INTEGRATED ASSIGNMENT ON CONCEPT

APPLICATION

Submitted in partial fulfilment of the requirement for

Internal Assessment

Master of Business Administration (MBA)

Batch: 2016- 2018

By

Mr. Devesh Gautam

Mr. Jatin Goel
MBA 4th Semester
1602570005
1602570007

Under the Guidance of

Prof. Ruchika Yadav

K.R. Mangalam University

Sohna, Gurgaon

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DECLARATION

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ACKNOWLEDGEMENT

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TABLE OF CONTENTS

4
LIST OF TABLES/GRAPHS

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SCOPE OF ACTIVITY AND ORGANIZATIONAL STRUCTURE

Amazon uses the components of a database to create usable knowledge for people.
Amazon is moving away from being a just an online retailer and is competing with
Google and Microsoft through business to business transactions based in data storage
and data imagery. Many new components are used in Amazons Elastic Cloud
Computing application to create data images for multiple user interfaces.

The components of a of a database are a logical grouping of data, tables, fields, values,
query, forms, reports, modules and data base management system according to Rainer
and Turban (2008). Amazon provides data storage (S3), applications they call elastic
cloud computing (EC2), simple DB and Mechanical Turk to other businesses. When
businesses use S3 through Amazon special software extracts data from businesses and
sends it to a data warehouse in summary form.

Using EC2 users are able to design their own software applications (Myerson, 2008).
The database components of EC2 very by region but contain Images, Security Groups,
SSH Keys, Elastic IPs, EBS Volumes, EBS Snapshots that cannot be shared between
regions (Right Scale, 2009). All obtained from businesses for EC2 are an image of the
original. According to Amazon (2009) simple DB is a web application that allows users
to interact with data indexing and querying quickly because it does not store the data in
raw form. Amazon offers a service which it calls the Mechanical Turk.

Information is processed by humans and converted to usable knowledge through this

service. The Mechanical Turk provides access to networks of people who process
information that can only be processed by the human mind. End users can see the results
of the EC2 service and the Mechanical Turk (Rainer & Turban, p. 26). Data,
information, and knowledge Amazon. Com: e-business and e-commerce for B2B and
B2C According to Rainer and Turban (2008) Business to business (B2B) entails all
transactions made between businesses.

Rainer and Turban (2008) also suggest that business to customer (B2C) entails all
transactions made between businesses and customers. Rainer and Turban (2008)
discuss transaction made over the internet as E-Commerce. E-business means all online
transactions including all Internet based interactions with B2B and B2C; E-business
transforms business processes for high efficiency (Rainer and Turban, 2008). Amazon

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uses S3, EC2, Simple DB and the Mechanical Turk to create an even flow of data that
is converted into information for businesses by applications created by users in the EC2
service.

The information is converted into knowledge for customers and businesses by the
Mechanical Turk. Amazon uses both e-business and e-ecommerce to service its
customers, collaborate with partners and perform electronic transactions between
organizations. Amazon sells products to businesses and organizations electronically
from an e-marketplace. Amazon invites individuals to its site to view catalogues and
place orders.

Amazon is moving away from being a leading online retailer because of increasing
competition and overspending on infrastructure. According to Rainer and Turban
(2008), Amazon was not using up to 90% of its computing capacity and made the good
economical decision to increase profits by decreasing its expenses on unused
infrastructure and compete in the markets of data storage, computing, travel and
financial services, web hosting, and film and software development, which changed the
company’s overall direction. Amazon.Com is competes with Google™ and Microsoft®
and Google are offering products similar to Amazon’s S3 product and EC2 product.
Microsoft entered into the business of cloud computing on the back of Amazon but has
more money, fully developed relationships with third-party developers and a superior
background in building software platforms. The offering that Google and Microsoft are
supplying and Amazon is competing with is Simple storage service. Microsoft’s cloud
computing service is called Windows AZURE (Reuters and New scientist, 2008).

Windows Azure features computer processing, storage hosting and web application
management from Microsoft data centres (Microsoft, 2009). Amazon is saving on
operating costs and putting its currently unused infrastructure to work by making it
available for rent to other companies and individuals who need it (Rainer & Turban,
2008). Conclusion Amazon has proven that its business decisions are sound, safe,
reliable and profitable. Amazon remains profitable because it continues to discover new
ways to enhance the stability and growth of its business.

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 EXECUTIVE SUMMARY

Amazon.com, Inc., doing business as Amazon, is an American electronic commerce

and cloud computing company based in Seattle, Washington which was founded by
Jeff Bezos on July 5, 1994. The tech giant is the largest Internet retailer in the world as
measured by revenue and market capitalization, and second largest after Alibaba Group
in terms of total sales. The amazon.com website started as an online bookstore and later
diversified to sell video downloads/streaming, MP3 downloads/streaming, audiobooks
downloads/streaming, software, video games, electronics, apparel, furniture, food, toys,
and jewellery. The company also produces consumer electronics—Kindle e-readers,
Fire tablets, Fire TV, and Echo—and is the world's largest provider of cloud
infrastructure services (IaaS and PaaS). Amazon also sells certain low-end products
under its in-house brand Amazon Basics.

