1. Describe Amazon.com: (i) What kind of company Amazon.com is?

, (ii) What is
Amazon's business model?, and (iii) What is Amazon's core competency?

Amazon.com is primarily an American multinational technology company that focuses on e-

commerce, cloud computing, digital streaming, and artificial intelligence. Founded by Jeff
Bezos in 1994 as an online bookstore, Amazon has since expanded into various other product
categories, including electronics, clothing, household goods, and more.

The company operates through several segments, including:

E Commerce: Amazon's core business is its online marketplace, where it sells a wide range
of products including groceries directly to consumers. It also offers third-party sellers the
opportunity to sell their products through its platform.

Amazon Web Service: AWS is Amazon's cloud based service which provides computing
and storage capacity, content delivery and data management, software networking, payment
and billing system & other application. It is a significant source of revenue for Amazon.

Amazon Prime: Amazon Prime is a subscription service that offers various benefits to
members, including free two-day shipping, access to streaming video and music content, and
more.

Hardware Products: Amazon designs and sells its own hardware products, including Kindle
e-readers, Fire Phone, Fire TV streaming video games & other applications, and Echo device
which is AI Based digital assistant.

Amazon Advertising: Amazon operates an advertising platform that generates targeted ads
for online businesses to promote their products and services on its website and other digital
properties.

Overall, Amazon.com is a diverse company that operates across multiple sectors, with a
significant focus on e-commerce, cloud computing, and digital content.

Amazon's business model is having several key components which is as follows :

E-commerce Platform: Amazon primarily operates the largest online marketplace, where it
sells a variety of products like books, electronic goods, fashion clothes & accessories,
household items, groceries etc. directly to consumers.

Third-party Marketplace: In addition to selling its own products, Amazon provides a

platform for third-party vendors to reach customers through its marketplace. These vendors
can list their products on Amazon's platform and leverage its vast customer base and allow
vendors to use Amazon warehouses, logistics expertise, and tracking of deliveries and other
services that the company offers its Prime customers.

Amazon Prime : Amazon Prime is a subscription service that offers various benefits to
members, including two-day free shipping, access to streaming videos and music content,
more. The subscription model is a recurring revenue for Amazon.

Amazon Web Services (AWS): AWS is Amazon's cloud computing platform, providing a
wide range of services, including computing facility, storage, databases, to businesses and
individuals. E.g. Uber, Snap etc. AWS operates on a pay-as-you-go model, where customers
pay for the resources they use, without the need to build out their own computing capacity
and ensures scalability and cost-efficiency.

Hardware Products: Amazon designs and sells its own hardware products, including Kindle
e-readers, Fire phone, Fire Tablets, Fire TV , and Echo devices like Amazon Elexa.

Advertising Revenue: Amazon operates an advertising platform that allows businesses to

promote their products and services on its website and other digital properties.

Physical Retail Stores: Amazon operates physical retail stores which enables customer
service by providing various facilities like next day delivery, pick up of online orders, returns
exchange etc. It also operates Amazon Campus store to fulfill student need of delivering any
good ordered online by student on next day and provide discounts.

Media Production : Amazon also integrated vertically in Media Production sector By

developing its own streaming video content with Prime Video to compete with Netflix.

Overall, Amazon's business model is characterized by its customer-centric approach,

leveraging technology and innovation to offer a wide range of products, services, and digital
content while continuously expanding its revenue streams.
Amazon's core competency lies in high standards of Customer Satisfaction (Customer
Obsession), its ability to leverage technology, innovation to dominate the e-commerce
market and expand into various other sectors.

2. How is Amazon using its core competency in scaling up business as well as its
diversification efforts? Amazon continues to spend billions on scaling up and
diversification efforts. Do you believe these efforts contribute to Amazon gaining
and sustaining competitive advantage? Why or why not? Where is Amazon's
next growth engine coming from? : Middle east
Customer Obsession: The first principle of Amazon is “Obsess over Customers” and hence
by providing various facilities like free & fast shipping including delivery by drones i.e.
Prime Air service, convenient payment options, Automated payment service Amazon-Go,
providing tracking & estimated delivery date & excellent customer care service contributed to
Higher Customer Satisfaction. Amazon has built a highly efficient Logistics & Fulfillment
network by acquiring Kiva Systems that enables it to deliver millions of products to
customers worldwide quickly.

