Have you ever purchased any product on the Internet, used the Internet to collect information or data, or played computer games on the Internet? You must agree that it is fast, easy, and enjoyable. The Internet has been a part of our daily life for several years now. In addition, in the business world, a new business model, E-business and E-commerce, has appeared for several years. According to Ali, there are two main types of E-commerce: B 2 B and B 2 C (2000). One is business to business (B 2 B). This means that enterprises use the Internet to transact or trade between business operations and their partners.
Another is business to consumer (B 2 C). In other words, enterprises provide products, support good, and services to the customers on the Internet. Amazon. com is a famous Internet retail company in E-commerce. Its business includes B 2 B and B 2 C. It opened its business in July 1996.
Today, Amazon. com has expanded its business in more than two hundred and twenty countries and this company sells various products like electronics, books, music, DVD, House wares, PCs and cars (Amazon. com Announces 4 th Quarter Profit 2002). It is the biggest retail store in E-commerce. Even though Amazon.
com owns these accolades, this company is struggling to survive. Amazon. com had a $19 billion market value before its stock prices decreased from $75. 25 to $9. 25 (German, 2001). The problem is that Amazon still has not made real profits since it opened.
How to help Amazon. com keep standing on the stage? If Amazon. com wants to survive in E-business and start making real profits, Amazon. com should merge with other retail companies, operate a new E-business strategy, and rebuild its financial structure. Everyone is wondering when Amazon. com will start making real profits.
Last year, their stock price went down from $76 to $14 (Hahn & Celarier, 2001). Moreover, Amazon. com lost almost $150 million last year (Amazon. com announces 4 th quarter profit, 2001). How can Amazon. com start making real profits? Hahn & Celarier suggests that Amazon.
com should merge with other retail companies such as General Growth Properties, Wal-Mart, and Bertelsmann because the merger will expand their market share, and create a new passageway and increase new customers and products, and recover their cash and Net sales loss (Fitch, 2000). First of all, the merger will help Amazon. com expand the market share in E-commerce and create a new passageway (Fitch, 2000). For instance, Amazon. com should merge with Wal-Mart, which has $26 billion market value and only $756 million debt (Hahn & Celarier, 2001). Now Wal-Mart is interested in E-commerce and online shopping.
If Amazon. com merges with Wal-Mart, they will become the largest retail company in E-commerce. Amazon. com will also increase its market share. In addition, after the merger, Amazon.
com can gain more marketing resources from Wal-Mart to create a new sales passageway. For instance, customers can purchase the products from Amazon. com on the Internet and pick the items, or return them at Wal-Mart. It will provide additional choose for customers.
Secondly, the merger will help Amazon. com create new customers and products. Bertelsmann has $14 billion market value and the company! |s strategy now is focusing on music retailing and book sales (Fitch, 2000). Their business is related to Amazon! |s business. The CEO of Bertelsmann is also trying to open their business in American market (Hahn & Celarier, 2001).
If Amazon. com merges with this company, Amazon. com will gain the new customers from Bertelsmann. Furthermore, integrating the products from Bertelsmann, Amazon. com can create new products on their website. Finally, a merger can improve and cover the financial loss of Amazon.
com such as net sales loss, long-dept and cash loss. For instance, if Amazon. com merges with General Growth Properties, which has 136 malls in 37 states and owns $2. 8 billion market value (Fitch, 2000), Amazon. com can still keep the power of operation and exercise the new marketing strategies. Moreover, Amazon.
com can gain the financial support from this company to cover its long-debt $2 billion (Fitch, 2000). In addition, the merger will help Amazon. com increase the financial resources such as the amount of cash flow, and also decrease the cost and expense of the company. The second proposal to help Amazon. com to make profit is to operate a new E-business strategy. E-commerce is one way that people can trade on the Internet.
This trading system is very important, but it is not the only thing that the e-commerce enterprises should focus on. Amazon. com is a giant in E-commerce and the company uses Secure Sockets Layer (SSL) to trade (web February 23, 2003), but Amazon. com cannot make profits even though the company has very strong technological support. Ali points out that! SS communication, resources allocation, and project management guarantees success in E-commerce!" (Ali, 2000.
p. 5). Effective communication, which can improve business performance, is one of the objectives that Amazon. com should fulfill. Effective communication includes two aspects: internal and external. First of all, internal communication emphasize negotiation.
Correct and adequate information must be transmitted precisely between the employees or the departments. Secondly, external communication emphasizes on empowerment and fast reaction. For instance, Customer Services is a department that helps customers to solve problems. They have to communicate with the customers and understand what the customers want and need, and then report to the departments or the board. If the customer service department has the power to react immediately from the problems of customers and has good communication and relationship with the customers, it will create more business opportunities for Amazon. com (Shaffer, 2002).
The second key that helps industry to succeed in E-commerce is resources allocation. There are various resources in the enterprises such as human resources and customer resources. First of all, concerning human resources, Amazon. com should understand employee! |s particularities and arrange them in appropriate positions. If the employees are set in the right positions, the company should become more efficient (Ancona, Koch an, Scully, Maan en, West ney. , 1999).
Secondly, in regard to customer resources, Amazon. com should collect information, such as suggestion, complaint or demand from the customers and then try to improve their products or services to provide better services to the customers. If the services satisfy the customers, Amazon. com will create more and more opportunities and new customers in the near future. For example, Characters Inc, a graphics company in Houston, Texas, used focus group to survey customers! | opinions.
