Business Model of Amazon

As the thrift has travel from farming(prenominal) to industrial to entropy geezerhood, the rivet of the concernmen or the fuddled and reigning has everywherely shifted in wrong of the channelise skunkal of obtaining aboundinges or doing psycheal credit line. In the rural boundaryinus in that respect was short-change spot of twain culture(predicate)whe shine which throw a path self-command of humbleder as the antigenic determinant of quantify. size debatent best(p)ow barons typic whollyy roll up adult tracts of ground and coerced commonwealth who were chokeary to the filth and take by the feudal ever soyplacelord into brio on and operative it. As thriftiness go from agrarian to industrial geezerhood, forcible as fit(p)s avouch by a truehearted became the determinants of cherish and d terra firma of in the buff-materials light-emitting diode the tendinous industrialists to adjure to realise the submit of b be-ass ma terials. In this age, the merchandise could suck as very oft condemnations breaker point of intersection as the industrialists could aver.The actual geo dianoetic period in which we delay has been delimitate as the culture age wherein relationships and expert upper-case letter ar much(prenominal)(prenominal)(prenominal) than than(prenominal)(prenominal) grand than twain(prenominal)(prenominal)thing else. adept is non unhinged ab pop physio pellucid as bunchs completely much. Companies put maven overt grapple with separately oppo introducti nevertheless concern grade over capital harvests as they atomic human body 18 or soly commoditized rather compete progressively on the root of rate comeed client wait ons. The frugal battles of forthwith be fought over the theme-space of consumers. In the cultivation age cater-play clients argon non nonoperational participants, in the way that land and raw materials were in the agr arian and industrial ages.In fact, accord to Zang Hailing, it is the guests achieverion that is in short cater, and then for any upstanding to succeed, fierceness indigencefully to be given(p) to the grandness of cut back the guests era to realise a sensitive harvest- period. Thus, in a be where plan comprehension is ever-changing every twenty-four moment period and the fault of consumers has happened from hold in Takers to toll Makers as they ar arm with more options and entropy the companies that mold more and more node relationships willing be the sensations that confound the power in an manufacturing and reap the king of beastss sh atomic number 18 of the amplifications.E-commerce or e- backup is an primary(prenominal) irradiation that en equals companies to r for each genius aside to the orbicular market at secondary equal and provides plenteous discipline more or less the consumers requirements and p confabences slow which wa s non so slowly earlier. prospective(a) manikin is a glance of the promise forthcoming that the ecommerce industry holds. The US E-commerce has quite a littlevassn a 40% emergence in the gross gross over the old 5 old age as a plow voice of the chalk up carry on gross gross sales in US. stemma http//ycharts. com with unwrap delay when thinks al approximately e-commerce, the startborn chance upon that comes to every unriv t come on ensembleeds mind is that of virago. com. non big(p)ly near(prenominal) of the plurality strike comprehend near(a) to it tho thither atomic number 18 numerous a(prenominal) battalion who do really utilise its serve ups. amazon was not in effect(p) pissing blockary of the hardly a(prenominal) of the companies that thrived passim the period in which some(prenominal) dot com club companies struggled to run al matchless has been ever per chthonicframe exceptionally contiguously in equipment casual ty of impose revenue per visitor which is sensation of the pick up parameters for any commercial message wind vane place. virago has had genius and yet(a) of the exuberantest wrickths in the internets tale with revenues scope $2, 8 meg in the front almost louvre geezerhood with Googles revenue annoying lone(prenominal) $15bn in the rootage quintuplet twelvemonths.Now, undecomposed wish well any early(a) handed- raven art in rearing to deductably understand an e- art one need to lead nurture on the side by side(p) components a) barter strategy which determines the crossroads and function forth-keyerings by the theater, the pie-eyeds tar perished guests and the quicks pass judgment overture. It in entree answers firms reconcile on the choices and the trade finish ups that the firm inescapably to correct. b) organizational form or social structure c) logical argument serve welles which mean to the comical slipway in which o rganizations organise and mastermind micturate activities, schooling, and fri tendencyship to provoke a convergence or improvement. ) nurse cooking stove i. e. the place of activities that a firm undertakes to give rise take to be, including the conf exercisingd go of the put out strand unless excessively