Innovation and Technology: Amazon continuously invests in technology and innovation to

enhance its offerings by using cloud computing (AWS), digital content delivery through
Amazon Prime Video & Music, Artificial Intelligence by providing Amazon Elexa (Echo
device) hardware development Like Kindle, Fire Tablets & Fire TV etc.

Yes, Amazon's continued investment in scaling up and diversification efforts does contribute
significantly to gaining and sustaining competitive advantage for several reasons:

4th In Market Capitalization : Amazon's continued investment in scaling up and

diversification efforts made it 4 th in Market Capitalization of $881 Billion amongst the top 5
Tech companies and well ahead of its competitor Walmart.

Amazon's investments in scaling up its logistics, fulfillment network by acquiring KIVA

system to make fully automated fulfillment network results in fast delivery and higher
customer satisfaction gaining the competitive advantage.

Diversification: Amazon's efforts to diversify its business beyond e-commerce into areas
such as cloud computing (AWS), digital content, hardware products, and advertising help to
have multiple revenue stream. Diversification allows Amazon to capture new revenue
opportunities, enter new markets thus enhancing its overall competitive advantage.

3. How have Amazon.Com's business decisions (scaling up and diversification) had

an impact on cost optimisation? And what would assure Amazon.Com's bottom-
line?

Logistics Efficiency: Amazon’s Central Hub, physical retail stores, Amzon Campus, Prime
Air service & acquisition of KIVA system enable it for fully automated logistic &
fulfillment network to increase efficiency of its final delivery and cutting down the last mile
delivery cost using UPS, FedEx currier service.

Vertical Integration: Amazon's diversification efforts, such as acquiring Whole Foods, have
allowed the company to vertically integrate its supply chain and reduce dependence on third-
party suppliers and distributors. By owning key components of the value chain, Amazon
gains greater control over costs, quality, and inventory management, while also capturing
more value from each transaction.

AWS Cost Optimization: Amazon Web Services (AWS) is a significant contributor to

Amazon's overall profitability, and the company continuously focuses on optimizing costs
within its cloud computing business. AWS pay-as-you-go pricing models to offer cost-
effective solutions to customers which reduce operating expenses and pass on savings to
customers.

Diversification of Revenue Streams: Amazon's diversification efforts into new business

lines, such as advertising, subscription services (e.g., Amazon Prime), and hardware products
(e.g., Kindle, Echo, Fire TV), help diversify revenue streams and mitigate risk. This
diversification allows Amazon to better absorb fluctuations in demand and market conditions,
contributing to overall cost optimization

Several factors contribute to assuring Amazon.com's bottom line, ensuring sustained

profitability and financial success:

Efficient operations like optimizing logistics & fulfillment network; Cost Optimization
through initiatives such as vertical integration, Automation and AWS cost management;
Revenue Diversification through a range of products and services, including e-commerce
sales, AWS cloud services, digital content subscriptions, advertising, hardware products, and
Media Production; Customer Satisfaction by delivering exceptional service and
continuously innovating to meet customer needs; Investment in Innovation & R&D by
investing consistently & heavily in innovation and R&D to develop new products, services,
and technologies to fuels future growth opportunities, excel in operational efficiency and
competitive advantage, ultimately assuring strong bottom line of Amazon.
 4. Is AWS related to Amazon's core business? Why or why not? Some investors are
presenting Jeff Bezo to spin out AWS as a standalone company? Do you agree
with this recommendation? Why or why not?

Yes, AWS (Amazon Web Services) is related to Amazon's core business, While Amazon's
core business initially started as an online marketplace for selling goods, AWS has emerged
as a crucial component of Amazon's overall strategy and revenue stream. Here's why AWS is
related to Amazon's core business:

Financial Contribution: AWS has become a significant contributor to Amazon's overall

financial performance and contributing almost 59% of total profit ($7 billion out of $12
billion in 2018) . AWS accounts for a significant portion of Amazon's total revenue and
operating income. This financial contribution suggest the importance of AWS to Amazon's
core business.

Competitive Advantage: AWS provides Amazon with a competitive advantage in the cloud
computing market, against rivals such as Microsoft Azure and Google Cloud Platform. With
AWS, Amazon strengthens its position as a technology leader and expands its market reach
beyond e-commerce.

Arguments For Spinning Out AWS:

Focus and Agility: As a standalone company, AWS could potentially operate with greater
focus and agility, allowing it to respond more quickly to changing market trends, customer
needs, and competitive threats. Without the constraints of being part of a larger company,
AWS could have more flexibility in decision-making and resource allocation.

