According to Devi, six months after opening in July 1995, Amazon.Com offered one-million book titles through its website and posted net sales of $511,000. But, after accounting for operating expenses, it incurred a net loss of $303,000. (Devi, 2008) This loss did not deter Amazon CEO, Jeff Bezos, who believed that his fledgling business would succeed. Mr. Bezos continue to work diligently to make Amazon better. By 1996 he had hired about 151 employees and had 2.5 million titles online. Although the business had grown, Amazon.com still suffered a net loss of $5.7 million because the company spent more on shipping the books to the customers. (Devi, 2008) Amazon also faced fierce online competition rivalries during the same year. According to Hitt, Ireland, and Hoskisson, competition rivalry, is an ongoing set of competitive action and responses that occurs among firms as they maneuver toward an advantageous market position”( Hitt, Ireland, and Hoskisson, 2011, p.130). Company like BookStacks, BookZone, and Internet Bookshop, were a few of the competitors that made it hard for Amazon.com to gain a competitive advantage.
In order to gain a competitive advantage, Amazon CEO, Jeff Bezos knew he had to adjust his company operational strategies. According to Devi, Amazon had three operational strategies; cost-leadership, customer differentiation and focus strategy. Cost-leadership; this strategy was employed by Amazon to differentiate itself primarily on the basis of price. The strategy made sure that Amazon offers the same quality products as other companies for a considerably less price. (Devi, 2008) Amazon second strategy was customer differentiation. “This strategy ensured that Amazon provides current and potential customers, differentiation through design, quality or convenience and Amazon.com always selects a differentiator that is different from other competitors, so that its consumers can recognize and differentiate its product from competitors”(Devi, 2008, p. 64). The last strategy Amazon used was focus strategy. This strategy takes one of the two earlier strategies and applies it to a niche within the market (Saunders, 2001; pp.122-123). “Amazon.com focuses on outstanding customer service as a niche but not the whole market because each niche has its own demand and requirement” (Devi, 2008, p. 64).
Jeff Bezos knew that he needed to grow his company; therefore, he took advantage of every opportunity to do just that. He teamed his company with Target Corporation, Circuit City, Borders, Walden, Waterstones and CDNOW to sell its books and other products on its behalf online. He also partnered with Toys R Us, expanded its choice of merchandise well beyond its core line of books, music, and videos, and added new technology to improve customer relations. (Devi, 2008) Mr. Bezos wanted Amazon.com to offer customers everything they could dream of online. Although, Amazon offered a variety of merchandise and services, online groceries was something it did not. Amazon CEO saw this as another opportunity for his company to grow by using it to provide something to the customers that the competition could not. This action is also known as Competitive Behavior, “which is the set of competitive actions and responses the firms takes to build or defend it competitive advantages and improve it marketing position” (Hitt, et al., 2011, p.130). So in 2006, Amazon