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.)

Case | HBS Case Collection | February 2019

Electric Car Wars, 2018

John R. Wells and Benjamin Weinstock

Electric cars had long been championed by environmentalists as a superior solution to the internal combustion engine (ICE), but, despite large government incentives and strong pioneering efforts by a few automakers over the years, electric and hybrid cars and light trucks still accounted for less than 1% of total global production in 2016. However, events took a turn in 2017 and 2018, when many governments committed to banning ICE vehicles. In response, leading automakers announced plans to launch hundreds of electric vehicle models within five years. Early pioneer Tesla, which, in 2017, had built a stock market valuation exceeding that of General Motors (GM), despite only delivering 103,000 cars compared to GM’s 9.0 million, looked as if it were about to be engulfed by this new competition.

But not all were convinced that electric cars would soon displace conventional ICE vehicles. It was not clear that the infrastructure was in place to charge all these electric vehicles. There were also questions concerning the electrical generating capacity to meet the new demand. Would battery prices fall enough to make mass-market demand a possibility? In low gasoline cost jurisdictions, such as the United States, the economics of owning an electric vehicle didn’t appear justified, unless subsidies were maintained indefinitely. In Europe, where gasoline taxes were high, the case for electric vehicles was stronger. But European governments depended on those taxes to meet their budget needs. Would a significant uptake of electric vehicles necessitate higher taxes on electricity? In 2018, electric cars were an expensive novelty for the rich subsidized by the poor. Would the sudden rush of new models change the balance?

Keywords: electric vehicle; electric vehicles; Electricity; electric motors; Electric Power Generation; electricity usage; electricity distribution; Internal Combustion Vehicle; auto manufacturing; Automobile Manufacturing; automotive industry; Tesla; General Motors; history; Nissan; innovation; batteries; Battery; subsidies; Government initiatives; government incentives; political issues; Energy Generation; Production; Infrastructure; Innovation and Invention; Government Legislation; Global Range; Business History; Auto Industry; China;

Citation:

Wells, John R., and Benjamin Weinstock. "Electric Car Wars, 2018." Harvard Business School Case 719-470, February 2019. View Details

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Founded at the end of 1999 by Juliet Davenport and Martin Edwards, Good Energy was the number-two renewable-energy seller in the United Kingdom at the end of 2016, supplying over 71,000 of the country’s 27 million households and small businesses with 100% renewable electricity and over 44,000 with gas. It also provided administrative support for over 133,000 mostly domestic solar generators selling surplus energy to the grid. Its wind and solar farms generated enough electricity for 20,000 homes. Revenues of £90 million had grown at an average of 33% over the previous five years, while operating profits of £6.0 million had grown at 27%.
However, all was not good at Good Energy. A commitment in 2015 to grow to 900,000 customers by 2020 was revised in 2016 to a target of “sustainable profit growth and enhanced customer service.” Moreover, the long-term goal of generating 50% of energy sold was abandoned in favor of sourcing more from third parties. Part of the challenge appeared to be the entry of many new renewable-energy suppliers that offered tariffs 20% to 30% below Good Energy’s tariffs. But CEO Juliet Davenport faced other challenges. A hostile government was threatening to cap energy rates and reduce renewable subsidies. Meanwhile, Dale Vince, the CEO of Ecotricity, the number-one green-energy supplier in the United Kingdom and Good Energy’s biggest shareholder, was trying to claim two seats on the board. How was Davenport going to navigate through these challenges and maintain Good Energy’s success?

This is the first case in a three-case series on Bulb Energy Ltd. It is followed by “Bulb (B): Launch” (719-441) and “Bulb (C): Rapid Growth” (719-442). It describes the foundation of Bulb, a renewable energy supplier entering the highly competitive UK market in August 2015. Founders Hayden Wood and Amit Gudka were hoping to capitalize on the hundreds of thousands of customers switching their energy provider each month, by promising excellent customer service, a simple, low-price tariff, 100%-renewable electricity, and services to reduce energy consumption. At the time there were only about 250,000 households on renewable tariffs, typically paying a high price for the privilege. Gudka and Wood were convinced that many more households would opt for renewable energy and turn it into a mainstream product if prices were more reasonable. Their goal was to sign up more than 23,000 properties by March 31, 2017 to reach breakeven, and then grow to more than 69,000 properties by March 31, 2021. On Friday August 21, 2015, Gudka and Wood sent out a batch of 1,400 emails to friends and family, encouraging them to switch to Bulb. They waited anxiously for the first sign-ups.

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Amazon.com, 2018

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