Professional Documents
Culture Documents
Ummsalamah Baksh
Strategic Management
Table of Contents
CASE STATEMENT---------------------------------------------------------------------------------3
MISSION STATEMENT----------------------------------------------------------------------------3
VISION STATEMENT------------------------------------------------------------------------------3
RATIONALE-----------------------------------------------------------------------------------------3,4
MILESTONES---------------------------------------------------------------------------------------4
EFE MATRIX------------------------------------------------------------------------ 5
EFE EVALUATION--------------------------------------------------------------------------------5
IFE MATRIX-------------------------------------------------------------------------6
IFE EVALUATION---------------------------------------------------------------------------------7
SWAT MATRIX----------------------------------------------------------------------9,10
TOWS CHART--------------------------------------------------------------------------------------11
STRATEGIC ALTERNATIVES----------------------------------------------------------------16
QSPM MATRIX----------------------------------------------------------------------16
RECOMMENDATION----------------------------------------------------------------------------17
REFERENCES---------------------------------------------------------------------------------------23
Amazon.com Inc. 3
Case Statement
Amazon is facing a high volume of competition, and long-term debt due to high inventory
risks. Along with the financial analysis, the strategic analysis with competitive advantages is
studied to determine the firm’s future in revenue, profitability, and growth. This report will also
follow the expansion strain on management, operations, finances, and other resources.
Mission Statement
“To leverage technology and the expertise of our invaluable employees to provide our
customers with the best shopping experience on the Internet (Amazon.com Inc. or Affiliates,
(1996-2018)).”
Vision Statement
"Our vision is to be earth's most customer-centric company; to build a place where people can
come to find and discover anything they might want to buy online (Amazon.com Inc. or
Affiliates, (1996-2018)."
Rationale
Based on Amazon’s mission statement evaluation it is not a strong one that includes all aspects
of the organization. Amazon’s concern for employees, and consumers are components that
addressed in the mission statement as invaluable employees, and customers shopping experience.
However the mission statement can include the concern for their public image, as a result of their
Amazon.com Inc. 4
sustainability efforts that have increased. The organization clearly mentions the use of
technology within the Internet commerce as well to drive customer to purchase online with easy
access. The concern for growth and survival should be an objective mentioned in the mission
statement as a recognized accomplishment to one of the largest e-commerce sites of the buying
and selling industry. Amazon’s mission statement is also not clearly mentioned on their website
Milestones
Amazon.com Inc has quite the company profile. Their goal is to global reach all industries, and
all consumers that have the desire to acquire more. After 30 years of its development Amazon
has become one of the major online bookstores to launch online since 1995. The organization
expanded their company with a wider selection of products, international websites, a larger
network of suppliers, and most of all fulfill their customer satisfaction approaches. One of
Amazon’s milestones was the ability to establish a relationship with their distributors,
understanding how price will drive the growth of their e-commerce, and the information
technology needed to bring it all together. In 2005 Amazon started using cloud computing, and
Kindle, and dominated the Internet by offering more e-book purchases in 2010 than physical
books (Lashinsky, (2016)). Amazon.com Inc. added the Prime feature where consumers had the
premium option. The option gives Prime members unlimited, commercial free, instant streaming
of more than 5,000 movies and TV shows with no additional cost other than the 1-year minimum
EFE Matrix
Weighted
Amazon.com Inc. 5
Opportunities
Threats
EFE Evaluation
According to Amazon’s EFE Matrix, the total weighted score is shown to be above the 2.5
averages, which entails that the company is strong. Their external environmental factors are
responding above average to the opportunities, and are able to overcome their threats. The
management team of Amazon.com Inc. does not have to reevaluate their companies prospecting
goals. The highest average rating for one of the opportunity key factors is the multiple products
offered with a high percentage of online retail sales. It ranked at 0.40 because there is an increase
Amazon.com Inc. 6
in e-commerce competition and barriers from the threat key factors the weighted average was
0.45. Amazon must keep up with offering wide variety of products to stay ahead of their
competitors.
