Amazon’s Details of Global Dominance

Matt Harvey, Stanford University December 2, 2010

Approximately half of’s revenue comes from outside the United States, according to the company’s Senior Vice President of International Retail, Diego Piacentini. This makes global strategy a key component to the company’s continued success. During Piacentini’s visit to the Entrepreneurial Thought Leaders seminar, he explained that, for Amazon, global strategy means delivering a consistent customer experience based on their original vision: Allow customers to discover the products they want to buy at the lowest possible price. Amazon aims to be the “most customer-centric company on the planet.” But what do you build, and how do you act, to make this mean something?

Not Everyone Thinks Customer First

“Start with the customer and work backwards.”

Many companies publicly claim to think about their customers first. However, a fully realized commitment to be customer-centric requires a disciplined approach to developing new products and programs. This is a critical step in Amazon’s process; their logic always takes into consideration what the customer is thinking. “Start with the customer and work backwards,” says Piacentini. An example of this process appears in Amazon’s popular Kindle reading device. Once the company realized how easy it was to purchase a book on the Kindle, they added a purchase process step to allow customers to confirm whether the purchase was intended or just a mistake. In this clip, Piacentini shares Amazon’s idea of thinking customer first.

Keep Your Core Values

When a company expands into foreign territories, common thinking dictates the company must learn to do business according to cultural norms. But Piacentini feels Amazon is better served by discovering ways to continue to deliver on the company’s customer driven vision, even if it goes against cultural business expectations. While the mechanisms and process may need to adjust, the customer experience and the company’s core values must remain consistent across the globe.

According to Piacentini, when Amazon began doing business in China in 2004, some of the company’s core values came into conflict with traditional business practice. After a sudden competitive price drop for the latest Harry Potter book, Amazon refunded the price difference to recent purchasers of the book. While this decision came as a shock to Amazon’s regional business partners, it also maintained Amazon’s core value commitment to low prices for customers.

The Myth of Best Practices

“In our business model, everything is equal unless proven with data that it needs to be different.”

Best practices are often just good intentions, says Piacentini. Moreover, good intentions don’t work — mechanisms work. In Amazon’s view, good mechanisms make for complete processes.” In our business model, everything is equal unless proven with data that it needs to be different,” says Piacentini. Amazon refers to its business model as the “virtuous cycle”, where growth is central, driven by product selection, customer experience, sales results, and lower prices. By focusing on this business cycle, Amazon honors the desires of its global customers as, according to Piacentini, it turns out that all customers like low prices, fast shipping, and access to Amazon’s large selection of products. Piacentini describes the myth of best practices in the following clip.

Take Risks Outside Your Core Business

Piacentini admires Amazon’s willingness to take risks outside of their core business, and he points to some prime examples. Amazon’s revenue flow from its main retail business is seasonal, particularly in the western world. This means that a great deal of the company’s information technology resources previously went unused in other parts of the year. This issue became an opportunity when the company began offering Amazon Web Services (AWS), a cloud computing service that allows companies to replace their web servers. What were once unused servers became a rental revenue stream.

Another example of taking a risk outside of the company’s core business was the development and release of the Kindle reading device. Piacentini says that building hardware was “clearly outside the company’s comfort zone, but we didn’t want to turn out like Kodak.” Through risk-taking and customer focus, Amazon feels positioned to maintain its dominance in the online retail space.

Watch the entire Diego Piacentini seminar at eCorner.