In 2017, Amazon.com made a number of acquisitions to help achieve its ambitions.
ID: 329568 • Letter: I
Question
In 2017, Amazon.com made a number of acquisitions to help achieve its ambitions. Among the firms acquired by Amazon.com are the following:
Whole Foods
Zappos
Kiva Systems
Elemental Technologies
Lovefilm
Souq.com
Quidsi
Audible
Annapurna Labs
Twitch
You are required to research on these firms and report on the following:
(15 points) Conduct a Five Forces Framework analysis for Amazon.com (customers, current competitors, potential entrants, substitute products, and suppliers)
(5 points) What is the objective of Amazon.com?
(20 points) Describe the background of each firm acquired.
(15 points) For each firm, explain what strategy does Amazon.com intend to accomplish.
(15 points) Discuss how each firm can help Amazon.com achieve its objective.
(10 points) What was the price of each acquisition? Do you believe that Amazon.com had overpaid the firms acquired?
(5 points) What is the type of diversification does each acquisition involve?
Explanation / Answer
In 2017, Amazon.com made a number of acquisitions to help achieve its ambitions. Among the firms acquired by Amazon.com are the following:
Whole Foods
Zappos
Kiva Systems
Elemental Technologies
Lovefilm
Souq.com
Quidsi
Audible
Annapurna Labs
Twitch
You are required to research on these firms and report on the following:
(15 points) For each firm, explain what strategy does Amazon.com intend to accomplish.
(15 points) Discuss how each firm can help Amazon.com achieve its objective.
(10 points) What was the price of each acquisition? Do you believe that Amazon.com had overpaid the firms acquired?
(5 points) What is the type of diversification does each acquisition involve?
(15 points) Conduct a Five Forces Framework analysis for Amazon.com (customers, current competitors, potential entrants, substitute products, and suppliers)
ANS:
Michael Porter developed the Five Forces Analysis model as a tool for the external analysis of firms. In the case of Amazon, the external factors define the conditions of the e-commerce industry environment, with focus on the online retail market. To keep this position in the long term, Amazon must regularly evaluate the external factors in the online retail industry environment, through the use of tools like the Five Forces Analysis model.
The global scope of the e-commerce business also exposes Amazon to a diverse set of external forces. Thus, the company must ensure that it remains resilient amid changes in the conditions of the online retail industry environment. The following are the intensities of the external factors affecting Amazon, based on Porter’s Five Forces Analysis model:
Amazon competes against strong competitors. This aspect of Porter’s Five Forces Analysis model tackles the effects of firms on each other. In the case of Amazon.com Inc., the following external factors are responsible for the strong intensity of competition or competitive rivalry in the online retail industry environment:
Amazon’s vsion statement and mission statement highlight the company’s customer-centric approach to e-commerce business. This aspect of Porter’s Five Forces Analysis model determines the influence of consumers on firms and the industry environment. The following external factors support the strong intensity of the bargaining power of customers in affecting Amazon:
Suppliers control the availability of supplies or materials Amazon.com Inc. needs for its e-commerce operations. The influence of suppliers on the online retail industry environment is outlined in this aspect of Porter’s Five Forces Analysis model. Amazon experiences the moderate intensity of the bargaining power of suppliers based on the following external factors:
Amazon.com Inc. competes with substitutes in the online retail market. This aspect of Porter’s Five Forces Analysis model identifies how substitutes affect the industry environment. In the case of Amazon, the following external factors support the strong intensity of the threat of substitution:
New firms potentially reduce Amazon’s market share in online retail. The effects of new entrants are considered in this aspect of Porter’s Five Forces Analysis model. Amazon.com Inc. experiences the weak intensity of the threat of new entry based on the following external factors:
(5 points) What is the objective of Amazon.com?
ANS:
The objective of Amazon.com is “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.”
(20 points) Describe the background of each firm acquired.
ANS:
Whole Foods Market Inc.: Whole Foods market Inc is an American supermarket chain that specializes in selling organic foods products without artificial additive products for growing foods, colours, flavours, sweeteners and hydrogenated fats. It has 473 stores in north America and the United Kingdom.
Zappos: Zappos.com is an online shoe and clothing shop based in Las Vegas, Nevada. Zappos’ primary selling base is shoes, which accounts for about 80% of its business. Currently about 50,000 varieties of shoes are sold in the Zappos store.
