Team Executive Summary
Case Statement:
Amazon faces the fact of not opening and building a new headquarters in the state
of New York due to limited state and local relationships between Amazon and the
state’s elected officials.
Mission and Vision Evaluation:
To be earth's most customer-centric company; to build a place where people can
come to find and discover anything Amazon might want to buy online.
Amazon is guided by four principles: customer obsession rather than competitor
focus, passion for innovation, commitment to operational excellence, and long-
term thinking.
• Customer Obsession
• Ownership
• Invent and Simplify
• Learn and Be Curious
• Hire the Best
• The Highest Standards
• Think Big
• Bias for Action
• Earn Trust
• Deliver Results
Amazon has a great mission and vision statement; however, the mission and vision
statements lack some key components that would show case the company as a
whole and inform their employees about the values of the business. The mission
statement is the use of technology, and the overall nature of the business. The
vision statement could provide more insight to employees, such as including; its
new services and promoting its brick-and-mortar stores.
Milestones:
• 1995: Amazon sold its first product – a book titled “Fluid Concepts and
Creative Analogies” by Douglas Hofstadter. The book was sold from Jess
Bezos’ garage, where Amazon was first running business.
• 2005: Amazon unveils Amazon Prime in. Amazon Prime is a $79 annual
customer loyalty program. This program provides many benefits for loyal
customers such as free overnight shipping and early access to products.
Amazon Prime has been proven to be one of the most valuable assets of
Amazon.
• 2018: Amazon raised minimum wage to $15 an hour for all US employees.
This pay increase will positively affect the hundreds of thousands Amazon
workers.
Internal & External Assessments
External Assessment:
• So far, Amazon has been able to strategize efficiently to take advantage
opportunities and avoid threats. But, there is still room for improvements.
Internet expansion increasing e-commerce markets, potential depth in the
Asia and the Pacific, and an increase in tech savvy shoppers are important
factors that Amazon should be taking advantage of. Amazon faces many
threats that could potentially harm the company. Capable and comparable
online competition and ease of entry into the market are among their greatest
threats. Amazon has a great opportunity with their bargaining powers
between customers and supplies. If Amazon loses a few customers, it will
not hurt their business because they are acquiring new customers every day.
Suppliers are willing to accept any negotiations just to do business with
Amazon.
Internal Assessment:
• Amazon operates within a strong brand name, company culture and high
sales. Amazon has been doing great in the market with their existing services
and newly created services while avoiding the risks. Amazon’s strong brand
name and great customer service is a reason for their rapid growth and
continued success within the industry. However, Amazon has major
weakness with increasing shipping cost on certain products and not keeping
their shipping costs streamlined across all goods and services, and new
ventures of introducing products with no relevance. Amazon can defeat the
odds of their weakness through their venture to ship items 7 days a week and
conducting business with local carriers.
Industry Analysis
• The intensity and rivalry among competing firms is very high. Amazon has
been dominating their market for years, with competition such as Apple and
Wal-Mart, Amazon manages to stay ahead of competition. One reason that
Amazon is always ahead of their competition is their use of technology.
Amazon having its own web services (Amazon Web Services, AWS), the
business can capitalize from their technology and allow their competitors to
pay for utilizing their software.
• The barriers of entering into Amazons online market are very low. Amazon
faces the risk of new entrants into their market because Amazon can’t
compete with more niche businesses and businesses offering more
personalized products. Smaller companies are entering the market because
they can provide smaller, personalized goods at the same or cheaper prices.
Amazon must take concrete steps to discourage new entrants.
• Amazon’s suppliers don’t have much power, as there is a large amount of
available suppliers and a vast span of online global distribution. The
suppliers are almost begging to work with a business giant such as Amazon;
therefore, suppliers are willing to pay any amount of money just to do
business with Amazon.
• Customers have a major buying power with utilizing Amazon and their
services. Amazon has so many existing customers and drives new customers
to their website on a daily basis. Amazon’s revenue continues to increase
each year, allowing customers to drive prices down through such programs
as Amazon’s Prime membership, where loyalty customers benefit from
many perks such as free shipping.
• The threat for substitutes for Amazon is not major problem. The
substitutions for Amazon are brick and mortar retailers, branded outlets,
discount shops, and stands. Amazon stands out against their threats because
of their wide variety of products, services, third party vendors and internet
traffic control.
Financial Analysis
The three most important financial ratios for Amazon are:
• Sales Growth Rate- Amazon’s growth rate is close to 30% because of they
have stood on the forefront of e-commerce and on-line book publishing.
Amazon continues to make capital investments using cash flow from
operations and their debt to equity ratio.
• Profit Margins- Amazon focuses on top line profit margins because the
business believes that increasing market share will decrease prices.
Amazon's operating margin and net profit margin are a mere 1.71% and
0.35%, respectively.
• Valuation Metrics- Amazon’s valuation metrics (price-to-earnings and price-
to-books ratios) surpass metrics of their competition. In their current market,
most companies would have a P/E and P/B in the teens and Amazon’s P/E
and P/B are 900 and 30. This means that Amazon needs to level out their
ratios through shifting their operation from sales-focused to earning-focused.
Amazon’s Strategies
Competitive Strategies
• Unrelated diversification would be a recommended strategy for Amazon.
Unrelated diversification strategy is the process of organizations acquiring
other successful unrelated businesses across different industries.
• The corporate or business strategy that is recommended for Amazon is
Differentiation Strategy (Type 3). This would be the most suitable for
Amazon as in this strategy allows a business to charge more for its products
and gain consumer loyalty because consumers may be attracted to the
business’ differentiation features.
• Building business relationships with local and state officials to better
understand the region and location of which Amazon is seeking to integrate
a new headquarters. This would be a great strategy for Amazon to integrate
into new local and foreign markets.
Recommended Strategy
• The recommended strategy would be for Amazon to create and sell more of
their own products, such as a cell phone. This is the best strategy because
Amazon is already leading in voice, with the Amazon Alexa and Echo Dots.
If they were to introduce a cell phone that could pair with other voice
activated products, they would have a competitive advantage. By creating
their own smart phone, Amazon would have the goods sold under their
name, rather than an outside vendor.
Ethical and Social Responsibility Dimensions of the Recommended Strategy:
• Amazon has an ethical responsibility for their customers and the
environment. They are responsible for providing customers with low priced,
high quality products with excellent customer service. While products are in
their hands, Amazon must take appropriate care of the product, safely
delivering it and causing no damage. Amazon also has an ethical
responsibility of providing their workers with suitable working conditions.
Implementation Plan
• Amazon currently has enough revenue to finance new business
opportunities. The implementation to integrate smart phones into their
business brand is a huge project. The cost of the integration project is slated
around 150 million dollars. With Amazon having control over their debt,
there is room for Amazon to expand into creating and innovating cell
phones. Financial managers and their teams have been hand-selected to
produce financial documentations to finalize all cost of the final project and
to ensure that funds for the project are appropriately disbursed.
