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Lecture 10

ISYS 1021 Lecture 10: Amazon Strategy Case Study
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3 Pages
81 Views
Fall 2016

Department
Information Systems
Course Code
ISYS1021
Professor
George Wyner
Lecture
10

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Amazon Strategy Case Study:
Lower cost structure leads to
Lower Price leads to
Customer experience leads to
High traffic leads to
More sellers lead to
More selection which leads to
Lots of growth
Three Pillars Drive Growth:
1. Selection
2. Lowe Prices
3. Customer Experience
Scale and Specificity (Amazon’s Crisis vs. Walmart):
Robots in huge inventories can bring pods to the Queue to someone for packing which
decreases searching time in large warehouses
Walmart has to go from warehouse to stores (10s of thousands) has specific stocks for
shipments
Amazon has to ship to millions of customers with random stocks very specific to the
certain customer at that specific time
Amazon Switching Costs:
Lose Prime specialties and free shipping
Might have already paid for prime
Credit card info
Amazon’s Negative Cash Conversion Cycle
A product stays on a shelf in best buy for about 70 days and 33 amazon
Amazon has negative cash conversion because they get paid before they pay suppliers
Invoice from other businesses have terms, but they give you net x with the time frame
you have to pay in
Best buy has to wait after paying for items before getting paid
o This time frame is the cash conversion cycle
May need to borrow money to fill Cash Conversion Cycle
Having a negative cash conversion cycle is a huge financial advantage
Cash Conversion Cycle and Turn Over Study
Barnes and Nobles
Amazon
Turnover
-average book store every 121 days
-book on shelf 68+ days
-3 times/ year
-have to figure out where to distribute
sellable products too
-committed to brick and mortar
model- can’t manage their inventory
the way amazon does
Inventory
-shelf and warehouse stock
Turnover
-16 times per year
-average book in house 22 days
-avg 28 days of float or title
Inventory
-All warehouse stock
-Few returns
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Description
Amazon Strategy Case Study : Lower cost structure leads to Lower Price leads to Customer experience leads to High traffic leads to More sellers lead to More selection which leads to Lots of growth Three Pillars Drive Growth : 1. Selection 2. Lowe Prices 3. Customer Experience Scale and Specificity (Amazons Crisis vs. Walmart): Robots in huge inventories can bring pods to the Queue to someone for packing which decreases searching time in large warehouses Walmart has to go from warehouse to stores (10s of thousands) has specific stocks for shipments Amazon has to ship to millions of customers with random stocks very specific to the certain customer at that specific time Amazon Switching Costs: Lose Prime specialties and free shipping Might have already paid for prime Credit card info Amazons Negative Cash Conversion Cycle A product stays on a shelf in best buy for about 70 days and 33 amazon Amazon has negative cash conversion because they get paid before they pay suppliers Invoic
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