Kiva Systems: Kiva systems is a Massachusetts-based company that manufactures mobile robotic fulfilment systems. Its automated storage and retrieval systems were previously used by companies such as The Gap, Walgreens, Staples, Gilt Groupe, Office Depot, Crate and Barrel and Saks 5th Avenue. After these contracts expired, amazon did not renew them, and kiva’s assets and technology are solely being used by amazon’s warehouses.
Elemental Technologies: It is a software company headquartered in Portland, Oregon and owned by amazon web services that specializes in providing multiscreen video solutions. Elemental creates software that performs video encoding, decoding, transcoding and pixel processing tasks on commodity hardware for adaptive bitrate streaming of video over IP networks.
LoveFilm: Lovefilm was a UK-based provider of DVD-by-mail and streaming video on demand in the UK and Germany. The company offered a download service alongside postal delivery but this ceased on 23 February 2009. The company has started a "watch online" service which offers over 4,700 films available to watch as part of a subscription. This online viewing is available free for subscribers who have opted for one of their unlimited monthly rental plans or the unlimited streaming-only account.
Souq.com: It is an English-Arabic language e-commerce platform, often described as the amazon of the middle east It is the largest e-commerce platform in the Arab world.
Quidsi/Diapers.com, founded in 2005 by Marc Lore and Vinit Bharara in montclair, new jersey was an online specialty retailer for baby products.Initially founded as 1800DIAPERS, the company set out delivering consumables, such as diapers, wipes, and formula. It uses kiva robots for warehouse automation and a combination of UPS Ground and FedEx delivery.
Audible: It is a seller and producer of spoken audio entertainment, information, and educational programming on the Internet. Audible sells digital audiobooks, radio and TV programs, and audio versions of magazines and newspapers. Through its production arm, Audible Studios, Audible has also become the world's largest producer of downloadable audiobooks. Audible's content is only accessible through special proprietary closed software, including unauthorized-playback prevention by means of an Audible user name and password.
Annapurna Labs: It is an Israel-based microelectronics company that was acquired by amazon.com for its amazon web services division, reputedly for US$350–370M in January 2015.
Twitch: It is a live streaming video platform owned by Twitch Interactive, a subsidiary of Amazon.[3] Introduced in June 2011 as a spin-off of the general-interest streaming platform, Justin.tv, the site primarily focuses on video game live streaming, including broadcasts of eSports competitions, in addition to creative content, "in real life" streams, and more recently, music broadcasts. Content on the site can either be viewed live or via video on demand.
(15 points) For each firm, explain what strategy does Amazon.com intend to accomplish.
ANS:
Whole Foods Market: With massive amounts of data from Whole Foods shoppers, Amazon will ultimately be able to tailor the grocery shopping experience to the individual. Amazon has already mastered the process of upselling, i.e. offering additional items that go with the items the consumer is looking to buy. With consumables like groceries, Amazon will know when a customer runs out of cereal and will present the customer with the offer to buy more at precisely the right time. Alternatively, the new box of cereal may just show up at the customer’s door at the moment he takes take that last bite.
Kiva Systems: Kiva's relatively new approach to automated material handling systems for order fulfillment gained traction in eCommerce fulfillment, retail restocking, parts distribution and medical device distribution operations. The system is much more efficient and accurate than the traditional method of having human workers traveling around the warehouse locating and picking items. This helped amazon to keep in track with its own ware house and fulfilment centres.
Elemental Technologies: The strategy behind the elemental technologies was to ensure that the major significant technological changes in the market were in tact with the amazon web services. Acquiring the elemental technologies gave an added advantage to amazon because it provided video encoding, decoding, processing services.
LoveFilm: The strategy behind acquiring Lovefilm was to extend its market towards UK and Germany. Lovefilm had customers and technology that helped amazon to gain more insights into DVD-by-Mail and Direct-to-Air services.
Souq.com: The main objective of acquiring souq.com was to enable amazon’s control and awareness in the middle east region. Souq.com became a middle-arm of the e-commerce business in the middle east asia.
Audible: The main objective of acquiring audible was to ensure amazon’s presence in the spoken audio entertainment, information and educational programming market which was not catered by amazon yet. This paved way to the creation of amazon kindle services and amazon echo.
Annapurna Labs: The acquisition of Israeli-based Annapurna labs by amazon still remains secretive and most of the information regarding the deal is not disclosed yet in the same way that Annapurna labs has always kept its products secretive and unrevealed.
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