Unlocking Value: Spinning out AWS could unlock significant value for shareholders by
allowing them to invest directly in a pure-play cloud computing company. This could attract
investors who are specifically interested in cloud services and are willing to pay a premium
for exposure to AWS's growth potential.

Independent Growth Trajectory: AWS's growth trajectory may differ from Amazon's core
e-commerce business. As a standalone company, AWS could pursue its growth opportunities
independently, without being tied to the performance or priorities of the e-commerce
segment. This could enable AWS to explore new markets, make strategic acquisitions, and
innovate more aggressively.

Market Perception: Some investors may view AWS as undervalued within Amazon's
broader corporate structure. Spinning out AWS could result in better market recognition and
valuation for the cloud computing business, leading to enhanced shareholder returns.

Arguments Against Spinning Out AWS:

Integration and Synergies: AWS benefits from synergies with Amazon's e-commerce
operations, including shared infrastructure, data insights, and customer relationships.
Spinning out AWS could disrupt these synergies and result in inefficiencies or missed
opportunities for collaboration between the two businesses.

Risk of Value Destruction: While spinning out AWS may unlock short-term value for
shareholders, there is a risk that it could lead to value destruction in the long term. Separating
AWS from Amazon's e-commerce business could weaken the overall company's competitive
position, reduce diversification benefits, and increase operational complexity.

Loss of Financial Support: AWS has benefited from access to Amazon's financial resources,
infrastructure, and brand credibility. As a standalone company, AWS may face challenges in
raising capital, and competing against larger rivals without the backing of Amazon's
resources.

Control and Governance: Jeff Bezos and Amazon's leadership team have played a pivotal
role in AWS's success and strategic direction. Spinning out AWS could result in changes to
governance structure, leadership team, and corporate culture, potentially affecting the
company's ability to execute on its long-term vision.

5. Which of its competitors does Bezos need to pay attention to, and why? And how
should he deal with them in terms of devising Amazon's business and corporate
strategy?

Wallmart : it is the largest physical retailer in the world and investing heavily in ecommerce
by operating websites like Walmart.com, jet.com and shoes.com. it offers free two day
shipping for any order above $35 and opened for third party vendors to sell their item through
walmart

Microsoft: it has completely transformed itself as a company to focus on an open, software

as a service business model. The company’s cloud computing service, Microsoft’s Azure, wis
Amazon Web Services’ strongest competitor and recently obtained $10 billion contract in US
defense.

Google : It is Amazon’s main competitor in some of the same businesses such as online
search and advertising and AI-enabled ecosystems (e.g., Alexa vs. Google Assistant), Also
Google acquired Youtube is threat to Amazon Prime video in streaming platform.

Netflix, Apple : With their media content and acquiring contents from other platforms,
becoming threat to Amazon Prime video resulting into revenue loss.

Here are some strategies Amazon could consider:

E-commerce Innovation and Differentiation: To compete effectively with Walmart in the

e-commerce space, Amazon should continue to innovate in technologies such as artificial
intelligence (AI) to enhance the shopping experience, personalized recommendations,
offering unique services like Amazon Prime to retain and attract customers. Amazon can
strengthen its competitive position against Walmart by further integrating its online and
offline retail outlets & channels. This could involve expanding Amazon Fresh grocery stores,
Amazon Go cashierless stores, and other physical retail formats to complement its e-
commerce operations.

Cloud Computing Leadership: In response to competition from Microsoft's Azure, Amazon

should reinforce its leadership position in cloud computing through continuous innovation,
superior customer service, and strategic partnerships. This may involve expanding AWS's
portfolio of services, enhancing security and compliance features, and investing in global
infrastructure to maintain scalability and reliability. Amazon could also leverage its extensive
customer base to cross-sell AWS services to existing e-commerce clients.

Digital Advertising: Amazon can compete with Alphabet (Google) by leveraging its e-
commerce platform and customer data to strengthen its digital advertising business by
offering targeted advertising solutions,
Content Creation and Distribution: To differentiate Amazon Prime Video from competitors
like Netflix, Apple TV Amazon should focus on producing high-quality original content,
securing exclusive licensing deals, and enhancing the user experience. This may involve
investing in content production studios, making partnership with content creators &
distributors, and marketing campaigns to attract subscribers and retain existing ones