Amazon has separate retail websites for the United States, the United Kingdom and
Ireland, France, Canada, Germany, Italy, Spain, Netherlands, Australia, Brazil, Japan,
China, India, and Mexico. In 2016, Dutch, Polish, and Turkish language versions of the
German Amazon website were also launched. Amazon also offers international
shipping to certain other countries for some of its products.

In 2015, Amazon surpassed Walmart as the most valuable retailer in the United States
by market capitalization. Amazon is the fourth most valuable public company in the
world, the largest Internet Company by revenue in the world, and the eighth largest
employer in the United States. In 2017, Amazon acquired Whole Foods Market for
$13.4 billion, which vastly increased Amazon's presence as a brick-and-mortar retailer.
The acquisition was interpreted by some as a direct attempt to challenge Walmart's
traditional retail stores.

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 AMAZON.COM INC STRATEGIES

FINANCIAL STRATEGY (TILL 2017)

Balance Sheet (all values USD millions)

Assets

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Liabilities

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Income Statement

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12
Cash Flow

Operating Activities

Investing

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Financing

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 HUMAN RESOURCE STRATEGY

According to Sims (2002), incorporating the top management’s goals to the HRM
practices and policies will bring out and reward the types of behaviour necessary for
achieving an organizations’ strategy. Effective HRM practices can enhance an
organization’s competitive advantage by creating both cist leadership and
differentiation. The HRM function focuses its activities on ways to help the
organization achieve corporate goals like growing through recruiting and hiring
employees, orienting and training them and making their initial and future job
assignments. HRM contributions to a cost leadership strategy focus on recruiting and
retaining employees who can work as efficient and productive as possible. HRM
contributes to the successful use of differentiation strategy by recruiting and retaining
employees who can perform high quality work and who can provide exemplary
customer service (Sims 2002).

Human Resource Management is a source of an organization’s competitive advantage

because:

1. It provides the right kinds of talent to the organization at the right time. HRM is
expected to assure that a supply of qualified labour in a timely fashion.

2. It ensures that the organization is properly staffed. When done effectively, the
staffing, recruitment, and selection process provides a flow of qualified individuals for
filling open positions within the organization on a timely and efficient basis.

3. Using appraisals, the employees are assesses and evaluated. Employee appraisals
have very profound implications for both the employees and for the future success of
the organization.

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4. Using effective pay systems, the management can focus employees’ efforts toward
desired organizational goals.

5. Ensures that the employees are properly skilled to perform their tasks and supports
the organization’s growth through career development. The goal of training as part of
the human resources management processes is to create cost-effective programs that
build the skills to perform effectively.

COMMUNICATION
Miscommunication across cultural lines is usually the most important cause of cross-cultural
problems in multinational companies. Miscommunication can have several sources, including:

• Differences in body language or gestures. The same gesture can have different meanings in
different parts of the world. For example, Bulgarians shake their heads up and down to mean
no. In addition, the way people count on their fingers is not universal: The Chinese count from
one to ten on one hand, and eight is displayed by extending the thumb and the finger next to it.
The same gesture is interpreted as meaning two in France and as pointing a gun in North
America.

• Different meanings for the same word, like gestures, words can have different meanings or
connotations in different parts of the world. The French word "char" means Army tank in
France and car in Quebec. The word "exciting" has different connotations in British English
and in North American English. While North American executives talk about "exciting
challenges" repeatedly, British executives use this word to describe only children’s activities
(children do exciting things in England, not executives).

• Different assumptions made in the same situation. The same event can be interpreted many
different ways depending on where one comes from. For example, although the sight of a black
cat is considered a lucky event in Britain, it is considered unlucky in many other countries.
Dragons are viewed positively in China, but negatively in Europe and North America.
These examples illustrate dissimilarities between cultures that are both large and simple in the
sense that they focus on a single cultural aspect that keeps the same meaning regardless of
context. As a result, such variations in communication will often be identified on the spot. By
contrast, subtle or complex differences are often identified much later in the communication

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process, when corrective action requires considerable effort and money. Sometimes, this
realization takes place so late that there is not enough time to address it, resulting in a missed
deadline.
In extreme cases, miscommunication can lead to casualties. For example, a few years ago, a
plane crash in the northeastern United States was caused--at least in part--by miscommunication
between the pilot and air traffic controller. The plane was running short on fuel. But somehow
the pilot did not manage to communicate the urgency of the situation to the air traffic controller,
who put the plane on a holding pattern because of airport congestion. The plane then crashed
when it ran out of fuel.

