Amazon Case Studies

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  • Topic: Amazon.com, Jeff Bezos, Balance sheet
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9-803-098
REV: FEBRUARY 13, 2003

STIG LESCHLY MICHAEL J. ROBERTS WILLIAM A. SAHLMAN

Amazon.com—2002
Jeff Bezos looked out the open doorway of his office and stared at the “problem of the day,” which his assistant Sarah had posted on the whiteboard in the hallway. It was Friday, September 13, 2002, and the whiteboard read: ”You have 10 bottles with 100 pills each in them. In nine of the bottles, each pill weighs 10 mg. In one bottle, each pill weighs 9 mg. These pills are poisonous. You have a digital scale that reads out in mg. Can you determine which bottle contains the poison with only one weight measurement?” Bezos—founder, chairman, and CEO of Amazon.com—normally enjoyed trying to solve these brainteasers. But today his mind was occupied with weightier concerns. Bezos had an unwavering vision that had guided the company’s efforts since its founding. In Bezos’s words, “We’re building a place where people can come to find and discover anything they might want to buy online.” Indeed, this vision of breadth and selection lay behind the choice of the name “Amazon,” the name of the world’s largest river. Yet, throughout its eight-year history, in the face of changing economics, uncertain financial markets, and a constantly evolving set of competitors, exactly how the company could best deliver on this vision remained a key question for Bezos: We started with books, but our focus on serving the customer has led us to embrace selection, price, and convenience as the three key dimensions that define the customer experience. In order to fill out selection—and present our customers with a variety of price points, including used products—we have opened up our Web site to other sellers, including big companies, small businesses, and individuals. Since its founding in 1994, the company’s business model had evolved through several stages. Initially, Amazon had been a pure online book retailer. Amazon had modest inventories and depended on a small number of large distributors to source its vast selection. Over time, however, this retail model evolved to incorporate a far wider variety of products, including music, video, electronics, and kitchen items, as well as deeper investments in physical distribution. By mid-1999, however, it was clear that if Amazon was to deliver on its vision of ultimate selection, it would have to augment its retail commerce model with a second strategy, the “marketplace initiative.” The first manifestation of this model was Amazon auctions, launched in March of 1999. This was followed by several other initiatives, all of which were characterized by the feature that Amazon did not own the goods being sold and, in many cases, did not take responsibility for the tasks that comprised order fulfillment. Rather, the company had developed a wide variety of commerce ____________________________________________________________

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Senior Lecturers Stig Leschly and Michael J. Roberts and Professor William A. Sahlman prepared this case with the assistance of Research Associate Todd Thedinga. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2003 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

803-098

Amazon.com—2002

models in which it served as an e-commerce outsourcing partner for individuals as well as small and big companies. It earned fees for bringing buyers and...
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