1. A SWOT Analysis of Amazon
A SWOT Analysis of Amazon.com & Strategic Plan suggestions for the next 3 – 5 years.
Abstract
The purpose of this presentation is to present an overview on the company’s background, analyze the internal and external pressures the company faces, examine the company’s competitive advantages, and finally to make strategic suggestions that the company should make to increase their competitive advantage. A range of resources were utilized in this study and they will be presented at the end of the presentation.

2. Overview & Background Name AMAZON.COM, Inc. Industries Served
Internet, Online retailing
Geographic areas served
Worldwide
Headquarters
U.S.
Current CEO
Jeff Bezos
Revenue
$ billion (2012)
Profit
$ -39 million (2012)
Employees
88,400 (2012)
Main Competitors
eBay, Netflix, Apple Inc., Barnes & Noble, Wal-Mart USA, LLC.
According to the amazon.com investor relations website, here are some interesting facts:
Amazon.com went public on May 15, 1997, and the IPO price was $18.00, or $1.50 adjusted for the stocks splits that occurred on June 2, 1998 (2-for-1 split), January 5, 1999 (3-for-1 split), and September 1, 1999 (2-for-1 split).
Amazon.com has never declared or paid cash dividends on their common stock. Amazon.com intends to retain all future earnings to finance future growth and, therefore, does not anticipate paying any cash dividends in the foreseeable future. The Company currently does not offer a Direct Stock Purchase Plan.
Amazon.com is traded on NASDAQ under the ticker symbol AMZN.
Net sales, in millions:
(2012) $61,093
(2011) $48,077
(2010) $34,204
(2009) $24,509
(2008) $19,166
It is important to identify the strengths, weaknesses, opportunities, and threats of any business. This type of identification model analyzes this information in order to determine what may assist the company in reaching its objectives. It also pinpoints which obstacles need to be minimized in order to achieve desired results. A SWOT analysis of Amazon.com shows the following information, as stated by Strategic Management Insight (Jurevicius, 2013):
According to a recent news article, Amazon.com is valued at nearly $100 billion. In addition, it employs over 65,000 employees (Wasserman, 2012). Each year, Amazon continues to grow and either overpower many of its competitors or join forces with them. For example, in the late 1990s Bezos bought IMDb.com. He then proceeded to buy Zappos.com, a shoe retailer, for $900 million. In addition, he owns Diapers.com, a baby retail outlet. (Wasserman, 2012). Jeff Bezos is listed as the thirtieth wealthiest man in America, according to Forbes.com.
Amazon.com: Background and Overview
Amazon.com is, in simple terms, a household name. Almost everyone on the planet has heard of, or has done business with, this company. However, this was not always the case. Surprisingly, Amazon.com started as a very small idea. In 1994, a man by the name of Jeff Bezos began by selling one book from his garage in Bellevue, Washington. At this point Jeff Bezos knew there was more to offer customers in terms of selling books. After several investments from various individuals who shared Bezos dream of creating an online bookstore, Bezos was able to take online retail to the next level. Bezos’ next step was to create the name of his company. He chose the first letter of the alphabet, “A” as a way to stand out and be seen first when researching online bookstores. He then chose the name “Amazon” because it represented strength and power. Years later, this concept has now reached global proportions. Individuals around the world visit this site for a variety of goods and services.
According to their website, Amazon.com’s mission statement reads “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices,” ("Company vitae:amazon.com ," 2012). It goes on to say that Amazon.com and other sellers offer millions of unique new, refurbished, and used items in categories such as books; movies; music & games; digital downloads; electronics & computers; home & garden; toys; kids & baby; grocery; apparel; shoes & jewelry; health & beauty; sports & outdoor; and tools, auto & industrial. Amazon.com continues to impress with rapid and continuous innovations. Among these innovations include Amazon’s “one click” program. This program makes purchasing easy and convenient by storing the customer’s personal information in one location, which is easily retrievable (Mellahi & Johnson, 2000). For these reasons, among many others, it is understandable why Amazon.com has become one of the world’s largest, customer-focused online distributors of goods and services.
P.N.

3. Strengths
SWOT
Strengths
Weaknesses
Opportunities
Threats
There have been many things going Amazon’s way recently. It can claim the best-selling E-reader, two-thirds of the eBook market, a base in the tablet market, a growing collection of video titles (including home-brewed series), and feasibly in the future, a smartphone and a music-subscription service. And let’s not forget the thousands of Amazon Web Services for customers. However, over the past year there have been a growing area of susceptibility at Amazon, and it’s an immense one: Its core retail operation. Hard to believe that the business that serves as the foundation and core of Amazon’s achievement is showing signs of distress. This can obviously could present difficulties for Amazon’s investors and its management moving forward. (Kelleher, 2014).
It is important to identify the strengths, weaknesses, opportunities, and threats of any business. This type of identification model analyzes this information in order to determine what may assist the company in reaching its objectives. It also pinpoints which obstacles need to be minimized in order to achieve desired results. A SWOT analysis of Amazon.com shows the following information, as stated by Strategic Management Insight (Jurevicius, 2013):
Strengths:
Cost leadership strategy. Amazon has become the largest retailer in the world, providing the widest range of products while providing the lowest cost in displaying these products.
