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Harvard Business School

9-800-330
Rev. September 5, 2000

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Amazon.com: Exploiting the Value of Digital Business Infrastructure
The Amazon.com platform is comprised of brand, customers, technology, distribution capability, deep e-commerce expertise, and a great team with a passion for innovation and serving customers well…We believe that we have reached a “tipping point,” where thisplatform allows us to launch new e-commerce businesses faster, with a higher quality of customer experience, a lower incremental cost, a higher chance of success, and a clearer path to scale and profitability than perhaps any other company.

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In May 2000, Amazon.com’s senior management, along with colleagues at other publicly-traded dot-com companies, faced tremendous pressures from Wall Streetand shareholders to generate profits.2 While many struggled to attract customers and top talent, Amazon.com’s success at defining online retailing was legendary. In fact, recent studies had shown that over 60% of U.S. consumers recognized the th Amazon.com brand—making it the #1 Internet brand. Amazon.com was ranked as the 57 most valuable brand worldwide between Pampers and Hilton. Amazon.com’sleadership came from the most widely respected and well managed firms in the world—General Electric, Wal-Mart, Microsoft and Allied Signal to name a few—and its CEO and Founder, Jeff Bezos, had been named Time Magazine’s “Man of the Year” in 1999. While most Internet companies had fairly straightforward business models and limited revenue streams, Amazon.com had continued to evolve its model,pushing forward the boundaries of what could be accomplished online. While the company was initially launched as an online book retailer in 1995, beginning in 1998 it aggressively launched new retail categories, including music, DVDs, videos, consumer electronics, software, toys, video games, home improvement, and lawn and patio products. In 1999, it extended its business model further by launchingtwo online auction stores—one low-end and another high-

1 Amazon.com 1999 Annual Report (Seattle: Amazon.com, 2000).

2 Friday, April 14, 2000, ended a week of major downslides for both technology and blue-chip stocks. The NASDAQ

Composite tumbled 355.46 points (9.7%) and closed at 3321.32 (its largest one-day point decline and second-largest percentage drop since its inception in 1971).Amazon.com (stock symbol AMZN) was listed on the NASDAQ. The Dow Jones Industrial Average slipped 616.23 points (5.6%) to 10,307.32, its worst ever one-day point loss. Amazon’s stock price closed at $46.875 per share, down from its fifty-two week high of $113.00 on December 9, 1999. Task, A., “Ruthless Selloff Hits All Sectors: This Was One for the Record Books,” www.TheStreet.com (14 April 2000).E-Business Fellow Meredith Collura and Professor Lynda M. Applegate prepared this case from published sources information as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright © 2000 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 1

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Excerpt from Jeff Bezos’ Letterto Shareholders, 1999 Annual Report1

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Amazon.com: Exploiting the Value of Digital Business Infrastructure

end—and an online marketplace for small merchants (called zShops).3 In early 2000, it evolved once more, entering into a number of equity partnerships with brand-name online retailers such as: Drugstore.com (health and beauty), Della.com (wedding and...
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