Approaches to Problem Solving

The approaches used by engineers of different cultural backgrounds to tackle the same
technical problem are likely to differ widely. The type of approach used to solve
engineering problems is often a reflection of what is emphasized in educational
curricula leading to engineering degrees in various countries. In France and Greece, for
example, engineers tend to emphasize theoretical or mathematical approaches over
experimental or numerical ones. Other countries, such as Canada and the United States,
tend to favour experimental or numerical approaches.

Although there is no absolute "right way" to approach technical problems, issues are
likely to arise when engineers with different inclinations work together to solve them.
On a practical basis, the approaches used by engineers in different countries can also
depend on the types of resources available. For example, high labour costs and the
availability of skilled workers make process automation and the use of heavy equipment
valuable in developed countries, while using large numbers of unskilled workers may
be a preferred approach in some developing countries.

Cross-cultural Differences & Engineering Firms

Cross-cultural issues also arise at the organizational level, because companies in

different countries organize their daily business differently. Some of the most
noticeable differences include the:

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• Relative hierarchy of departments. The relative power of the various departments
within a corporation is often a function of the country where the corporation has its
headquarters. For example, the manufacturing departments of German-based
companies have influence over their marketing and sales counterparts that many
Canadian and American manufacturing departments can only dream of. German
manufacturing departments are often able to limit the number of products offered to a
few options, thereby optimizing production and improving the quality of the products
offered. By contrast, Canadian and American manufacturing departments tend to follow
the lead of marketing and sales departments, which tend to favour a larger number of
product options since this increases the probability of attracting a broader group of
customers.
These differences in the way products are manufactured and marketed create the need
for different approaches to selling products and services. The same type of argument
cannot be used to win customers in North America and Germany – whether through
sales presentations or general marketing efforts. While North American customers look
for flexibility and response speed in the products and services they purchase, German
customers want durability, reliability, and quality.

• The way information is shared and distributed. The way information moves within
a company varies significantly from country to country. For example, in Germany, the
flow of information tends to be fairly compartmentalized. Information flows within
departments along hierarchical lines, and does not flow easily within a given
hierarchical level or from department to department. In addition, Germans tend to share
information with only those people they believe need to know the information. In
Canadian companies, information tends to move within departments and to cross
departmental boundaries more freely. It also tends to flow along the lines of
communication networks used by individual employees. As a result, when working
with German engineers as suppliers, partners or customers, Canadian engineers are
likely to receive less information than they would generally expect. A Canadian
engineer supplying products or services to a German company may not receive all of
the information he or she believes is necessary to fulfil orders or complete projects on
time, resulting in either missed deadlines or incomplete orders.

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• Hiring process. Cross-cultural differences are fairly significant in this area. For
example, people interviewed for positions in France will be asked personal questions
that are considered illegal in Canada, such as their age, marital status and number of
children, while German interviewers routinely ask candidates for the profession of their
parents.
More importantly, there are significant differences in the types of skills that companies
in different countries look for in candidates. In France, for example, large corporations
expect their engineers to work for them throughout much of their careers. They
therefore tend to hire graduate engineers who appear to have long-term potential and
create jobs for these engineers. As a result, large French companies tend to emphasize
specific technical knowledge less and soft skills more than Canadian ones.

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MARKETING STRATEGY

Global e-commerce giant Amazon said it would continue to focus on every geographic
segment of India's online retail market just days after home grown
rival Flipkart earmarked the country's vast rural hinterland and smaller cities as its
future growth markets.

"Our ambition in India is to become everything for everyone," said Amit Agarwal, head
of Amazon in India. "We don't think that way (whether the time has come in
India's ecommerce market to target particular segments of customers). We believe
customers, wherever they are in India, should be able to buy and get products delivered
to them."

ET had reported last week that Bengaluru-based Flipkart witnessed a spike in orders
from Tier II cities in the second half of 2016, with that segment currently accounting
for about two-thirds of total sales. The online retailer had also said the company would
ramp up its network of delivery hubs to service the increasing number of orders from
smaller towns.

"Ecommerce is no more a large city phenomenon: Our strategy is focused on middle

India," Nitin Seth, chief operating officer at Flipkart had told ET. Seth estimates that
around 65% of new customers who shopped on the platform, after the end of its mega
annual sale in October, are from non-metro areas.

Flipkart and Amazon, the two largest ecommerce players in the country, are running
neck and neck in the South Asian nation's promising online retailing market that is
expected to swell to $103 billion by 2019-20 from $26 billion at present, according to
Goldman Sachs. In the crucial Diwali sales during October, Flipkart announced that it
had sold 15.5 million units, compared with Amazon's 15 million units.

Segmentation, targeting, positioning in the Marketing strategy of Amazon

E-commerce giants like Amazon uses demographic & psychographic segmentation to

segment the markets. Amazon’s segmentation is based on actual purchase behaviour:

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not what people might have expressed interest in, but what they actually did. Amazon’s
micro-level segmentation targets each customer individually, allowing the company to
convert visitors into long-term, high-value customers.

