In 1994, at the age of 30, Jeff Bezos began what has come to be a household name, Amazon.com. Jeff started Amazon.com on a shoe string, out of his garage. He had an idea to take existing technology and use this to create a retail mail order business. This technology was originally created by the defense department. The technology that was available took different computers used within the government and created a system that connected them with one another, the internet. Jeff??™s idea was to take the mail order business one step further and use the internet not the telephone. He conducted research and found that of the top 20 mail order businesses, books were merchandise that stood out as something which might be sold easier over the internet than through the typical mail order business methods. Along the way, Jeff picked up a couple of investors or business partners. He first tested the new business through friends and acquaintances and subsequently Amazon.com was launched.
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The business took off quickly and continued to grow. While the business grew, Jeff and company worked on the website continuing to make improvements. In 1997 Amazon.com went public. By 1999 Amazon.com had more market share of the retail book business than the next two largest book store chains combined. At this point Jeff made his intentions clear. He wanted Amazon.co to go from being the ???Earth??™s biggest book store??? to the ???Earth??™s biggest anything store??? (Academy of Achievement, 2009).
This type of business, a retail internet business is considered an e-business or an e-commerce business. E-business includes any business activity conducted electronically between or within businesses, whereas e-commerce is defined to be just the electronic interaction that enables exchange of goods and services. Amazon.com uses e-business for business to consumer (B2C) by using the internet to sell directly to consumers. Consumers access the Amazon.com website, place an order, and the order is shipped directly to the consumer. Additionally, Amazon.com uses e-business trade to conduct business with other businesses (B2B). Amazon.com does not use B2B as much to generate revenue as it does to make business connections and form partnerships (Pearlson & Sanders, 2005). Such partnerships have or do include Target, Borders, Toys R Us, and Sears. Businesses partner with Amazon.com using the Amazon.com website to further their sales.
Jeff Bezo??™s intention of becoming the earth??™s biggest anything store is becoming a reality as
he remains innovative and competitive. And Amazon does have competitors, Google and
Microsoft. Amazon competes more with Microsoft than with Google. Google is primarily a
search engine, a site a user accesses to find other sites. Amazon has begun offering more
technical support for other companies similar to Microsoft. Amazon developed a new strategy
which is to use more of their processing capacity by providing a series of computing, storage,
and additional services to other companies (Rainer & Turban, 2008). Amazon developed three
such services; Simple Storage Services (S3), Elastic Compute Cloud (EC2) and Mechanical Turk
(Rainer & Turban, 2008). The service S3 provides for companies is the storage of data and
applications on Amazon disk drives. The EC2 is a service that rents out processing power by the
hour and is comparable to one basic server. Amazon??™s Mechanical Turk services provide a
combination of processing power and networks of real people. Amazon??™s S3, EC2, and the
Mechanical Turk are the systems that compete with Microsoft. While Amazon offers services by
the hour, Microsoft offers primarily a onetime fee to buy the application. Some applications
must be renewed each year and there is an annual fee.
Amazon is receiving and storing a large amount of data each week with these three services.
Amazons possible management issue will be with the processing capacity for it??™s new services.
Prior to offering these services Amazon was only using 10% of its processing capacity. Amazon
will also need to manage all the data, information, and knowledge they receive from companies
and allocate it accordingly. Amazons information technology or architecture can map plan the
information assets by integrating the business needs for information. The infrastructure support
technology of Amazon consist of IT components, IT services, and IT personnel who the
organization (Rainer & Turban, 2008). The IT infrastructure and platform of Amazon is
imperative in today??™s competitive environment.
Some might say that by expanding their services, Amazon is moving away from their core competency, to be the earth??™s biggest anything store. By 2007 Amazon spent 2 billion dollars building the infrastructure of its online store in support of fulfilling that promise (Turban & Rainer, 2008). Their profits had fallen and the company??™s operating margin was less than Wal-mart??™s (Turban & Rainer, 2008). At this point the decision was made to expand their services and they began offering S3, EC2, and Mechanical Turk. To take this route was a big risk. Although these services contributed to Amazon??™s bottom-line and increased profits, this move could have thrust Amazon into a hosting position for the technical and logistical parts of businesses rather than their original business of being an online retail giant. Amazon had to decide if they should stay focused on the core competencies and competitive advantages that had made them what they were or diversify to keep up with or attempt to surpass their competition.
Today Amazon is bigger than ever. The growth in digital delivery has boosted their profit margins. Their innovative efforts created new areas of growth. Their wise diversification move has made Amazon very successful in today??™s environment. While changing business strategy may be necessary, this does not have to occur at the expense of loosing sight of one??™s goal. Balance is the key in a fast changing market. Amazon was successful because it leveraged its current businesses with the demands of operating new ones.
Academy of Achievement, (2009, June 6). Jeff Bezos biography retrieved on February 4, 2010
Amazon: From book seller to service provider, (2009, March 15). Message posted to
Munarriz, R. A. (2008). Amazon in 2010. Retrieved on February 4, 2010, from www.fool.com
Pearlson, K. & Sanders, C., (2005). Managing and Using Information Systems. A Strategic Approach. 3rd ed.
Rainer, R. K., & Turban, E. (2008). Introduction to information systems (2nd ed.) Hoboken, NJ: John Wiley & Sons