Strategy Letter I Ben Jerrys vs Amazon Phillip

Strategy Letter I: Ben & Jerry’s vs. Amazon Phillip Guest November 12, 2014

Introduction ● Brief History of Ben & Jerry’s and Amazon ● Differences between the two models ● Spolsky’s Advice when choosing a model

Brief History of Ben & Jerry’s ● ● Began in 1978 Revenue for 1984 was over $4 Million Revenue for 1992 was $132 Million By 2008, annual sales were exceeding $200 Million

Brief History of Amazon. com ● Founded in 1994 by Jeff Bezos ● In 2000, began offering e-commerce platform to additional retailers ● In 2003, reported revenue of $5. 26 Billion ● In 2013, reported revenue of $74. 45 Billion

Differences Between Models 1. Established Competitors 2. Network Effect and Customer Lock-in 3. Initial Capital Required 4. Importance of Corporate Culture 5. Learning from Mistakes 6. What Rate of Growth Offers Employees 7. Chances of Success

Established Competitors ● Ben & Jerry’s o Slowly win customers from competitors ● Amazon o o “Land grab” Get as many customers as possible before competition shows up

Network Effect & Customer Lock-in ● Ben & Jerry’s o No network effect or customer lock-in ● Amazon o Works when you have both

Initial Capital Require ● Ben & Jerry’s o o Initial investment is low Reinvest profits to grow ● Amazon o o Large amount of capital required Substitute money for time to beat competition

Importance of Corporate Culture ● Ben & Jerry’s o o Corporate culture is important Allows for mentorship and adherence to company values ● Amazon o o o Corporate culture is impossible Growing too fast for mentorship The number of employees means there will be many different sets of values

Learning From Mistakes ● Ben & Jerry’s o o Mistakes hurt company Must learn from these mistakes ● Amazon o o Growing too fast to notice mistakes Mistakes are easy to cover with money

Growth Rate & Employees ● Ben & Jerry’s o o o Growth over long amount of time Translates to job security for employees Comfortable work space is important to make up for lower wages ● Amazon o o o Get big fast Able to offer high salaries Hours may be long

Chances of Success ● Ben & Jerry’s o o High chance of success In the event of failure, losses will be low ● Amazon o o High chance of failure In the event of success, payoff may be great

Choosing a Model ● Must choose one ● Choose Amazon if: o o No competition Network effect and customer lock-in ● Choose Ben & Jerry’s if: o o Entering an established market Set goals of sustainability and profitability

Choosing a Model ● Consider personal values o Which company would you rather work for? ● Stick to choice o Cannot be both

Conclusion ● History of Ben & Jerry’s and Amazon ● Differences between models ● Guidelines when make the choice

References ● http: //www. joelonsoftware. com/articles/fog 000056. html ● http: //www. benjerry. com/about-us ● http: //www. entrepreneur. com/article/197626 ● http: //phx. corporateir. net/phoenix. zhtml? c=176060&p=irol-fact. Sheet ● http: //www. nasdaq. com/symbol/amzn/revenue-eps ● http: //www. forbes. com/sites/ryanmac/2014/06/05/bezosnet-worth-rises-1 -4 -billion-on-rumors-of-3 -d-amazonsmartphone/

Questions?