Amazon’s strategic management

 Amazon has grown its valuation from around a $300 million market cap when it went public in 1997 to now $1.966 trillion, making it the world's fifth most valuable company by market cap. Amazon has been able to do this because of their founder and ex-CEO Jeff Bezos and his drive for success.

Jeff Bezos started Amazon as an online bookstore which was meant to compete with brick and mortar bookstores. As this worked out very well by the late 1990s Jeff Bezos decided to expand past just selling books. He also realized how important the internet was going to be and created AWS in 2006 for cloud computing which now makes up about half of Amazon's revenue.

Amazon says their mission goal is to be “Earth’s most customer centric company”. They also say they want to be Earth’s best employer and Earth’s safest place to work. They are incredibly customer centric as their claim to fame is their 2 day shipping and they have an incredible return policy in which almost all items can be returned 30 days after purchasing it. With just these two things consumers feel like they are being put first. Since they are now a gigantic company their customer support isn’t as good as it used to be but it doesn’t stop them from trying to constantly improve it.

 In Jeff’s 2017 Letter to Shareholders, he called out the nature of consumers to continue increasing their expectations. “One thing I love about customers,” Jeff wrote, “is that they are divinely discontent...People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary.” Jeff is no different as he strived to continue improving Amazon’s customer service to match the customers expectations. There’s a famous story that was confirmed by Jeff Bezos that he called customer support during a board meeting to see how long it would take for the call to be picked up. He did this to show that Amazon's wait times were too long.

Amazon has done an incredible job getting consumers to trust them and enjoy using their services. They’ve won numerous awards for this including-

● No. 3 Most Trusted Brands in the U.S., No. 1 among Tech Brands by Morning Consult, 2023

● No. 2 American Customer Satisfaction Index Internet Retail Category, 2023—Ranked in the top 5 of the Internal Retail category, over twenty years running

● No. 1 Lowest-priced Retailer, Profitero, 2023, seven years running

These awards show how trusted and respected Amazon is and that they’re getting closer and closer to being Earth’s most consumer centric company.

An incredible part of how Amazon has grown to become a massive company is because of Jeff Bezos's foresight. Most people realize his foresight of e-commerce but not cloud computing. Cloud computing’s estimated market size in 2024 is $679 billion and is expected to grow at 16% per year till 2032. Jeff Bezos realized this early on and created AWS in 2006. Now Amazon has the largest market share in cloud computing with 33% and has been the leader for over a decade. It brought in an estimated $90.76 billion dollars in revenue in 2023. Since Bezos was able to realize the internet's potential Amazon was able to get in early and take the lead over before competitors came. For example Google, one of the biggest competitors in the cloud computing space joined in 2008, which is 2 years after Amazon.

Amazon has also done a great job of fending off competitors using some monopolistic strategies. A great example of this was their war with Diapers.com. Diapers.com was doing a great job at getting parents items for their children quickly and profitably and Amazon took notice. “These guys (Diapers.com parent company) are our #1 short term competitor ... We need to match pricing on these guys no matter what the cost,” said Amazon executive Doug Herrington and that’s what they did. Amazon cut the cost of their products and gave big discounts while taking massive losses to put their competition out of business. After this pricing war Amazon was able to buy the company for $545 million and then shut it down a few years later. Unsurprisingly the prices of diapers on Amazon went back up after they bought their competitor. While this tactic may not be the most ethical (this was brought up in the court case when the FTC sued Amazon) it definitely works very well.

Using Jeff’s foresight and some monopolistic tactics Amazon has grown to be the 5th largest company in the world. Its revenue has grown from $15.7 million in their first year to $574.78 billion in 2023. They also have a dominant market share with 37.8% according to data published by Statista. This puts them way ahead of competitors like Walmart and eBay which have 6.3% and 3.5% respectively. Overall Amazon has done an incredible job keeping ahead of the competition and strategically planning for the future.