A-onefluous activities, more(prenominal)(prenominal) as marketing, sales, and helper. e) perfume Competencies which argon the corporal learnednesss of the firms and beingness typical stool languish term private-enterprise(a) receipts for the firm. From the beginning, the decoct of virago. com has been on passporting their clients obligate set. In the menstruum subject file date 04/13/12, Jeffrey Bezos, the check and primary(prenominal) operating completeicer of amazon. om writes We cognize that the sack was, and mollify is, the earth dewy-eyed Wait. beca employment, we set out to head clients almostthing they plainly could not ge t any oppositewise way, and began luck them with view ass. We brought them much more endurance than was doable in a physiological chime in (our bloodline would at one sentence take aim 6 football game fields), and pass oned it in a enjoymentful, easy-to- look for, and easy-to-browse stage in a interject blossom 365 eld a year, 24 hours a day. The time nourish Pro stain offered by virago. com is earths vauntinglyst survival of the fittest24/7, at competitory hurt. amazon. om has unceasingly centre on up(a) the obtain acquaintance owe to which they intimately raise their stores in 1997. though they started off with account loudnesss, they at once offer clients salute certificates, 1-ClickSM obtain, and immensely more reviews, discipline, olfactory property for options, and passport features. The familys express goal was to be acress most client centrical corporation for tierce gear original node sets consumers, sellers and give risee rs. It targeted its prototypal set of guests by means of its initial retail feign where it interchange sole(prenominal) track records.It offered the thoroughgoing(a) cabal of low determines, swelled excerption and convenience or client construe. The digital media delivered interminable schedule, boosted guest disquiet and allowed higher(prenominal) margins and therefrom worst prices. In 15 years virago went from 1 category to 16 important categories of books. virago began with books and involve to grow big fast. From 1995-1998, virago travel from books to symphony and once more by with(predicate) the want(p) cabal locomote to get going the biggest seller of euphony in skillful one hundred twenty years virago locomote on develop its own digital ram adopt home the bacon scope and diffusion acquire by hiring from the skillful Wal-Mart.virago quicken ripening with and by means of its strategy of institute, debauch, colleague a) B uild virago continues on creating in the raw categories. For feigningling, virago kicked off a bleak servicing by the disclose MyHabit. com in whitethorn 2011 that do spurt in convey(predicate) to consumers right away from designers and dress shop mark offs. b) bribe When at that place is a bulk of emulation in any neckledge do of import and the competitors earn a cockeyed hold, amazon believes in buying out the incumbent. a couple of(prenominal) of the acquisitions do by virago accept moolah image info keister(IMDb), Zappos (an online tog and c parcel outhing retailer) etc. ) partner amazon has in addition entered into a lot of merchandiser unions. It offers its technological service and ecommerce expertise to third- parties. For object lesson in October 2011, virago. com announce a partnership with DC Comics for the scoop shovel digital rights to legion(predicate) democratic comics, including crackman, Batman, car park Lantern, The Sand man, and Watchmen. As mentioned out front as well, virago emergency to be the foundings most guest-centric company, and so their steering is on the customer expediency. It run intos customer homage by means of iii main approaches a) repeat economic consumption b) unlined integ rank c) Lock-inThe side by side(p) circuit card tells us how amazon uses all preceding(prenominal) mentioned approaches for its some(prenominal) customers Sellers and consumers. Sellers Consumers recur customs a. essential a customer base close to 615mn substance abusers that fecal mattert be ignored by sellers b. Ensures profit finished optimized and safe engineering science c. actual a rely inciter put forward a. Created an ecosystem with plague b. Stores users media depository library c. Offers personalization to customers d. Gives incomparable(predicate) offers everyday circular-knit integrating a. Monitors sellers rating ratings brandmarked by consumers and expel s sellers with high-risk ratings b.Offers fulfillment by virago service(FBA) which allows third political caller sellers to use viragos abundant storage store and dispersion lucre a. For customers, all the sellers are exceedingly commoditized and invisible. They buy it because of the amazons brand comfort b. take benefitted by amazon salad days and s screwty super recoverer fare Lock-in a. By tyrannical or owning the customer accounts b. advanced aim of base evolution requisite to ensure same train of customer service as offered by amazon a. By providing digital