Case | HBS Case Collection | August 2015 (Revised May 2016), 2016

by John R. Wells, Galen Danskin and Gabriel Ellsworth


On January 28, 2016, Amazon announced record 2015 operating profits of $2.2 billion on $107 billion of sales, and the markets responded with cautious optimism. For years, founder and CEO Jeffrey Bezos had prioritized growth and investment in new business areas over profits, but pressure from analysts was mounting as growth was slowing and profits were failing to materialize. In 2014, Amazon had recorded a net loss of $241 million on revenues of $89 billion, in stark contrast to China’s leading Internet player Alibaba, which reported $3.9 billion of net income on revenue of $12.3 billion. While Alibaba was a third-party marketplace with no distribution or inventory holding, Amazon’s business model was more diverse. Amazon was primarily an online retail department store, offering a wide range of product categories, but it also maintained a significant third-party marketplace where it offered shipping, customer service, payment processing, and return services to independent retailers. Amazon also offered software and cloud storage services, online video streaming, and its own line of electronic hardware (mobile, e-reader, and smart television products). In addition, Amazon published books, hosted its own app store, funded video content development, and operated Amazon Prime, an annual membership program with a wide range of benefits. Indeed, Amazon’s activities overlapped with those of Apple, Google, eBay, Alibaba, and many other companies. Amazon had proven itself to be aggressive and resilient during the dotcom crash and a revenue-focused, secretive corporation in the years after, providing little information on the profitability of its lines of business, many of which were believed to be unprofitable. Which businesses would drive Amazon’s future growth? Would the investments Amazon was making in market share eventually translate into profits? Or would another major competitor or business model replace Amazon? On a visit to the United States in June 2015, Jack Ma, chairman of Alibaba, stated, “We’re not coming here to compete.” Could Amazon or its investors afford to believe him?

Keywords: Strategic Analysis; retail; e-commerce; Amazon; internet;; AmazonFresh; Jeff Bezos; Cloud Computing; marketplaces; streaming; e-reader market; digital media; mobile app; online retail; shipping; database; Tablet; Kindle; Kindle Fire; smartphone; delivery; Market Platforms; Competition; Internet; Corporate Strategy; Online Advertising; Business Growth and Maturation; Business Model; Business Organization; For-Profit Firms; Film Entertainment; Games, Gaming, and Gambling; Music Entertainment; Television Entertainment; Profit; Revenue; Global Strategy; Multinational Firms and Management; Taxation; Business History; Human Resources; Resignation and Termination; Books; Human Capital; Working Conditions; Business or Company Management; Goals and Objectives; Growth and Development Strategy; Growth Management; Management Practices and Processes; Industry Growth; Industry Structures; Media; Distribution; Distribution Channels; Order Taking and Fulfillment; Infrastructure; Logistics; Product Development; Supply Chain; Supply Chain Management; Organizational Culture; Public Ownership; Work-Life Balance; Problems and Challenges; Labor and Management Relations; Strategy; Adaptation; Business Strategy; Competitive Strategy; Diversification; Expansion; Integration; Horizontal Integration; Vertical Integration; Hardware; Information Technology; Mobile Technology; Online Technology; Technology Networks; Technology Platform; Web; Web Sites; Price; Software; Retail Industry; Advertising Industry; Distribution Industry; Electronics Industry; Entertainment and Recreation Industry; Information Technology Industry; Manufacturing Industry; Motion Pictures and Video Industry; Music Industry; Publishing Industry; Shipping Industry; Technology Industry; Video Game Industry; Web Services Industry; United States; Washington (state, US); Seattle;


Wells, John R., Galen Danskin, and Gabriel Ellsworth. ", 2016." Harvard Business School Case 716-402, August 2015. (Revised May 2016.)