Seraj A. FarooquiBusiness Marketing & Logistics 751

March 2012

All Departments Agenda

Brief Introduction

Segment and Customer Analysis

Competitor Analysis

Market and Environmental Analysis

Internal Analysis

Proposed Strategy and Future Outlook

• Founded in 1994– Seattle, WA– Jeff Bezos, Chief Executive

• Expanded to Music and Video Segments in 1998

• Strategic partnerships and acquisitions to expand product bredth, absorb competition, and enhance distribution efficiencies.

• Released Kindle (1st Generation) in 2007– Kindle Fire release in 2011

• International Growth

Brief Introduction

Media

North America: $7,959

International: $9,820

All books, movies, music, digital downloads, software and video games (includes consoles).

Electronics and Other General Merchandise

North America: $17,315

International: $11,397

All electronics/computers, home and garden, toys, grocery, apparel, jewelry, health and beauty, sporting and outdoor equipment, tools, automotive, etc.

Other

North America: $1,431

International: $155

Cloud services, web services, marketing/promotional agreements, co-branded credit card agreements.

Notes: *Market Figures are calculated in millions, and based on Q4 2011 Press Release, http://bit.ly/ymMsOY

Segment Analysis

• Convenience– One-stop shopping, Across retail segments– Product comparisons and reviews

• Promotions– Competitive pricing– FREE Super Saver Shipping (Orders over $25.00)– Amazon Prime Membership Programs– Partner-discounts (Discover Card, etc.)

• Differentiation– Brand reputation– Dependable fulfillment; Pro-active communication– Customer Service / Returns Management– Personalized recommendations

List of Customer Motivations Analysis

• Cost Leadership – Low-Price Guarantee – “Refund the difference” Initiatives

• Segment Differentiation– FREE Enhanced Delivery (White-glove)– Schedulable Delivery Time

• Online Experience– Transactional Security– Order Status Monitoring– Order Management

List of Customer Motivations Analysis

• Tangibility of product offerings

• Returns Management

• Continuous innovation

• Consistency of Customer Service level• Maintaining a “personal” shopping experience

• Regulating Third-Party Sellers

• Low International Scalability

Unmet Needs Analysis

Direct

Competitors

• Target• Walmart• Overstock.com• Barnes and Noble• Apple (Media)• Samsung (Media)• Ebay• Netflix (Media)

Indirect

Competitors

• Google• Brick and mortar store• Third-Party Wholesale

Competitor Analysis

KSFs/Competitors

Brand Recognition

Breadth of Products

Quality Perception/Value

Breadth of Channel Coverage

Geographic Coverage

Financial Performance(POA/ROI), Profitability

Scale Indicator

Very Strong

Strong

Average

Weak

Media Segment

KSFs/Competitors

Brand Recognition

Breadth of Products

Quality Perception/Value

Breadth of Channel Coverage

Geographic Coverage

Financial Performance(POA/ROI), Profitability

Scale Indicator

Very Strong

Strong

Average

Weak

Electronics/General Merchandise Segment

KSFs/Competitors

Brand Recognition

Breadth of Products

Quality Perception/Value

Breadth of Channel Coverage

Geographic Coverage

Financial Performance(ROA or ROI), Profitability

Scale Indicator

Very Strong

Strong

Average

Weak

Other Segment

ASSETS AND COMPETENCIES: Apple Netflix Target Walmart eBay Overstock Amazon         Name Recognition                 Breadth of Product Line                 Breadth of Channel Coverage                 

Specialty                 Financial Resources                 

Cost Structure                 Geographic Coverage:        

US      

International             

Key:

Strong   Average Weak

Above Normal  Below Normal

Competitor Strength Grid

Media

16%

Electronic and other General Merchandises

57%

Other

73%

Domestic Market Analysis

Notes: *Market Figures are calculated in millions, and based on Q4 2011 Press Release, http://bit.ly/ymMsOY

Media

23%

Electronic and other General Merchandises

55%

Other

24%

Notes: *Market Figures are calculated in millions, and based on Q4 2011 Press Release, http://bit.ly/ymMsOY

International Market Analysis

• Barrier of entry – Medium– Kindle Fire vs. Apple iPad– Kindle Apps vs. Apple Apps