E-commerce segmentation often involves creating personas who will buy in a certain
way & certain products. Similarly Amazon targets the middle class & upper class
people who have got hands on experience in the basic technology but don’t have time
or prefer convenience over shopping from the physical outlets.

Amazon has successfully positioned itself as a Glocal (Go global Act local) e-
commerce giant where one can buy anything & get it delivered at any remote locations.
Using the catchphrase #AurDikhao in its most recent campaign in India, it has further
helped them carve a distinct space in the consumer’s mind.

Competitive advantage in the Marketing strategy of Amazon

In order to differentiate itself, company acquired many IT & e-commerce start-ups like
pets.com, audible.com, Junglee.com, IMBD.com, Zappos.com, Woot etc. which helped
them in providing high value to their customers using existing technology of the
acquired partners at low cost. Amazon has also achieved economies of
scale through extensive product offerings which include electronics, toys and games,
apparels, DIY and many more.

These offerings help Amazon to keep its prices low thereon passing on the benefits to
the consumers. Amazon’s robust customer centric approach to analyse the customer
buying behaviour based upon preferences has helped them to have competitive edge
over their competitors. More than 50% of the consumers are the repeat buyers at
Amazon.com. Furthermore, Amazon is one of the longest players to be present in the
online sector and has a solid hold in European countries and US. This bottom line is
helping the company to expand in new markets.

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BCG Matrix in the Marketing strategy of Amazon –

On BCG matrix Amazon have certain businesses which are cash cows while others are
stars & question marks.

E-books, movies on demand & Amazon prime are practically cash cows giving the
maximum margins to Amazon. In fact, Amazon was a book store before it started
electronics.

Kindle, VOD (Video on demand) & Amazon web services are question marks because
with the advent of technology these services have become obsolete & have low
demand.

Electronics and other consumer durable products are stars for Amazon because these
products have high growth rate but the market share of Amazon is also high for these
products.

Distribution strategy in the Marketing strategy of Amazon –

Amazon realizes that the most important thing that customers want is the quick delivery
of products they order. This is where Amazon’s extensive distribution system has
come into play. Amazon now has more than 55 fulfilment centres exceeding 43 million
square feet.

This does not include Amazon’s new “under-the-tent” strategy of using existing vendor
warehouse space for consumer-packaged goods to more quickly serve
customers. Their aggressive strategy of infiltrating warehouses and improving their
distribution lines brings Amazon to new areas and customers.

Amazon had created a deep & structured network in order to make the product available
at remote locations that too free of cost delivery charges up to certain limit. Amazon
has developed an extensive global distribution network that continues to grow at
frenzied rate.

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Brand equity in the Marketing strategy of Amazon

From being merely an e-book provider to emerging as the 2ndlargest e-commerce

company in the world, Amazon.com has steadily increased its spending on advertising
and promotion to make its brand stronger and have a higher brand equity.

By April 2015, the brand of Amazon.com was worth US$ 176 billion. “A brand for a
company is like a reputation for a person. You earn reputation by trying to do hard
things. With more than 55% repeat buyers, the numbers tells everything about the
brand. It is among 13 world’s most valuable brand” (Forbes list).

Competitive analysis in the Marketing strategy of Amazon

Short listing the competitors of Amazon depends on what business sector of Amazon
is being considered. Apple would be the largest competitor when considering book or
content related delivery such as books, movies, magazines, and audiobooks.
The iTunes store will always be a threat to the amazon store because of Apples devices
like the iPad, iPhone, and MacBook. When considering web services Google would
emerge as the largest competitor.

Walmart is the biggest threat to Amazon in US as reports roll in of various attempts to

compete with the large online retailer. Reports of Walmart testing a locker system for
consumers where shoppers can order and pay online and pickup at their convenience
are surfacing.

Walmart is also still testing same-day delivery in four cities and remains the fourth
largest online retailer. Walmart rakes in about $9 billion in Internet sales, which
Amazon more than doubles in a quarter. However, Amazon does not have the physical
structure base that Walmart has to start with.

In developing countries as well as in developed, there are many local portals which give
tough competition to Amazon. For example – Snap deal, Flipkart are some of the
competitors of Amazon. Similarly, group on, first cry (targeted towards moms) are
specialised e-commerce portals which take away traffic from Amazon. Thus, these local
competitors of each country also react strongly to Amazon’s presence.

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Market analysis in the Marketing strategy of Amazon

The global E-commerce market is still in the evolving phase. With the adaptation of
technology in the developing economies customers are now becoming more
comfortable with online shopping. Fierce competition from Biggies
like Alibaba, EBay, start-ups & local ecommerce players like Flipkart, Snap deal is
more of resulting into overall growth of the industry which is good for the industry.