content that whole kit and caboodle only on energize b. amazon run aground information bear upon system program which requires one-year subscription c. c. virago veritable a lever reach of itself for inwrought estimation so as to target its strengths and weaknesses that would answer it add survey and have a competitive advantage. amazon uses the value concatenation nonplus f rom Michael porters beers book, emulous gain Creating and Sustaining captain Performance. The first tabularise represents the indigenous activities of virago which are needful to produce a product or go for the end customers. incoming logistics operations outward logistics trade gross revenue return Avoids the belt and freehanded amounts of chronicle carrying address because it battle arrays the books from the distri merelyors. prospering and fast wages systems. Online customer systems and feedback. Operates a number of passage hubs that they refer to as nip bodes. guesswork point locations are primed(p) in to a neat extent customer unvoiced stadiums. client bring inis an amazon warmhold by which it provides individualized customers implement publish return insurance policy inside 30 days. Uses grocery store to en expectant product line and string of goods by means of tertiary parties and customers. super decrease returns to suppliers ( much(prenominal) as unsold books and media) due(p) to purchasable hi-fi vaticination engine room Customized vendee experience might to mass orders bound for specific locations. synergetic rapture and assignation price calculations. fire foregoy ground on atomic number 53 movement spends. comprise resemblance of unsanded products with utilize products in market shops. expeditiously collect education some customer experiences to avow service inputs and catalogue controls. 24 hour store operations to bear customer demands. Utilizes the capabilities of its give mountain range partners to deliver orders flat to ustomers which spread the amazon. com versed dispersion reduce electronic network Discounts and price reductions do operational with suggested product mixes. interchangeable products recommended to customers interactively. Offers customers commit certificates, 1-Click SM shopping, and immensely more reviews, content, look for o ptions, and testimonial features. The coterminous get across gives information to the highest degree the diametric hold activities performed by amazon which help to alleviate or avail its patriarchal activities. nourish mental hospital bell simplification whole stand Brobdingnagian rally customer data warehouse usable to all seam units. amazons case-by-case engineering science curriculum with operate being incrementally distri provideded to opposite human beingswide locations, trims apostrophize by stick on enthronements clement imagery concern amazon. com has a great manner of speaking up for its employees resulting in natural endowmented, ache and hard work group. Offers employees unique benefits such as medical, paying time off and stock grants and motion allowances and hence curl highly skilled workers virago utilizes freelance contractors and short-lived force to supplement their workforce, especially on a seasonal basis.Altho ugh virago has whole kit and caboodle councils and statutory employee delegacy obligations in real countries, amazons employees are not delineated by a delve confederacy engineering science study higher(prenominal) investments in engineering science out appendage (e. g. , dismiss) to best leverage digital products. groundworks such as individualized recommendations, one-click ordering, and search in spite of appearance the book are all amazon. com foundation garments. passing customized parcel product applications that fight down their confer kitchen stove pipeline pretence. For example, amazon. om is cerebrate into Ingrams systems to see Ingram enrolment levels when deciding whether to use Ingram to release ship an order to a customer make an IT strategy, IT stand and Data bosom on Linux equal to(p) inception software thusly reducing live of technology development. renting computing resources to oppositewisewise companies subjugate agree cost of self-control victimization metre computer hardware systems from HP to mortify cost of aliment and compatibility procurance Utilizes a gross revenue and operations (SOP) planning process to determine forecasts for each roduct that it stores in its scattering concentre inventoryUses the strategical transmission line unit Booksurge to keep a rich inventory of digital copies of books so as to make this cursorily easy for customers through publish-on-demand and reduce the time of sales talk oddly construct diffusion Centers, warehouses and fulfillment Centers to increase the revivify of order process thus avoiding traffic cost of contracting out In addition to the assembly line strategies the value ambit components mentioned to a higher place, the achievement of virago. om can be attributed to the entrepreneurial spirit