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ISIT901
IT Strategic Planning
Assignment
Case Study on Amazon.com
Osasumwen Ogbebor
4377436
0562965461
osasu.ogbebor@gmail.com
Dr. Slim Saidi
Tuesday, 06 November 2012
Tuesday, 06 November 2012

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Subject: ISIT901
Student Name: Osasumwen Ogbebor
Due Date: Tuesday, 06 November 2012
Signature of Student:

Assignment Title: Case Study on Amazon.com

Student Number: 4377436
Date Submitted: Tuesday, 06 November 2012

Student Assignment Receipt (To be filled in and retained by Student upon submission of assignment)
Subject: ISIT901
Student Name: Osasumwen Ogbebor

Assignment Title: Case Study on Amazon.com

Student Number: 4377436

Due Date: Tuesday, 06 November 2012

Signature of Lecturer

Date Submitted: Tuesday, 06 November 2012

Amazon is a fortune 500 company founded by Jeffrey P. Bezos in the year 1995. Its a top leader
in e-commerce. The company had a successful initial public offering (IPO) on May 15, 1997,
and made a profit of $50million which it used with the capital associated with it to expand from
an online retail bookstore into an online superstore providing house hold items, music, books,
videogames, consumer electronics, software and a full line of kitchen/ home improvement
products.
The company experienced tremendous growth during and after the tech boom with an increase in
its consumers between 1999 to 2000 from 14 million to 20 million. But this had implications in
the sense that the company had not produced profits during these years. The challenge for Bezos
and the Amazon.com team was to make profit from the company before running out of available
funds and operations ceasing or going bankrupt. The solution was to use a $680 million
borrowed in early 2000 and a $318 million raised through stock options in 1999 to enhance their
operations and generate profits.
Amazons strengths began from its inception. It started up during the dot com bubble which
meant they made an entry into a new industry from its earliest start. Also being located in Seattle
meant the company had e-commerces top talent and leading experts close by. The companys
next strength sprung out from its decision to provide its consumers with multiple product lines
meeting various consumer needs in other words which acted as substitute products or services.
The company created a barrier to entry by being the first large seller of books online.
Amazon.com recruited the best hands in IT which helped it switch from being a bookseller to a
retailer by utilizing virtual resources and traditional physical requirements like store fronts and
floor space.
With the incredible branding power and name recognition Amazon.com had become a household
name and this made it difficult for new competition to gain grounds in the business of online
sales, online retail, etc.
Amazons competition ranged from retailers in the video industry, book industry, entertainment,
music industry and also included those in the auto parts, retail camera and optical goods retail
sector.
Amazons weakness in my opinion was that they partnered with retailers that already had an
online presence such as pets.com, but they should have formed partnership with traditional
retailers looking to develop online retailing.

Another area in which there was operational cash drain was in their inventory. Inventory
management became a challenge after the addition of multiple lines of products and distribution
centers in the year 2000. The inventory turnover for Amazon in 1999 was 20% that of their
competitor Barnes and Noble and contributed to downbeat cash flow in 2000.
The crash of the dot-com stock market aggravated the companys problems and by the middle of
2000 many of its online retail partners had declared or were heading towards bankruptcy.
My recommendations would be to utilize an advanced enterprise resource planning (ERP)
software to better estimate the inventory required to meet the customers demand without
overstocking.
They should also form partnership with traditional retailers looking to develop online
retailing presence.

If I were a shareholder who received Amazons year 2000 annual report, I would have
strongly agreed with the CEO Jeff Bezos that the company must achieve profitability by
year-end 2001. My recommendation will be that the company cuts costs related to
fulfillment and inventory and by capitalizing on the previous years investment by
increasing revenue.

Referral:
1. Corporate information strategy and Management by Lyanda. M Applegate, Robert D.
Austin, Deborah L. Soule.
2. (2010, 04). Case 1 - Amazon .Com: the Brink of Bankruptcy. StudyMode.com. Retrieved
04, 2010, from http://www.studymode.com/essays/Case-1-Amazon-Com-The318706.html.
3. (2011, 02). Amazon: the Brink of Bankruptcy. StudyMode.com. Retrieved 02, 2011, from
http://www.studymode.com/essays/Amazon-The-Brink-Of-Bankruptcy-575115.html.