Strategic Analysis for Amazon Inc.

Strategic Analysis for Amazon Inc.

Company Profile

This paper gives a strategic analysis of Amazon Company; the problems identified the benefits and recommended a way forward in the improvement of the company as a solution. Amazon company participates in retail offers of buyer goods and subscriptions in North America and globally. The company operates through three fragments: North America, global, and Amazon Web Services (AWS).  Amazon sells products and substances acquired for reselling from external merchants with the use of physical and online stores. The company additionally makes and trades electronic goods, like tablets, kindle, TVs, and Echo and different gadgets.

Moreover, Amazon provides programs that enable merchants to trade their goods on its Websites, just like its stores; and projects that permit manufacturers, performers, movie producers, application designers, and others to share and sell content. Additionally, the company gives a figure, stock-accumulation, data-stock, and various AWS administrations, just as satisfaction, publicizing, distribution, and computer-based content rights. Moreover, it offers Amazon Prime, a participation program, which gives free sending of different things; access to the spilling of motion pictures and television scenes; and various administrations. It serves shoppers, traders, designers, ventures, and goods makers (Qin et al., 2020). The company was established in 1994 and is headquartered in Seattle, Washington.

Amazon Company is in the internment and direct marketing industry. It has a total number of 798,000 employees. As outlined, it was founded in 1994. The trading data from the website shows that daily volumes are about 3,597,893 with a 52 weekly range of 1,626 to 2, 185. The average amount per three months is 5,557,294 and an average volume of 5,624,857 per 7 days.

Share statistics show that Amazon has 497.8M company shares outstanding, with about 15 percent being from insiders. The ticker shares outstanding is also 497M, with 57 percent being held by institutions. The float stands at 84 percent.

The valuation data shows that the market cap is about 970B, the enterprise value is 993 B, the PE ratio is 84.73, the PEG ratio is 5.95, and the price/sales 3.43. The price/book is 15.65, the price/tangible book is 22.45, price/cash flow 25.20, and enterprise value/sales stand at 3.54 while enterprise value/EBITDA is 27.44.

Profitability data for Amazon show that the gross profit margin is 40.99 percent, EBIT margin 5.12 percent, and the net margin is 4.13 percent. The return on assets is 4.6 percent, return on equity is 21 percent, and the asset turnover ratio is 1.45 percent.

Income statement data illustrates that Amazon revenue stands at 280B, revenue growth is 20.45 percent, net income stands at 11B, revenue per share is 567, and gross profit is 114B. Balance sheet data show that total cash is 55B, total cash per share is 110, total debt is 77B, the total liability of equity is 124.95 percent, and long-term debt is 23B. This implies that the company needs to

The net operating cash flow is 38.51B. Amazon has a 3-year dividend growth rate, 5-year dividend growth rate, 4-year average payout, and 4-year average yield.

This paper aims to break down a load of Amazon, therefore mostly called Amazon, from a speculator’s perspective. In doing as such, it is essential to conduct a money related analysis, by first structure a point by point feasible model to conjecture Amazon’s future fiscal summaries, and following esteeming its stock by use of a few techniques, such as open company tantamount, end of economic exchanges, and some income analysis  (Diehl and Bishop, 2017). Notwithstanding, to yield essential outcomes, any monetary analysis needs to be joined by a strategic review, which contemplates a critical business model, just as the more prominent picture condition, industry basics, and rivals to survey the potential for future income generation and gainfulness. Due to the limited extent of this paper, the attention lies in the money related analysis with just a short strategic analysis in the first place to give the policymakers some fundamental foundation data on Amazon. For additional reference, a point-by-point strategic analysis is provided in the Appendix.

Amazon Business Model

First and foremost,  Amazon company was established in 1994 by the current  Chairman Jeffrey P. Bezos and is in the globe’s most elevated income-generating on the web retailers with over 100B dollars annually. The company is headquartered in Seattle, Washington, and is registered on the NASDAQ Global Select Market under the image “AMZN” from the period of its first sale of stock in 1997. In 1995, Amazon did open its virtual pathways to turn into “Earth’s Biggest Bookstore” and “Earth’s Most Customer-oriented Company.” Starting with books, the company has from that time forward invested into a broad scope of goods classifications, including buyer hardware, media, advanced apps,  and clothing, wellbeing and magnificence, children items, home, and nursery, just as auto and modern. Additionally, away from the United States, Amazon has outlets in Canada, Germany, the United Kingdom, France, Italy, Spain, Japan, Mexico, India, Brazil, Australia, the Netherlands, and China.

According to Globocnic et al. (2020), apart from extending its virtual retail trade as far as new grading and geologies, Amazon additionally extended its scope of goods and services to serve clients as well as dealers, endeavors, and goods manufacturers. As to items, for instance, the company additionally makes electronic gadgets, which is a yearly participation program that involves free transporting, promotion of motion pictures, and television scenes, just as getting digital books for Kindle gadgets. In general, the company centers around an immense choice, most reduced costs, and exceptional client experience by giving simple to-utilize usefulness, quick and stable satisfaction, and timely customer assistance.

