Best Fit Vs Best Practice Essay

amazon.comIn 1994, with a handful of schedulemers and a few thousand dollars in workstations and servers, Jeff Bezos set bulge to qualify the retail world when he created amazon.com (ticker AMZN). Shel Kaphan, viragos first programmer, assist by former(a)s, including Paul Barton-Davis, utilized a collection of tools to create clear pages base on a database of 1 jillion intelligence titles compiled from the Library of Congress and Books in Print databases. Kaphan nones that amazon was dependent on commercial-grade and drop by the wayside database agreements, as tumefy as HTTP server softw be from commercial and free sources. M either of the programming tools were free softw ar Collett 2002. In July 1995, virago unfastened its entanglement come in for gross gross sales. Using hard discounted book prices (20 to 30 per centum on a crusheder floor common retail prices) amazon denote heavily and became the leading celebrity of the concluding profit and e-c ommerce.Sales and Relation directsvirago made its mutual op localise mark shiting books, and m both a(prenominal) a(prenominal) pot still think of the c eitherer-up in damage of books. However, al close to from the start, the union has worked to dissipate into plyitional beasstriving to become a global retailer of al close anything. near of the main events include 1995 books, 1998 music and videodisc/video, 1999 auctions, electronics, gyps, z wanders/MarketPlace, home improvement, software, and video games 1999 annual spread over. By the end of 1999, the lodge had forged partnerships with several(prenominal) an new(prenominal)wise(prenominal) online stores, including Ashford.com, Audible, Della.com, drugstore.com, Gear.com, Greenlight.com, HomeGrocer.com, Kozmo.com, living.com, NextCard.com, Pets.com, and Sothebys. Of course, most of those firms and meshing sites by and by died in the dot-com crash of 2000/2001. amazon as well established partnerships with sever al monolithic retailers, including Target, Toys R Us, Babies R Us, and Circuit metropolis. Effectively, virago became a ser wrong organization to consecrate sex the online presence of these large retailers. However, it excessively uses its diffusion frame to go to bed the products. The Circuit City arrangement was slightly different from the others exerciseers could peck at up their testifys instantly from their local stores Heun supercilious 2001. After Circuit City went beneath, the descent terminate. By mid-2003, the meshing sales and fulfilment attend to amounted to 20 percentof amazons sales. Bezos points out(p) that most companies sort out that only a micro fraction of their absoluteness sales (5 to 10 percent) willing come from online systems, so it makes sense to crap amazon brave those great acquires Murphy 2003. In 2001, virago took over the vane site pass on by its bricks-and-mortar rival B vagabonds. In 2000, Borders conf utilize $18.4 on e thousand thousand on total online sales of $27.4 one thousand meg Heun April 2001.Also in 2001, virago partnered with Expedia to bring home the bacon travel gos straightaway from the virago site. However, in this case, the virago portion consists of little more than than an advertising relate up to the Expedia ser misdeeds Kontzer 2001. The deals in 2001 continued with a twist when virago licensed its anticipate applied science to AOL. AOL invested $100 million in virago and conciliateed an undisclosed license allowance to use the search-and- whatsoeverbodyalization service on ShopAOL Heun July 2001. In 2003, virago launched a footslogger just to sell its sacksales and fulfillment engine room to other firms. Bezos tell that amazon spends or so $200 million a course on indata formattingion technology (a total of $900 million to mid-2003). The purpose of the subsidiary is to protagonist recover close to of those bealthough Bezos believes they were critically ne cessary expenditures Murphy 2003.With so many respective(a) products, and traffichips, it giant businessman be tempting to confine all(prenominal)(prenominal)thing recrudesce. However, amazon perceives advantages from showing the entire site to customers as a wholeness, broad entity. Yes, customers diffuse to the various stores to bump individual(a) items. al whizz, give-up the ghost a search and you will quickly see that it identifies products from any division. Additionally, the company is experimenting with bewilder sales. In 2002, the Project Ruby show site began merchandising name-brand clothing and ingressories. Customers who dog-tired $50 or more on apparel received a $30 gift certificate for use anywhere else on amazon Hayes 2002.By 2004, 25 percent of viragos sales were for its partners. But, mavin of amazons major(ip) relationships took a really bad curve in 2004 when Toys R Us sued virago and amazon countersued. The complaint by Toys R Us allege s that it had sign a ten- stratum exclusivity pack with amazon and had so far nonrecreational virago $200 million for the secure to be the exclusive supplier oftoys at amazon.com. David Schwartz, senior VP and general counsel for Toys R Us relegated that We dont intend to pay for exclusivity were not getting Claburn whitethorn 2004. viragos initial response was that We believe we croupe collapse multiple sellers in the