Case Study: Amazon on the Brink of Bankruptcy

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CASE 1 - AMAZON .COM: THE BRINK OF BANKRUPTCY

Summary: Amazon.com is a global leader in online-retail. The company was born out of the tech boom of the 1990’s and founded by Jeff Bezos. Since its founding as an online bookseller, Amazon.com and drastically grown to expand its product offerings, fulfillment, and customer service. This growth required huge investments in technology and processes to support the complex business. Today, Amazon .com sells, or auctions, books, music, videos, toys, videogames, consumer electronics, software, and home products. The company experience extraordinary growth during and after the tech boom with customers increasing from 14 million in 1999 to over 20 million in 2000. But with rising fulfillment costs, the company had not produced profits during these years. The challenge Bezos and Amazon.com faced was turning the company profitable before cash ran out and operations would have to cease or go bankrupt. In fact, were it not for the $318 million raised through stock options in 1999 and another $680 million borrowed in early 2000, the company surely would have run out of cash. Strengths: Amazon.com strengths begin in its roots. Starting up in Seattle during the dot com bubble meant Amazon.com was entering a new industry from its earliest beginnings. And being located in Seattle meant the company had e-commerce’s top talent and leading experts nearby. The company’s next strength came from its decision to become a business that offered multiple product lines meeting various consumer needs. The talent and industry that Amazon.com was surrounded by made it easy for the company to switch from a bookseller to retailer by utilizing virtual resources versus traditional physical requirements such as store fronts and floor space. The company also created a barrier to entry by being the first large online bookseller. With the incredible branding power and name recognition Amazon.com had developed it became difficult for other...
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