• Potential Entrants– Medium to low– eBay

• $3.38B in revenue (Dec. 2011), 19.3% of Amazon’s Revenue

• Threat of substitute – Low– Innovated Service – High Brand Recognition– High Customer Satisfaction– Well Recognized and Trusted Service

• Bargaining power of suppliers – Low– Sales Medium for Third Party Sellers of books, audio, technology– Pay suppliers quickly (35 days after item has been sold)

• Bargaining power of customers – Low– Cost Leadership– Customer Service

Industry Profitability Analysis

• Efficient Supply Chain and Logistics• Product availability, Bredth• Low prices• Innovative new offerings

– Kindle, Cloud, Web Services, etc.• Ease of shopping• Strategic acquisitions and investments

– Woot.com, IMDB.com, Zappos.com, etc.

Key Successful Factors (KSF)

Objective Area Objective Status and Comment

Sales Steadily Increase General merchandise and Kindle sales shows growth

Profits Improve Profit Margin Taking a hit on profit margin to increase market share

Quality/service Maintain Customer Fulfillment strong, Improving products through R&D

Cost Maintain or Raise Lowing price to customers but absorbing costs

New Products Diversify Constant Innovation and new products needed (Kindle=Success)

Customer Satisfaction Build Brand Loyalty Amazon is continually working to improve customer satisfaction and build brand loyalty

People Hire Leaders Continue to hire the best, Have drastically increased # of employees

Performance Analysis

Competitive Position

Mark

et

Gro

wth

Rate

High

Hig

h

Low

Low

E-Book (Kindle)

Music downloads

Online Book Sales

Online consumer goods

StarsProblem Children

Cash Cow Dogs

Amazon On Demand

Portfolio Analysis

• Global Expansion (BRIC)

• Video-On-Demand Segment

• Kindle Segments

• Seasonal• Brick and Mortar

Stores• E-Commerce

Maturing

• Free shipping leads to profit losses

• Possible Brand Confusion

• Customer Service• Diverse Product

offerings• Constantly Evolving

Strengths

Weaknesses

Opportunities

Threats

Portfolio Analysis

Industry Median is 3.6%

ROA Trends

Competitor ROA

Stock Prices (2007-2011)

2007 2008 2009 2010 2011SG&A Expense 2.69B 3.45B 4.3B 3.23B 8.84BResearch & Development 818M 1.03B 1.24B 1.73B 2.91BOther SG&A 1.87B 2.42B 3.06B 1.5B 5.94B

Operating Expense Analysis

Low Prices

Large Selection

Greater Convenience

More DistributionChannels

Larger Reach

More Third Party Sellers

More Customers

Current Strategy

Aquisition

• Increase collaboration with channel partners.

• Enhanced integrated marketing – Communicate to more clients in the global markets

• Forward-integration – Promote and manipulate where products and services are

being sold

• Continued focus on R&D– Innovative strategies and devices to provide a

competitive advantage in the electronics marketplace

• Customer Service

Proposed Strategy

Continuous Innovation, 2020+

• http://www.bloomberg.com/news/2011-10-25/amazon-profit-plunges-after-new-products-increase-expenses-shares-tumble.html

• http://www.amazon.com/Values-Careers-Homepage/b?ie=UTF8&node=239365011

• http://www.phonesreview.co.uk/2012/02/17/amazon-kindle-fire-2-possible-may-release/

• http://marketingteacher.com/swot/amazon-swot.html • http://www.smartmoney.com/invest/stocks/jeff-bezos-on-the-future-of-amazon-co

m/• http://www.minyanville.com/businessmarkets/articles/amazon-ebooks-kindle-e-b

ooks-ebook/5/27/2011/id/34815• http://en.wikipedia.org/wiki/Amazon.com• http://www.huffingtonpost.com/2012/02/06/amazon-retail-stores-seattle_n_12580

32.html• http://www.amazonstrategies.com/• http://mashable.com/2012/01/31/amazon-q4-results/• http://www.helium.com/items/1901369-amazon-kindle• http://www.sramanamitra.com/2011/02/02/amazon-aligned-with-multiple-major-tr

ends/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+sramanamitra+%28Sramana+Mitra+on+Strategy%29

All Departments References

Thank you for listening

Any Questions?

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