Superior quality products and services. Only the best quality products are offered at Amazon.com. This company has a proven record of being reliable and convenient. In addition, it offers the lowest and fastest shipping, additional free services with online support, and excellent customer service.
Strategic Acquisitions. Amazon.com has been successful in acquiring new firms to bring additional products, services, and capabilities to the business. This has allowed it to offer such extras as cloud services. In addition, these strategic acquisitions have led to the development of information management and customer relationship management skills.
Efficient logistics and distribution. In each market it operates, Amazon.com has a number of fulfillment warehouses, geographically spread out in various countries. This allows for faster and easier distribution.
Economies of scope. Savings are gained from producing two or more items goods or services at less cost than producing individually. Amazon.com experiences economies of scope by utilizing their IT abilities to offer a larger selection of products online. In addition, they also use excess server capacity to provide cloud computing services.
C.R.

4. Weaknesses
SWOT
Strengths
Weaknesses
Opportunities
Threats
In a less than ideal world, Amazon realizes it cannot keep losing money on buying customer loyalty. Amazon Prime is presently driving up shipping costs, which will cause the delivery costs to rise, stimulating higher Prime fees. If this transpires, Prime will start to look less like a bargain to most. Shoppers will find better bargains on other sites and elect for the discount over the promise of Amazon’s fast shipping. This scenario would cause Amazon’s revenue growth to keep reducing, and also shipping and digital-content costs to escalate. So the questions come down to why Amazon’s revenue growth is slowing. If Prime is the answer and can reverse the decrease, Amazon’s future is looking pretty bright. If it is not the answer to why, it could mean the customer loyalty may be too dicey for Amazon to hold on to for long.
The pursuit for the best deal may be more influential than Amazon could ever imagine. Amazon will have to think if their customers are loyal enough, and will the high costs it’s been paying for their loyalty going pay to off in the long run. Given the high multiple of Amazon’s stock, and that fact of the premise that Amazon will keep growing, these are definitely questions worth asking in (Kelleher, 2014).
Weaknesses:
Only online presence. Unlike Wal-Mart and Target, Amazon.com does not offer a physical, brick and mortar type establishment where products can be seen, touched and purchased.
Selling at zero margins. In order to gain market share, many of Amazon.com’s products are sold at zero margins. Initially, this is a strong tactical move, however, this move hurts the company’s profits long-term.
Negative publicity. In the United Kingdom, as well as the United States, Amazon.com has gained negative publicity due to tax avoidance. In addition, it has also been reported that this company maintains poor working conditions for their employees as well as anti-competitive actions, and price discrimination.
C.R.

5. Opportunities Opportunities
SWOT
Strengths
Weaknesses
Opportunities
Threats
Opportunities
Amazon.com has some great opportunities in the current market. Amazon.com currently offers Amazon Payments, which is far behind its competitor PayPal. Because Amazon.com is an online retailer, having a secure payment system that is proprietary to Amazon.com could be extremely advantageous. One reason that Amazon.com is not completely capitalizing on this opportunity is because PayPal accepts four forms of payment whereas Amazon.com only accepts two; PayPal supports 24 currencies whereas Amazon only supports 11; PayPal supports over 300 shopping carts online, whereas Amazon only supports 1; and the customer support for PayPal has multiple different forms of customer service, whereas Amazon Payments has only the web form of support to its users (“Compare your”, n.d.). Businesses are able to use Amazon Payments but to expand on the digital payment process, Amazon Payments could partner with other online retailers so that those companies could have Amazon Payments support their shopping carts and be able to pay with Amazon Payments. Furthermore, Amazon Payments could take advantage of the digital payment process by creating a product that could be used to swipe credit cards with mobile devices called the “Ama-square” that would also have a compatible Amazon Ama-square application for those mobile devices. As Amazon.com is aware of, the online retail business is growing, the opportunity to tap into the digital payment process could really help Amazon.com gain a lead in the online retail business and also on their competitor PayPal.
Consumers have reacted positively to the Kindle line of products that is only offered by Amazon.com. According to the Amazon.com’s website the original kindle has on average a four star rating out of five stars from over 22,000 customers (“Customer Reviews”, n.d.). If Amazon.com were to create more product lines such as the Kindle and expand their brand, they could receive more brand loyalty from consumers.
Though Amazon.com has acquired many different companies since its start in 1995, increasing products and services by acquisitions is an opportunity to become an even bigger force than it already is. Acquiring more companies will help Amazon.com increase its bargaining power with suppliers and also increase its customers by making more products and services available.
Amazon.com operates in multiple countries such as the United Kingdom, Germany, France and China and maintains over fifty fulfillment centers around the world, which encompasses more than 26 million square feet (“About Amazon”, n.d.b). Even with this growth there is more opportunity for Amazon.com to continue expanding globally. Expanding to Russia, where online shopping has increased 26 percent last year (Brady, 2014), would be a great opportunity for Amazon.com. Additionally, 13.9 billion dollars is what Amazon.com has invested in its warehouses since 2010 to provide fast delivery to customers around the world (Kucera, 2013b).
