1. UNIVERSITY OF SOUTH AUSTRALIA
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Student Name (Print clearly) UniSA Email ID
1. Dehipitiya,Dehipitiya Arachchilage Randi Jayamini
2.
DEHDY001@students.unisa.edu.au
2. Hafiz,Tasnim HAFTY01P @students.unisa.edu.au
3. Isitt,Kathryn OLOKY001 @students.unisa.edu.au
4. Miranda,Candice MIRCY001 @students.unisa.edu.au
5. Smart,Dominic Raymond SMADR001 @students.unisa.edu.au
Course code and title: INFS 3045 and INFS 5058, Information Technology Strategy and Management and Fundamentals of
Information Systems M
Program Code: N/A School: School of Computing and Information Science
Day, Time & Location of Tutorial/Practical: N/A
Course Coordinator: Brian Hanisch Tutor: Brian Hanisch
Extension granted (Yes/No): Due Date:23/8/2010
Assignment number & topic: 1. Case Study 1
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Signed: Date:
Dehipitiya,Dehipitiya Arachchilage Randi Jayamini
6.
22/8/2010
Hafiz,Tasnim 22/8/2010
Isitt,Kathryn 22/8/2010
Miranda,Candice 22/8/2010
Smart,Dominic Raymond 22/8/2010
Date received from student Assessment/grade Assessed by:
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2. Trace the evolution of Amazon.com business from the company’s launch in 1995 to the dot-com collapse in
2000.
In July 1995, Jeff Bezos launched an online bookstore called Amazon.com. Within months of its launch this small startup
capable to run out of the founder’s garage with only a website and few employees seeing sales of over $20,000(USD)
per week (Applegate, Austin, & Soule, 2009, p. 147)
Throughout 1996, focus was directed towards enhancing the Amazon.com website with innovative and sophisticated
features for better customer experience. On May 15 1997, Amazon.com went public. On May 15th 1997 the company
had an initial public offering which provided substantial capital that funded the transformation into an online retail
superstore.
Beginning in 1998, an aggressive expansion was undertaken. New product categories were introduced and moves were
made into international markets. A large investment was made in 'state-of-the-art' business infrastructure designed for
overcapacity which planned for future growth. 1999 saw Amazon.com exploring new business models providing
services such as online auctions and marketplaces where instead of retailing with inventory, Amazon.com became an
agent, providing software and services to their customers through the company's online store-front.
In early 2000, to further expand its marketplace, Amazon.com began forming equity partnerships with other online
retailers, such as, Drugstore.com, living.com and pets.com who offered a specific line of goods to their customers online.
The dot.com crash in the same year saw several Amazon.com partners declaring bankruptcy and an overall decline in
the number of online retailers.
In order to continue its expansion, the company re-evaluated its business model. The new business model effectively
outsourced the company's ‘excess’ distribution capacity and capabilities, combined with its base business model.
Traditional retailers were targeted. It was believed that the company, with its extensive online store-front experience
and proven efficient digital business infrastructure, would be capable of providing a superior service to traditional
retailers that were looking to develop an online presence. Toys ‘R’ Us were one of the first such companies to form an
alliance with the company. The company founder, Bezos, believed that this business model evolution would be the
turning point for the company, enabling exponential growth in returns (Applegate, Austin, & Soule, 2009, p. 148).

