses
on entry and growth in new markets. From the beginning, Amazon has kept expanding its
borders and it has never stopped adding new countries where it offers its services. If at first,
Amazon provided its online retail services to consumers in the United State, now the company
operates e-commerce websites in more than 10 countries, including Canada, the United
Kingdom, China and India. Every new country represents another growth opportunity for the
company

2.4.3.2. Market Penetration

Amazon’s secondary intensive growth strategy. This strategy aims to generate more revenue
from markets where the company currently operates. Amazon is dependent on its consumers,
which is why when consumerism grows, the business by default grows. The company can benefit
from higher sales revenue, if they succeed in increasing consumers’ interest for online retail
shopping. It may sound daunting, but that might not be as hard to do nowadays, considering the
popularity of the Amazon brand. A strategic objective based on this intensive growth strategy is
to implement an aggressive marketing campaign to attract more consumers to Amazon’s e-
commerce website.

2.4.3.3 Product Development

Amazon’s third, supportive intensive strategy for business growth. The goal of this intensive
growth strategy is to develop and offer new products to gain higher revenues. The growth of
Amazon itself is partly influenced by the development of new products. For instance, the
company now offers Amazon Basics products and Amazon Web Services – AWS. One strategic
objective based on this intensive growth strategy is to increase research and development
investment, which can lead to rapid product development and quick release on the online retail
market.

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2.3.4.4 Diversification

This is the final intensive growth strategy employed by Amazon. The objective in applying this
intensive strategy is growth based on new business. For instance, by acquiring Audible, a
producer of audiobooks and related products, Amazon managed to grow even more and expand
its influence in a new market segment. This shows us that the company makes use of acquisition
to implement this intensive growth strategy. Growing the e-commerce business through an
aggressive acquisition strategy is another strategic objective associated with this final growth
point.
3.1 CONCLUSION

Amazon is a fascinating example of what academics call the “ambidextrous organization”. This
is a company that improves its existing business while creating an organizational space
to invent future businesses at the same time. Ambidextrous organizations are difficult to achieve,
but it can be done. In his annual letter to shareholders, Jeff Bezos laid out how Amazon
intentionally designs an organizational culture that makes space for invention inside the
company. The points we pulled out below are el Amazon is a large company with over 224,000
employees worldwide. When companies swell in size and scale out products or services, the
organization can fall into a trap of slowness, unthoughtful risk aversion, and failure to
experiment (three elements that are opposite of a company that constantly reinvents itself). Bezos
is highly aware of these “large company maladies”, and emphasizes that it’s something Amazon
will address every step of the way.

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