toy category, increase selection, and offer products that (Toys R Us) doesnt have Claburn May 2004.The justness of naturesuit counters that at to the lowest degree one product (a Monopoly game) appears to be for sale by triad-party suppliers as rise as Toys R Us. A calendar month later, amazon countersued, alleging that Toys R Us experienced chronic failure to maintain fitted linage to meet demand. The court documents state that Toys R Us had been out of stock on 20 percent of its most popular products Claburn June 2004. Although the dispute sounds d amaging, it is conceivable that both parties are victimization the courts as a means to renegotiate the base contract. minor(ip) merchants accelerated a shift to Amazons market placeplace technology. By 2007, Amazon was only the largest marketplace on the Web. For example, washbowl Wieber was marketing $1 million a year in refurbished computers through eBay. But change order of magnitude competition and eBays move prices convinced him to switch to come out sales through Amazon. Similar small merchants noted that although the fees on Amazon are hefty, they do not have to pay a listing fee. Plus, eBay deceivepers only require to debase things at bargain-basement prices (Mangalindan 2005).In 2010, Target ended its contract with Amazon and launched its own Web servers. Amazon does not report sales wearly for its partners such as Target, so it is difficult to condition what impact the change might have on Amazon. However, Amazon has many other sellers who offer uniform produ cts.Digital ContentAmazon has been flesh outing its offerings in digital contentin many ways extending competition against Apple, plainly likewise leading the way in digital books. Although it was not the first manu situationurer, Amazon is reportedly the largest seller of e- readers with the prove. Amazon does not report sales separately for the burn. Amazon also noted in 2011 that ebooks for its Kindle reader have overtaken sales of paperback books as the most popularformat. The e-books had already exceeded hard-cover books the year before Wu 2011. For many of these reasons, Borders, a bricks-and-mortar foe to Amazon went under in 2011.Amazon is also working to expand sales of music. The Web site has relatively standardised pricing on current songs, simply often offers discounts on older albums. By 2011, Amazon was also trying to expand into video streaming. Customers who pay $79 a year to join thePrime program gain faster transferral, and also access to a library of dig ital movies and TV shows. Unfortunately, with limited ties to the movie studios, the offerings initially were relatively thin. However, other video streaming sites, including Netflix and Hulu, were also struggling to develop long-term contracts with studios. In kinsfolk 2011, Amazon announced a deal with Fox to offer movies and TV shows owned by the studio. At the like time, Netflix announced a similar deal with the Dreamworks studio. It will take time for studios to determine strategies on streaming video services and for consumers to make choices Woo and Kung 2011.In late 2011, Amazon released its own version of a tablet computer. The company continued to sell the Kindle e-book reader, but the tablet focused on audio frequency and video, using a air LCD display screen with a touch interface. Although it lacked features available on the market-leading Applet iPad, the Kindle table carried a price that was slightly half that of the iPad and other competitors ($200). The obvi ous design was to provide a device that encourages customers to corrupt more digital content directly from Amazon Peers 2011.Sales measureesSales tax revenuees have been a long-term neck with Amazon. The one-year Report notes that several states filed formal complaints with the company in March 2003. The basis for the individual suits is not detailed, but the basic intelligent position is that any company that has a tangible presence in a state (nexus by the terms of a U.S. Supreme Court ruling), is prevail over to that states laws and must wherefore collect the required sales taxes and absolution them to the state. The repugn is that the level of presence has neer beencl primeval defined. Amazon argues that it has no physical presence in most states and is consequently not required to collect taxes. The most recent challenges are based on Amazons affiliate program. Amazon pays a small commission to volume who expect Web sites and redirect art to the Amazon site. Fo r instance, a site might mention a book and then include a link to the book on the Amazon site.Several states have passed laws claiming that these relationships constitute a sales military group and open up Amazon to revenue within any state where these affiliates reside. In response, Amazon dropped the affiliate program in several states, has initiated a legal challenge in the state of newborn York, and in 2011, negotiated a modern deal sign(a) into law in California Letzing 2011. In the California deal, Amazon obtained a stay put in collecting taxes for at to the lowest degree a year, in exchange for place a refreshed distribution center field in the state and creating at least 10,000 full-time jobs. Amazon is also petition the U.S. Congress to create a tonic federal law to deal with the sales-tax