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Amazon Case Study

Essay by   •  November 25, 2010  •  Case Study  •  2,102 Words (9 Pages)  •  2,058 Views

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Have you ever purchased any product on the Internet, used the Internet to collect information or data, or played computer games on the Internet? You must agree that it is fast, easy, and enjoyable. The Internet has been a part of our daily life for several years now. In addition, in the business world, a new business model, E-business and E-commerce, has appeared for several years. According to Ali, there are two main types of E-commerce: B2B and B2C (2000). One is business to business (B2B). This means that enterprises use the Internet to transact or trade between business operations and their partners. Another is business to consumer (B2C). In other words, enterprises provide products, support good, and services to the customers on the Internet.

Amazon.com is a famous Internet retail company in E-commerce. Its business includes B2B and B2C. It opened its business in July 1996. Today, Amazon.com has expanded its business in more than two hundred and twenty countries and this company sells various products like electronics, books, music, DVD, House wares, PCs and cars (Amazon.com Announces 4th Quarter Profit 2002). It is the biggest retail store in E-commerce. Even though Amazon.com owns these accolades, this company is struggling to survive. Amazon.com had a $19 billion market value before its stock prices decreased from $75.25 to $9.25 (German, 2001). The problem is that Amazon still has not made real profits since it opened. How to help Amazon.com keep standing on the stage? If Amazon.com wants to survive in E-business and start making real profits, Amazon.com should merge with other retail companies, operate a new E-business strategy, and rebuild its financial structure.

Everyone is wondering when Amazon.com will start making real profits. Last year, their stock price went down from $76 to $14 (Hahn & Celarier, 2001). Moreover, Amazon.com lost almost $150 million last year (Amazon.com announces 4th quarter profit, 2001). How can Amazon.com start making real profits? Hahn & Celarier suggests that Amazon.com should merge with other retail companies such as General Growth Properties, Wal-Mart, and Bertelsmann because the merger will expand their market share, and create a new passageway and increase new customers and products , and recover their cash and Net sales loss (Fitch, 2000).

First of all, the merger will help Amazon.com expand the market share in E-commerce and create a new passageway (Fitch, 2000). For instance, Amazon.com should merge with Wal-Mart, which has $26 billion market value and only $756 million debt (Hahn & Celarier, 2001). Now Wal-Mart is interested in E-commerce and online shopping. If Amazon.com merges with Wal-Mart, they will become the largest retail company in E-commerce. Amazon.com will also increase its market share. In addition, after the merger, Amazon.com can gain more marketing resources from Wal-Mart to create a new sales passageway. For instance, customers can purchase the products from Amazon.com on the Internet and pick the items, or return them at Wal-Mart. It will provide additional choose for customers.

Secondly, the merger will help Amazon.com create new customers and products. Bertelsmann has $14 billion market value and the companyÐŽ¦s strategy now is focusing on music retailing and book sales (Fitch, 2000). Their business is related to AmazonÐŽ¦s business. The CEO of Bertelsmann is also trying to open their business in American market (Hahn & Celarier, 2001). If Amazon.com merges with this company, Amazon.com will gain the new customers from Bertelsmann. Furthermore, integrating the products from Bertelsmann, Amazon.com can create new products on their website.

Finally, a merger can improve and cover the financial loss of Amazon.com such as net sales loss, long-dept and cash loss. For instance, if Amazon.com merges with General Growth Properties, which has 136 malls in 37 states and owns $2.8 billion market value (Fitch, 2000), Amazon.com can still keep the power of operation and exercise the new marketing strategies. Moreover, Amazon.com can gain the financial support from this company to cover its long-debt $2 billion (Fitch, 2000). In addition, the merger will help Amazon.com increase the financial resources such as the amount of cash flow, and also decrease the cost and expense of the company.

The second proposal to help Amazon.com to make profit is to operate a new E-business strategy. E-commerce is one way that people can trade on the Internet. This trading system is very important, but it is not the only thing that the e-commerce enterprises should focus on. Amazon.com is a giant in E-commerce and the company uses Secure Sockets Layer (SSL) to trade (http://www.Amazon.com, February 23, 2003 ), but Amazon.com cannot make profits even though the company has very strong technological support. Ali points out that ÐŽ§communication, resources allocation, and project management guarantees success in E-commerceЎЁ (Ali, 2000.p.5).

Effective communication, which can improve business performance, is one of the objectives that Amazon.com should fulfill. Effective communication includes two aspects: internal and external. First of all, internal communication emphasize negotiation. Correct and adequate information must be transmitted precisely between the employees or the departments. Secondly, external communication emphasizes on empowerment and fast reaction. For instance, Customer Services is a department that helps customers to solve problems. They have to communicate with the customers and understand what the customers want and need, and then report to the departments or the board. If the customer service department has the power to react immediately from the problems of customers and has good communication and relationship with the customers, it will create more business opportunities for Amazon.com (Shaffer, 2002).

The second key that helps industry to succeed in E-commerce is resources allocation. There are various resources in the enterprises such as human resources and customer resources. First of all, concerning human resources, Amazon.com should understand employeeÐŽ¦s particularities and arrange them in appropriate positions. If the employees are set in the right positions, the company should become more efficient (Ancona, Kochan, Scully, Maanen, Westney., 1999). Secondly, in regard to customer resources, Amazon.com should collect information, such as suggestion, complaint or demand from the customers and then try to improve their products or services to provide better services to the customers. If the services satisfy the customers, Amazon.com will create more and more opportunities and new customers in the near future. For example, Characters Inc, a graphics company in Houston, Texas, used focus group to survey customersÐŽ¦ opinions. They improved their defects and launched new business by customerÐŽ¦s

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