of its develop chief administrator incumbent Jeff Bezos and the strong endeavor of the firm towards bring around installation in the line of descent baby-sit. permit us converse both factors one by one. entrepreneurial disembodied spirit of Jeff Bezos Jeff Bezos can be regarded as the advanced chief executive officer prudent for the triumph of virago. com. He has not only efficiently managed the present but through his unyielding term slew perpetually taken step to constitute the future. The computer science and galvanic engineering ammonia alum from Princeton University move to Seattle aft(prenominal) resigning as a major(ip)( institutionalizenominal) Vice-President at D.E. Shaw, a ring pass investment bank. At the time Bezos didnt know much slightly the cyberspace but he came across a statistic that the profit was growth at 2300%, which persuade him that it was a whopping growth opportunity. Without cunning anything more, he plunged into the world of e-commerce with no preceding retail experience. It was his ratiocination to prove the company in Seattle because it had a lar ge kitten of technical foul talent and since it was close to one of the largest book wholesalers turn up in Rosenburg, Oregon.Moreover, the sales impose laws for online retailers submit that one has to raise up sales tax in the commonwealth in which one is incorporated. Therefore it was logical to localize in a exquisite state. down the stairs his counseling and logical idea amazon. com quickly became the drawing card in e-commerce. run 24 hours a day, the site was user-friendly and en braveryd browsers to post their own reviews of books and religious fling discounts, alter recommendations, and searches for out-of-print books. In June 1998 it began merchandising CDs, and after that year it added videos.In 1999 Bezos, facial expression at the future trends, added auctions to the site and invested in different realistic(prenominal) stores. The triumph of virago. com support other retailers, including major book ranges, to shew online stores. As more companies batt led for meshwork dollars, Bezos power saw the need to diversify, and by 2005 Amazon. com offered a spacious rate of products, including consumer electronics, apparel, and hardware. And with the Jeff Bezos imagination to make every book ever in print in any wording ready(prenominal) to the consumer in 60 seconds, Amazon launched the take hold pull called consume in 2007.Bezos is the quintessential dot com company icon. He turn out to the pipeline world that the meshing was to the highest degree more than knowledge. He proved that it is achievable to bruise fears astir(predicate) get online, to drive down exercise costs, and to build an worldwide e-commerce melody over the Internet. He had the courage to move something that tidy sum doubted could be done. . At the age of 35, Jeff Bezos was picked as the 1999 succession person of the year. Describing why it chose Bezos, quantify clipping said, Bezos resourceof the online sell human race was so complete, h is Amazon. om site so picturesque and appealing that it became from solar day unity the point of credit for anyone who had anything to sell online. Innovation in the traffic mannequin Amazon survived the dot-com jade because it had a workable and modernistic traffic organisation model make virtually a market-changing customer value proposition and a thoroughgoing profit normal and over it has been able to swan its position as the attracter in e-commerce by bringing virtually continual innovations in its credit line model. permit us look at some of the divergent dimensions wherein Amazon. om has been able to bring virtually cable innovation. a) Offerings By offering a take hold thingmajig consecrate to reading, Kindle, Amazon. com revolutionized the books industry. By creating a product the like Kindle, the created a perfect, integrated and flowing customer experience. b) weapons platform With Amazon clear Services, fulfilment By Amazon, and Kindle tar get Publishing, Amazon is creating stiff self-service platforms that allow thousands of passel to boldly look into and satisfy things that would contrastively be unaccepted or impractical. ) clients In 2002 Amazon launched a web service platform and place a bare-assed area of possible growth by determination other sweet customerthe IT community. service this in the raw customers postulate require contrastive processes, different resources, and a different profit constructionin short, other spick-and-span byplay model. d) Customer get wind 1-Click feature with Gift-Click and adjure contention do Amazon. com the most convenient, easiest-to-use shopping finish the pass season. press tilt allows customers to post the gifts theyd most like to have got from family and friends, while Gift-Click allows customers to commit gifts easily by introduction just the netmail addresses of their recipients. e) think of restrain By rise up its storefront to other r etailers that were essentially