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From the Start, Amazon

question 63

Multiple Choice

From the start, Amazon.com has been in a hurry to be a success. According to company founder and chief executive officer (CEO) Jeff Bezos, "Our initial strategy was very focused and very unidimensional. It was GBF: Get big fast. We put that on our shirts at the company picnic."
With billions to spend from its initial stock offering (Amazon's stock quickly rose to over $100 per share) , Amazon spent $400 million to build eight high-tech warehouses across the country. Why spend that much for warehouses? In theory, each was capable of shipping 60 million items per year, and Amazon needed to control the entire buying transaction, beginning with online ordering, proceeding to quick warehouse handling and boxing, and ending with
timely shipping and delivery. And, believing that their growth would parallel its own, Amazon then spent $350 million to buy large shares of two Internet retailers, Kozmo.com and Pets.com. Kozmo.com promised the ability to deliver thousands of items from gourmet foods to CDs and movies to customers' homes in 11 major cities within one hour after an order was placed. Pets.com was supposed to grow because Americans spend over $30 billion a year on their pets, but the pet industry was still comprised largely of small family-owned stores and was not yet dominated by a "big box" retailer like Home Depot.
Unfortunately, Amazon grew so fast that it soon lost control of the basics. Despite the billions it had raised, Amazon burned money so quickly that it had to issue bonds to raise another $2.2 billion to keep the company running. Still, it had only enough business and cash to run six of those new warehouses. Consequently, the company took a $400 million loss to close two of the warehouses and lay off 1,500 people. Furthermore, the six remaining warehouses were poorly run. Defective products which should have been returned to manufacturers sat on the shelves wasting space. Mystery orders, like a truckload of unordered kitchen knives, kept showing up. Instead of declining the deliveries, workers put whole truckloads of unordered items on the shelves. Amazon's frustrated chief of
operations said, "We kept it all-we just kept it. We put it on the shelf and said, 'I don't know.' " In fact, Amazon had so much unsold inventory in its warehouses that CEO Bezos sent out an email with a point-blank message, "Get the crap out." Finally, Amazon's $350 million investment in Kozmo.com and Pets.com evaporated when both filed for bankruptcy.
Amazon's problem was not its sales, which were growing exponentially, but poor management. As a result, its stock, once valued at over $100 per share, dropped to a low of $6. As for profits, founder Bezos cautioned patience, saying, "Look at USA Today; it took 11 years to become profitable." However, Amazon has lost over $3 billion since its inception. Although the company has finally earned its first profits, that profit amounted to only $5 million on $1.12 billion in sales in its fourth quarter (October to December) , and Amazon still lost $45 million for the year. Furthermore, it still has long-term debt of $2.2 billion to pay off at the rate of $120 million per year. Results like these would have cost any other CEO his or her job. If Amazon is ultimately to survive and be profitable, what does it need to do to become a more efficiently run company?
-Refer to Amazon.com. Which traditional management function will be key to make sure Amazon is never again burdened with thousands of dollars worth of unsold inventory?

Definitions:

Transition History

A record of the sequence of states or conditions an application or system has passed through over time.

PLC Editing Functions

Features within a PLC programming environment that allow the programmer to make changes, corrections, or updates to the PLC program.

Instructions

Commands or orders given to a computer processor to perform specific operations during the execution of a program.

Temporary End Instruction

A directive in programming that signifies a temporary halt or pause in the execution of a sequence of code.