Amazon.Com Essay

1071 words - 4 pages

Amazon.com is the wonder company of the web. It is the one stop shopping gate to books, videos and music. However, as CEO Jeff Bezos will reluctantly admit, the company has some major issues. The report of sales for the year 2000 showed a thirty percent increase in the sale of books, music and videos over the previous year but was down from a growth rate of 122% between 1998 and 1999. Total revenue increased by 127% in 2000. Regardless, the company's stock down by about 80%. Amazon is planning to close its distribution center in the Netherlands and centralize its European customer service facilities in the U.K and Germany. The restructuring effort includes plans to close the Seattle distribution center (Milliot 2001).Amazon.com, with all of its increases in revenue, continues to be in debt to the tune of $2.1 billion. At the end of July they announced that America Online was joining the group of on and off-line companies associated with Amazon. AOL is said to have paid $100 million for a roughly 2% stake in Amazon, with terms that are open for an eventual takeover. In addition, AOL paid for Amazon software to conduct searches and personalize merchandise offerings in AOL's Shop at AOL, CompuServe, and Netscape (Heun, 2001). Bezos continues to predict (and promise) that shareholders will see a solvent company before the end of 2001.Michael Porter has identified five forces that drive competition within an industry: the threat of entry by new competitors; the intensity of rivalry among existing competitors; pressure from substitute products; the bargaining power of buyers; and the bargaining power of suppliers. Porter's paradigm fits for both new companies and for businesses currently in the market. For either, the purpose of developing a strategy based on these five forces is the task of being competitive.Porter makes the point that profit margins or financial growth is intricately associated with competition. Often, the competitive strategy utilized by any given company can make or break their success in the market.Amazon's strategy seems to be to include the competition within the business as a means of insuring cooperation. For instance, they have entered into a contract with another of the large book selling companies, Borders, that will, hopefully, be beneficial for both. Borders acquires Amazon technology (a very sought after commodity) and Amazon acquires a 'brick-and-mortar' outlet for Internet sales. While in the store to pick up orders made online, it is assumed that shoppers will also look and buy from Borders (Davis, 2001).There are several strategies that are often chosen as a means of pursuing an advantage over competitors. A company may change their prices or - as seen recently with Amazon.com, offer a 'special' (free shipping) that will attract people who hope to save. Amazon also "completed some small cost-cutting measures at the beginning of this year. Rather than wait for the quickening of a corporate apocalypse to slash...

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