Case Study:
AMAZON CONTINUES TO diversify at a relentless pace. Besides offering same-day delivery of groceries in some metropolitan areas and testing drones for even faster distribution, Amazon now plans to capture a large piece of the over $10 billion college bookstore market. In a pilot project, Amazon initiated a student-centered program at three large universities: Purdue University, the University of California, Davis, and the University of Massachusetts Amherst. The goal of Amazon Campus is co-branded university-specific websites that offer textbooks, paraphernalia such as the ubiquitous logo sweaters and baseball hats, as well as ramen noodles! As part of this new campus initiative, Amazon offers its Prime membership to students at a 50 percent discount ($49 a year) and guarantees unlimited next-day delivery of any goods ordered online, besides all the other Prime membership benefits (free streaming of media content, loaning one e-book a month for free, discounts on hardware, etc.). To accomplish next-day delivery, Amazon is building fashionable delivery centers on campus, university co-branded such as “amazon@purdue.” Once a package arrives, students receive a text message and can then retrieve it via code-activated lockers or from Amazon employees directly. The on-campus delivery facilities also serve as student return centers. Amazon’s new campus initiative allows it to bind a younger generation of shoppers ever closer into its web of products, services, and content. Next-day delivery makes students less likely to shop at traditional campus bookstores. Amazon also has a history of selling textbooks at a discount in comparison to old-line campus bookstores. All course materials automatically qualify for next-day delivery and do not require a Prime membership. The Amazon Campus initiative is predicted to save students $200 to $400 a year on textbooks and other supplies.
Q1. Amazon continues to spend billions on seemingly unrelated diversification efforts. Do you believe these efforts contribute to Amazon gaining and sustaining a competitive advantage? Why or why not?
Q2. Amazon is now over 20 years old and makes some $100 billion in annual revenues. As an investor, would it concern you that Amazon.com has yet to deliver any profits? Why or why not? How much longer do you think investors will be patient with Jeff Bezos as he continues to pursue billion-dollar diversification initiatives?
Q3. One of the most profitable business endeavors that Amazon pursues is its cloud service offering, AWS. In 2014, AWS revenues were an estimated $6 billion, but bringing in $1 billion in profits. What is Amazon’s core business? Is AWS related to Amazon’s core business? Why or why not? Some investors are pressuring Jeff Bezos to spin out AWS as a standalone company. Do you agree with this corporate strategy recommendation? Why or why not? Hint: Do you believe AWS would be more valuable within Amazon or as a standalone company?
Your answer must be typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.