Competition Analysis

To safeguard and further broaden its market position, Amazon distinguishes choice, costing, and accommodation as the significant serious variables for its retail trade, just as quality, resilience, speed, and dependability, for its traders and undertaking administrations. Amazon’s entire image acknowledgment is indeed reflecting precisely these items, which is an uncommon blend among traders that joined with expectation and endeavors to upgrade client experience speaks to one of Amazon’s dominant upper hands. Besides, it is the minimal effort activity of its virtual stage that permits the company to give lower costs and reinforce its prominent position. All the more correctly, its satisfaction and dissemination arrange is more financially conscious and simpler to scale than having an enormous physical nearness like conventional retailers.

Furthermore, Amazon has cost preferences from the U.S. charge laws, where virtual retailers just need to gather deals assesses in states where they keep up a physical nearness. Another particularly favorable position over contenders is a supposed system impact, which is an aftereffect of Amazon’s low costs, immense choice and easy to use interface. These draw in a considerable number of clients, which thus either pull in different shippers to the Amazon stage or empower wholesalers and producers selling legitimately to Amazon (Globocnic et al.,2020). This impact is additionally strengthened through new administrations, including Amazon Prime, client audits, and item suggestions, just as an extended determination of both physical items and digital content.

PESTEL Analysis

PESTEL is a strategic scientific instrument, and the abbreviation represents political, economic, social, innovative, environmental, and lawful elements.

Political situations can influence Amazon internet business. For example, the political stability of nations such as Australia gave Amazon a chance to establish a business in its space. In real and actual sense, a stable kind of government can imply a risk to a company if the political situation is toxic. The European Union, for instance, is assessing Amazon’s company basing on the use of the client’s data who buy and sell at the Amazon marketplace. In a case whereby the controller sees Amazon as guilty of any charge in its proceedings, it can face severe outcomes. Such issues can influence Amazon as a company in terms of image and profitability.

Amazon will develop quickly if the economic conditions are specified in the regions where it is working. Retailing is a medium how makers offer their items and administrations to shoppers. Shopper purchases from retailers in any economic condition and occasionally the retail business endure even in the most noticeably terrible economic conditions.

Social factors, patterns, and proceedings can affect the image of Amazon Company largely. Amazon made individuals less active by allowing them to stay back home. At the same time, it ensured delivery systems would avail all that the customers need; for instance, movie streaming, food, and grocery deliveries (Cupepper and Thelen, 2020). The staying at the home of individuals has led to the eating of a lot of junk food that has affected the health of people, especially the children and adults in the United States of America. The government is thus inserting pressure to put all strategies of improving the lifestyle of the citizens.

Technology is very crucial to Amazon. Technology-led to Amazon being branded as one of the most profitable companies globally. Amazon is geared towards technology, in the essence of cloud web services, to satisfy the clients effectively. Amazon is banking on technology for increasing efficiency in the service delivery system. Amazon prime air is the latest development to deliver goods to customers through the use of aerial machine-like drones.

Environmental factors are crucial. Amazon, however, for instance, has not revealed essential information that is useful to ecological impact despite pressure from stakeholders and investors. Amazon has a problem with the reduction of company emissions. It is not easy to calculate the emissions from e-commerce trade ( Cupepper and Thelen, 2020). Ordering online needs less energy as compared to driving to physical stores to buy and pick commodities.

The legal factors are also fundamental.  Amazon has to comply with various laws and rules. Numerous legal issues can affect Amazon, for example, the antitrust laws, consumer protection laws, the laws of discrimination, data protection laws, and other commercial business bound acts. Counterfeit goods regulation is very crucial for Amazon for the protection of consumers. Amazon could instead take this as an opportunity to invest in quality and minimize counterfeit products on e-commerce platforms.

Valuation Metrics and Multiples

Before investigating valuation products in the accompanying areas, it is critical to comprehend the different basics that influence the value of a multiple. The fundamental truth is that multiplier models utilize fewer presumptions than limited income models, which referenced as an advantage of multiplier models previously, isn’t altogether valid. To be increasingly exact, the two strategies depend on similar presumptions.

A personal view, recommendations, and conclusion

`           Amazon is performing well economically, enjoying vast amounts of profits and has a great competitive advantage compared to the rivals. Amazon is, however, faced with serious risks that it should take care of.  From the PESTEL analysis, it shows that Amazon is facing severe social issues as far as the health of the consumers is concerned due to the lack of physical exercise and an effect on feeding habits. Amazon should factor in ways of regulating the adverse impact of this social problem, including the provision of health advice. Concerning the environment, Amazon should develop an elaborate method of computing the effects of its activities on the background to avoid questions by stakeholders and investors.

Reference

Diehl, K., & Bishop, B. (2017). Strategic Analysis of Amazon Madison Morgan November 16, 2017, MGMT 275.

Qin, X., Liu, Z., & Tian, L. (2020). The strategic analysis of logistics service sharing in an e-commerce platform. Omega, 92, 102153.

Globocnik, D., Faullant, R., & Parastuty, Z. (2020). Bridging strategic planning and business model management–A formal control framework to manage business model portfolios and dynamics. European Management Journal, 38(2), 231-243.

Culpepper, P. D., & Thelen, K. (2020). Are we all amazon primed? Consumers and the politics of platform power. Comparative Political Studies, 53(2), 288-318.