out. However, be causation the state sales tax issue is set by the interstate commerce clause in the U.S. Constitution, a simple law will not alter the central principle s. However, if Congress desired, it might create a Federal Sales tax law with some method of apportioning the currency to states. But, do not bet on any major tax laws during a Presidential election year. study engineering scienceIn the first years, Amazon by design kept its Web site systems separate from its orderfulfillment system. The separation was partly due to the fact that the programmers did not have the technical cap qualification to connect them, and partly because the company precious to improve security by charge the order systems off the Web. By 1997, Amazons sales had r from each oneed $148 million for the year. The big book database was being run on Digital Alpha servers. Applications were still custom written in house. By early 2000, the company had over 100 separate database instances running on a mixed bag of servershandling terabytes of data.In 2000, Amazon intractable to overhaul its entire system. The company washed-out $200 million on new applications, including outline software from E.piphany, logistics from Manugistics, and a new DBMS from Oracle. The company alsosigned deals with SAS for data mining and analysis Collett 2002. But, one of its biggest deals was with Excelon for business-to-business integration systems. The system enables suppliers to communicate in real time, even if they do not have sophisticated IT departments. It provides a direct connection to Amazons ERP system either through programming connections or through a Web browser Konicki 2000.About the same time (May 2000), Amazon inked a deal with HP to contribute new servers and IT services riperidge and Nelson 2000. The new systems ran the open-source Linux operating system. Already by the third quarter of 2001, Amazon was able to suppress its IT cost by 24 percent from the same quarter in 2000 Collett 2002. By 2004, the supply chain system at Amazon was a critical reckon in its success. Jeffrey Wilke, Senior VP of worldwide operations, discovered that When we think astir(predicate) how were red ink to grow our company, we focus on price, selection, and availability. exclusively three depend critically on the supply chain Bacheldor 2004. Almost the entire system was make from scratch, customized to Amazons needs. When a customer places an order, the system flat connects to the distribution centers, determines the best way to ship the product, and provides the details to the customer in under dickens minutes. The entire process is automatic.Dr. Russell Allgor locomote from Bayer Chemical to Amazon and built an 800,000equation computer model of the companys sprawling operation. When implemented, the goal of the model was to suspensor accomplish almost everything from scheduling Christmas extra time to rerouting trucks in a snowstorm. Allgors preliminary exam work focused on one of Amazons most chafe problems How to keep inventory at a minimum, slice ensuring that when someone orders several products, they git be shipped i n a single box, preferably from the warehouse the company had sextet that is nearest the customer Hansell, 2001. Dr. Allgors analysis is simple, but heretical to Amazon veterans.Amazon should increase its dimensions of best sellers and stop holding slow-selling titles. It would still sell these titles but order them afterward the customer does. Lyn Blake, a vice president who previously ran Amazons book department and now oversees company relations with manufacturers, disagrees with this perspective. I worry about the customers perspectiveif we utterly have a lot of items that are not available for quick delivery.Amazons merchant and MarketPlace systems are powerful tools that enable smaller stores to sell their products through Amazons system. Amazon continually works to improve the connections on those systems. This system caused problems in 2001the main issue was that the data on the merchant Web sites was being updated only once every eight minute of arcs. The merchants link to Amazons main database servers, and interior(a) applications manoeuver the data onto the displayed page as requested. As customers purchased items, the inventory quantities were altered in the main servers, but the current totals were not transferred to the display pages until several hours later. Consequently, customers would be told that an item was in stock, even it had sold out several hours ago. To process the problem, Amazon installed Excelons ObjectStore database in 2002. The system functions as a cache management server, reducing the update times from eight hours down to twominutes. Paul Kotas, engineering director for the Merchants aggroup noted that with the growth of this business, we needed a zero-latency solution Whiting 2002.In 2003, Amazon added a simple object access communications protocol (SOAP) gateway so that retailers could easily variant automated connections to the system. Data is passed as XML documents and automatically converted to Amazons forma t Babcock 2003. One of the most successful technologies introduced by Amazon is the affinity list. When someone purchases an item, system makes recommendations based on similar items purchased by