Amazon: the Brink of Bankruptcy

Since its incorporation in 1994, viragos business pretence had expand from whirling a simple cyberspace marketplace for books to providing web services to online retailers, retentivity solutions and a dramatically expanded yield line. Nevertheless(prenominal), despite massive gross sales the follow failed to produce a profit for shareholders and amazon was on the brink of bankruptcy at the beginning of 2001. If I were a shareholder who received the guilds 2000 classly report, I would dupe strongly concord with CEO Jeff Bezos that the attach to must give profit qualification by year-end 2001.I would urge that the company accomplish this by cutting cost related to fulfillment and caudex and by increasing revenue by capitalizing on the previous years investments in infrastructure. While galore(postnominal) expenditures in 2000 were related to amazons efforts to implement its outline for growth, ope pass judgment costs had also increased. Amazons fulfillment costs were 11 part of sales in 1997 and 1998, ballooned to 14 percent in 1999, and further increased to 15 percent in 2000.Because e-Commerce was still hot and only when beginning to establish customer trust, its censorious that these costs be lessen without negatively impacting quality, speed of delivery or customer service. Because of Amazons oversized scale and repeatable processes, I would recommend a continuous improvement strategy more than(prenominal) as lean six Sigma. An an new(prenominal)(prenominal) area of operational hard bullion drain is inventory. After adding multiple new product lines and distribution centers in 2000, inventory management became a challenge for Amazon. In 1999, inventory turnover was 20% that of contender Barnes and Noble and contributed to negative cash menstruation in 2000.Amazon would be comfortably advised to use IT technology such as an advanced ERP to better portend the inventory needed to meet contend without overstocking. In additio n to cutting costs, Amazon must increase revenue. While it may be tempting to suggest the company completely abandon some of its less gainful products and international endeavors, I cogitate this would be poor advice. Many of these areas have just been developed and hold potential difference for future profits in the vex of the past years investment. Instead, I propose Amazon focus on their efforts to leverage brisk infrastructure.For less profitable verticals such as consumer electronics and home and garden, the company should reproduce the Toys r Us model and partner with established, brick and mortar organizations that can profit by exploiting Amazons ability to handle high volumes while trim down their risks of taking operations online. In return, these companies offer Amazon a stability that other online retailers of the dot-com era lack. It would be critical that Amazon implement these recommendations immediately in order to become profitable in 2001. Amazon. om must p rove to Wall road and investors that it is capable of generating a profit.Through 2000, much of Amazons growth was funded by investors and the debt market. The environment generated by the dot-com clash and Amazons plummeting credit rating will significantly limit glide slope to new capital. Since the company will to the highest degree certainly have to dip into existing cash reserves in the firstborn quarter of 2001 to pay suppliers for 2000 Q4 inventory among other obligations, Amazon must begin replenishing cash reserves through its operations in the next four quarters.