IFE Matrix
Weight
Strengths
Weaknesses
IFE Evaluation
According to the Amazon.com Inc. IFE Matrix, the total weighted average has scored lower
than the external factors. This entails that the companies external position is more stable, and are
Amazon.com Inc. 7
able to overcome their weaknesses. Amazon’s major weakness were broken down into two
factors, they are the risky breach of customer information, which weighted at 0.30, and not
enough suppliers that weighted at 0.30 as well. The one of the strongest key internal factors is
the updated technology that is weighted at 0.40. Since Amazon has updated their technology, and
SWOT Analysis
Overall Amazon.com Inc. has some internal key factors that they need to focus on in order to
build upon considering their strengths. Maintaining strong global alliances, and overcoming the
threat of competition and premium are the initial steps to benefiting Amazon’s exceptional
customer services with their strong management team. Considering both the EFE and IFE
Matrix’s Amazon.com Inc. is well on their way to successfully maintain their mission and vision.
Substitution
company.
Amazon.com Inc. 8
force because of the growth of the online retail industry. The three largest competitors
of Amazon are E-bay, Barnes & Noble, and Wal-Mart. The 3 big companies are also
targeting particular products like apparel, car parts, as well as refurbished electronics.
The online shopping industry was at its highest in 2017 with a reported 77% of U.S
rise.
buyers is a strong force because they favor customer satisfaction. Amazon retained
Satisfaction Index based in the U.K. (Amazon.co.uk). Customers have the ability to
control when they want their products delivered, and within a specific time frame.
Amazon must abide to their delivery satisfaction with customer agreement to ensure
customer satisfaction. Amazon also allows for customers to have low switching costs
3) Bargaining Power of Suppliers (Weak Force)- Amazon’s suppliers are low due to
the increased number of e-commerce entrants in the retail industry. Bargaining power
order for Amazon to consider suppliers they must ensure they are following ethical
business deals, and working conditions. Suppliers are not able to control Amazon’s
product prices. With the U.S President Trump administration tax & trade policies,
Amazon.com Inc. 9
retailers like Amazon are concerned with the impact of 20% border tax on imports
due to the increase of global retail industry. Amazon products are not exclusive or
Amazon books can be substituted by the company’s book sales competitor, Barnes &
Noble. E-bay’s auctioning of products can overcome industry price, and Wal-Mart’s
strong force due to the easy access to online markets. Anyone can create a website to
customer data, such as credit cards; and addresses, investment in market share, and
Strengths:________________________________________________________________
3) Updated Technology
Weaknesses:______________________________________________________________
1) Operation losses
Amazon.com Inc. 10
Opportunities:____________________________________________________________
5) Advertising revenue increase to 37% annually from 2016-2018 can lead to $5 billion
business
Threats:_________________________________________________________________
4) Amazon Prime annual price to increase from $79 to $99 = loss of premium customers
international distribution centers as online diverse products sold, to unique products that
2) Create more ads with the updated 2) Decrease operation losses, by increasing
technology while recognizing customer C2C auctions. Allowing the consumers to use
competitors with in-store experiences. Online increase the segmented population that Amazon
environment to discuss issues, or get more reaches, and to eliminate online retail
products.
Amazon.com Inc. 12
Based on the SWOT analysis, and the SWOT Matrix there are a number of approaches to
improving Amazon.com Inc. With the increased debt, and operation losses as the companies’
weakness, I recommend Amazon decreasing their restrictions on suppliers, and partner with
more international companies to operate on behalf of fewer losses with low taxation on capital.
Countries like the United Kingdom can benefit from the exceptional customer services provided
by Amazon.co.uk by targeting already satisfied customers, and push for premium services such
as Prime. Amazon can enhance their technologies to protect against data breaches among
purchasing products at low rates from Amazon, and wholesaling the products themselves.
The SWOT Matrix applies to the Amazon companies goals by determining the matched results
based on the EFE/IFE matrixes. The SWOT Matrix allows for market penetration in many areas,
and demonstrates where the company must allocate its resources, technology, and management
of suppliers.
