Primed for Success

           This article discussed the rise of Amazon over the last two decades, outlining some of the reasons for its success as well as the challenges it faces moving forward. As the world's 5th largest company by value, Amazon has experienced tremendous growth since first going public 20 years ago. This is evident in the fact that it is the largest online retailer in America accounting for over half of all new spending with its cloud-computing business, Amazon Web Services (AWS), being larger in terms of basic computing services than the three closest rival cloud offerings combined. Notably, despite its share price having risen 173% since 2015, seven times the growth of the preceding two years, Amazon's boss Jeff Bezos continues to emphasize the importance of long-term growth as a primary objective. As a result, Amazon frequently reports higher profits, but lower revenues than might be expected as it pursues campaigns into new markets and attempts to expand its e-commerce services.This willingness to take risks has inevitably produced some failures like the Fire Phone, however, it has also led to breakthroughs like Amazon Prime Subscription which is now one of its most well-known features.

           Part of the reason for Amazon's successes comes from its ability to "spend money in ways that bring increasing returns." This can be seen in the fact that Amazon Web Services and the e-commerce business are both platforms that take advantage of "network effects" in that the more customers buy from and, generally speaking, use them the better they become. For instance, as more companies use AWS more developers also become familiar with how to best utilize its features. This virtuous cycle results in Amazon being given greater data for further optimization of services thus attracting a greater number of shoppers and "third party sellers", increasing the variety of goods that can be offered, and, ultimately, attracting even more shoppers. In a similar way, Amazon's financial success can also be traced to its decision to allow others to "use the company's e-commerce platform, warehouses, and other services" since "fees from sellers around the who use Amazon reached $23 billion in 2016." In fact, the scale of this is fairly substantial as "there are more than 70,000 companies earning more than $100,000 a year" who sell through Amazon's site.

            Looking ahead, it seems likely that Amazon will continue to reach into new realms (this can already be seen in the expansion of Amazon Prime Video to more than 200 countries) while also seeking to improve existing services. The question, therefore, is how well other tech giants such as Netflix, Apple, and Google will be able to adapt and remain competitive with Amazon. Fortunately, even if such companies are unable to sell a product that customers want and Amazon lacks, this article argues that they can still benefit from being compelled to improve their overall brand and management as, for example, Walmart has. What direction do you see Amazon headed in the months and years ahead?

http://www.economist.com/news/briefing/21719461-they-think-amazon-going-grow-faster-longer-and-bigger-almost-any-firm-history-are