Amazon.com, 2018

John R. Wells; Galen  Danskin; Gabriel  Ellsworth

Case | HBS Case Collection | August 2015 (Revised May 2018)

Amazon.com, 2018

by John R. Wells, Galen Danskin and Gabriel Ellsworth

Abstract

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; Amazon.com; 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; Two-Sided 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; Marketing; Marketing Strategy; Working Capital; Customer Focus and Relationships; Customer Value and Value Chain; 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;

Language: English

Format: Print

40 pages

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Citation:

Wells, John R., Galen Danskin, and Gabriel Ellsworth. "Amazon.com, 2018." Harvard Business School Case 716-402, August 2015. (Revised May 2018.)

This case addresses the rise of The Progressive Corporation (Progressive) as a top player in the property and casualty and auto insurance industries. In July 2018, Progressive, the USA's third largest auto insurance writer, reported half-year earned premiums up 21% on the same period the previous year and net income up 95%. For CEO Tricia Griffith, appointed on July 1, 2016, this was a clear indicator that her commitment to accelerating growth was bearing fruit. In the ten years from 2005-2015, Progressive's earned premiums had grown at 4% per year. They then grew 13% in 2016 and 15% in 2017; 2018 promised to be an even better year. In 2017 Griffith commented that Progressive was in 10% of US homes and would double that "in short order." This would make it larger than 2018 industry leader State Farm. But the auto insurance business was plagued with hundreds of competitors and had historically been very cyclical. In 2018 Progressive was enjoying an unusual period of rising prices and growth. Would Griffith's strategy be enough to sustain double digit growth? The markets seemed convinced; In July 2018 Progressive's stock price had almost doubled in two years.

Case | HBS Case Collection | March 2016 (Revised May 2018)

ASOS PLC

John R. Wells, Gabriel Ellsworth, John R. Wells and Gabriel Ellsworth

Launched in 2000, ASOS was one of the world’s largest online fashion specialists in 2018. Focusing on young consumers aged 16–25 years, the company offered over 85,000 items on its websites, many times more than the largest fashion stores, and added several thousand new lines every week. Based in the United Kingdom, ASOS shipped products to 230 countries and territories, and international sales represented more than 62% of total revenues. When new CEO Nick Beighton took over from founder Nick Robertson in September 2015, he faced some significant challenges. While ASOS was large by online standards, traditional fashion retailers were building their own online sales capabilities, and Amazon was expanding its apparel offering. Meanwhile, new online competitors were emerging at a rapid rate. After ASOS issued several profit warnings in 2014, its growth had slowed to 18% in 2015. Beighton was convinced that ASOS’s strategy was right and that the company needed to improve its execution to recapture its historical success. In 2018, the company’s performance under Beighton seemed to indicate that he was right, and the stock price was at record highs. However, the threat of Amazon remained.

Keywords: ASOS; AsSeenOnScreen; online fashion; online apparel; Nick Beighton; Nick Robertson; e-commerce; E-Commerce strategy; online retail; multichannel retailing; omnichannel; social media; marketplaces; shipping; Advertising; Online Advertising; Business Growth and Maturation; Business Model; Business Startups; For-Profit Firms; Customer Focus and Relationships; Age; Gender; Currency Exchange Rate; Profit; Revenue; Geography; Geographic Scope; Global Range; Global Strategy; Globalized Firms and Management; Globalized Markets and Industries; Business History; Selection and Staffing; Journals and Magazines; Human Capital; Business or Company Management; Crisis Management; Goals and Objectives; Growth and Development; Growth and Development Strategy; Growth Management; Management Succession; Brands and Branding; Marketing Channels; Marketing Communications; Marketing Strategy; Product Positioning; Social Marketing; Media; Distribution; Distribution Channels; Order Taking and Fulfillment; Infrastructure; Logistics; Public Ownership; Problems and Challenges; Strategy; Adaptation; Business Strategy; Competition; Competitive Strategy; Corporate Strategy; Expansion; Vertical Integration; Segmentation; Internet; Mobile Technology; Online Technology; Search Technology; Web; Web Sites; Apparel and Accessories Industry; Fashion Industry; Retail Industry; United Kingdom; England; London;