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Strategy Presentation on Amazon

  1. 1. Board of Directors Meeting 2011 Senior Leadership Gabbi Baker, Samantha Cloutier, Josh Majewski, Marius Mocanu, Clifton Song, and Conor Wolchesky
  2. 2. Overview I.  Corporate Strategy II.  Industry Analysis III.  Business Level Strategy IV.  Major Factors & Key Challenge V.  Strategic Alternatives & Evaluation VI.  Action Plan
  3. 3. Corporate Strategy
  4. 4. Businesses: E-Commerce •  Internet Retail •  Smartphone Applications •  MP3 – Cloud Player •  Instant Video •  Grocery •  Technological Services •  Audiobooks •  Digital Gaming •  Cloud Drive
  5. 5. Customers Consumers Sellers Content Enterprises Creators
  6. 6. Founding Vision •  Online Bookstore –  Customer Friendly –  Easy to Navigate –  Providing Buying Advice –  Offer Broadest Selection at Lowest Price •  “Educate, Inform and Inspire”
  7. 7. Corporate Goals To be the earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online. •  Customers •  Profits •  Employees •  Costs
  8. 8. Fit Among Businesses Smartphone Applications MP3 – Cloud Instant Video Players Internet Technological Retail Amazon Services
  9. 9. Corporate Strategy •  Concentric Diversification •  Online & Accessible •  Common channel – amazon.com •  Common technology – web-based •  Common customer – wide audience
  10. 10. Long-Term Success Potential Annual Revenue (Billions) $40 $35 $30 $25 $20 $15 $10 $5 $0 2007 2008 2009 2010 2011
  11. 11. Long-Term Success Potential Net Income (Millions) $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2007 2008 2009 2010 2011
  12. 12. Industry Analysis
  13. 13. Strategic Map E-Commerce Retailers Barnes & Noble Best Buy Product Price Overstock Target eBay Amazon Wal-Mart Product Breadth
  14. 14. Barriers to Entry High Total Capital Requirement Moderate High Learning Differentiation Curve Moderate High High Access to Barriers Economies of Distribution to Entry Scale
  15. 15. Barriers to Exit High High Contractual Management Commitments Commitment High High Fixed Specialized Costs High Assets Barriers to Exit
  16. 16. Barriers to Entry & Exit LOW LOW EXIT HIGH ENTRY HIGH
  17. 17. Rivalry High Low Low Concentration Growth Rate High High Fixed Costs High Storage Costs High Differentiation Low Switching Costs High Capacity Additions Diverse Competitors Low High Exit Barriers
  18. 18. Supplier & Buyer Power Supplier Buyer Supplier Relative Industry Supplier Power Competition Power Importance of What is Sold Buyer Switching Costs Buyer Supplier Threat of Vertical Supplier Power Integration Power Supplier Product Differentiation Supplier Availability of Substitutes Buyer
  19. 19. Substitutes •  Physical-World Retailers •  Online E-Commerce & Mobile Sites •  Indirect Competitors •  E-Commerce Service Providers •  Infrastructure Web Service Providers •  Digital Media Device Companies
  20. 20. Complementors •  Technology •  Manufacturing •  Shipping •  Business Affiliates & Associates •  Payment Providers
  21. 21. Industry Globalization National Global Economies of Scale Global National Customer Needs Competition Global National Channels Transportation Costs Global Product Standards Global (country v. industry)
  22. 22. Industry Globalization High Global Transnational Forces for Global Coordination / Integration Multinational Average Low Forces for National High Responsiveness / Differentiation
  23. 23. Business Level Strategy
  24. 24. Strategic Resources Tangible Intangible •  Data Centers •  Brand Equity •  Fulfillment •  Technology Centers •  Reputation •  Employees •  Patents
  25. 25. Competitive Advantages •  Differentiator – Process •  Cost Leadership – Products & Pricing •  Convenience •  Technological Capabilities
  26. 26. Sustainability •  Technological Innovation – R&D •  Brand Name & Reputation •  Corporate Goals & Leadership
  27. 27. Competitive Disadvantages •  E-Commerce Imitation •  Too Many Business Lines •  Dependency on Partners •  Government Regulation & Lawsuits
  28. 28. Generic Business Strategy Cost Leader Broad Differentiator Differentiated Medium
  29. 29. Major Factors & Key Challenge
  30. 30. Summary of Major Factors Strengths Weaknesses Opportunities Threats
  31. 31. Strengths •  Brand Name •  Wide Breadth of •  Patents Products •  Economies of Scale •  Price •  Channels of •  Associates/ Distribution Acquisitions •  Technology •  Focus on Customer Software (SOA) •  Growth with •  Employee-Pizza Direction Teams
  32. 32. Weaknesses •  Security •  Fulfillment Centers/Data Center Costs •  Seasonality •  Internet Access •  Third Party Reliance •  Limited to Android (AppStore)
  33. 33. Opportunities •  Speed of Delivery •  International Expansion •  Acquisitions/Partnerships •  Media Devices
  34. 34. Threats •  Government Regulation •  Easy to Imitate •  Increasing Transportation Costs •  Economic Conditions •  International Backlash •  Lawsuits for Third Party Sellers
  35. 35. Key Strategic Challenge How can we ensure our growth potential stays in line with our founding principles and objectives?
