Amazon.com Business Combinations and Financial Results Analysis
Amazon.comBusiness Combinations and Financial Results Analysis
Amazon.comBusiness Combinations and Financial Results Analysis
Amazon.comprovides various services to its consumers and customers through itsretail websites. Its chief focus is on price, convenience, andselection. It operates both in North America and International. Itswebsites create a platform for the selling of millions of productsacross many product categories (Ben, 2011). It offers programs thathelp sellers advertise and sell their products on its websites aswell as on their own branded websites.
Startingwith customers and working backwards strategy is one of thestrategies that Amazon uses. The chief objective of this strategy isto offer low prices and apply them across the whole product range ina broad manner instead of discounting a small number of products fora limited period (Radtke, Fonseca, & Wiliamson, 2010). In otherwords, this strategy means that how a product is presented onAmazon.com is determined by both its pricing and availability. Whileapplying this strategy, Amazon.com pay little or no attention on howa third-party sellers feel about low-priority placement. Instantgratification strategy help Amazon.com sell books its books to Kindlein an instant manner, video on demand, and music via its MP3 store inan immediate manner (Radtke et al., 2010). International expansionstrategy further helps the company to achieve huge profits in acontinuous manner. Forty seven percent of its total revenue iscomposed of international sales. In fact, Ben (2011) argues that thetotal revenue that the company generates has a high likelihood ofincreasing in the future. U.K, France, Germany, and China are some ofthe company’s international segment. In 2007, the company’sinternational segment brought in 8.46 billion dollars (Maslin &Burns, 2009). According to Ben (2011), the company continues to sellit general merchandise and electronics abroad. Approximately eightyears ago, more that ninety percent of Amazon’s internationalbusiness were made of media sales. The percentage from media salescontinue to increase in an appreciable manner. For instance, in 2007,media sales brought in about 5.5 billion dollars, which was 66percent of the overall sales (Lemos, 2013).
Financialvalue of the acquisitions and investments made by Amazon.com
Overthe past years Amazon.com has made several acquisitions andinvestment however, it seem to favor making various investments incompanies as well as marketing agreements with the companies thatthey agree to venture into or invest in. Lemos (2013) posits thatmost of these acquisitions have tended to be companies that utilizesmaller technology since they enhance web-based or consumer shoppingretailers that broaden product offerings in quite a large way. Infact, most of these companies are too small to small to require valuedisclosure. Some of its transactions were made in a public mannerwhile others were carried out privately. In 2004, Amazon purchasedJoyo.com-the largest web retailer for videos, music, and books inChina by that time- at 75 million dollars (Maslin et al., 2009). Italso acquired Brilliance Audio, Inc on 23 May 2007 the company wasthe largest independent publisher of audio books in U.S prior to itsacquisition by Amazon. It also acquired Zappos in July 2009 at 1.23billion dollars. Zappos is the leading online purveyor of footwear(Ben, 2011). Again, by the end of 2011, Amazon acquired or purchasedtwo technological companies for undisclosed amount of money. One ofthese companies, Yap Inc., deals with the development ofspeech-to-text technology while the other company Quorus allowsconsumers to weigh various buying options through social media. This,in turn, has made Amazon enhance its consumer experience regardlessof whether it is product or shipping price or availability. Thecompany however, has invested in some companies that have made itincur quite an appreciable amount of loss. For instance, in the late2010, it paid 175 million dollars for a thirty four percent stake inLivingsocial.com and since the Livingsocial has experienced immenseloss as well as suffered bigger competition in the marketplace(Lemos, 2013).
Effectof the Amazon’s equity investments and impairments
Amazon’sacquisition of Kiva has made it shine and excel in a huge manner. Inaddition, Kiva’s success has attracted many investors interested inthe production and development of next-generation industrial robotsas well as spurred the venture that is paramount in thesustainability of development. It operates with razor-thin marginseven without any costly storefront real estate. In fact, it has highreturn on equity that come from extremely low investments ininventory and efficient use of assets as compared to other retailers.In 2009, Amazon net sales were reported as 25,509 million dollarsthis was a notable increment compared to the 19,166 million dollarsreported in the year 2008 (Lemos, 2013). Amazon.com cost’s ofrevenue in 2009 was 18,978 million dollars hence, its total grossprofit was 5,531 million dollars ($24,509- $ 18,978) (Ben, 2011).Total operating expenses for Amazon.com in the year 2009 includedadministrative, technology and content, fulfillment, and marketingand they added up to 4,402 million dollars. Amazon’s bottom line ornet income was 902 million dollars, in 2009, (operating income –(interest expenses + income taxes)). Additionally, Radtke et al(2010) notes that Amazon’s gross profit margin was 22.57 percent in2009 since 5,532 divided 24, 509 gives a total of 22.57 %, while itsnet profit margin was 3.7 percent ($902/24,509).
Indeed,growth in the European market can have a significant impact ocurrents earnings and profit for Amazon company since it will be ableto market and sell its products to a wide range of consumers andcustomers.
Ben,R. (2011, Jan 21). Amazonbuys remainder of LoveFilm.TheWall Street Journal Eastern Edition,1.
Lemos,M. (2013). EnvironmentalPolicy-Making Networks and the Future of the Amazon.PhilosophicalTransactions: Biological Sciences,363, (3), 1897-1902.
Maslin,A.M & Burns, S.J. (2009). Reconstructionof the Amazon Basin Effective Moisture Availability over the past14,000 Years. NewSeries,290 (2), pp. 2285-2287.
Radtke,M. G Fonseca, R.V & Williamson, G.B. (2010). TheOld and Young Amazon: Dung Beetle Biomass, Abundance, and SpeciesDiversity. Biotropica,39 (6),725-730.