Amazon Business Model canvas

1. Business Model Canvas

2. Strategy
Strategy followed by Jeff Bezos to build the Amazon empire:
• Be like the Godfather: Make them an offer they can’t refuse
• Don’t give up information unless absolutely necessary
• Keep teams small enough that members can be fed with two pizzas
• Stop talking so much
• Get adversarial
Overall, Amazon follows a Dominant Strategy. Jeff Bezos’ critical insight
when he founded Amazon was that the Internet allowed a retailer to have
both (effectively) infinite selection AND lower prices. In other words,
Amazon was founded on the premise of theirs being a dominant strategy:
better selection AND better prices.

3. Leadership Strategy
Amazon’s strategy is low cost leadership which is
clearly reflected in this statement made by its CEO, Jeff
Bezos:
“There are two kinds of companies: Those that work to try to
charge more and those that work to charge less. We will be
the second.”

4. A napkin sketch by Jeff Bezos
Note: No arrows pointing outwards labeled ‘take profits’; it’s a closed loop

5. Service Delivery Framework
Amazon tries to close the service gaps in order to
effectively meet consumer expectations. For that its
service delivery framework comprises the following:-
• Understanding customer needs
• Customer defined standards
• Service performance

6. Product Delivery Strategies
Amazon has kept pushing the envelope with respect to delivery
time and methods. Following are some illustrations:
• One/two day delivery deals
• Own logistics
• Amazon Fresh, grocery delivery system
• one-hour delivery
• Online travel business
• Prime Air
• Automated warehouses and fulfillment centres

7. Logistics
Partner
Affiliates
Authors and
Publishers
Merchandising
Production and
Design
Low Cost structure
Economies of
Scale
Individual
Leverage
Group Leverage
Affiliates
Application
interfaces
Physical
warehouses
Human : Web
application &
development
Self service
Automated
Service
Convenience
Price
E books and
content
Sale of Assets Acquisitions and
Investment
Prime monthly
subscriptions fees
Commission on
reseller sales
Amazon.com
Network of
sellers
IT and fulfillment
infrastructure
Instant fulfillment
with eReader
Vast selection
Global consumer
market
Amazon’s Business Model Canvas

8. IS and KM and Amazon
IS in Amazon
• Broadly Amazon uses 2 main systems:
• AWS-Amazon web service
• S3-Simple storage service
• MIS is used for CRM. TPS is based on creating convenience for users. Each customer has to
create an account in amazon.com. Advantages provided/ Features-
• Shopping basket
• Shopping cart
• Wish List
• One click
• Online payment Systems
• Recommender Systems

9. IS and KM and Amazon
• Recommendation for Amazon
• Improvement in web based IS to make it more user friendly which will be more
revenue generating for the company.
Customer KM in Amazon
• Amazon operates on a KM technology platform that allows customers to search
using discreet ‘data’. This prompts the system to return contextual ‘information’
which provides value to the user in the form of knowledge.
• Amazon has not only found ways to use KM practices to provide value to customers,
but also to intrinsically motivate customers to share knowledge.

10. Five Forces Analysis
Supplier
Power
Buyer
Power
Competitive
Rivalry
Threats of
Substitutio
n
Threat
of new
entry

11. SWOT Analysis

12. Firm Infrastructure
Human Resource
Management
Technology Development
Procurement
Inbound Logistics Ops. Outbound
Logistics
Sales &
Marketing
Service and
Support
PRIMARY ACTIVITIES
SUPPORT
ACTIVITIES
Custom
erValue
Custom
erValue
M
argin
Value Chain Analysis
Maintenance
and
packaging of
goods;
assembling
and
customization
of items
Receiving products from
partners, routing the
items to a put-away
location, picking up
products from prime
locations for order
fulfillment, replenishing
the products; Quality
control
Fulfillment
of orders;
order
handling,
dispatch,
delivery,
invoicing
Customer
tracking and
management,
order taking,
promotions,
market
research,
sales analysis
Warranty,
upgrades,
maintenance, order
tracking facilities,
training
Legal, accounting, financial management
One click ordering, personalized recommendations,
Warehouse Management Systems
purchasing raw materials, and other items used in operations
Recruitment, training, firing and compensating personnel

13. Product
Existing
New
Market
Ansoff Matrix
Market Penetration
 Loyalty program
 Pricing
NewExisting
Product Development
 Kindle
 Echo
Market Development
 Expand internationally
 Affiliates program
Diversification
 Acquisition of
businesses like IMDB,
Zappos
 Horizontal diversification
 AWS

14. Financial Analysis
•Amazon is involved in different businesses at different stages of maturity.
Some are profitable, some not.
•Third party sales of products through Amazon’s own platform are now 40%
of unit sales. The fees charged to these vendors are now 20% of Amazon’s
revenue.
•For close to half of the units sold on Amazon.com, Amazon does not set
the price, it just takes a margin.
•Amazon’s OCF margin has been very roughly stable for a decade, but the
FCF has fallen, due to radically increased capex.

15. Revenue and Net income of Amazon

16. Where is the money going?
 More capacity for more products, including 3P products
 Proximity - as Amazon builds warehouses closer to customers, the shipping time
goes down and so does the shipping cost
 AWS
• Amazon will have to stop investing at the point where marginal returns from these
investments start diminishing