Customer analysis in the Marketing strategy of Amazon

Amazon customers consist of upper & middle class social groups who have inclination
towards using E-commerce portals and are comfortable with online shopping. Majority
of the customers are professionals or businessmen who are busy with their business/Job
& find it convenient to purchase anything online rather than visiting the physical outlet
in order to save time & money.

Furthermore, the customers might also be the ones who are searching for deals. Due to
this, the portal is known to have specific days where they give massive discounts to
their buyers.

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AMAZON CORPORATE STRATEGY

Amazon’s generic corporate strategy can be described as concentric diversification. This

strategy is based on leveraging technological capabilities for business success and following a
cost leadership strategy aimed at offering the maximum value for its customers at the lowest
price in addition to wrapping its business around the customers wherein they find Amazon to
be the go-to portal for their online shopping needs.

Indeed, this strategy has paid off well as can be seen from the fact that it is the world’s largest
online retailer and has consistently been the leader in the market segments in which it operates.
Having said that, it must also be noted that cost leadership can follow the law of diminishing
returns wherein firms following this strategy find that they are unable to sustain growth or
increase profitability once the “low-hanging fruit” are plucked.

Continuing the discussion, the generic business strategy followed by Amazon can be explained
using The Ansoff matrix as represented pictorially in the figure above. Amazon is placed in the
Overall Cost Leadership quadrant and its relentless focus on costs is the key to understanding
its overall strategy.

The specific measures taken by Amazon in pursuit of this strategy include steep discounts for
is regular members through the Amazon Prime program, ensuring timely and even express
delivery and at times, waiving off the shipping charges, passing on the benefits of avoiding

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state taxes to the customers thereby lowering the price even further, and an overall strategy
based on making the customer experience as seamless and as smooth as possible.

Apart from this, Amazon’s strategy is driven by its sources of competitive

advantage wherein it is focus on technology, actualizing the benefits of economies of scale,
and leveraging the efficiencies from the synergies between its external drivers and internal
resources have been the cornerstones of its business model. Further, Amazon uses Big Data
Analytics as a tool to map consumer behavior. Indeed, Big Data has been embraced to such an
extent by the company that it is now in a position to market this as another service offering.

Anyone who has shopped on Amazon encounters a list of recommended products that are
picked according to the browsing history and the mapping of their purchases with that of likely
purchases in the future. This has meant that Amazon can sense and intuit what consumers want
and tailor its strategies accordingly. As mentioned throughout this article, Amazon uses
technology to the fullest, which is not surprising considering it is after all an internet-based
company.

However, Amazon’s overall cost leadership with little product differentiation means that its
business model has been copied by “me-too” competitors in a cutthroat price war that has left
everyone bruised. Further, its focus on cost reduction at the expense of product differentiation
means that its products are available on other portals as well and there is no product line that is
exclusive or unique to it.

Apart from this, Amazon does not stock products that appeal to the need for “instant
gratification” wherein consumers make impulsive purchases and who are impatient and need
quick fixes. For instance, except for its movies and other digital items, the other product lines
are all not in the category of those that provide this gratification to the customers.

Having said that, it must be noted that Amazon’s current strategy is also built around the
convenience aspect wherein customers need not go to a physical bookstore or even wait for
their purchases to arrive after some time as it has introduced same day delivery in many
countries and is even toying with the idea of using Drones for near instantaneous delivery.
Apart from that, its focus on non-retail product lines such as cloud based services means that it
is addressing the issue of differentiation as well as its overreliance on cost leadership.

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ROLE OF INFORMATION TECHNOLOGY IN ACQUIRING
COMPETITIVE ADVANTAGE

Over the past 20 years, Amazon has developed from a small seller working from a
garage in Seattle, to a global company with 285 million customers worldwide. In
Europe alone, we have a thriving network of 29 fulfillment centers in seven countries.
In 2015, we shipped over one billion units to our many customers across Europe.

We have a rich history of developing and introducing cutting-edge technology into our
fulfilment centers to assist our employees in their roles and deliver for our customers.

Today, our employees work in technology enabled environments where the technology
is used to improve processes and assist them doing their daily role, ranging from
random stow and pick through to box sizing algorithms, software that determines the
shortest, most efficient walking route from one place to another and the SLAM process
(Scan, Label, Apply, Manifest), which was developed by Amazon and remains a
revolutionary innovation for customers because it speeds up the packing process and
helps ensure accurate deliveries.

The introduction of Amazon Robotics in the UK, at our new fulfilment centers in
Dunstable and Doncaster, is the newest example of this commitment to invention in
logistics on behalf of our employees and our customers. These fulfilment centers
opened in the autumn of 2015 and combined will create 800 new permanent jobs, with
competitive wages and comprehensive benefits starting on day one.

