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
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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
Amazon understood firsthand that the competitive advantage of a company originates immediately from how distinctive the organization's resources and competencies are. Amazon is able to both engage in production at a lower cost and generate a superior product at a standard cost. This is accomplished mostly via Amazon's strategy of having a wide variety of goods and competitive pricing. Customers know they can find basic products at slashed prices or high quality goods at standard prices and this is all achieved via the enormous range of products and product brands and types available on their massive marketplace. For example, the depiction displayed in the case study which shows how growth was related directly to: lower cost structure- lower prices customer experience traffic sellers -selection and convenience. While this is a grave oversimplification of the Amazon business model, it demonstrates how many aspects of the strategy reinforced one another.
Through selling more in a lower price, Amazon can achieve economies of scale, which in return can increase their bargaining power over its suppliers and partners.
How would you define Amazon’s industry? What difficulties do you encounter identifying primary competitors and key lines of business?
Amazon’s fulfillment centers are valuable, rare, costly to imitate, and organized to captured value. Thus, they attribute to Amazon’s competitive advantage. Amazon Prime and 1-Click are also valuable to the organization. However, they can be replicated. Walmart launched a membership program to compete with Amazon’s Prime Service. With Walmart’s membership program customers receive free two-day shipping when they spend $35 or more on orders. Amazon Web Services is valuable, rare, costly to imitate and the organization has capture the value of it. Therefore, AWS has contributed to Amazon’s sustainable advantage. Amazon’s brand name and reputation have also given the company sustainable advantage. Amazon acquired enormous brand valuation in a short period of time. It is
Low cost leadership is pursued by Amazon by differentiating itself primarily on the basis of price. Amazon’s goal is to become customer – centric, aiming to offer a wide range of products with lower prices and convenience to its customers. It can be seen that the company believes offering low prices and focusing on customers are fundamental to Amazon’s success. Over the time, Amazon seeks to mitigate the costs in order to lower the prices through achieving higher sales volumes. The company also finds many ways to negotiate to obtain better terms with their suppliers, and achieving better operating efficiencies. Amazon always ensures that they maintain
This sort of global expansion adds great complexity to the functionality of Amazon’s management, personnel, operation systems, technical performance, financial resources, and internal financial control and reporting functions. With the perplexity of current situations, Amazon may not be able to sustain growth effectively, which ultimately could bring damage to their reputation and limit their operating growth as well. .
In terms of industry profitability, it appears that profit margins have a tendency to fall. This is because competition is high and customers tend to buy low-priced high-value items. The average gross margin and net profit margin is 37.1% and 14.3%, respectively (MSN Money, 2010).
The next segment of this look at the financial condition of Amazon.com involves a horizontal and vertical analysis of Amazon’s income statement and balance sheet. Since both of these statements involve many segments, we will address key and noteworthy figures to gain a broad understanding of Amazon’s progress in the last three years.
$10,644,800 / $2,271,400 = 4.69 Times Return on Common Stockholders’ Equity (2002) $647,645 / $1,928,960 = 33.58% Return
With that being said, Amazon will continue to have increased revenue growth and will eventually begin to generate profit.
The effectiveness of Amazon’s financial management can be seen in the performance over the last 5 years. Largely investor confidence has been very high throughout the 5 years analyzed. This can be seen in the increase of 4 times the stock price. Stock prices were at an all-time high the end of 2013 at price of $405USD each (Morningstar, 2014). Through analysis of the financial statements and history of stock prices it can be determined that the financial management team at Amazon is doing a great job.
Operating profit margin figures in the table above show the return from net sales[13]. However profit margin ratios are high enough for the 3 years, there is a fall from 12.86% to 11.26% during 2011-12. Sales revenue increases with a higher rate than gross profit so there is a poor
This case analysis serves the purpose to provide an analytical framework to evaluate Amazon.com from an internal and external perspective, and to provide strategic direction based upon the internal and external evaluation. The case will begin with an introduction to Amazon.com.
This paper reviews the supply chain management practices of Amazon.com (AMZN) and highlights findings in the framework of a Strengths – Weaknesses – Opportunities – Threats (SWOT) framework.
The first recommended strategic action is to focus on increasing Amazon’s brand products. The company can gradually start offering its customers more of their brand products. Amazon has already built a loyal customer base from all over the world and they must take advantage of this. According to Statista (2016), the company had over 31