  36. 36. Alternatives and Evaluation
  37. 37. Alternatives Strategic Fulfillment Acquisitions & Center Partnerships Expansion Key Leadership Forward Vertical Insurance Integration
  38. 38. Partnerships & Acquisitions Strategically invest in companies that have distinctive competencies and could further improve Amazon’s sales ability and knowledge PROS CONS •  Long term profits •  Expensive •  Market share •  Government •  Entry barrier intervention avoidance •  Overestimating •  Past experience economic benefits •  Risk of synergy
  39. 39. Fulfillment Center Expansion Increase quantity of Amazon fulfillment centers in areas of high density to provide faster delivery and service PROS CONS •  Speed of operations •  Operating and •  Long-term cost inventory costs savings •  Hiring and training •  Sustain current •  Taxes competitive advantage •  Complexity of supplier •  Control over scheduling support
  40. 40. Leadership Insurance Develop leadership training and replacement process in case of loss of key senior management personnel PROS CONS •  Employee loyalty •  Impact current •  In line with company company environment goals •  Hiring and training •  Prepared for sudden •  Shareholder change in company implications structure
  41. 41. Forward Vertical Integration Invest in the creation of an Amazon-owned distribution service to manage the shipping and handling processes PROS CONS •  Control over •  Cost distribution •  Company goals •  Cut long-term •  Contractual transportation costs relationships •  Direct contact with •  Threat to current customers competencies
  42. 42. Solution Strategic Acquisitions & Partnerships
  43. 43. Action Plan
  44. 44. Goal To increase acquisitions and partnerships in an effort to solidify Amazon’s position as the largest fixed price product Internet retailer. A1 A2 A3 Automation Book & Media International Technology in Retailers and E-Commerce Fulfillment Publishers Platforms Centers
  45. 45. Who Is Responsible Jeffrey Thomas Blackburn, Szkutak, Senior Vice Senior Vice President for President and Business Chief Financial Development Officer
  46. 46. Divisional Structure Coordination & Integration Team
  47. 47. Timeline Analyze Research & Analyze & Evaluate A1 Current Observe Acquisition: Automation Technology Effectiveness of Operations Key Players Investments Analyze Research & A2 Current Observe Acquisition: Book Retailers & Publishers Operations Key Players Analyze Research & Current Observe A3 Operations Key Players Year One Year Two
  48. 48. Timeline A1 Analyze & Evaluate A2 Effectiveness of Investments Analyze & Evaluate A3 Acquisition: International E-Commerce Effectiveness of Investments Year Three Year Four
  49. 49. Budget $4,500   4200   $4,000   $3,500   $3,000   Purchases  of  Fixed   $2,500   Assets  (Millions)   2200   $2,000   Acquisi@ons  and   $1,500   Partnerships   (Millions)   $1,000   $500   $0   2012   2013   2014   2015  
  50. 50. Major Impediments •  Lack of synergy and integration •  Incorrect research •  Strict regulations & government involvement •  Overestimating financial and market benefits •  Barriers to exit and entry
  51. 51. Contingency Plans •  History of positive acquisitions •  “Pre-Purchase Contingency Plan” – screening process prior to commitment –  Investment and partial ownership •  Liquidate, if necessary
  52. 52. Summary •  How can we ensure our growth potential stays in line with our founding principles and objectives? •  Strategic Acquisitions and Partnerships –  Automated Fulfillment Technology –  Book & Media Retailers and Publishers –  International E-Commerce Platforms
  53. 53. Board of Directors Meeting 2011 Senior Leadership Gabbi Baker, Samantha Cloutier, Josh Majewski, Marius Mocanu, Clifton Song, and Conor Wolchesky
  54. 54. Appendix 1: Warehouses
  55. 55. Appendix 2: Acquisitions

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