Amazon Robotics was introduced to both these sites during the first few months of
2016. More than 50 skilled engineers and IT professionals will support the technology.
Oliver is one of them: “I have always been interested in robotics, but when I started at
Amazon I wasn’t aware that this opportunity was available,” he remembers. “We are
not only working with the robots day to day, we are also looking at how we can make
them better in the future.”

The robots slide under a tower of shelves where products are stowed, lift it and move it
through the fulfilment center. Robots help speed order processing time and reduce
walking by employees by moving the shelves to employees, reducing the time taken to

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stow items for sale or pick them for new customer orders. They also save space,
allowing for 50% more items to be stowed per square foot. Liam, one of the employees
at Doncaster, describes robots as “innovative technology that enables us to get the items
to the customer a lot quicker.”

The Amazon fulfilment teams are dedicated to innovating in our fulfilment centers to
increase speed of delivery while enabling greater selection at lower costs for our
customers. The advancements in our latest fulfilment centers hit all three of these
customer desires while continuing to provide a work environment that is great for
employees.

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OPERATIONS STRATEGY

In the wake of the 4th annual Amazon Web Services (AWS) user conference, AWS has
finally emerged as a leader in cloud infrastructure and platform services. AWS now has
over 1 million active customers and year-over-year growth in EC2 instances, data
transfer, and database use that is close to 100% as of 2015 Q2. AWS did $4.6 billion in
revenue in 2014 and expects to see $7.3 billion by the end of 2015 which is close to
60% growth. Amazon is now adding over $1 billion in new revenue per quarter. It’s
rare to see these kinds of growth rates in a business that is closing in on 10 years old.
This shows the transformative effect that cloud services are having on the IT business.

But the high growth of AWS is far more than a story about being in the right place at
the right time. Although AWS was a pioneer in the IaaS and PaaS market segments,
plenty of vendors, including storied names like Microsoft, IBM, and Oracle, now have
a strong cloud presence. Survey data also shows private cloud being a preferred path
forward which is a path that AWS doesn’t support. So what is it about AWS that sets it
apart from its competitors? We believe that it boils down to one factor: operational
excellence.

AWS and Amazon both hold the objective of high volume and low cost as core values
that are part of their DNA. While it’s easy for most vendors to make occasional
efficiency claims, the growing strategic importance of IT meant that enterprises have
been trained that they need to pay to play. This has been especially true since 2000 in
the highest growth area of IT, which was software. Much of this software revenue was
tied to proprietary products with high price tags and licensing policies that in today’s
world seem punitive. While open source software products have been successful as low
cost alternatives, they address a different target market due to their unique business
model, which impacts their scope and performance. The net result has been an IT
market that has grown weary of high prices and is ripe for disruption.

From the start, AWS has designed its data centers to deliver reliable services on demand
at a low price. AWS has now perfected the process of designing, building, and operating
data centers. AWS employs purpose-built servers, storage, and networks which enables
them to carefully control costs while ensuring delivery of reliable on-demand services.

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AWS has also mastered how to manage their supply chain to make sure they are well
insulated from cataclysmic events given the rate at which they now are bringing
capacity online. This operational excellence also extends to how AWS develops
software services. These services often have their roots in open source but are
reengineered by AWS to improve performance. The result has been 516 new services
launched in 2014 and 487 so far in 2015. AWS has now reached a point where from an
IaaS and PaaS perspective they have comprehensive offerings with significant depth in
infrastructure, security & compliance, integration, analytics, application services,
mobile services, development, operations, and support.

Because all of this has been developed with a continual eye on delivering high volume
at a low cost, AWS pricing sets the bar to beat in the industry. While Microsoft and
Google monitor and adjust their prices to achieve parity or leadership in some cases,
AWS is driving margins of 17%, meaning that it would be hard for them to lose any
race to the bottom. Now that AWS has demonstrated that they can deliver reliable on-
demand services worldwide, enterprises are taking notice. The number of enterprises
now all in on AWS has exploded in 2015 and we see this largely as a recognition that
AWS’s focus on operational excellence is a winning strategy. However, while other
strategies such as product leadership and customer intimacy are also formulas for
success, AWS is pursuing a strategy that is new to the IT market where there is a vast
sea of pent-up demand for exactly what AWS is delivering.

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IMPACT ON ENVIRONMENT

Amazon has set a goal to host solar energy systems at 50 fulfillment network buildings
by 2020. Amazon will host solar energy systems on 15 fulfillment facility rooftops
across the US, with the capacity to generate 41 megawatts (MW) of power. In April
2016, Amazon joined Apple, Google, and Microsoft in filing a legal brief that supports
the continued implementation of the U.S. Environmental Protection Agency’s Clean
Power Plan.

In September 2016, we announced Amazon Wind Farm Texas, our largest wind farm
to date – a new 253 MW wind farm that will generate 1 million megawatt hours (MWh)
of wind energy annually.

At Amazon, we are putting our scale and inventive culture to work on sustainability not
only because it is good for the environment, but also for the customer. By diversifying
our energy portfolio, we can keep business costs low and pass along further savings to
customers. It's a win-win-win.