With the increased popularity of music streaming services like Pandora, Spotify and iHeartRadio, another opportunity of Amazon.com would be to create a music streaming service. This service could be called Amazon Radio and would deliver streamed music straight to mobile devices. Amazon Radio could offer subscriptions that would get rid of the commercials that would play while listening to Amazon Radio. A mobile application could be created so that consumers could listen to their Amazon Radio while on the go. Amazon Radio could target businesses that would normally have music within their store, to purchase the subscription so that there would be no commercials but the store could chose different stations to listen to throughout the day. Amazon Radio could also help Amazon.com to create an Amazon music listening device that could play their music streaming, like an iPod. Although, Amazon.com has Amazon mp3, Amazon.com could also market a certain amount of downloads with subscriptions to encourage more consumers to use the service or also combine the Amazon mp3 application with the Amazon Radio application.
V.S.

6. Threats
SWOT
Strengths
Weaknesses
Opportunities
Threats
Threats
According to the latest figures from the United States Department of Justice, credit card data theft has increased 50% from 2005 to 2010 (Anderson, 2013). As a result of these increasing fraud rates, consumers could be very skeptical about giving out personal information over the Internet, which also includes giving out credit card information to make purchases. Because Amazon.com is solely an online retailer, the security risks of doing business on the Internet could threaten its success.
Amazon.com has experienced some legal issues in the past few years. There has been lots of controversy around copyright infringements; with sellers selling copies of films and television shows that some are saying is unauthorized. Currently, Amazon.com is facing a class action lawsuit over their Amazon prime membership services. Plaintiffs are claiming that Amazon.com hiked prices to include shipping charges that were supposed to be free with the Amazon prime membership (Kim, 2014). Additionally, Amazon.com continues to battle legal issues of tax avoidance. Depending on the settlements and conclusions to some of the legal troubles that Amazon.com has experienced could also prove to be a threat, not only financially but could also damage the public perception of the company and its business practices.
The strategic alliances that a company forms gives the corporation a competitive advantage, blocks competitive threats and also helps to mitigate risks. Amazon.com’s strategic alliances are great but what happens when Amazon.com’s competitors create strategic alliances with other corporations? It makes those company’s stronger competitors of Amazon.com. eBay announced in 2001 that they formed a strategic alliance with Microsoft to help expand globally (“eBay and Microsoft”, 2001). Overstock.com reported in 2004 that they had contracted with DHL to be its primary delivery company to help reduce logistics cost (Kempfer, 2005). The strategic alliances of Amazon.com’s competitors could prove to provide stronger competition within the current market.
Amazon.com has been able to avoid charging sales tax on items due the company being an online retailer and exempt from charging taxes but this advantage is starting to change. There are currently 20 states on Amazon.com (“About sales”, n.d.) that if items are shipped to these states, sales tax has to be charged on those items. Credit Suisse estimated that if Amazon.com were forced to collect sales tax in all states, it would lose as much as 653 million dollars is sales in 2011, or 1.4% of an estimated 45.5 billion dollars in revenue (Woo, 2011). With the changing tax laws it might not be possible for Amazon.com to continue avoiding charging sales tax.
Regional online retailers could prove to be a threat for Amazon.com. Due to regional online retailers smaller warehouses and local placement they could offer cheaper shipping rates to customers. Additionally, these regional online retailers could make ordering more convenient by providing localized products to consumers. Customers would be able to order online but on a much more intimate basis than large companies like Amazon.com.
To compete on the scale of Amazon.com, new entrants would have to have a substantial amount of funds to influence customer and supplies to switch to a different company. The investment, fixed costs and capital requirements to compete with Amazon.com would be high for new entrants. Although it is not difficult to start a website and sell things, it would be difficult to run an operation of the same magnitude as Amazon.com.
V.S.

7. Strategic Planning: Strengths
Create one stop shopping with expanded products and services
More acquisitions mean more customers, esp. in streaming video and music
Expanded Logistics & distribution centers mean faster, same day delivery
Since Amazon’s early days as a book retailer, it has morphed into one of the most recognized brands in the world. In order to continue to “eat other people’s lunch”, Amazon must continuously work to maintain its strengths and overcome its weaknesses.
One of Amazon’s biggest strengths is its cost leadership strategy as one of the largest retailers across the globe. They are able to continue providing superior products and services by obtaining new customers and keeping the old ones. By continuing to build on the strategy of making it extremely easy to buy on Amazon, more customers will remain loyal. Amazon tailors products to customers as they browse the sight, then makes recommendations by suggesting additional/similar products. If a customer looks at or purchases a vegan cookbook, more vegan cookbook recommendations will show up on the page. Amazon can further expand these “related to what you viewed” recommendations by continuing to add products and services to the line-up, such as cookware, dinnerware, vegan foods on Amazon grocery, etc. A new service that Amazon can start by June, 2015, is one that recommends local vegan restaurants or locations of grocery stores. They can start by posting an ad on their homepage detailing the new concept, then restaurants and stores can conveniently sign up on their site to participate. Coupons or discounts can be offered if Amazon is mentioned, then the restaurant can pay Amazon a small fee for advertising for it. The more Amazon can make a one stop shop for its customers, the more loyal they will be. Continually growing and expanding an excellent platform for cross selling further books and products will help Amazon’s profits continue to grow (Maraseo, 2012).