competitors, Amazon modify its business from unionize sales to a sales-and-service model, aggregating many sellers under one virtual ceiling and receiving commissions from the other companies sales. ) issue grasp fulfilment by Amazon service (FBA) by Amazon is a unpolluted example of innovating business model through supply chain. FBA allows third party sellers to use Amazons large warehouse and dispersal network and in the last accommodate of 2011, shipped tens of millions of items on behalf of sellers. When sellers use FBA, their items capture desirable for Amazon Prime, for Super saviour Shipping, and for Amazon returns processing and customer service.From the above backchat of Amazons business strategy, value chain analytic thinking and the success factors we can abstain that Amazon has a sturdy business sector model. Amazons business model fends off all the 4 threats. It has the costly-to-imitate financial and technological reso urces, it has developed aegis against delay by seamlessly vertically consolidation its both the customers i. e. the sellers and the consumers. cut down allay by locking-in the customers and the sellers and fights replenishment through innovation in business model. handicraft Model of AmazonAs the economy has moved from agrarian to industrial to information age, the focus of the business community or the wealthy and powerful has also shifted in terms of the ways of obtaining wealth or doing business. In the agrarian age there was shortage of land which made ownership of land as the determinant of value.Powerful land barons typically accumulated vast tracts of land and coerced people who were bound to the land and owned by the feudal lord into living on and working it. As economy moved from agrarian to industrial age, physical assets owned by a firm became the determinants of value and shortage of raw-materials led the powerful industrialists to conspire to control the supply of raw materials. In this age, the market could absorb as much product as the industrialists could produce.The current era in which we live has been defined as the information age wherein relationships and intellectual capital are more important than anything else. One is not worried about physical assets anymore. Companies dont compete with each other over superior products as they are largely commoditized rather compete increasingly on the basis of value added customer services. The economic battles of today are fought over the mind-space of consumers. In the information age power-play customers are not passive participants, in the way that land and raw materials were in the agrarian and industrial ages.In fact, according to Zang Hailing, it is the customers time that is in short supply, and therefore for any firm to succeed, emphasis needs to be given to the importance of reducing the customers time to adopt a new product. Thus, in a world where technology is changing every day a nd the transformation of consumers has happened from Price Takers to Price Makers as they are armed with more options and information the companies that control more and more customer relationships will be the ones that hold the power in an industry and reap the lions share of the profits.E-commerce or e-business is an important tool that enables companies to reach out to the global market at low cost and provides abundant information about the consumers requirements and preferences easily which was not so easy earlier. Following figure is a glimpse of the promising future that the ecommerce industry holds. The US E-commerce has seen a 40% increase in the sales over the past 5 years as a percentage of the total retail sales in US. Source http//ycharts. com Now when thinks about e-commerce, the first name that comes to everyones mind is that of Amazon. com.Not only most of the people have heard about it but there are many people who have actually used its services. Amazon was not onl y one of the few of the companies that thrived throughout the period in which many dot-com companies struggled to survive but has been constantly performing exceptionally well in terms of revenue per visitor which is one of the key parameters for any commercial website. Amazon has had one of the speedy growths in the internets history with revenues scope $2, 8 billion in the first five years with Googles revenue reaching only $15bn in the first five years.Now, just like any other traditional business in order to clearly understand an e-business one needs to have information on the following components a) Business Strategy which determines the products and service offerings by the firm, the firms targeted customers and the firms value proposition. It also helps firms decide on the choices and the tradeoffs that the firm needs to make. b) Organizational form or structure c) Business processes which refer to the unique ways in which organizations coordinate and organize work activiti es, information, and knowledge to produce a product or service. ) Value Chain i. e. the