Financial Ratios
Amazon’s annual report ended in December 2017, as a strong company due to their high
record of sales growth. Based on the financial ratios the company exceeds most of the profit
margins compared to the industry averages. Making the company one of the most profitable
firms to invest in the coming years. Amazon’s Current Ratios determined it is lower than the
market standard. The firms current ratio projects 1.04, while the industry average projects
1.07(MSN Money, 2018). These numbers mean that Amazon positioned itself to cover the bare
minimum of their current short-term liabilities with their current assets. Amazon’s Inventory
turnover has declined significantly from 2016 to 2017 with close observations of the 2018 first
quarter. Amazon is improving their costs of goods sold over inventory they have. The inventory
turnover for the firm is 11.33, while the industry average is 11.70. This determines that the
company is selling their products over a longer period of time, rather than a shorter period of
time at a slower rate compared to their competitors. Amazon’s Quick ratio is defines the
companies’ strength in its number above 1.0 when compared to its industry average. The
companies’ quick ratio financially is healthy with a 0.73 compared to the industry average,
which is 0.27. The company is in a path to improving its financial stability by improving its
profits. Amazon’s debt-to-equity is not far from the industry average of 0.88, and the firms
average is 0.89. These numbers reveal that Ford is making rational, reasonable moves and
processes with its cash, inventory and other assets. The company’s asset turnover also reveals
1.71 of its sales or revenues are valued, compared to its industry average of 1.55. That is a
significant increase from 2012’s negative decline in revenue of -0.23. Amazon’s receivables
turnover is a shorter term that is represented on their balance sheet. Receivables turnover is
Amazon.com Inc. 14
18.20, which is much higher than 55 comparable markets that are below the industry average of
13.54.
Profitability Ratios
The profitability of Amazon is deemed as the companies’ success. The operating margin of
3.25 compared to its industry average suggests that Amazons managers are not efficiently
allocating funds to satisfy their stakeholders at an effective rate. The operating margin of the
industry is 4.25, which is well over the firm’s current capabilities. ROA is 2.92 above industry
average of 2.10. Amazons return on assets indicates that the company is efficiently using their
assets to generate earnings for their investors, as well as managers. The firms P/E ratio shows
that stockholders or investors must plan on investing $338.80 in dollar amounts in order to
expect to earn $1 of the companies’ current earnings. In the industry it will cost investors $29.97
Growth Ratios
Amazon is not able to raise short-term capital. Due to the firm’s debt to equity, they are not able
to raise capital to give back the money that is owed to their investors and creditors. The
Amazon is able to raise long-term capital. The company has a long-term debt of $37,926 M
passed its 12-month future. It has also increased from its quarterly averages from Dec 2016 to
Dec 2017 by 0.29 %. The ratio of long-term debt over total assets of suggests that Amazon may
be relying on their dependency for the company’s growth (MSN Money, 2018).
Working Capital
Amazon’s working capital has increased from Sept 2017 to the end of the financial quarter Dec
2017 ending in $6,066 M. The working capital suggests that the firm has sufficient working
Amazon’s capital budgeting procedures are in good standing. The companies investors, and
financial managers are allocating their funds, and are working on their debt to equity ratio. Once
the debt to equity has improved over a shorter term the company will see a significant increase in
Dividend-payout Policies
looks as if the company did not have a dividends-payout reported in its end of financial quarter
in Dec 2017. Amazon did not have to pay out any percentage of company earnings (MSN
Money, 2018)
Amazon.com Inc. 16
If Amazon is known for having everything, it is certainly known for taking care of their
relations with their investors and stockholders. On the companies website they include the proper
documents, letters to shareholders, most recent proxy, conflict minerals reports, and their 1997
Financial Managers
Amazon.com Inc’s financial managers have the most understand of the companies mission, and
growth potential. They are considered to be able to break down, analyze. Test, and challenge the
status quo. The financial managers have a right to also recommend, and develop policies to help
STRATEGIC ALTERNATIVES
Alternative 1 Alternative 2
0 0
0 0
0 0
Based on Amazon’s QSPM Matrix I suggested two alternates to objectively select the best
strategy to increase financial growth, and long-term goals .The key factors identified from the
The International segments will consist of amounts earned from retail sales of consumer
capital. As the company increases revenue based on their dependency of their future funding the
company will go with alternative 1. The suggested strategy of branching out and expanding the
companies distribution centers will increase the amount of suppliers needed to fund the long-
term dependency. Pulled from the SWOT matrix and Porters Five Forces analysis, Amazon will
Decrease competition with international suppliers & international distribution to increase the
segmented population that Amazon reaches, and to eliminate online retail competition. On
October 12, 2016, the Lawyers’ Committee for Civil Rights and Economic Justice wrote to
Amazon’s CEO Jeff Bezos to express concern about a new company directive that requires
delivery companies that Amazon company contracts with to institute more stringent background
check procedures. To increase suppliers, those background checks must decrease its background
check requirements allowing for more slack on entry to international markets, and regulations.
