Amazon.Com Case Study 5

1264 Words Mar 18th, 2008 6 Pages
Strategic Management

The main area we will look at is Amazons strategic management capabilities, we will look at the External factors that have influenced Amazons stratgey and the Opportunities and Threats this industru poses. We will also look at the strengths and weakenesses that Amazon have to address these threats and take advantage of the opportunites presented to them

Firstly it is necessary to conduct an external analysis of the environmnet that may have influenced amazons strategic management decision. We will look at the PEST analysis model that may have influenced Amazons strategic planning. The main two external factors that influenced amazons strategies were

Political - These factors address legal issues such as trading
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In terms of market growth rate and customer base Amazon have been very successful, Amazon when compared to their competitors have grown at a phenominal rate of 413% the closest competitor in terms of growth. However, in terms of profitability they have not.

Amazons Gross profit percentage was 21.06% which was not bad in comparising wuth the industry standard of 28.92%.

However when we look at the Net profit % we are deeply disappointed, the net profit percenteage is minus 34.84%, compared with the industry standard of –0.89 this is a massive loss.

Therefore we can only assume that amazon are incurring huge costs or is not operating effeciently. Thus let us look at the efficency rations. On looking at Amazons revenue/Employe od 324, 430 per person it is fairly good and near enough to the industry average. The Inventory Turnover is 11.48 which is excellent and nearly double the industry average. However the asset turnover is low and is half that of the industry avergae. Thus Amazon probably are not using their assets fully.

Next we must look at the expenses amazon are incurring. Their operating costs have increase six fold between 1998 and 2000, however their sales have only increased by four fold. Thus Amazons costs are steadily rising each year. Thus Amazon may need to reduce expenses.

We can conclude this section with the fact that Amazon are generating a high revenue and their loss is not

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