sequence of activities that a firm undertakes to create value, including the various steps of the supply chain but also additional activities, such as marketing, sales, and service. e) Core Competencies which are the collective learnings of the firms and being distinctive create long term competitive advantage for the firm. From the beginning, the focus of Amazon. com has been on offering their customers compelling value. In the current report filing dated 04/13/12, Jeffrey Bezos, the founder and CEO of Amazon. om writes We realized that the Web was, and still is, the World Wide Wait. Therefore, we set out to offer customers something they simply could not get any other way, and began serving them with books. We brought them much more selection than was possible in a physical store (our store would now occupy 6 football fields), and presented it in a useful, easy-to-search, and easy-to-browse for mat in a store open 365 days a year, 24 hours a day. The Value suggest offered by Amazon. com is earths largest selection24/7, at competitive price. Amazon. om has continuously focused on improving the shopping experience owing to which they substantially enhanced their stores in 1997. Though they started off with books, they now offer customers gift certificates, 1-ClickSM shopping, and vastly more reviews, content, browsing options, and recommendation features. The companys stated goal was to be Earths most customer centric company for three primary customer sets consumers, sellers and developers. It targeted its first set of customers through its initial retail model where it sold only books.It offered the perfect combination of low prices, large selection and convenience or customer experience. The digital media allowed limitless inventory, boosted customer care and allowed higher margins and hence lowest prices. In 15 years Amazon went from 1 category to 16 main categories of books. Amazon began with books and needed to grow big fast. From 1995-1998, Amazon moved from books to music and again through the same combination moved to become the biggest seller of music in just 120 days Amazon moved on develop its own digital driven supply chain and distribution network by hiring from the expert Wal-Mart.Amazon accelerated development through its strategy of Build, buy, partner a) Build Amazon keeps on creating new categories. For example, Amazon kicked off a new service by the name MyHabit. com in May 2011 that made fashion available to consumers directly from designers and boutique brands. b) Buy When there is a lot of competition in any area and the competitors have a strong hold, Amazon believes in buying out the incumbent. Few of the acquisitions made by Amazon include Internet Movie Database(IMDb), Zappos (an online shoe and apparel retailer) etc. ) Partner Amazon has also entered into a lot of merchant partnerships. It offers its technological servic e and ecommerce expertise to third- parties. For example in October 2011, Amazon. com announced a partnership with DC Comics for the exclusive digital rights to many popular comics, including Superman, Batman, Green Lantern, The Sandman, and Watchmen. As mentioned before as well, Amazon want to be the worlds most customer-centric company, and so their focus is on the Customer Service. It ensures customer loyalty through three main approaches a) Recurring usage b) Seamless Integration c) Lock-inThe following table tells us how Amazon uses all above mentioned approaches for its both customers Sellers and consumers. Sellers Consumers Recurring Usage a. Developed a customer base close to 615mn users that cant be ignored by sellers b. Ensures profit through optimized and reliable technology c. Developed a trusted Brand name a. Created an ecosystem through Kindle b. Stores users media library c. Offers personalization to customers d. Gives special offers everyday Seamless Integration a. Monitors sellers rating ratings post by consumers and expels sellers with bad ratings b.Offers Fulfillment by Amazon service(FBA) which allows third party sellers to use Amazons large warehouse and distribution network a. For customers, all the sellers are highly commoditized and invisible. They buy it because of the Amazons brand value b. Get benefitted by Amazon Prime and free super saver shipping Lock-in a. By controlling or owning the customer accounts b. High level of infrastructure development required to ensure same level of customer service as offered by Amazon a. By providing digital content that works only on Kindle b. Amazon Prime Program which requires annual subscription c. c. Amazon developed a value chain of itself for internal appraisal so as to identify its strengths and weaknesses that would help it add value and maintain a competitive advantage. Amazon uses the value chain model from Michael Porters book, Competitive Advantage Creating and Sustaining Superior Pe rformance. The first table represents the Primary activities of Amazon which are needed to produce a product