Electronic Commerce

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1. In 2004, Toys R Us sued Amazon.com for violating terms of the agreement between the companies (specifically, Toys R Us objected to Amazon.com’s permitting Amazon Marketplace retailers to sell toys) (Note: when the lawsuit was filed, Amazon Marketplace was called “zShops”). Amazon.com responded by filing a countersuit. After more than two years of litigation, a New Jersey Superior Court judge ruled that the agreement had been violated by both parties. The judge ordered that the agreement be terminated and denied both companies’ claims for monetary damages.

Use your favorite search engine and the links in the Online Companion for Case C1 to review the judge’s findings and ruling. Prepare a report of about 200 words in which you summarize each company’s arguments and the judge’s rationale for her decision. Conclude the report by stating how you would have ruled on the case. Support your ruling with logic and facts. Answer: Amazon.com has been known in the web industry for building a business name that is a powerful one. Jeff Bezos who was intrigued by the rapid growth of internet look for a way to capitalize and that ended to calling his online bookshop as Amazon.com. Years later, Amazon.com has expanded its structure by having business partners such as Toys R Us.

During 1999 shopping holiday season, Toys R Us had experienced difficulties in selling online and making deliveries on time that’s why Toys R Us signed an agreement with Amazon.com in 2000 that placed Toys R Us products on the Amazon.com web site. Amazon.com agreed not to sell toys itself or on behalf of other partners for whom it might provide online sales services in the future but in 2004, Toys R Us claimed that Amazon.com violated the said agreement. Toys R Us objected to Amazon.com’s permitting Amazon Marketplace retailers to sell toys.

Two years after, the judge had concluded that the two parties violated the agreement. The judge found out that they could have avoided litigation only if the agreement has been clearly modified. Toys R Us had been so awfully expectant that they ended up taking legal action against Amazon.com as if in the 1st place Amazon.com did not help them at all while Amazon.com had been so slumber and did not even notice that they had been violating terms of agreement with its business partners. The judge had decided that the agreement be terminated and denied both companies’ claims for monetary damages because she believed that the two partners has the ability on standing on their different point of views.

2. Outline the advantages and disadvantages that Amazon.com would have considered before it made the agreement with Toys R Us to limit competing toy sales. In about 200 words, summarize these advantages and disadvantages, then evaluate Amazon.com’s decision to enter such an agreement. Answer: It has been clearly seen that before the Amazon.com should have signed the agreement with their business partner which is the Toys R Us, they should have been more transparent on the advantages and disadvantages on entering that kind of agreement cause whatever the outcome maybe, still both companies will be legally responsible for the success or failure of their business online.

One possible advantage would be vastly increasing product base and potential without having to recreate the electronic commerce code Amazon has developed. Also, Amazon.com could see a potential increase in crossover sales from consumers who go to Amazon.com to buy toys and discover other products. They can have the ability to provide their customers a wide variety of choices as long as their needs are fulfilled.

Possible disadvantages include that Amazon would be restricted from entering into potentially more lucrative partnerships with other toy retailers. Also, the financial success and reputation of Amazon.com would be tied to another company they have no control over. Amazon.com has decided to enter such agreement for either considering their business partners to be in long-term relationship with them or with respect to their status in the business industry.

3. In about 200 words, outline specific recommendations you would have made to Amazon.com in 2004 for negotiating a settlement with Toys R Us that would have benefited both companies and avoided litigation. Answer: For the part of Toys R Us, it has been best done to talk to Amazon.com before directly filing a case against the site in respect to partnership relationship of both parties.

For the part of Amazon.com, they should have been more sensitive and aware if they are violating agreements to their business partners so that it wouldn’t have ended to complication and having a case filed by their business partners. To settle the conflict between the two parties, the Amazon.com should have responded by accepting terms of agreements provided by the Toys R Us. Since Toys R Us is one of Amazon.com’s business partners, then they will be liable enough to consider terms of agreement accepted by both parties. By doing so, they could have avoided litigation and did not ruin their business relationship with each other.

4. In 2005, Circuit City and Amazon.com agreed to end their 4-year-old partnership in which Circuit City customers could place orders on Amazon.com’s Web site. In about 200 words, describe why this partnership, which made sense during the first wave of electronic commerce, might no longer be good for the two companies. Answer: One possible reason follows: during the first wave of electronic commerce consumers may have been more likely to trust a relatively more established e-commerce company such as Amazon for making online orders. Also, Amazon’s status as a popular e-commerce portal may have provided Circuit City with access to a larger volume of online consumers. However, as consumers became more comfortable with e-commerce and the Circuit City brand became more established these benefits may have been minimized.

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