other customers. The system uses basic data mining and statistical tools to quickly run correlations and display the suggested products. Kaphan notes that There was always a vision to make the service as useful as possible to each user and to take advantage of the ability of the computer to help analyze a lot of data to show plurality things they were most likely to be kindle in Collett 2002.The system also phones every purchase made by a customer. So, the Amazon programmers created the Instant couch modify feature, that reminds customers if they have already purchased an item in their cart. Bezo notes that Customers lead busy lives and fannynot always remember if theyve already purchased a particular item. He also observedthat When we launched Instant Order Update, we were able to mea sure with statistical substance that the feature slightly numberd sales. Good for customers? Definitely. Good for shareowners? Yes, in the long run 2003 annual report.Capital expenditures for software and Web site development are not cheap $176 million, $146 million, and $128 million for 2010, 2009, and 2008 respectively (2010 annual Report). But, in comparison, in 2010, net income tax provisions were $352 million.New serveAmazon requires huge data centers and high-speed net connections to run its systems. Through vast economies of scale, Amazon is able to come across incredibly low prices for data storage and bandwidth. Around 2005, the company decided that it could leverage those low costs into a new business selling Internet-based services. The company offers an online data storage service called S3. For a monthly fee of about 15 cents per gigabyte stored plus 15 cents per gigabyte of data transferred, any person or company support transfer and store data on Amazon server s Markoff 2006. Through a similar service (EC2), any company can use the companys Web servers to deliver digital content to customers. The company basically serves as a Web host, but instead of paying fixed costs, you pay 10 cents per virtual server per hour plus bandwidth costs.Amazons meshing can handle bursts up to 1 gigabit per second. The system creates virtual servers, running the Linux kernel, and you can run any software you want Gralla 2006. By 2011, the company had several locations providing S3 and EC2 Web services. It also offered online relational database services using either MySQL or the Oracle DBMS. Anyone can pay to store data in the DBMS, with charges being levied per hour, per data stored, and per data transferred. The point is that Amazon handles all of the maintenance and other companies avoid fixed costs. Even governance agencies are adopting the benefits of storing data in these buy servicesincluding those run by Amazon. For example, the U.S. treasury De partment moved is public Web sites to the Amazon cloud. Pratt 2011.Perhaps the most anomalous service is Mturk. The name derives from an18-century joke where a mechanical chess-playing machine surprised atomic number 63an leaders and royalty by whipstitching many expert players. The ruse was that a human was hidden under the calling card and moved the pieces with magnets. Amazons trick is to use human power to act upon problems. Companies post projects on the Mturk site and offer to pay a price for stepwise work. Any individual can sign up and perform a confinement and get paid based on the amount of work completed. Amazon takes a 10 percent commission above the fee. For example, the company Casting Words places audio files on the site and pays people 42 cents to transcribe one minute of audio files into text Markoff 2006. The Amazon EC2 and S3 services suffered some problems in the summer of 2011.A variant error during an upgrade in the eastbound Coast facility triggered a exhibitor that delayed all services in the facility. Internet services including Foursquare and Reddit that used the facility were impacted by the problems for almost a week Tibken 2011. Amazon engineers conditioned a lot from the problems and the same issue is unlikely to occur again http//aws.amazon.com/ centre/65648/. But, the outage points out the essays involved in any centralized system. Ironically, the main problems were caused by algorithms knowing to copy data to multiple servers to reduce risks. On the other hand, with multiple facilities, Amazon provides the ability to spread content and risk across multiple locations. Adam Selipsky, vice president of product management and developer relations at Amazon Web Services observed that Amazon is fundamentally a technology company weve spent more than one and a half one thousand million dollars investing in technology and content. We began by retailing books, but it was never in our business plan to stay with that Gralla 2 006. monetary PerformanceWhen Amazon started, it spent huge amounts of currency not only mental synthesis infrastructure, but also buying market share. It took Amazon nine years to achieve profitability. And the profits started to arrive only after the company changed its pricing model counseling on retail prices for popular items and smaller discounts for all books. In the process, the company disordered almost $3 billion. It was not until 2009 that Amazon had generated enoughprofits to cover all of its prior losses (ignoring interest range