Today, Amazon is known as one of the most valuable brands in the high-tech sector. Only Microsoft bypasses it. At the same time, many other players in the IT market are represented in the niche that the CEO of Jeff Bezos is developing. What allows Amazon to take a leading position in its segment?
The main rule of Bezos
Even 22 years ago, in 1997, when the company entered the stock market, its leader formulated a simple rule: focus on the future, ignoring short-term interests that could impede development. Until today, Amazon’s administration has adhered to this principle, which for the most part has positive effects, but not without negative factors.
Profit omission
The Bezos rule means that all of the main revenue should cover key investment positions to ensure the systematic growth of the company. An example is the cost of delivery technology. The infrastructure serving Amazon customers requires huge investments - currently more than $ 8 billion. And this is just one example of how management ensures the development of the company, moving it into the future. By the way, the same delivery is traditionally one of the most expensive articles in the business, forcing many players in the online sales segment to restrict such services, eventually losing to more generous competitors.
Of course, this tactic leads to a decrease in Amazon's profits, which sometimes leads to a decrease in the value of shares, but in the long run, the company still demonstrates stable growth by tens of percent per year.
Long-term perspective
Jeff Bezos formulated his rule of business orientation for the future in a letter to investors, published in the same 1997. Then he emphasized that only long-term investments will allow the company to achieve success. The head of Amazon repeated the contents of this letter during the most difficult periods of these 22 years. For example, in 2012, when the company recorded the largest losses in the past 10 years, Bezos repeated the same thesis, noting that the interests of investors and customers regarding the company coincide in terms of the content of long-term decisions.
And he was right, because all the financial support in subsequent years allowed Amazon to make a powerful economic and technological breakthrough, becoming a pioneer in several areas of the IT industry. As for the investors themselves, they for the most part express support and trust in the position of Bezos, demonstrating their readiness to suffer temporary losses for the sake of major and even historical breakthroughs.