HBS Case Study - Amazon.com

Authors Avatar

Amazon.com

Business Model: Amazon started off as an online bookseller and later expanded its product offerings to include music, DVDs, videos, toys electronics, software, videogames, home improvement products etc. The Company purchases products from a network of manufacturers/publishers. For the orders that cannot be fulfilled through inventory, the company has a proprietary software that fulfils orders via electronic interfaces and in some cases forwards the order to special order groups.

Features:

  1. Amazon had its own distribution centres to have more control over the distribution system and thus facilitate reliable and timely delivery to its customers.
  2. Fulfilment costs represent – operating and staffing the distribution and customer service centres.
  3. Operating and staffing costs shown as Marketing and Sales Costs
Join now!

  1. Prior to reclassification of fulfilment costs as a part of costs of sales instead of Marketing & Selling Expenses, the Income statements of Amazon are as follows:

Post Reclassification of fulfilment costs as a part of costs of sales instead of Marketing & Selling Expenses; the Income statements of Amazon are as follows:

As is evident from the tables above the gross profit has reduced due to the reclassification of fulfilment costs as cost of sales instead of marketing and sales expenses.

Effect on Inventory:

  1.  As the CFO of Amzon.com, the ...

This is a preview of the whole essay

Here's what a star student thought of this essay

The report doesn't include an screenshot of Amazon.com, and this should be in-putted into the report. This will allow the examiner to visualize the report, which would support the student's writing.

The report states Amazon's business model, however this is limiting. The student could go further in explaining how the business generates their profits. The report could include 'Amazon's profit margin's on the vast majority of their products are small, and there don't receive a large amount of profit per unit. However Amazon does receive vast orders, and the small amounts of profit per unit adds upto their profit figure. Competitive prices alongside an outstanding customer service allows the business to acquire these vast sales'.

In summary, the report is quite basic. The report describes a little regrading the business model alongside three features. In addition, the report gives financial data and a little explaining this. However this is lacking in-depth understanding. The student could justify why the business may implement a number of features to make the business as effective as it is. The report states that the business has a number of 'distribution centres', although where are these? The report could state the locations of each centre and describe why the business would want the location there. For example, having a warehouse within London would allow the business to focus on the area of London, as this is a large area. Or there could have one within York to cover the areas of Yorkshire and Humber. The student could explain how the centres could be placed to cover the demand from the website. The tables of data is displayed well and I've done a quick check to Amazon's official document and this does appear accurate figures.