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How Amazon.com became the leading online retailer by 2011

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by Stephanie Croteau on 19 February 2014

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Transcript of How Amazon.com became the leading online retailer by 2011

How Amazon.com became the leading online retailer by 2011
By: Alexandre Hébert, Alexander Ristiniemi, Max Bengtsson, Marcus Oestman, Stéphanie Croteau
Background
Diversification
Strategies
Reasons to diversify
Types of diversification
Related
Unrelated
Diversification methods
• Started off with selling books

• Vision: to build an online bookstore that:
is customer-friendly and easy to navigate
provides buying advice
offers the broadest possible selection of books at low prices

• 1995: Lauch of online venture with 7 million dollars in borrowed capital

Portfolio Management
Way for companies to determine how to divide organizational resources among diversified units and where to invest capital
Management of the mix of businesses in a corporate portoflio
Most common and widely used tool
Boston Consulting Group
Matrix
Stars :
Large market share in a fast growing industry.
Generate cash but require large investments to sustain their growth and lead
Eventually become Cash Cows


Cash Cows:
Large market share in a mature, low growth industry
Require little investment and generate cash (most profitable)


Question Marks :
Potential future stars if they succeed
Require investment to increase their market share


Dogs :
Least attractive types of business
Small market share in a mature industry
Maintained only if do not represent costs

GAME 2: BCG Matrix
Industry Growth Rate
HIGH
LOW
Market Share
HIGH
LOW
GAME 2: BCG Matrix
Industry Growth Rate
HIGH
LOW
Market Share
HIGH
LOW
Amazon.com
Amazon Kindle
Zappos.com
Amazon Web Services
IMDB
Audible.com
Amazon Cloud
Amazon MP3
Increase in market power
Desire to learn new technologies
Desire to turn around a failing business, leading high returns
Improvement in growth
Stabilization or improvement in earning
Risk reduction through investments in dissimilation business or less-dynamic environment
Application of resources, capabilities, and core competencies to related areas
Generation of synergy/economy of scope

REASONS TO DIVERSIFY?
Desire increase in power and status
Desire to increase compensation from running a larger enterprise
Desire to increase value of the firm
Craving for a more interesting and challenging management environment

WHAT WERE THE BENEFITS FOR JEFF BEZOS OF EXPANDING AMAZON?
Benefits for the CEO to expand a Company
Types of diversification
Grow the business to a Music provider store
Bring the company to a technology company
Creating Amazon Associates program
Push the company to a different core skills selling services "leading internet product provider"
Introduction of a new product in the market "KINDLE FIRE"
METHODS
Internal Ventures:
Create by the company itself. They decide to launch a new service or a new product in the market.

Merger:
Occurs any time when two organization combine into one.

Acquisitions:
In which one company buys a controlling interest in the stock of another organization or buys it outright from its owners, are the most common types of mergers.

Strategic alliance:
Formed when two or more organizations join in a common purpose.

Joint Venture:
When firms come together to form a legally independent company.


GAME 1: DIVERSIFICATION
ANSWERS
Boston Consulting Group
Matrix


Based on :
-Industry Growth Rate
-Relative Market Share
GAME 2: BCG Matrix
Industry Growth Rate
HIGH
LOW
Market Share
HIGH
LOW
ANSWERS PART 1
ANSWERS PART 2
Expand internationally

-More warehouses
-More employees
-Faster delivery


Optimizing transport

-Algorithms that optimize space utilization on shipments
-Earlier been a source of competitive advantage
-Build on it and scale
-Drones
-Lower transport time
-Faster, more lean
-Laws FAA need to approve




-Push content even more
-Leverage server strengths
-Acquired Double helix
-Track record dodgy
-Develop games for the kindle?

Future Media
Solutions


Core strength not in the hardware business
Need to acquire talent and experience
Aggressive investment scheme causing heavy costs
Business model reliant on future cash flows
No profits for a long time, first time after holidays 2013

• May 2007: Amazon.com’s stock began trading on the NASDAQ stock exchange

• 2011: Business mission states that its goal is to be “Earth’s most customer-centric company” for three primary customer groups:
consumer customers
seller customers
developer customers

• Late 1990's:Took a more diversified approach

Background
Amazons failures in their diversification strategy
Online auction
Search engine


Size Matters
Economies of scale that is almost impossible to match
Larger than the next 12 online retailers combined

Kiva system
Robotsystem for warehouses
Acquired the company in 2012
WHY WOULD YOU DIVERSIFY YOUR BUSINESS ACTIVITIES?
Unrelated
Related
Amazon's Diversification
Warehouse efficiency


"Fulfillment by Amazon"
Business software solutions
Cloud service



Amazon Services
Competitive Advantage
Acquisitions
Earning money of other online retailers
Future of delivery
Kindle
-Another channel to meet consumers
-Sell the product bellow production price
-High costs of entering the market, very established actors,
-Advertisement to reduce price

Video Streaming
-Acquired a large stake in Love Film
-Producing their own series
-Content control


CONCLUSION
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