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92 PART 2 • STRATEGY FORMULATION

This chapter focuses on identifying and evaluating a firm’s strengths and weaknesses in the
functional areas of business, including management, marketing, finance/accounting,
production/operations, research and development, and management information systems.
Relationships among these areas of business are examined. Strategic implications of
important functional area concepts are examined. The process of performing an internal
audit is described. The Resource-Based View (RBV) of strategic management is
introduced as is the Value Chain Analysis (VCA) concept.

Doing Great in a Weak Economy. How?

Amazon.com, Inc.

ased in Seattle, Washington, Amazon’s sales grew
B14 percent to $4.65 billion in the second quarter of
2009; the firm’s worldwide electronics sales grew 35
percent. CEO Jeff Bezo’s strategic plan for Amazon is to
make the firm the “Wal-Mart of the Internet” through
heavily discounted prices and expansion into more and
more product offerings as well as free shipping. Amazon
prides itself on offering the lowest prices anywhere on any-
thing, and the firm is charging ahead as brick and mortar
retailers falter, declare bankruptcy, and even liquidate.
Amazon has no retail stores, just inventory warehouses.
Therefore the firm has low fixed costs. Its primary online
rival, E-bay, is incurring declining revenues and profits.
Amazon is the largest online bookseller in the What started as the planet’s biggest bookstore has
United States and is making its Kindle e-books available rapidly become the planet’s biggest anything store. The
for reading on Apple’s iPhone and iPod Touch devices. firm’s main Web site offers millions of books, music, and
E-books is a rapidly growing segment of the publishing movies (which still account for the majority of the firm’s
business. Barnes & Noble recently acquired e-book firm sales), not to mention auto parts, toys, electronics, home
Fictionwise for $15.7 million, and Google is getting furnishings, apparel, health and beauty aids, prescription
heavily in the e-book business. Sony Electronics recently drugs, and groceries. Customers can also download
formed a partnership with Google to compete against books, games, MP3s, and films to their computers. In addi-
Amazon in the growing digital books market. Amazon’s tion to Kindle, Amazon provides other products and ser-
Kindle electronic book reader is under attack from the vices too, such as self-publishing, online advertising, and a
partnership that enables readers to use the Sony Reader Web store platform. The firm is capitalizing on a huge
device to access more than half a million public domain consumer shift toward online shopping during a recession.
books from Google’s digital book library. Some states are strapped for cash and are forcing
Amazon sold about 500,000 Kindles in 2008 and retailers to collect taxes on online sales. New York
expects the Kindle could bring $3.7 billion in annual rev- passed an Internet sales tax law in 2008. North
enue by 2012. In July 2009, Amazon lowered the price Carolina, Hawaii, California, Maryland, Minnesota, and
of its Kindle product from $359 to $299 in an effort to Tennessee are close to passing similar laws. Amazon is
make Kindle a blockbuster hit. fighting these laws. Amazon collects sales tax only in