Amazon.com was founded by Jeff Bezos in 1994, making it one of the first companies to sell goods over the internet. The business name was chosen because the Amazon River is one of the largest rivers in the world and so the name suggests large size and power. It also started with the letter 'A', and as a consequence, Amazon.com would appear near the beginning of alphabetical lists. Amazon.com started as an online bookstore, but quickly diversified into selling additional product ranges such as DVDs, CDs, and music downloads, computer software, video games, electronics, clothing, furniture, food, and toys. A common anecdote is that the Bezos wrote the Amazon business plan while he and his wife were in a car en route to Bellevue, Washington (next to Seattle) from Texas. This business plan was rather unusual in that the company was not expected to break-even for the first four to five years. However, it did not actually make any profit at all until 2003, when it recorded a substantial profit of $ 3.9 billion. Fortunately for Amazon.com, its investors were prepared to wait that little bit longer for their money, although there was some nervousness in 2001, with many dot-com set-ups going to the wall and with Amazon reporting a fiscal loss of $1.4 billion.
Since 2003, Amazon has gone from strength to strength and announced a profit in 2010 of $24.5 billion.
Amazon.com considers itself a completely customer centric company, which is reflected in their company values statement:
- Customer Obsession: We start with the customer and work backwards.
- Innovation: If you don't listen to your customers you will fail. But if you only listen to your customers you will also fail.
- Bias for Action: We live in a time of unheralded revolution and insurmountable opportunity- provided we make every minute count.
- Ownership: Ownership matters when you're building a great company. Owners think long-term, plead passionately for their projects and ideas, and are empowered to respectfully challenge decisions.
- High Hiring Bar: When making a hiring decision we ask ourselves: "Will I admire this person? Will I learn from this person? Is this person a superstar?"
- Frugality: We spend money on things that really matter and believe that frugality breeds resourcefulness, self-sufficiency, and invention!
Using its customer base and technology infrastructure Amazon as moved rapidly into cloud based services. Amazon Web Services (AWS), which lets customers rent servers to house data and run computer networks, may one day be larger than the retail business, the company has said. In 2010, Amazon opened a new data centre in Singapore to give customers in Asia, India, and Australia speedier access to its AWS business. That business lets companies buy from Amazon, on an hourly basis, computing power that's delivered over the Internet.
There was some doubt in the early years that Amazon.com would ever make a profit and in 2001 there were some fears that Amzon.com might go the way of other dot.coms and crash. Read the article Will Amazon ever make a profit?, which refers to this period (you can do this in the window below or follow the previous link to read the article in a separate window), and then consider the questions below.
You may also like to read the businessweek article Amazon.com's Profit Forecast Falls Short of Estimates, which provides a recent commentary on Amazon.com's business model and profitability.
Distinguish between a positive cash-flow and profit.
Explain why fans of the firm believed that Amazon.com's 'first mover' advantage was one of the biggest strengths in the online marketplace.
Analyse the importance of the information in Amazon.com's business plan to different stakeholders.
Using information from the articles and support material, evaluate the need for Amazon.com to change its objectives in response to changes in the internal and external environment.