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Problems in Management March 12 2003 Amazoncom Expanding Beyond Books 1 Analyze the companys history development and growth Amazoncom founded in 1994 in Seattle by Jeff Bezos Virtual store front on the internet -No physical store As of now 2 warehouses and 1600 employees 30 million cumulative customers 1996 -340000 in the first half spend on advertising and marketing End of 1997 Amazon had found its millionth customer In 1998 Amazoncom added music In July 1998 profits at the 400 level In 1998- 265 million on marketing -equivalent to 23 of sales Sales in 1998 were 5876 million with operating margin of 10 In February 1999 stock at the 1000 profit level More than 31 million titles in 2000 In 2000 stock dropped 80 On January 28 2000 Amazoncom cut 150 employees Services unit contributed 225 million in revenue during 2001 2 Identify the companys internal strengths and weaknesses Strengths Leader in e-commerce Strong in-house internet technology Excellent offline customer service A huge database of loyal customers - base of over 12 million shoppers Wide variety of products and services Distribution facilities to handle growth and fulfillment Building international presence in markets outside of the USA Has moved away from being a low price supplier of books toward a focus of delivering outstanding service and price One-click purchase patent Low inventory and overhead cost inventory turnover 26 times Current alliances with ToysRUs Circuit City Yahoo Well established web brand Leader in use of technology to deliver targeted content Low price Consumer notification of shipping Database- five times bigger Weaknesses High advertisement cost High delivery cost Low bargaining power on suppliers Internet only Amazoncom brand has been diluted by entering a wide number of product segments increasing competition Need to restructure business to drive toward profitability has meant upward pressure on prices No offline brand presence Now competes as a mass merchant allowing specialty stores to identify with particular segments such as Barnes
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