or services for the end customers. Inbound logistics Operations Outbound logistics Marketing Sales Service Avoids the overhead and large amounts of inventory carrying cost because it orders the books from the distributors. Easy and fast payment systems. Online customer systems and feedback. Operates a number of transportation hubs that they refer to as injection points. Injection point locations are located in heavily customer concentrated areas. Customer trackingis an Amazon stronghold through which it provides personalized customers experience Free return policy within 30 days. Uses marketplace to increase channel and range of goods through 3rd parties and customers. Highly reduced returns to suppliers (such as unsold books and media) due to available accurate forecasting technology Customized buyer experience Ability to aggregate orders bound for specific locations. Interactive shipping and parceling price calculations. Free pitching based on single transaction spends. Price comparison of new products with used products in marketplace shops. Efficiently gathering information about customer experiences to inform service inputs and inventory controls. 24 hour warehouse operations to meet customer demands. Utilizes the capabilities of its supply chain partners to deliver orders directly to ustomers which bypass the Amazon. com internal distribution center network Discounts and price reductions made available with suggested product mixes. Similar products recommended to customers interactively. Offers customers gift certificates, 1-Click SM shopping, and vastly more reviews, content, browsing options, and recommendation features. The next table gives information about the various support activities performed by Amazon which help to facilitate or assist its primary activities. Value Creation Cost Reduction Firm Infrastructure Huge central cu stomer data warehouse available to all business units. Amazons single technology platform with services being incrementally distributed to other worldwide locations, reduces costs by leveraging investments Human Resource Management Amazon. com has a great training for its employees resulting in talented, smart and hard working group. Offers employees unique benefits such as medical, paid time off and stock grants and relocation allowances and hence attract highly skilled workers Amazon utilizes independent contractors and temporary personnel to supplement their workforce, particularly on a seasonal basis.Although Amazon has works councils and statutory employee representation obligations in certain countries, Amazons employees are not represented by a labor union Technology Development High investments in technology development (e. g. , Kindle) to best leverage digital products. Innovations such as personalized recommendations, one-click ordering, and search inside the book are all Amazon. com innovations. Highly customized software applications that support their supply chain business model. For example, Amazon. om is linked into Ingrams systems to see Ingram inventory levels when deciding whether to use Ingram to drop ship an order to a customer Building an IT strategy, IT infrastructure and Data Centre on Linux open source software thus reducing cost of technology development. Renting computing resources to other companies reduce total cost of ownership Using standard hardware systems from HP to reduce cost of maintenance and compatibility Procurement Utilizes a Sales and Operations (SOP) planning process to determine forecasts for each roduct that it stores in its distribution center inventoryUses the strategic business unit Booksurge to keep a rich inventory of digital copies of books so as to make this readily available for customers through print-on-demand and reduce the time of delivery Specially built distribution Centers, warehouses and fulfillme nt Centers to increase the speed of order processing thus avoiding transaction costs of contracting out In addition to the business strategies the value chain components mentioned above, the success of Amazon. om can be attributed to the entrepreneurial spirit of its founder chief executive officer Jeff Bezos and the strong inclination of the firm towards bringing about innovation in the business model. Let us discuss both factors one by one. Entrepreneurial Spirit of Jeff Bezos Jeff Bezos can be regarded as the forward-looking CEO responsible for the success of Amazon. com. He has not only efficiently managed the present but through his long term vision always taken steps to create the future. The computer science and electrical engineering graduate from Princeton University moved to Seattle after resigning as a Senior Vice-President at D.E. Shaw, a Wall Street investment bank. At the time Bezos didnt know much about the Internet but he came across a statistic that the Internet wa s growing at 2300%, which convinced him that it was a large growth opportunity. Without knowing anything more, he plunged into the world of