Strategy Letter I: Ben & Jerry’s vs. Amazon Phillip Guest November 12, 2014

Introduction Brief History of Ben & Jerry’s and Amazon Differences between the two models Spolsky’s Advice when choosing a model

Brief History of Ben & Jerry’s Began in 1978 Revenue for 1984 was over $4 Million Revenue for 1992 was $132 Million By 2008, annual sales were exceeding $200 Million

Brief History of Amazon.com Founded in 1994 by Jeff Bezos In 2000, began offering e-commerce platform to additional retailers In 2003, reported revenue of $5.26 Billion In 2013, reported revenue of $74.45 Billion

Differences Between Models Established Competitors Network Effect and Customer Lock-in Initial Capital Required Importance of Corporate Culture Learning from Mistakes What Rate of Growth Offers Employees Chances of Success

Established Competitors Ben & Jerry’s Slowly win customers from competitors Amazon “Land grab” Get as many customers as possible before competition shows up

Network Effect & Customer Lock-in Ben & Jerry’s No network effect or customer lock-in Amazon Works when you have both

Initial Capital Require Ben & Jerry’s Initial investment is low Reinvest profits to grow Amazon Large amount of capital required Substitute money for time to beat competition

Importance of Corporate Culture Ben & Jerry’s Corporate culture is important Allows for mentorship and adherence to company values Amazon Corporate culture is impossible Growing too fast for mentorship The number of employees means there will be many different sets of values

Learning From Mistakes Ben & Jerry’s Mistakes hurt company Must learn from these mistakes Amazon Growing too fast to notice mistakes Mistakes are easy to cover with money

Growth Rate & Employees Ben & Jerry’s Growth over long amount of time Translates to job security for employees Comfortable work space is important to make up for lower wages Amazon Get big fast Able to offer high salaries Hours may be long

Chances of Success Ben & Jerry’s Amazon High chance of success In the event of failure, losses will be low Amazon High chance of failure In the event of success, payoff may be great

Choosing a Model Must choose one Choose Amazon if: No competition Network effect and customer lock-in Choose Ben & Jerry’s if: Entering an established market Set goals of sustainability and profitability

Choosing a Model Consider personal values Stick to choice Which company would you rather work for? Stick to choice Cannot be both

Conclusion History of Ben & Jerry’s and Amazon Differences between models Guidelines when make the choice

References http://www.joelonsoftware.com/articles/fog0000000056.html http://www.benjerry.com/about-us http://www.entrepreneur.com/article/197626 http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-factSheet http://www.nasdaq.com/symbol/amzn/revenue-eps http://www.forbes.com/sites/ryanmac/2014/06/05/bezos-net-worth-rises-1-4-billion-on-rumors-of-3-d-amazon-smartphone/

Questions?