Amazon.com's Business Model and its Evolution


Amazon.com's Business Model and its Evolution
Case Code: BSTR486
Case Length: 22 Pages
Period: 1996-2016
Pub Date: 2016
Teaching Note: Available
 Price: Rs.600
Organization: Amazon.com
Industry: E-commerce
Countries: US; Global
Themes: Business Model Innovation, Blue Ocean Strategy
Amazon.com's Business Model and its Evolution
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

The case describes the business model of one of the world's largest e-tailers, Amazon.com, Inc. (Amazon). Amazon had been at the forefront of innovation, adding and refining technology and changing the way customers shopped. It had a sustainable and innovative  business model  that intensely focused on its long-term growth opportunities as opposed to short-term profit margins. The case discusses the business model innovation at Amazon and how it evolved from just an online bookstore into one of the largest e-commerce platforms in the world where customers could find and discover anything they wanted to buy online in a more convenient way. The case outlines the four pillars of Amazon’s business model - low prices, wide selection, convenience, and customer service. Amazon attracted customers through low prices, prompt delivery, an ever-expanding array of services and products, and exemplary customer service. The case concludes by highlighting the challenges related to Amazon’s business model and how the business was losing its spark as profits were dragged down by the aggressive investments that Bezos was making in building warehouses, IT infrastructure, and product development. While shareholders had been patient with the company's investment strategy, Amazon needed to be selective about the opportunities it pursued because if the huge investments did not work out, then the company would be in trouble. Though Amazon posted two consecutive quarterly profits in 2015, some analysts were still apprehensive about whether the company would continue its profitability streak, capture growth, and sustain its market position.

Issues

The case is structured to achieve the following teaching objectives:

  • Evaluate Amazon's business model, and understand the reasons behind the company's success
  • Understand the need to continuously reinvent the business model of a company amidst rising competition and the changes in the business environment
  • Understand the issues and challenges related to Amazon's business model; Study the customer-centric philosophies of Amazon, the systems and processes, and how these contributed to the success of the company
  • Identify the challenges faced by Amazon and explore strategies that the company might adopt to overcome them

Contents

Keywords

Business model, The business model canvas, Four box framework; Business model innovation, Competitive Strategy, Blue Ocean Strategy, Eliminate-Raise-Create-Reduce framework, TOWS matrix, Customer Value Proposition, Profit formula, Innovation, Amazon Flywheel, Product development, Digitally-driven supply chain, e-commerce

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