They improved their defects and launched new business by customer! |s opinions. (Rak stis, 1996) The third key that helps industry to succeed in E-commerce is project management. A successful E-commerce enterprise should focus on project management. Project management emphasizes teamwork. There are many teams in the company and each team has its different project and goal. Each team also has its power to make the decision.
The responsibility of the team is to achieve the product. The responsibility of the enterprise is to manage the teams and make sure that the projects can be finished effectively. Distributing the limited resources to different teams and projects is the great challenge to the project management. The best way to overcome this challenge is to emphasize effective communication and negotiation. For example, Ohio Savings Bank (OSB) had a problem with their project management. All of the project teams had different directions to perform their projects, so OSB sent their project managers to join a training program to solve this problem.
The three days training program made them understand that all of the teams have to corporate and negotiate to achieve each team! |s goal (Dolezalek, 2002). The third proposal to help Amazon. com making profit is rebuilding its financial structure. According to Amazon. com! |s annual report, Amazon.
com earned $1. 12 billion for fourth quarter in 2001. In that quarter, Amazon. com made pro forma operating profitability, $59 million, and pro forma net profit, $35 million. In addition, the international division, the sales increased 81%. Moreover, Amazon.
com! |s Net sales in 2001 earned $3. 12 billion (Amazon. com Announces 4 th Quarter Profit 2002). However, the factual financial situation of Amazon. com does not seem like the official statement. Amazon.
com has a very serious potential problem. According to Sloan, Amazon. com has two billion dollars debt and last year, the sales loss was $1. 4 million (2001). What is more, the pro forma operating did not include the debt. How can Amazon.
com solve the financial problem? Amazon. com should rebuild its financial structure through reducing the unnecessary cost and expense, selling more products, and improving the confidence of investors (Sloan, 2001; Hof, 2001; Garrity, 2001; German, 2001). By improving Amazon. com! |s financial situation, the company should reduce the unhelpful cost and expense.
In the business, the heaviest rates of expense and cost are the salary and capital assets. The first operation that Amazon. com should practice is to close some unprofitable businesses and factories in the world because each factories cost a lot of money. If Amazon. com exercises this strategy, the company will save a large amount of money. The second operation is to lay off some unhelpful employees.
For instance, according to Hof, 1300 workers or 15% of its stuff will be cashiered by Amazon. com, shutting down one of its 12 distribution centers, mothballing rest of them until the 2001 holidays, and closing one of nine customer service centers (2001). After that, the company should reduce the cost from personnel expense. In other words, Amazon. com should lay off some employees who are in unnecessary positions or have only one capability. Therefore, if Amazon.
com wants to improve its financial structure, the first step that the company should exercise is to reduce the unhelpful cost and expense. The second strategy to assist amazon. com in improving the financial structure is to increase the sales. There are two factors to consider. First of all, Amazon.
com should focus on its new business, used-goods. According to Garrity, used-goods increased 90% in the third quarter in 2001. Moreover, compared with second quarter, sales used-good also increased 10% (2001). Amazon. com should emphasize this market in order to increase its sales. Secondly, the strategy that Amazon.
com practices now is to sale every product. Amazon. com should adjust this strategy because most products cannot increase the sales and cost the expense. Amazon. com should focus on its core products such as music, books sales, and DVD (web February 23, 2003). Those are the advantages products that can help Amazon.
com increase the sales. The last strategy that Amazon. com should implement in order to improve its financial structure is to improve the confidence of investors. According to German, the stock price of Amazon. com declined from $75. 25 to $9.
56 and the Lehman Brothers analysts suggested that the investors should keep away from Amazon. com (2001). In other words, now the investors do not have any confidence in this company. To solve this problem, Amazon. com should adjust its business slogan! D! SS Get big first!" (Hof, 2001).
Because of this slogan, Amazon. com expanded its business and factories very fast. Sloan points that the more sales it sells, the more money it loses (2001). That is the main reason why the investors do not support Amazon. com. If Amazon.
com reduces unhelpful cost and expense and focuses on its core products, it will start making profits and then it will help the investors rebuild their confidences to support Amazon. com again. Last Christmas, I bought a VCD from Amazon. com on the Internet. The procedure of purchase was simple, the price was reasonable, and the delivery time was just three days. I had a good experience on Amazon.
com. In the other hand, for investors, it was a money-losing company because it has not made any profit yet. Most investors have lost their confidence in this company. Consequently, Amazon is a convenient retail store for customers, but it does not have a good system or body in E-commerce. Since the so-called internet bubble burst in April 2000, hundreds of dotcom companies have closed because of the recession of E-commerce (Mise k, 2003).
According to See wald, ! SS That trend is expected to continue this year as chemical companies continue to cut back on external spending!" (2001). E-business seems like a bomb for investors and customers because the speed of collapse is very fast. No one knows which company will disappear in E-business. Even though Amazon.
com is an E-commerce Pioneer, and it earned $1. 12 billion last quarter, compared with $972 million in the fourth quarter in 2000, and has $19 billion market value (Amazon. com Announces 4 th Quarter Profit 2002), it is also struggling to survive in the E-commerce world. Unless Amazon. com merge with other retail companies, practice new E-commerce strategy, and rebuild its financial structure, it will not be eliminated through competition in the E-commerce. Marking profits is the most important for company, especially for Amazon.
com. If Amazon. com exercises these proposals presented in this paper, it will overcome its challenges and weaknesses, and then start making real profits.