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Chapter 6

Chapter 6 BU415.docx

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Wilfrid Laurier University
Phil Cutter

BU415Chapter 6Amazoncom An Empire Stretching from Cardboard Box Week 4to Kindle to CloudIntroductionAmazon went seven years without turning a profit losing 3 billion during that time CEO Bezos followed his best reckoning on where markets and technology were headed postponing profit harvesting while expanding warehousing capacity building ecommerce operations worldwide growing one of the Internets most widely used cloud computing platforms Amazons future continues to be hotly debated as the firms profitability swings wildly Why Study AmazoncomLooking at the Internets largest retailer provides a context for introducing several critical management concepts such as cash efficiency and channel conflict We can see in which techfueled operations can yield above average profits far greater than offline players Amazons Kindle business allows us to look into the importance of mobile computing as a vehicle for media consumption a distribution channel for increased sales and advertising a creator of switching costs a fathering point for powerful data and in competition for platform dominance Amazon is the largest online retailer and has expanded to dozens of categories beyond books Amazon takes a relatively long view with respect to investing in initiatives and its commitment to grow profitable business Amazons profitability has varied widelyThe Emperor of ECommerceAmazon got its start by selling books online Today the firm has 90 distribution centres worldwide that boast well over 26 million square feet of warehouse space Amazon is now the worlds largest online retailer in dozens of categories Amazons wheel of growthAt the heart are three pillars of Amazons business large selection customer experience and lower prices The three pillars of selection customer experience and low prices reinforce one another and work together to create several additional assets for competitive advantage Exceptional customer experience fuels a strong brand that makes Amazon the first place most consumers shop online That virtuous cycle of buyerseller growth is a twosided network effect yet another source of competitive advantage Each digital movement is logged and the firm is constantly analyzing what users respond to in order to further finetune the customer experience squeeze out costs and drive profits Fulfillment OperationsDriving Selection Customer Convenience and Low PriceAmazon has always sold direct to consumer but it didnt always do this well To build a system that worked Amazon focused on costs data and processes so that it could figure out what was wrong and how it could improve
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