Amazon has begun hosting large-scale rooftop solar systems on fulfillment centers
across the country. Our goal is to have more than 50 fulfillment centers with rooftop
solar installed by 2020; 15 sites are planned to be complete by the end of 2017. The
solar systems in the initial deployment could generate as much as 41 MW of power.

Our commitment to on-site solar is about more than clean, renewable energy – it also
reflects the strength of partnerships we develop with local utilities, clean energy service
providers, community leaders and building owners. Our commitment is also to our
associates – we expanded our innovative Career Choice offerings to include funding
for associates to earn the North American Board of Certified Energy Practitioners
(NABCEP) certification, which includes entry level knowledge assessment and
accreditation to become a photovoltaic installation professional.

This first deployment of rooftop solar systems is part of a long-term initiative that will
start in North America and spread across the globe. To date, Amazon has announced or
commenced construction on wind and solar projects that will generate a total of 3.6
million megawatt hours (MWh) of renewable energy annually. We were the leading
corporate purchaser of renewable energy in the United States in 2016.

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In September 2016, we announced the plan to build our largest wind project to-
date, Amazon Wind Farm Texas. A 253 MW wind farm in Scurry County with more
than 100 turbines, the project will generate 1,000,000 MWh of wind energy annually –
enough to power almost 90,000 U.S. homes.

Our energy and environmental efforts are taking place across the company, and at our
locations around the world. We are retrofitting our existing buildings to improve energy
efficiency and reduce costs, including converting lighting systems to low-emitting
diode (LED) lighting. This change alone reduced our energy consumption to-date by
approximately 50,000 MWh per year and we are gaining additional energy savings
through low- and no-cost process and set point adjustments.

We are constantly looking for ways to build upon our best energy and environmental
practices and implement them across Amazon. Our new buildings are equipped with
energy efficient technologies such as LED lighting, advanced building management
systems, motor variable frequency drives, high efficiency heating and cooling systems,
and remote energy and power monitoring.

Amazon Web Services (AWS) Wind and Solar Farms

AWS has a long-term commitment to achieve 100% renewable energy usage for our
global infrastructure footprint. We've made a lot of progress on this commitment. AWS
exceeded its goal of 40% renewable energy by the end of 2016, and set a new goal to
be powered by 50% renewable energy by the end of 2017.

In 2015, AWS announced the construction of Amazon Solar Farm US East, Amazon
Wind Farm Fowler Ridge, Amazon Wind Farm US Central and Amazon Wind Farm
US East, located in Virginia, Indiana, Ohio and North Carolina respectively. Amazon
Wind Farm Fowler Ridge became operational January 1, 2016, and Amazon Solar Farm
US East went into operation in October, 2016.

In 2016, AWS announced the construction of Amazon Wind Farm US Central 2, a 189
MW wind farm in Hardin County, Ohio. We also announced five additional solar farms:
Amazon Solar Farm US East 2, Amazon Solar Farm US East 3, Amazon Solar Farm
US East 4, Amazon Solar Farm US East 5 each have a capacity of 20 MW and are
located in New Kent, Buckingham, Sussex, and Powhatan counties in Virginia.
Amazon Solar Farm US East 6 is a 100 MW facility in Southampton County, Virginia.
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These ten renewable energy projects will deliver a total of 2.6 million MWh of energy
annually onto the electric grid powering AWS data centers located in the AWS US East
(Ohio) and AWS US East (N. Virginia) Regions. The electricity produced from these
projects is enough to power the equivalent of over 240,000 U.S. homes annually, which
is approximately the size of the city of Portland, Oregon.

Recycling Energy

Amazon's newest buildings in the Denny Triangle area of Seattle are heated using an
innovative approach to sustainability—recycling energy from a nearby data center.
This "district energy" system works by capturing heat generated at a non-Amazon data
center in the neighboring Westin Building and recycling that heat through underground
water pipes instead of venting it into the atmosphere. This unique approach is nearly
four times more efficient than traditional heating methods and will also enable the
Westin Building data center to cut back on the energy it uses to cool its building.

The district energy system came about from a collaboration among Amazon, Clise
Properties, McKinstry and the City of Seattle. Through it, Amazon will be able to heat
three million square feet of office space. This ability to recycle energy from a neighbor
is another big benefit of having an urban campus in the heart of Seattle.

ETHICAL BUSINESS PRATICES FOLLOWED

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 Amazon.com employees should always act lawfully, ethically, and in the best
interests of Amazon.com. This Code of Business Conduct and Ethics (the “Code of
Conduct”) sets out basic guiding principles. Employees who are unsure whether their
conduct or the conduct of their coworkers complies with the Code of Conduct should
contact their manager or the Legal Department. Employees may also report any
suspected noncompliance as provided in the Legal Department’s reporting guidelines
referred to in paragraph IX below.