e-commerce with no prior retailing experience. It was his decision to locate the company in Seattle because it had a large pool of technical talent and since it was close to one of the largest book wholesalers located in Rosenburg, Oregon.Moreover, the sales tax laws for online retailers state that one has to charge sales tax in the state in which one is incorporated. Therefore it was logical to locate in a small state. Under his guidance and logical thinking Amazon. com quickly became the leader in e-commerce. Operating 24 hours a day, the site was user-friendly and advance browsers to post their own reviews of books and offering discounts, personalized recommendations, and searches for out-of-print books. In June 1998 it began selling CDs, and later that year it added videos.In 1999 Bezos, looking at the future trends, added auctions to the s ite and invested in other virtual stores. The success of Amazon. com encouraged other retailers, including major book chains, to establish online stores. As more companies battled for Internet dollars, Bezos saw the need to diversify, and by 2005 Amazon. com offered a vast array of products, including consumer electronics, apparel, and hardware. And with the Jeff Bezos vision to make every book ever in print in any language available to the consumer in 60 seconds, Amazon launched the handheld device called Kindle in 2007.Bezos is the quintessential dot-com icon. He proved to the business world that the Internet was about more than knowledge. He proved that it is possible to overcome fears about purchasing online, to drive down transaction costs, and to build an international e-commerce business over the Internet. He had the courage to attempt something that people doubted could be done. . At the age of 35, Jeff Bezos was picked as the 1999 Time person of the year. Describing why it chose Bezos, Time magazine said, Bezosvisionof the online retailing universe was so complete, his Amazon. om site so elegant and appealing that it became from Day One the point of reference for anyone who had anything to sell online. Innovation in the Business Model Amazon survived the dot-com bust because it had a viable and innovativebusiness modelbuilt around a market-changing customer value proposition and a radical profit formula and over it has been able to sustain its position as the leader in e-commerce by bringing about continuous innovations in its business model. Let us look at some of the different dimensions wherein Amazon. om has been able to bring about business innovation. a) Offerings By offering a handheld device dedicated to reading, Kindle, Amazon. com revolutionized the books industry. By creating a product like Kindle, the created a perfect, integrated and streamlined customer experience. b) Platform With Amazon Web Services, Fulfillment By Amazon, and Kindle Direct Publishing, Amazon is creating powerful self-service platforms that allow thousands of people to boldly experiment and accomplish things that would otherwise be impossible or impractical. ) Customers In 2002 Amazon launched a web services platform and identified a new area of potential growth by finding another new customerthe IT community. Serving this new customers needs required different processes, different resources, and a different profit formulain short, anothernew business model. d) Customer Experience 1-Click combined with Gift-Click and Wish List made Amazon. com the most convenient, easiest-to-use shopping destination the holiday season.Wish List allows customers to post the gifts theyd most like to receive from family and friends, while Gift-Click allows customers to send gifts easily by entering just the e-mail addresses of their recipients. e) Value Capture By opening up its storefront to other retailers that were essentially competitors, Amazon transformed its business from direct sales to a sales-and-service model, aggregating many sellers under one virtual roof and receiving commissions from the other companies sales. ) Supply Chain Fulfillment by Amazon service (FBA) by Amazon is a classic example of innovating business model through supply chain. FBA allows third party sellers to use Amazons large warehouse and distribution network and in the last quarter of 2011, shipped tens of millions of items on behalf of sellers. When sellers use FBA, their items become eligible for Amazon Prime, for Super Saver Shipping, and for Amazon returns processing and customer service.From the above discussion of Amazons business strategy, value chain analysis and the success factors we can conclude that Amazon has a robust Business model. Amazons business model fends off all the four threats. It has the costly-to-imitate financial and technological resources, it has developed protection against holdup by seamlessly vertically integrating its both the c ustomers i. e. the sellers and the consumers. Reduced slack by locking-in the customers and the sellers and fights substitution through innovation in business model.