Amazon Revolution
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- Date Submitted: 02/28/2010 05:35 PM
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Jeff Bezos founded Amazon with the intention of revolutionizing e-commerce. He wanted to make Amazon the largest global online retailer and has, on many fronts succeeded. Amazon initially started off as an online book retailer and according to Adam Penenberg, “...Amazon has, over in 14-year history, developed into a monstrous cybermall, offering millions of products and accumulating a market capitalization north of $34 billion” (2009).
According to Rainer & Turban, by 2007 Amazon had spent over two billion dollars on infrastructure for its online store, but only 10% of its processing capacity is used at any one time. To make use of its unused processing capacity, Amazon has decided to offer storage and other services to other companies at a fee (2008). From this picture, it is clear that Amazon is not moving away from its core competency of being a leading online retailer rather it is making use of its infrastructure and resources to improve its falling profits.
Even though Amazon’s Strategy is to stay competitive, the online retail giant’s profits have fallen, with operating margins at 4.1 % less than Wal-Mart’s 5.9 percent” (Rainer &Turban, 2008). In addition to that, Amazon has not recorded consistent profit growth. Therefore, the strategy to offer other companies and individuals the use of its unused resources is a wise move. The components of the Amazon database that allows it to offer these services are the Simple Storage Service (S3) that provides storage space for data and applications on Amazon’s unused disk drives. For this service, Amazon charges 15 cents per terabyte. The Elastic Compute Cloud (EC2) allows clients to use Amazons processing power for which Amazon charges an hourly rate of 10 cents for the equivalent of one basic server. The third service that Amazon offers uses the Mechanical Turk, which is a combination of processing power and networks of real people who ensure that data has appropriate content and also to transcribe audio...
According to Rainer & Turban, by 2007 Amazon had spent over two billion dollars on infrastructure for its online store, but only 10% of its processing capacity is used at any one time. To make use of its unused processing capacity, Amazon has decided to offer storage and other services to other companies at a fee (2008). From this picture, it is clear that Amazon is not moving away from its core competency of being a leading online retailer rather it is making use of its infrastructure and resources to improve its falling profits.
Even though Amazon’s Strategy is to stay competitive, the online retail giant’s profits have fallen, with operating margins at 4.1 % less than Wal-Mart’s 5.9 percent” (Rainer &Turban, 2008). In addition to that, Amazon has not recorded consistent profit growth. Therefore, the strategy to offer other companies and individuals the use of its unused resources is a wise move. The components of the Amazon database that allows it to offer these services are the Simple Storage Service (S3) that provides storage space for data and applications on Amazon’s unused disk drives. For this service, Amazon charges 15 cents per terabyte. The Elastic Compute Cloud (EC2) allows clients to use Amazons processing power for which Amazon charges an hourly rate of 10 cents for the equivalent of one basic server. The third service that Amazon offers uses the Mechanical Turk, which is a combination of processing power and networks of real people who ensure that data has appropriate content and also to transcribe audio...