Amazon.com Inc. 19
Strategy Implementation
Marketing
Amazon will continue to pursue multi-year waste reduction initiatives by preparing free
packaging, Ships in Own Container, and Amazon Frustration-Free Packaging to promote the use
of 100% recyclable packaging that is easy to open and eliminates hard plastic, all packing foams,
and additional shipping boxes. These initiatives have eliminated more than 110 million pounds
of excess packaging just in 2016, a 54% increase over 2015. Promoting, with all Amazon
Operations
Amazons international activities are significant to the revenues and profits, and plan to further
expand internationally. In certain international market segments, Amazon will have relatively
operating experience and may not benefit from any market advantages. It is costly to establish,
develop, and maintain international operations and websites, and promote the Amazon brand
internationally.
Finances
Increasing operating income and efficiently managing working capital, including the decision
to purchase or lease property and equipment. Increases in operating income primarily result from
increases in sales of products and services and efficiently managing operating costs, partially
Preliminary Financials
Liabilities
Accounts Payable 35 25 -1 -27%
Other Current Liabilities 17 13 -1 -22%
Total Current Liabilities 52 39 -1 -25%
Long-Term Debt 24,743 15 -1 -100%
Other Long-Term Liabilities 5 3 -1 -42%
Total Liabilities 24,799 57 -1 -100%
Equity
Common Stock 5 5 0 0%
Retained Earnings 9 5 -1 -43%
Treasury Stock -1,837 -2 -1 -100%
Paid in Capital & Other 21,389 22 -1 -100%
Amazon.com Inc. 21
Liabilities
Accounts Payable 25 25 25
Other Current Liabilities 13 13 13
Total Current Liabilities 39 39 39
Long-Term Debt 15 15 15
Other Long-Term Liabilities 3 3 3
Total Liabilities 57 57 57
Equity
Common Stock 5 5 5
Retained Earnings 14,088 28,171 42,254
Amazon.com Inc. 22
Treasury Stock -2 -2 -2
Paid in Capital & Other 22 22 22
Total Equity 14,114 28,197 42,280
References
Mims.C. (2014) Amazon and Google are in an Epic Battle to Dominate the Cloud and Amazon
attempt-to-dominate-the-cloud-before-it-even-got-started/
ir.net/phoenix.zhtml?c=97664&p=irol-newsArticle&ID=906817
site-penetration-across-markets/
https://www.cbsnews.com/news/20-years-of-amazons-expansive-evolution/
https://www.amazon.jobs/working/working-amazon
nvestopedia Staff. (2018) Industry Handbook: Porter’s 5 Forces Analysis. Retrieved from
https://www.investopedia.com/features/industryhandbook/porter.asp
Peck, R. Lanning, S., Davies, B. (2018) Institute of Customer Service. Retrieved from
https://www.instituteofcustomerservice.com/media-centre/press-releases/article/amazon-on-top-
again-for-customer-satisfaction
https://www.fool.com/investing/general/2014/02/25/2-threats-to-amazoncoms-future-
growth.aspx
https://www.investopedia.com/features/industryhandbook/porter.asp
Jhonsa, E. (2018). Amazon’s Annual Report Reveals a Lot About How Its Business Is Evolving.
reveals-lot-about-how-its-business-evolving
https://www.msn.com/enus/money/stockdetails/fi126.1.AMZN.NAS?symbol=AMZN&form=PR
FIHQ
marketing-strategy/online-business-revenue-models/amazon-case-study/
market-data
Amazon.com Inc. 25