Business Operations in the 21 st Century

Humble Beginnings Jeff Bezos founded Amazon in 1995 “use the Internet to transform book buying into the fastest, easiest and most enjoyable shopping experience possible.” Increased selection to 2.5 million titles to become the “Earth’s Biggest Bookstore” Plan: Rely on wholesalers Growth: DC- 50,000 to 285,000 square feet 1997 Second DC in Delaware

The Story Continues June Music November Video Competition: Buy.com (low prices), CDNow BarnesandNoble.com “Get Big Fast” strategy New DC’s: Reno, NV - Campbellsville, KY - Lexington, KY - Coffeyville, KS - McDonough, GA DC will mostly all carry a mix of products

How will we succeed “Pick-to-light” system- linklink Voice technology, computers “verbally” communicate instructions Worker performance: # of items picked per hr. Jeff Wilke: Six Sigma DMAIC (Define, Measure, Analyze, Improve, and Control) Simulate holiday season conditions

Operational Initiatives Improved Inventory Management: pinpoint demand in different regions Available-to-promise capabilities “Cascading” buying rules “Drop ship” orders 4 th quarter of 2001: $22 million expenses cut (17%)

International Transition – Started as a pure book retailer through acquisitions UK & Germany Duplicated the US “Get Big Fast” Strategy Incorporated a wide variety of products to grow Expanded into the France market in 2000 Built the site from scratch Multiple product lines at the same time

International Challenges..... Cultural differences: Dedicated separate websites for each country Content and items displayed were unique to each country Selling Regulations – Book prices were fixed & could not be discounted: Introduced free shipping and promotional activities

Challenges Continued Payment Options Offered local preferred alternatives to credit cards (checks / postal orders) Procurement Strategy – Limited wholesalers & low EDI utilization Established relationships with hundreds of publishers and distributors Delivery Method Relied on national postal service carriers

EDN – European Distribution Network Location of Inventory is Strategically rather than Geographically Determined 1.Link different sites to a single European DC 2.Keep all 3 DCs 3.Keep 2 DCs – one Northern and one Southern

Valuation, Profitability, Growth.... Stock: All-time high $ (4/22/10) P/E ratio of 54; industry median is 30 Operating Margin 4.79%; industry 8.62% Revenue Growth 34%; industry 23% THE KINDLE!

AMZN: 10 year Stock review.....

SOURCES -Harvard Business School - Amazon.com's European Distribution Strategy -TD Ameritrade -Hoovers -Amazon.com - amazon-dot-com.jpg -