Maintaining strength by continuing strategic acquisitions is another way of giving Amazon a competitive advantage. Amazon is currently in talks with about ten retailers that do not currently sell their wares on the site to start doing so, providing yet another way to draw more customers (Bensinger, Amazon lifts price for Prime, 2014). The latest acquisition was last week, when Amazon purchased ComiXology, a giant comics platform. With the sales of physical comics faltering, ComiXology (a kind of iTunes for comics), is playing a leading role in developing the technology to move comics online. Amazon plans to invest money in the company and expand its team (Streitfeld, 2014). In the next year, by May, 2015, Amazon will have the power to start selling digital comic books on its Kindles. This can revitalize the comic book industry and generate revenue for Amazon.
In the next two years, by the end of 2016, Amazon should acquire Hulu to further delve into the extremely competitive video market. Just as Apple is in talks with Comcast to set up an internet based tv service, Amazon is considering an advertising supported streaming tv service. Amazon has the advantage of not needing to immediately make money in video (Gottfried, 2014) and could therefore afford to buy out Hulu to take advantage streaming its content to further compete with Netflix, the current industry leader in streaming video.
In the next three to five years, Amazon needs to continue expansion of its efficient logistics and distribution to further speed up shipping times. The 25% increase in Amazon Prime membership serves to offset rising delivery and content acquisition costs. Amazon chose a lower price hike to upset the fewest customers even though shipping expenses jumped 29% last year, to $6.6 billion, while revenue from shipping services rose 36%, to $23.1 billion. Analysts predict that fewer than 10% of the over 20 million Prime members will drop their accounts due to the price increase. Additional spending by Prime members could generate between $150 million and $300 million in operating income annually (Bensinger, Amazon lifts price for Prime, 2014). By using this income to build more warehouses closer to urban centers, Amazon can easily expand its same day delivery options. Amazon can enter into agreements with a local delivery service in each city that a warehouse is located which can pick up the items from the conveniently located warehouse and have them on the customer’s doorstep by the end of the day. By creating a quicker, easier method of delivery, Amazon can offer an even better option than the order on-line, pick up in store programs now offered by stores like Wal-Mart, Lowes, and Sears.
L.S.

8. Strategic Planning: Weaknesses
Increase profit by expanding the subscription services to include more demographic groups
Move to increase positive publicity and reduce negativity in the press
Give employees more equity in the company by offering stock options and grants
Weakness strategies are ever evolving and Amazon evaluates each one thoroughly before executing them. One weakness is that they are an online only presence in the marketplace and they do not offer a physical brick and mortar establishment where products can be seen, touched, tried out, and purchased. An effective strategy is for Amazon to re-establish the retail relationship. As chain stores began to dominate, the one-on-one relationships that were fostered in the old days of mom and pop retailers became non-existent. Customer behavior inside a big box store is effectively invisible for managers. But because Amazon has the ability to collect endlessly useful information about its customers, it has the ability to expand its one-on-one customer relationship using that information to its advantage.
According to Greg Girard, an analyst for IPC Retail Insights, “Whenever a customer buys something from Amazon or simply logs in without buying anything, Amazon is collecting information about that person” (Time Magazine, 2012). There is an almost unlimited amount of data that can be mined about how a customer peruses the website: what products they search for, how they research it, what they put in their shopping cart, what they buy or abandon, what is on their wish list, what prices they pay, if they are a Prime member or not, if they use Subscribe and Save, if they are a student, and so on. Amazon Mom and Amazon Student are specialty marketplaces and Amazon can start offering additional service related ones. Amazon Senior could offer services and products to people over 55. This is the largest portion of the population and Amazon could market and sell all the things that are necessary for a healthy lifestyle, including prescription medication delivery. Amazon could partner with a customer’s local pharmacy, and for an additional fee, medications could be delivered on the same day. Further developing a one-on-one relationship with its customers is invaluable and puts Amazon in a prime position to turn the growing role of e-services into revenue growth.
A second weakness that Amazon has is that it is selling at zero profit margins, especially the Kindle e-reader. However, Amazon’s core retail business is still secure. According to a brand new study from Consumer Intelligence Research Partners, Amazon customers who own a Kindle spend $1223 on Amazon products annually. The customers without a Kindle spend $790 annually. This $443 difference means that selling those Kindle Fire tablets a zero margins is working like a charm (Kindle fire pricing strategy, 2013). Amazon can further enhance this strategy by continuing to upgrade the Kindle Fire and keeping it at a lower price than any of its competitors. A similar strategy that is coming to fruition in June of this year which will replicate the perceived zero profit margin weakness over the long term is the introduction of an Amazon smartphone. Amazon will start shipping phones by the end of September to take advantage of the holiday shopping season (Bensinger & Rusli, Kindle phone?, 2014). Within six months after the smartphone roll out, Amazon should offer a high end smart phone at a very low cost or they could even offer it free to Amazon Prime members who sign up for a longer term contract. Another idea is to offer a data pricing strategy that beats any other mobile service provider. In another year or so after that, Amazon can also eventually offer a pricing program that will decrease based on the amount of money a customer spends on Amazon each year. The more you spend buying on Amazon, the less costly your cell phone services will be.
