Amazon: The Dark Horse

Amazon: The Dark Horse

Managerial Economics ECO 5113

Master’s in Business Administration Group 135

Southern Nazarene University

Professor Dan Junkin

Alexis Brown

March 28, 2016

Amazon: The Dark Horse

Summary

Ten years ago when Amazon launched its first web services people thought CEO Jeff Bezos had lost his mind and had went crazy when he started selling the storage and computing services that Amazon used every day to other companies. Analyst from different areas of the business world saw this as a disadvantage and a very critical thing for Amazon to do.  One journalist named Tim O’Reilly from O’Reilly Media called Amazon the dark horse of its competitors.

Amazon in the last ten years has come so far in helping startup companies by streaming on Amazon Web Services (AWS), companies like Netflix who still uses the AWS to streaming its videos through Amazon. Amazon has blown away other competitors in this market like Microsoft, and Google. Amazon continues to crush big time internet giants with making a gross profit of 7.9 billion in 2015, this was a 70 percent growth from the 2014 year. Amazon is continuing to grow in retail operations at a rate four times faster than its competitors. Morgan Stanley has estimated Amazon’s future revenues to grow to 12 billion this year and by 2017 it to be around 16 billion.  AWS has given Amazon a new way to gain a profit in this new marketing area. AWS unit only makes up 7 percent of the Amazon company revenues. Looking at the operating budget which operates at   2.8 billion for Amazon whole company, AWS in part is only cost 1.9 billion in the operating budget, which is only about 7 percent of this operating total. Last year AWS itself was valued at being 75 billion.

        AWS has made Amazon more than a retail business it has become a platform that many companies use to build and profit from. AWS has reshaped and transformed the technology world in a short period of time. AWS has helped startups companies become a business overnight with little capital being spent on hardware and software. Amazon has made a pathway for the cloud technology that one’s see today in retail, entertainment, and transportation. Thinking about business that like Netflix INC, The Apple Store App and Uber these companies would not have been able to grow as fast as they did without AWS’ cloud services. Compared to other competitors that are using the cloud AWS has 27 percent in shares, compared to Microsoft having 16 percent shares and IBM having 12 percent shares.

Amazon’s CEO Bezos is not surprised by the success that has come from AWS, he is just happy that it worked when people doubted Amazon ten years ago. If Amazon would have listened to the doubters the company would not be as successful and as well-known as it is today.  Bezos goes against the norm which is the key to throwing off rivals in the web service businesses. The innovation the Amazon continues to drive for vexes the investors for the last two decades because they would like to receive the profits from Amazon instead of spending so much money on new initiatives.  Some of the ways Amazon has been so successful described by Werner Vogels is the company has always moving forward in developing new features without cutting corners in a speedy fashion.  Amazon being so quick at advancing in technology has continue to leave it competitors in the dust or even dropping their public cloud. Amazon at this time cannot say what the future holds for them but the competitors are trying different ways to catchup to Amazon, but at this time the competitors cannot afford to be as powerful in a market that is so crucial in the technology industry.