Business Model Canvas

Strategy
Strategy followed by Jeff Bezos to build the Amazon empire:

Be like the Godfather: Make them an offer they cant refuse

Dont give up information unless absolutely necessary
Keep teams small enough that members can be fed with two pizzas
Stop talking so much
Get adversarial

Overall, Amazon follows a Dominant Strategy. Jeff Bezos critical

insight when he founded Amazon was that the Internet allowed a
retailer to have both (effectively) infinite selection AND lower prices.
In other words, Amazon was founded on the premise of theirs being
a dominant strategy: better selection AND better prices.

Leadership Strategy
Amazons strategy is low cost leadership
which is clearly reflected in this statement
made by its CEO, Jeff Bezos:
There are two kinds of companies: Those
that work to try to charge more and those
that work to charge less. We will be the
second.

A napkin sketch by Jeff Bezos

Note: No arrows pointing outwards labeled take profits; its a closed loop

Service Delivery Framework

Amazon tries to close the service gaps in order
to effectively meet consumer expectations.
For that its service delivery framework
comprises the following:-

Understanding customer needs

Customer defined standards
Service performance

Product Delivery Strategies

Amazon has kept pushing the envelope with respect
to delivery time and methods. Following are some
illustrations:

One/two day delivery deals

Own logistics
Amazon Fresh, grocery delivery system
one-hour delivery
Online travel business
Prime Air
Automated warehouses and fulfillment centres

Amazons Business Model Canvas

Logistics
Partner
Affiliates

Self service

Merchandising

Production and
Design

Convenience

Automated
Service

Price
Authors and
Publishers
Physical
warehouses

Network of
sellers

Group Leverage

Instant fulfillment
with eReader
Affiliates
Vast selection

Human : Web
application &
development

Economies of
Scale

Global consumer
market

Application
interfaces
Amazon.com

Low Cost structure

IT and fulfillment
infrastructure

Individual
Leverage

Sale of Assets

E books and
content

Commission on
reseller sales

Acquisitions and
Investment

Prime monthly
subscriptions fees

IS and KM and
Amazon
IS in Amazon

Broadly Amazon uses 2 main systems:

AWS-Amazon web service

S3-Simple storage service

MIS is used for CRM. TPS is based on creating convenience for users. Each
customer has to create an account in amazon.com. Advantages provided/
Features-

Shopping basket
Shopping cart
Wish List
One click
Online payment Systems
Recommender Systems

IS and KM and
Amazon

Recommendation for Amazon

Improvement in web based IS to make it more user friendly which

will be more revenue generating for the company.

Customer KM in Amazon

Amazon operates on a KM technology platform that allows customers

to search using discreet data. This prompts the system to return
contextual information which provides value to the user in the form of
knowledge.

Amazon has not only found ways to use KM practices to provide value
to customers, but also to intrinsically motivate customers to share
knowledge.

Five Forces Analysis

Supplier
Power

Buyer
Power

Competitive
Rivalry

Threats of
Substitutio
n

Threat
of new
entry

SWOT Analysis

Value Chain Analysis

SUPPORT
ACTIVITIES
Firm Infrastructure

Legal, accounting, financial management

purchasing raw materials, and other items used in operations

gi
ar
M

Procurement

er

One click ordering, personalized recommendations,

Technology Development
Warehouse Management Systems

om
st e
Cu lu
Va

Human Resource
Recruitment, training, firing and compensating personnel
Management

Receiving products from

partners, routing the
and
items to a put-away
packaging of
location, picking up
goods;
products from prime
assembling
locations for order
and
fulfillment, replenishing
customization
the products; Quality
of items
control

Fulfillment
of orders;
order
handling,
dispatch,
delivery,
invoicing

Sales &
Marketing
Customer
tracking and
management,
order taking,
promotions,
market
research,
sales analysis

PRIMARY ACTIVITIES

Service and
Support
Warranty, upgrades,
maintenance, order
tracking facilities,
training

Outboun
d
Maintenance Logistics

Cu
Va st
lu o m
e
e

Inbound Logistics Ops.

Ansoff Matrix
Existing

New

Existing

Market Penetration

Product Development

Loyalty program

Kindle

Pricing

Echo

Market

Diversification
Market Development
Expand internationally
Affiliates program

Acquisition of
businesses like IMDB,
Zappos
Horizontal diversification
AWS

New

Product

Financial Analysis
Amazon is involved in different businesses at different
stages of maturity. Some are profitable, some not.

Third party sales of products through Amazons own

platform are now 40% of unit sales. The fees charged to these
vendors are now 20% of Amazons revenue.

For close to half of the units sold onAmazon.com, Amazon

does not set the price, it just takes a margin.

Amazons OCF margin has been very roughly stable for a

decade, but the FCF has fallen, due to radically increased
capex.

Revenue and Net income of Amazon

Where is the money going?

More capacity for more products, including 3P products

AWS

Proximity - as Amazon builds warehouses closer to customers, the

shipping time goes down and so does the shipping cost

Amazon will have to stop investing at the point where marginal

returns from these investments start diminishing