Amazon.com: An E-Commerce Retailer
A. EXECUTIVE SUMMARY
Summary statement of the problem: Amazon.com is a company that was founded by Jeff Bezos several years ago. A very educated and determined man with a vision and idea of what he wanted his company to be. In the second quarter of 2003 he realized that he would have to address some of his concerns about Amazon.com. The first being that the Internet Tax Moratorium law was going to be up for renewal, with no assurance of it being extended. Another issue at hand was that eBay and Yahoo! were starting to expand into Amazon.com’s markets. 2. Summary statement of the recommended solution: The issues that
Amazon.com faces are issues that are real and need to be addressed as quickly
as possible. With the financial situation of the individual state budgets, taxation
on e-commerce was a huge target for recurring revenue streams. With eBay
and Yahoo! Expanding into Amazon.com’s markets, they needed to formulate
new strategies that would help them remain competitive, such as offering online
auctions, and a B2B (business to business) exchange. Both of these would offer
Amazon.com a way to remain competitive and increase sales.
B. THE SITUATION
Amazon.com became a retailer in 1994 by Jeff Bezos. With a mission in mind Bezos’s first concern was to find a location that would best suit his online business. He needed to make sure that the location he chose had to have the necessary programming talent to develop the software, closeness to a major book wholesaler, and a state with little or no sales tax. Bezos finally decided to settle on Seattle, Washington as being the best place to start his business. During this period, the internet was becoming more accessible to everyone. (Collins, P., Mockler, R, & Gartenfeld, M, p. 1, 2003) In 1995 sales through the web site had begun to take off. One theme had always remained a contestant for Amzon.com: to get big fast, at all costs. With its low overhead the more sales that made the bigger the increase in profit margin on the items it sold.Amazon.com was able to generate a large amount of working capital by learning that they could float vendor payments from 30 to 40 days. (Collins, P., Mockler, R, & Gartenfeld, M, p. 2, 2003) One of the main issues that Amazon.com was going to face was the Internet Tax Moratorium. In 2003 there was some great debate on the taxation of the e-commerce business. Governments were beginning to look for new recurring revenue streams and what better place than the internet businesses. The main issue was that different states categorized products in a different way. An agreement by 33 states was out there to simplify and help to develop a consistent tax platform for pointing the direction of taxes being levied on certain transactions, so what was known as a significant competitive advantage was possible coming to an end. In the end the U.S. Supreme Court issued a ruling forbidding the taxation of interstate commerce by individual states. (Collins, P., Mockler, R, & Gartenfeld, M, p. 15, 2003)
Another issue that Amazon.com was going to face was that eBay and Yahoo! were quickly moving into Amazon.com’s market place. He had two ideas to help put Amazon.com ahead of the others in the market place. The first was to expand Amazon.com’s business in an online auction. This would help to expand the existing services offered and would not incur any additional expenses. The second was to implement a B2B (business to business) exchange for suppliers, manufactures, distributors and retailer to use. This would allow them to market this service to a large number of affiliates and partners. This would translate into lower prices for Amazon.com, and additional income from charging fees and commissions for completed transactions. (Collins, P., Mockler, R, & Gartenfeld, M, p. 15 2003)
A. ANALYSIS OF THE SITUATION...
References: Mockler, R, & Gartenfeld, M, 2003; From Wheelen, T., & Hunger, J. (2008). Strategic management and business policy. Upper Saddle River, NJ: Prentice Hall. See: http://owl.english.purdue.edu/owl/resource/560/08/.
Wheelen, T.L. & Hunger J.D. (2010). Strategic management and business policy (p. 222-223) Upper Saddle River, NJ: Prentice Hall.
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