Four Boxes Business Model Amazon in 2007 (T2)
Customer Value Proposition (promised customer value)
- Presenting the Kindle, CEO Jeff Bezos announced, “This isn’t a device, it’s a service.” - Complete experience for the customer: an expansive library of books and the ability to download the book instantly using Amazon’s wireless network - The customer enjoyed a cheaper ($9.99 or less instead of $25 for a hardcover), and some would say better, reading experience without sacrificing breadth of book choice - No PC involved: shopping directly from the device and download an e-book over-the-air within 1 minute - One standard format
- E-ink for a more comfortable e-book experience and long lasting battery - Fees for over-the-air data transmission included in retail price of the book Profit Formula (defines how the company creates value for itself) - To jump-start the e-book ecosystem, Amazon sacrificed its own e-book profits: Amazon pays publisher 50 % of hardcover price ($25) and then sells it for $9.99 or less lost $2.51 on each e-book sold - Negative markup compensated by very fast inventory turns
- Maximized the return from its working capital and shifted the cash flow from a seller-financed model to a buyer-financed one - Amazon made up much of the difference in its sale of the $399 Kindle device (with an estimated margin of $200 per unit) - Sales of e-books in 2007 around $10 million
Value is not only in profit but in creating a huge market share in e-books and readers (Unbalanced Scorecard?!) Key Resources (people, technology, products, facilities, equipment and brand required to deliver the value proposition) - Weaker electronic device than Sony: “Kindle was larger than the [Sony] Reader, weighed more, and had an inferior screen” - Powerful retail platform and warehouse/distribution system (Key Assets) - Expansive library of books and the ability to download the book instantly using Amazon’s wireless network without hooking up the device to a PC - One...
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