Why did Amazon buy Zappos, the online shoe and apparel store, in 2009? It wasn’t primarily for the shoes; Amazon already owned a shoe site called It wasn’t primarily for the existing Zappos Web interface—Endless’s interface was at least as attractive—or the cash flow. Zappos was a ten-year-old company with a loyal following, but it was barely profitable.

The acquisition wasn’t really for assets at all. It was for the capabilities—and, in particular, for the contribution Zappos would make to Amazon’s own capabilities system. The Zappos case is a clear example of the main point of this chapter: the companies that create the most value combine organic growth with mergers and acquisitions (M&A), ...

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