I. Compliance with Laws, Rules and Regulations

Employees must follow applicable laws, rules and regulations at all times.
Employees with questions about the applicability or interpretation of any law, rule or
regulation, should contact the Legal Department.

II. Conflicts of Interest

Employees are expected to use their judgment to act, at all times and in all ways,
in the best interests of Amazon.com. A “conflict of interest” exists when an employee’s
personal interest interferes with the best interests of Amazon.com. For example, a
conflict of interest may occur when an employee or a family member receives a
personal benefit as a result of the employee’s position with Amazon.com. A conflict of
interest may also arise from an employee’s business or personal relationship with a
customer, supplier, competitor, business partner, or other employee, if that relationship
impairs the employee’s objective business judgment.

Because an employee’s receipt of gifts or services could create a conflict of

interest, the Legal Department will develop and maintain guidelines for disclosure of
gifts or services received from customers, suppliers, competitors or business partners.

Employees should attempt to avoid conflicts of interest and employees who

believe a conflict of interest may exist should promptly notify the Legal Department.
The Legal Department will consider the facts and circumstances of the situation to
decide whether corrective or mitigating action is appropriate.

III. Insider Trading Policy

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 Federal and state laws prohibit trading in securities by persons who have material
information that is not generally known or available to the public.

Employees of the Company may not a) trade in stock or other securities while in
possession of material nonpublic information or b) pass on material nonpublic
information to others without express authorization by the Company or recommend to
others that they trade in stock or other securities based on material nonpublic
information.

The Company has adopted guidelines designed to implement this policy. All
employees are expected to review and follow the Amazon.com Insider Trading
Guidelines. Certain employees must comply with trading windows and/or preclearance
requirements when they trade Amazon.com securities.

IV. Discrimination and Harassment

Amazon.com provides equal opportunity in all aspects of employment and will

not tolerate any illegal discrimination or harassment of any kind. For more information,
see the Amazon.com policies on Equal Employment Opportunity and Workplace
Harassment in the Amazon.com Owner’s Manual.

V. Health and Safety

Amazon.com provides a clean, safe and healthy work environment. Each

employee has responsibility for maintaining a safe and healthy workplace by following
safety and health rules and practices and reporting accidents, injuries and unsafe
conditions, procedures, or behaviors.

Violence and threatening behavior are not permitted. Employees must report to
work in a condition to perform their duties, free from the influence of illegal drugs or
alcohol.

VI. Price Fixing

Employees may not discuss prices or make any formal or informal agreement with
any competitor regarding prices, discounts, business terms, or the market segments and
channels in which the Company competes, where the purpose or result of such

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discussion or agreement would be inconsistent with applicable antitrust laws. If you
have any questions about this section or the applicable antitrust laws, please contact the
Legal Department.

VII. Payments to Government Personnel

The U.S. Foreign Corrupt Practices Act prohibits giving anything of value,
directly or indirectly, to officials of foreign governments or foreign political candidates
in order to obtain or retain business. Employees may not make illegal payments to
government officials. Employees who are conducting business with the government
officials of any country must contact the Legal Department for guidance on the law
governing payments and gifts to governmental officials.

VIII. Recordkeeping, Reporting, and Financial Integrity

Amazon.com’s books, records, accounts and financial statements must be

maintained in appropriate detail, must properly reflect the Company’s transactions and
must conform both to applicable law and to the Company’s system of internal controls.
Further, Amazon.com’s public financial reports must contain full, fair, accurate, timely
and understandable disclosure as required by law. The Company’s financial, accounting
and legal groups are responsible for procedures designed to assure proper internal and
disclosure controls, and all employees should cooperate with these procedures.

IX. Questions; Reporting Violations

Employees should speak with anyone in their management chain or the Legal
Department when they have a question about the application of the Code of Conduct or
when in doubt about how to properly act in a particular situation.

The Amazon.com Legal Department has developed and maintains reporting

guidelines for employees who wish to report violations of the Code of Conduct. These
guidelines include information on making reports to the Legal Department and to an
independent third party. Please see the reporting guidelines for information and
instructions.

Amazon.com will not allow retaliation against an employee for reporting

misconduct by others in good faith. Employees must cooperate in internal
investigations of potential or alleged misconduct.

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 Employees who violate the Code of Conduct will be subject to disciplinary action
up to and including discharge.

X. Periodic Certification

The Legal Department will designate certain employees who, based on their level
of responsibility or the nature of their work, will be required to certify periodically that
they have read, understand and complied with the Code of Conduct.

XI. Board of Directors

With respect to their service on behalf of the Company, Amazon.com’s Board of

Directors must comply with the relevant provisions of this Code of Conduct, including
conflicts of interest, insider trading and compliance with all applicable laws, rules and
regulations.

XII. Waivers

Waivers of this Code of Conduct may be made only in a manner permitted by law

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