A third weakness that Amazon needs to work on overcoming is the negative publicity is has received for maintaining poor working conditions at its warehouses. In September, 2011, Amazon was publicly criticized by past and present employees for its “sweatshop conditions” at its warehouses. In June, 2012, Amazon began spending $52 million installing air conditioning at its warehouses across the county. This cost was equivalent to 8.2% of its 2011 earnings. They immediately responded to the complaints and workers now say the warehouses are cool in the summer. Even though this produced negative publicity for Amazon, it didn’t really hurt sales. (Soper, 2012). The best strategy Amazon has is to continue to monitor worker conditions, take immediate action if anything negative arises, and showcase employee relations. Each year, Amazon can continue to upgrade its existing facilities and when new ones are built, they should be high tech, state of the art facilities that provide safe working environments for employees. The money that is spent on these facilities now will avoid future complaints and negative publicity. Another positive campaign that will foster goodwill between Amazon and its employees is to highlight a real Amazon employee’s exemplary performance on the front page of the website. Every quarter, Amazon can create a short video introducing an employee, showcase their achievements, talk about their families, volunteer work, etc. Customers can view a kind of employee of the quarter video that can show that Amazon cares about its employees.
L.S.

9. Strategic Planning: Opportunities
Develop and market the new Amazon Blaze VoIP Smart Phone
Introduce Amazon Air; A subscription based music and video streaming service
Acquire Spotify, Google +Play, and iTunes customers through value added Amazon Air
Kindle Blaze
Amazon has the opportunity to set the world on fire in the area of portable phones. Currently, no one offers a portable Voice Over Internet Protocol Phone. The phone would use Wi-Fi hotspots to connect to the internet and allow the user to place and receive phone calls with crystal clarity. According to a study conducted by market research company Informa Telecoms and Media, hotspots will more than triple within by 2015, to an estimated 5.8 million locations (Informa.com, n.d.).
Many cities are embracing Wi-Fi hotspots as a way to contribute to citizens’ quality of life. In New York City, hotspots now exist in all city parks and every phone booth. The bubble radius on the phone booths is capable of reaching out to 200 feet. Many businesses in the city also offer free hotspots; in fact, it is hard to find a place on a sidewalk that isn’t covered by a hotspot bubble (Stern, 2012).
The Kindle Blaze will be offered as a cell phone alternative, based on our current custom Android operating system, and will connect to Amazon’s app, music, and video store. The phone will feature sleek styling, and will initially be offered in four colors; black, white, silver, and crystal. A subscription based pricing with tier levels will be offered, giving the customer a choice of how much music and video they wish to stream each month; pricing is yet to be determined. Prime customers will be offered a free one year subscription with a purchase of the Blaze.
The Blaze will be able to store mp3s, apps, and video; memory configurations are 16 GB, 32 GB, and 64 GB. The device will offer the ability to transfer the users’ iTunes music catalog and video to the Blaze catalog, and Cloud services will be included in the monthly subscription. The Kindle app will be included, allowing the users to read from their Kindle library, while on the go.
The Kindle Blaze will be rolled out in three phases, with each generation offering more features. Research and development will begin immediately. Applications for trademarks and patents will be filed as technology is developed in our labs, to protect our investment. As we roll out the second generation, we will also promote a trade in program that will offer a discount on the purchase of the newer Blaze. The traded in phones will be refurbished, and sold for a discount. Marketing will also reach out to charities and other organizations, such as our deployed military personal to donate the refurbished phones. This will give us great visibility and favorable press in regards to Amazon and the Blaze.
We expect hostile reactions from the obvious competitors, Apple Inc., Microsoft, AT&T, Verizon, and other carriers that may fear the device will revolutionize how calls are made in the future, and $50 million has been earmarked to protect our patents and defend against any claims of infringement.
We anticipate offering the first Blaze device in in Q3, 2016, in time for the holidays. We will heavily market the Blaze in print, TV, and internet ads, featuring celebrities pitching the various features. The theme will be “Setting Your World on Blaze”. Pricing will be determined once our research labs have developed the first prototypes; the goal is to offer the Blaze with 16 GB of memory for under $200, and offer tier pricing for 32 GB and 64 GB devices. This will make the Blaze competitive with the Apple iTouch.
Amazon Air
Amazon currently has the second largest online digital music store, following Apple Inc. (Levy, 2014). In 2012, Amazon sold $1.1 billion worth of mp3s, representing 22% of the market (Levy, 2014). In 2013, digital music sales have slowed, as music streaming saw a dramatic increase. Amazon is currently in talks with the major record labels to begin offering streaming to its Prime membership. Amazon needs to increase its profits to convince investors it is on the right track, as it has lost money in the past several quarters, while it continues to invest in long term growth. It is for this reason that we suggest Amazon add another subscription model, Amazon Air.
Amazon Air will be offered in a monthly and yearly subscription based format, and offer unlimited streaming of mp3s and video, including Amazon Original programming such as Alpha House (featuring John Goodman) and Betas. This offers Amazon the opportunity to increase the number of viewers with access to its original programming. Subscribers will be able to also purchase music through the subscription at a reduced price, making it more attractive to subscribe. The music discovery feature will increase sales of mp3s, as listeners discover new music they may not have been exposed to before.
