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Sample Case Study on Amazon

Case Study on Amazon.com

Recommendations:
Books, music and DVD/Video accounted for 48% of 2002 revenues for Amazon.com. As a result, we suggest that Amazon concentrate its business on this segment alone. It has the most expertise in this particular field(s) and thus is the most profitable for them. But we also suggest that Amazon drastically reduce its inventory of “physical” inventory in order to cut warehouse costs and the number of employees needed in the warehouse. A way to do this is to start selling e-books, books that can be downloaded onto your computer, charge a flat per song fee to download songs, and also charge a fee to download movies to your computer. By doing so, Amazon will stay within its market niche while inventory for these items will be almost non-existent.

Amazon should also move into a customer-to-customer auction forum, much like Ebay. By do this they can be more competitive with Ebay and still not have much inventory on hand, thus reducing costs.

We believe that their (Amazon) strategic alliances should continue to grow as the Business-to-Customer market increases, as will the Business-to-Business market. With all three of these suggestions, Amazons cost of changeover is minimal compared to keeping their traditional warehouse inventory method.

Alternatives:
Possible alternatives for Amazon include recruiting a new management team, one that focuses on making a profit rather than enlarging its market share. Capturing market share is indeed vital for any business to flourish, but if the business does not generate a profit it could end up bankrupt.

Another possible alternative is to phase out some of Amazons least profitable venues, such as appliance sales. By doing so they could sell off their least profitable sector and cut their losses now rather than incurring large amounts of debt by keeping large amounts of inventory and freeing up extra space for more profitable items.

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