The financial health of Amazon has improved rather considerably over the past several years, an improvement that has to do both with changes that the company has made internally as well as changes that have occurred more generally in the world of ecommerce. Thus while the company no doubt deserves some substantial credit for its increased health since 2000, the turn-around must also be attributed to some general increased in the U.S. economy as well as a general increase in virtual commerce. Buying goods on-line has become a habit for an ever-increasing portion of the American public - in addition to which buying books and other goods from Amazon has also become an ever-increasing habit. The company has thus been able to benefit from both internal and external changes but still remains at some financial risk.
As outlined in Harvard Business School study 9-101-045, in mid-2000, Amazon was suffering from a number of key problems, including a "weak balance sheet, poor working capital management, and massive negative operating cash flow" (p. 1). This sorry state of affairs had come about for two major reasons. The first was one of the most common of all reasons: The company under founder and CEO Jeff Bezos had decided to expand beyond its original brief. In pushing such an expansion, not simply in terms of income and number of customers but also in terms of the kinds of products that the on-line site sold, the company undercut its most precious resource, its brand name. The brand name of any company is arguably amongst its most important assets, but the "branding" of a company is especially important for a virtual company because of its lack of retail stores to remind the consumer of its presence. As Amazon moved away from its initial business of selling books and then away from selling other "media" products, consumers lost sight of the brand. For an online company, this was perilous - and the potential consequences even greater than f...