The media will be delivered through Amazon’s current smart phone app, Amazon mp3; which will be further enhanced to offer the new features proposed here. The app will offer to import the user’s iTunes library over to Amazon Air, and store the content in Amazon Cloud, where the user can access their music through any device connected to the internet. It is hoped this feature will encourage iTunes users to switch over to Amazon Air because of its convenience and storage of digital content.
Amazon Air would be a great feature to add to the newly proposed Amazon Blaze. By getting more Amazon hardware into the hands of users, Amazon can increase its brand awareness, and increase the sales of digital content, including eBooks, music, video, and apps. Each subscriber will get 200 Amazon coins per month to use toward digital content as they please; equating to $2 US dollars. They could buy two mp3s or use the coins towards other content; adding to the perceived value of the subscription.
While Amazon Prime offers many of these features, it also gives its subscribers free 2 day shipping on all prime eligible purchases. By offering Amazon Air, Amazon can attract a wider audience, including those that don’t perceive Prime to be of great value to them. Amazon Air should roll out in less than a year, as all of the pieces needed are already in place, assuming Amazon’s talks with the record labels goes well. Such a service will also attract customers from Spotify and Pandora, as Amazon will offer Cloud storage, and videos into the mix.
R.S.

10. Strategic Planning: Threats
Address declining sales caused from collecting sales tax
Vigorously defend against Prime lawsuit
Turn threats into opportunities
Sales Tax: Declining Sales
According to a new study conducted by Ohio State University, Amazon sales have decreased by 10% in states that Amazon was required to start collecting sales tax (D’Onfo, 2014). On purchases of $300 dollars or more, sales have decreased by 24% (Satariano, 2014). The loss of revenue will severely impact Amazon’s ability to expand. The push by states to force internet retailers to collect sales tax took a turn for the worst for Amazon when the Supreme Court refused to hear an appeal filed by Amazon that asked the court to overturn a lower court ruling that it begin collecting sales tax in New York.
Online retailers that do not collect sales tax have seen a 20% increase in sales since Amazon was forced to begin collecting sales taxes (Satariano, 2014). Further analysis indicates that brick and mortar stores haven’t been the beneficiary of customers looking elsewhere to purchase items; other online retailers were. Amazon has no control over how people view paying sales tax, so educating customers that the tax benefits their respective states would more than likely be fruitless.
Amazon does have the ability to force all online retailers to compete on a level field by lobbying Congress to pass comprehensive legislation that forces all online retailers to collect sales tax. The legal argument couldn’t be simpler; forcing some companies to charge sales tax but not others seems based on unfair trade practices. Given the threat of declining sales, it is imperative that Amazon take a lead in lobbying Congress to pass a bill that addresses this issue.
Amazon should retain a law firm that specializes in trade practice law, and lobby Congress. Given that Amazon has lost billions in revenue since beginning to charge sales tax in 20 states, this issue deserves Amazon’s top attention in the next 1-3 years.
Prime Class Action Lawsuit
Amazon has been accused of raising the price of items that qualify for free shipping of its Prime eligible goods. Amazon should take this threat head on, and file that the case be dismissed as frivolous, based on several factors. Amazon offers low prices on millions of items, many of which qualify for free shipping to Prime members, in an effort to compete with Wal-Mart and Target. While there are some items that may be priced higher, most are offered by third party merchants that set their own prices. Amazon can clearly demonstrate that millions of items are available at the same or lower price than their competitors.
Another point Amazon should present, is the other services that offer value to a Prime membership, such as unlimited access to streaming video, including movies and original content that only Prime members have access to. The plaintiffs would have a hard time refuting this claim, considering the same service offered by Hulu and Netflix begin at $96 a year for the basic plans (Kell, 2014). Amazon is also in talks with major record labels to begin offering unlimited streaming music, and a music discovery service available exclusively to Prime members. Similar music streaming services offered by Pandora and Spotify start at $59.88 per year. Combined, the cost of membership for alternative streaming services that don’t offer unlimited access is $ Amazon needs to conduct an education campaign for the public that educates them on these costs associated with using alternative services, and promote the true value of an Amazon Prime membership. This would negate the threat, and turn it into an opportunity to increase membership, given the added value. The free shipping is only part of the Prime membership offered to customers.
If Amazon is able to convince the presiding judge to drop the lawsuit based on these merits, it should use that to its advantage and start a national marketing campaign that compares the costs of alternative services to the cost of Amazon Prime. Amazon Prime customers are more likely to purchase from Amazon more often. Amazon is also finalizing plans to add HBO programming to its Prime membership, further enhancing the value.
R.S.

11. References
Amazon.com. (n.d.). About Sales Tax on Items Sold by Amazon.com. Retrieved from
Amazon.com. (n.d.) Customer Reviews Retrieved from reviews/B0051VVOB2
Anderson, J. (2013). Identity theft growing, costly to victims. Usatoday.com. Retrieved from
Bensinger, G. (2014, March 14). Amazon lifts price for Prime. The Wall Street Journal, p. B1.
Bensinger, G., & Rusli, E. (2014, April 12-13). Kindle phone? The Wall Street Journal, p. A1.