3. Define what is a business strategy. Use this definition to describe how Amazon.com’s business strategy evolved
over time.
Applegate states that, a business strategy is a guide that identifies the opportunities that a company has chosen to
pursue to gain the competitive advantage; it determines the products and services a company provides and how they
will differentiate themselves from their competitors.
A niche strategy is identified by its selection of a narrow-scope market segment and an aim to be the best in that
market. (Applegate, Austin, & Soule, 2009, p. 146) Jeff Bezos identified a niche market of online book selling in 1994
and went on to launch Amazon.com, an online bookstore, in 1995.
With product differentiation strategy, a company offers unique capabilities in their products and services which
differentiate them from their competitors. (Kotler, Brown, Adam, Burton, & Armstrong, 2007, p. 72) Amazon.com
implemented this strategy when adding features such as sophisticated browsing,1-Click shopping, wish list to their
website presenting customers with a one-stop shopping service online.
A company’s growth strategy allows it to expand its target market, value chain network and enhanced business model.
(Applegate, Austin, & Soule, 2009) The book e-tailer aggressively expanded its product lines to feature items such as
toys, music, videogames and many others. This meant its value chain network also expanded with new suppliers and
partners supplying a variety of products. Amazon.com allowed online business models such as auctioning and
marketplaces, (Rayport & Jaworski, 2002) so their market expanded from individuals to small businesses thus gaining
access to a wider range of customers.
During 1998-99 Amazon.com invested $429 USD million to build a digital infrastructure that linked its customer
service processes to its backend supply-chain processes. It was expected that this technology would reduce fulfilment
costs thus adhering to cost leadership strategy. However, the strategy failed because only books, music and videos were
cost efficient, whilst others continued to make a loss.
Now with a million dollar technology asset, that was not able to reduce costs, Amazon.com changed its cost strategy to
alliance strategy. It allied with suppliers, consumers and small businesses. Once again, Amazon.com grew, not only with
individuals and small business but partnered with specialised e-tailers. However, executives were forced to curl back
from this alliance strategy, because its online allies began going bankrupt. In order to sustain the business, Amazon.com
adapted the ‘Infrastructure Services’ model to become infrastructure providers to traditional retailers, as opposed to
online retailers only. Amazon.com’s partnership with Toys ‘R’ Us reflects an infrastructure revenue model where
Amazon.com installed, hosted, maintained and updated an online store for Toys ‘R’ Us.

5. 3. How did the business capabilities change in supporting Amazon.com’s evolving business strategy? What
value did it deliver to stakeholders?
Initially, Amazon.com had a simple infrastructure. An small scale inventory, a website developed by a few skilled
employees successfully serviced its niche market. With such a small company, the costs of holding stock would have
been low and the reduced overheads would have provided a good return on investment for the owners. Customers
were making orders to the tune of $20,000 per week which identifies that they were experiencing excellent customer
service and were having their orders fulfilled.
Amazon.com’s product differentiation strategy, expanded its software capabilities to differentiate its service on the
Amazon.com website by implementing capabilities such as focused searches, 1-click shopping and wish lists This made
Amazon.com distinct and superior to its competitors. Customers were provided with an improved experience, which
with word of mouth would bring more customers. For the owners of Amazon.com, more customers would lead to more
profit, however this would be at the expense of the growth that would be required to continue to service the increasing
sales.
The growth in sales did require Amazon.com to expand its physical capabilities significantly. During this phase, talent
was hired from leading retailers and distributors (Applegate, Austin, & Soule, 2009, p. 148), whose prior experience
would be crucial to ensuring the correct direction for Amazon.com. The back-end was also grown by implementing a
state-of-the-art digital business infrastructure to link their nine distribution centers and six customer service centers
around the world. In order to fund this massive growth, the company went public.
This infrastructure created massive overcapacity ensuring that customer orders were handled efficiently and correctly
and that this would continue for the foreseeable future. Customers were also provided with a larger range of products
to select from. The digitalization improved cost efficiency of some goods but not all. Therefore, the company executives
began to explore new innovative strategies to sustain the company. Amazon.com had the customer base, an efficient
distribution network, a linked back end, the best technology and the right people. All these points offered excellent
value to a third party that was looking to get into online retail without a large risk. For the shareholders of
Amazon.com, expanding with partners was an excellent opportunity. The partner would front the cost of holding the
stock, and all Amazon.com had to do was use its existing network to distribute the products. The outlay was minimal
and it could be directly covered with a set fee, clearly an excellent income generator for the company. Finally, for
customers, the alliances that Amazon.com was forming would provide them with many more products at the lowest
cost possible all backed by with the excellent service they had come to expect from Amazon.com.

6. References
Applegate, L. M., Austin, R. D., & Soule, D. L. (2009). Corporate Information Strategy and Management: Text and
Cases (8th ed.). New York: McGraw-Hill Irwin.
Kotler, P., Brown, L., Adam, S., Burton, S., & Armstrong, G. (2007). Marketing. NSW: Pearson Education Australia.
Rayport, J., & Jaworski, B. (2002). Introduction to Ecommerce. Boston: McGraw-Hill Irwin.

7. Peer Review
Group Number 8 Randi Tasnim Kathryn Candice Dominic
Did the group
member contribute
to discussions?
Yes Yes Yes Yes Yes
Did the group
member produce all
required preparation
for discussions
Yes Yes Yes Yes Yes
Did the group
member contribute
ideas
Yes Yes Yes Yes Yes
What is the number
of hours spent on
this case?
10.5 9 10 9 10
What is the agreed
percentage
allocation for this
case?
20 20 20 20 20