How should Amazon Web Services price its services to Zappos.

Amazon.com has some of the biggest data centers in the world, where it runs cloud-based hosting services. Amazon Web Services, Inc. (AWS), is the division of Amazon.com that provides compute, storage, and database services to a wide variety of companies, including GE, Netflix, Pfizer, Pinterest, and others. Amazon's divisions also use its cloud-based hosting services. Amazon has several divisions; one of these divisions is Zappos, an online shoe and clothing shop. Assume Zappos uses AWS's cloudbased hosting services. Other cloud-based hosting services exist, including Terremark, Savvis, and Dimension Data.

Budgets, performance evaluation and how management isolates and analyzes variances derived from price and efficiency.

Use These key terms in answers:

Cost-plus transfer pricing

Dual transfer pricing

Market price-based transfer pricing

Negotiated transfer pricing

Transfer price

Questions:

1. What possible pricing methods could Amazon use to set the transfer price for AWS's cloud-based hosting service to Zappos?

2. Why might Zappos' management argue for a discounted transfer price?

3. Why might the management of AWS argue for a transfer price at the market price?

4. What advantages could Zappos experience from using Amazon's AWS services? What advantages could Zappos conceivably experience by using a different cloud-based hosting service? 5. Should Zappos be allowed to use a cloud-based hosting service other than AWS? Why or why not?