Company Vitae: amazon.com. (2012, October 1). Management Today, 16. Retrieved from 7be7b149d94bc3f600   
Compare your online payment processing options. (n.d.). Paypal.com. Retrieved from bin/?cmd=_render- content&content_ID=merchant%2Fgoogle_checkout_vs_paypal_vs_amazon_payments
D'Onfro, J. (2014, April 22). Amazon Sales Drop With Online Sales Tax - Business Insider. Retrieved April 23, 2014, from
Jurevicius, O. (2013, February 13). Amazon SWOT analysis 2013 | strategic management insight. Retrieved from
References
About Sales Tax on Items Sold by Amazon.com. (n.d.). Amazon.com. Retrieved from
Anderson, J. (2013). Identity theft growing, costly to victims. Usatoday.com. Retrieved from
Bensinger, G. (2014, March 14). Amazon lifts price for Prime. The Wall Street Journal, p. B1.
Bensinger, G., & Rusli, E. (2014, April 12-13). Kindle phone? The Wall Street Journal, p. A1.
Company Vitae: amazon.com. (2012, October 1). Management Today, 16. Retrieved from   
Compare your online payment processing options. (n.d.). Paypal.com. Retrieved from
Customer Reviews (n.d.) Amazon.com. Retrieved from
D'Onfro, J. (2014, April 22). Amazon Sales Drop With Online Sales Tax - Business Insider. Retrieved April 23, 2014, from
Jurevicius, O. (2013, February 13). Amazon SWOT analysis 2013 | strategic management insight. Retrieved from
Kell, J. (2014, April 21). How a Higher-Priced Netflix Stacks Up - Digits - WSJ. Retrieved April 23, 2014, from
Kelleher, K. (2014, March 25). “Amazon’s core “strength” may actually be its biggest weakness”. Retrieved from:
Kempfer, L. M. (2005). DHL Delivers for Overstock.com. Material Handling Management, 60(5),
Kim, S. (2014). Amazon Accused of Cheating Customers Through Shipping Costs. Abcnews.com. Retrieved from
Kindle fire pricing strategy. (2013, December 17). Retrieved from BGR.com:
Kucera, D. (2013a). Amazon Surges to Record High on Global E-Commerce Growth. Bloomberg.com. Retrieved from
Kucera, D. (2013b). Why Amazon Is on a Warehouse Building Spree. Businessweek.com. Retrieved from
Levy, A. (2014, March 3). 3 Reasons Amazon Is Itching to Stream Music (AMZN). Retrieved April 22, 2014, from
Maraseo, C. (2012, November 1). Retrieved from Motley Fool:
Mellahi, K., & Johnson, M. (2000). Does it pay to be a first mover in e.commerce? The case of amazon.com. Management Decision, 38(7), Retrieved from
Satariano, A. (2014, April 21). Amazon Sales Take a Hit in States With Online Tax - Bloomberg. Retrieved April 23, 2014, from
Streitfeld, D. (2014, April 10). Bits. Retrieved from The New York Times:
Time Magazine. (2012, July 16). Time Business. Retrieved from Time:
Wasserman, S. (2012, May 12). The amazon effect. The Nation., Retrieved from
Woo, S. (2011). Amazon Battles States Over Sales Tax. Wallstreetjournal.com. Retrieved from

12. References
Kell, J. (2014, April 21). How a Higher-Priced Netflix Stacks Up - Digits - WSJ. Retrieved April 23, 2014, from higher-priced-netflix-stacks-up-against-rivals/
Kelleher, K. (2014, March 25). “Amazon’s core “strength” may actually be its biggest weakness”. Retrieved from: core-strength-may-actually-be-its-biggest-weakness/
Kempfer, L. M. (2005). DHL Delivers for Overstock.com. Material Handling Management, 60(5),
Kim, S. (2014). Amazon Accused of Cheating Customers Through Shipping Costs. Abcnews.com. Retrieved from
Kindle fire pricing strategy. (2013, December 17). Retrieved from BGR.com:
Kucera, D. (2013a). Amazon Surges to Record High on Global E-Commerce Growth. Bloomberg.com. Retrieved from
Kucera, D. (2013b). Why Amazon Is on a Warehouse Building Spree. Businessweek.com. Retrieved from 29/why-amazon-is-on-a-warehouse-building-spree
Levy, A. (2014, March 3). 3 Reasons Amazon Is Itching to Stream Music (AMZN). Retrieved April 22, 2014, from
Maraseo, C. (2012, November 1). Retrieved from Motley Fool:
References
About Sales Tax on Items Sold by Amazon.com. (n.d.). Amazon.com. Retrieved from
Anderson, J. (2013). Identity theft growing, costly to victims. Usatoday.com. Retrieved from
Bensinger, G. (2014, March 14). Amazon lifts price for Prime. The Wall Street Journal, p. B1.
Bensinger, G., & Rusli, E. (2014, April 12-13). Kindle phone? The Wall Street Journal, p. A1.
