Amazon Case Study - 1

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Amazon Case Study

Question 1
In 2000, Amazon and Toys-R-Us entered into a symbiotic agreement that would benefit both corporate entities. Both companies had recently had unimpressive fiscal years due to differing issues. Toys “R” Us struggled with poor order fulfillment. Although they were equipped with enough merchandise, other issues kept them from being able to get orders to customers in a timely manner; especially during the busy holiday season. Conversely, Amazon was forced to write off $34 million because of a miscalculation in inventory and had orders that could not be honored (Ouchi, 2004). Following these debacles, both organizations felt that joining forces would assist both in fixing their respective issues. The agreement between the two entities included a certain level of exclusivity for Toys-R-Us on the Amazon.com web site. The agreement covered in excess of 4000 products sold by Toys-R-Us via Amazon.com. In addition, Amazon would not allow any of Toys-R-Us’ competitors to sell similar product lines on Amazon. The only exception in this agreement was for collector’s items that could be sold by competitors. If Toys-R-Us chose to no longer carry a specific product, Amazon would be allowed to sell the item themselves. Amazon would in turn receive $50 milluion a year from Toys-R-Us for a period of ten years in addition to a share of the sales sold via Amazon.com (Schonfeld, 2009). “Toys “R” us filed a lawsuit for breach of contract. While Amazon was perfectly happy to be the exclusive online presence for Toys “R” Us, it didn’t feel that it had agreed to make Toys “R” Us the exclusive of provider of toys on Amazon. A New Jersey court ruled in favor of Toys “R” Us back in 2006. But only yesterday did Amazon finally settle with Toys “R” Us, agreeing to pay $51 million.” (Schonfeld, 2009) In my opinion, the first ruling was accurate. I believe that both companies were in...
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