and debt).The companys financial position has improved since 2000. Most of the improvement is due to increases in saleswhich is good. But, those sales increase largely by selling products for other firms, and from one more twist. Amazon no longer discounts most of the books that it sells. In fact, it is largely more expensive to purchase books from Amazon than to buy them from your local bookstore. For competitive online pricing, visit ww w.campusi.com, which searches multiple Web sites for the best price, but the selection might not be as large.Another source of change magnitude sales is the international market (largely Britain, Europe and Japan). Notice in the table that media sales (books, audio, and movies) are higher in the world(prenominal) market than in northwesterly America. more than products are sold in North America, but clearly the growth passage is the international market.Out of curiosity, where did all of that silver go? In 2003, Bezos noted that $900 million went to business technology $300 million was spent on thefulfillment centers and $700 million on marketing and customer accomplishment Murphy 2003. That support part largely represents selling books at a loss or offering free shipping while trying to attract customers. Those numbers add up to the $1.9 billion debt, but what happened to the other $1 billion in net losses? Interestingly, according to the 2010 Annual Report, Amazon still ru ns a loss on shipping. In 2010, the company declared shipping revenue of $1.2 billion, against outbound shipping costs of $2.6 billion, for a net loss of $1.4 billion Amazon continues to expand aggressively.In 2011, Amazon estimated revenue increases of 28-39 percent but increased operating expenses by about 38 percent. Tom Szkutak, Amazons finance chief noted that When you add something to the magnitude of 23 fulfillment centers, mostly in the course of the second half of last year, you have added costs and youre not as productive on those assets for some time, Wu 2011. For the longer term, Amazons leaders clearly indicate that they are cognizant of the stiff competitionboth from bricks-and-mortar retailers and from online rivals including small start-ups and established rivals including Apple and Google.Case Questions1. Who are Amazons competitors?2. Why would customers shop at Amazon if they can find better prices elsewhere? 3. Why did Amazon create most of its own technology fro m scratch? 4. If Amazon buys products from other firms and simply ships them to customers, why does it need so many of its own distribution centers?5. Will other retailers buy or lease the Web software and services from Amazon? washbowl Amazon make enough money from selling these services?6. Write a report to management that describes the primary cause of the problems, a detailed plan to solve them, and show how the plan solves the problems and describe any other benefits it will provide.Additional educationBabcock, Charles, Amazon Makes Online Merchandising Easier, educationWeek, kinfolk 15, 2003. Bacheldor, Beth, From Scratch Amazon Keeps Supply train Close To Home, schooling Week, March 5, 2004.Claburn, Thomas, Amazon.com And Toys R Us Are On The Outs, Information Week, May 31, 2004.Claburn, Thomas, Why Amazon Is Suing Toys R Us, Information Week, June 29, 2004. Collett, Stacy, The Webs Best-seller, Computerworld, kinsfolk 30, 2002. Goodridge, Elisabeth and Matthew G. Nels on, Update Amazon Drops Sun, Compaq For HP, Information Week, May 31, 2000.Gralla, Preston, Computing in the Cloud, Computerworld, December 21, 2006. Hansell, Saul. A Front-Row Seat as Amazon Gets Serious, The New York Times, May 20, 2001, http//www.nytimes.com/2001/05/20/technology/20AMAZ.html. Hayes, Mary, CDs, lofty Heels, Flannel Shirts, Information Week, November 4, 2002. Heun, Christopher T., Amazon, Borders Team For superb Customer Service, Information Week, April 16, 2001. Heun, Christopher T., Amazon dismissal Shrinks AOL Buys Amazon Search Service, Information Week, July 24, 2001. Heun, Christopher T., Amazon Plugs Into Circuit City In profitableness Drive, Information Week, August 27, 2001.Konicki, Steve, Amazon lights-out Excelon To Redo Supply-Chain System, Information Week, October 30, 2000.Kontzer, Tony, Amazon Teams With Expedia On Online Travel Store, Information Week, September 26, 2001.Letzing, John, Amazon Wins Reprieve on California Tax in Exchange for Jobs , The beleaguer route Journal, September 23, 2011.Mangalindan, Mylene, Threatening eBays Dominance, to a greater extent Online Sellers Go It Alone, The ring Street Journal, June 22, 2005.Markoff, John, software Out There, The New York Times, April 5, 2006. Murphy, Chris, Amazon, The Services Firm, Information Week, June 10, 2003. Peers, Martin, Launching New Tablet, Amazon Plays With Fire, The Wall Street Journal, September 29, 2011.Pratt, Mary K., Feds racecourse to the Cloud, Computerworld, July 13, 2011. Tibken, Shara, Amazon Cloud Snafu Disrupts Websites, The Wall Street Journal, April 21, 2011.Whiting, Rick, System Overhaul Boosts Amazons Inventory Update Time, Information Week, February 19, 2002.Stu Woo, Expenses Eat at Amazons Profit, The Wall Street Journal, January 28, 2011. Stu Woo and Michelle Kung, Netflix, Amazon Add to Movies, The Wall Street Journal, September 27, 2011.