Company Vitae: amazon.com. (2012, October 1). Management Today, 16. Retrieved from
Compare your online payment processing options. (n.d.). Paypal.com. Retrieved from
Customer Reviews (n.d.) Amazon.com. Retrieved from
D'Onfro, J. (2014, April 22). Amazon Sales Drop With Online Sales Tax - Business Insider. Retrieved April 23, 2014, from
Jurevicius, O. (2013, February 13). Amazon SWOT analysis 2013 | strategic management insight. Retrieved from
Kell, J. (2014, April 21). How a Higher-Priced Netflix Stacks Up - Digits - WSJ. Retrieved April 23, 2014, from
Kelleher, K. (2014, March 25). “Amazon’s core “strength” may actually be its biggest weakness”. Retrieved from:
Kempfer, L. M. (2005). DHL Delivers for Overstock.com. Material Handling Management, 60(5),
Kim, S. (2014). Amazon Accused of Cheating Customers Through Shipping Costs. Abcnews.com. Retrieved from
Kindle fire pricing strategy. (2013, December 17). Retrieved from BGR.com:
Kucera, D. (2013a). Amazon Surges to Record High on Global E-Commerce Growth. Bloomberg.com. Retrieved from
Kucera, D. (2013b). Why Amazon Is on a Warehouse Building Spree. Businessweek.com. Retrieved from
Levy, A. (2014, March 3). 3 Reasons Amazon Is Itching to Stream Music (AMZN). Retrieved April 22, 2014, from
Maraseo, C. (2012, November 1). Retrieved from Motley Fool:
Mellahi, K., & Johnson, M. (2000). Does it pay to be a first mover in e.commerce? The case of amazon.com. Management Decision, 38(7), Retrieved from
Satariano, A. (2014, April 21). Amazon Sales Take a Hit in States With Online Tax - Bloomberg. Retrieved April 23, 2014, from
Streitfeld, D. (2014, April 10). Bits. Retrieved from The New York Times:
Time Magazine. (2012, July 16). Time Business. Retrieved from Time:
Wasserman, S. (2012, May 12). The amazon effect. The Nation., Retrieved from
Woo, S. (2011). Amazon Battles States Over Sales Tax. Wallstreetjournal.com. Retrieved from

13. References
Mellahi, K., & Johnson, M. (2000). Does it pay to be a first mover in e.commerce? The case of amazon.com. Management Decision, 38(7), Retrieved from
Satariano, A. (2014, April 21). Amazon Sales Take a Hit in States With Online Tax - Bloomberg. Retrieved April 23, 2014, from
Streitfeld, D. (2014, April 10). Bits. Retrieved from The New York Times: comixology/?_php=true&_type=blogs&_r=0
Time Magazine. (2012, July 16). Time Business. Retrieved from Time:
Wasserman, S. (2012, May 12). The amazon effect. The Nation., Retrieved from
Woo, S. (2011). Amazon Battles States Over Sales Tax. Wallstreetjournal.com. Retrieved from
References
About Sales Tax on Items Sold by Amazon.com. (n.d.). Amazon.com. Retrieved from
Anderson, J. (2013). Identity theft growing, costly to victims. Usatoday.com. Retrieved from
Bensinger, G. (2014, March 14). Amazon lifts price for Prime. The Wall Street Journal, p. B1.
Bensinger, G., & Rusli, E. (2014, April 12-13). Kindle phone? The Wall Street Journal, p. A1.
Company Vitae: amazon.com. (2012, October 1). Management Today, 16. Retrieved from
Compare your online payment processing options. (n.d.). Paypal.com. Retrieved from
Customer Reviews (n.d.) Amazon.com. Retrieved from
D'Onfro, J. (2014, April 22). Amazon Sales Drop With Online Sales Tax - Business Insider. Retrieved April 23, 2014, from
Jurevicius, O. (2013, February 13). Amazon SWOT analysis 2013 | strategic management insight. Retrieved from
Kell, J. (2014, April 21). How a Higher-Priced Netflix Stacks Up - Digits - WSJ. Retrieved April 23, 2014, from
Kelleher, K. (2014, March 25). “Amazon’s core “strength” may actually be its biggest weakness”. Retrieved from:
Kempfer, L. M. (2005). DHL Delivers for Overstock.com. Material Handling Management, 60(5),
Kim, S. (2014). Amazon Accused of Cheating Customers Through Shipping Costs. Abcnews.com. Retrieved from
Kindle fire pricing strategy. (2013, December 17). Retrieved from BGR.com:
Kucera, D. (2013a). Amazon Surges to Record High on Global E-Commerce Growth. Bloomberg.com. Retrieved from
Kucera, D. (2013b). Why Amazon Is on a Warehouse Building Spree. Businessweek.com. Retrieved from
Levy, A. (2014, March 3). 3 Reasons Amazon Is Itching to Stream Music (AMZN). Retrieved April 22, 2014, from
Maraseo, C. (2012, November 1). Retrieved from Motley Fool:
Mellahi, K., & Johnson, M. (2000). Does it pay to be a first mover in e.commerce? The case of amazon.com. Management Decision, 38(7), Retrieved from
Satariano, A. (2014, April 21). Amazon Sales Take a Hit in States With Online Tax - Bloomberg. Retrieved April 23, 2014, from
Streitfeld, D. (2014, April 10). Bits. Retrieved from The New York Times:
Time Magazine. (2012, July 16). Time Business. Retrieved from Time:
Wasserman, S. (2012, May 12). The amazon effect. The Nation., Retrieved from
Woo, S. (2011). Amazon Battles States Over Sales Tax. Wallstreetjournal.com. Retrieved from