Nov 19, 2020 in Analysis

Assignment 1: Amazon.com Business Combinations and Financial Results Analysis
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Amazon.com is an online retailer company that is performing very well in the market and is currently number 15th largest in America by revenue. It is also the largest Internet retailer. Amazon.Com sells items like music, books, DVDS, videos, toys, electronics, software, books, home improvement products, video games and software (Spector, 2000). It was established by Jeff Bezos in July 1995 and now serves approximately 22.5 million customers in more than 150 different countries.

Amazon.com Products and Services

 

Amazon.com is simpler than an ordinary book retailer firm and its customers pay less for the products, receive better customer care services and save on time since there is no queuing when purchases are being made. Additionally, Amazon.coms technological innovation enables it sell many types of products at low prices and more conveniently (Stanley, 2001). The customer care service is available to the customers 24/7.

Growth Strategy Alternatives Utilized by Amazon.com

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in the Global and Domestic Retail Markets

Notably, the new economy is based on the technology and marketing. A strong technological platform enables a business compete favorably with others in the same market. Amazon.com embraces new technology and has adopted the strategy of technology and marketing. This strategy has enabled it to develop specialized unique software in its business and has also acquired commercially developed technology. An example of e-commerce innovation development includes the 1-Click technology, user search and browse features that are user-friendly, wireless access to the business stores, safe payment and shopping services that are personalized (Schepp & Schepp, 2009). Amazon has developed its own cloud computing services enabling customers to access computing storage and the power of computing. This strategy has strengthened the Amazon.com brand name, increased the number of customers in their web pages and has also built customer loyalty due to repeated buys.

The second strategy used is a profit plough-back method, where the founder invests back into the company all the companys earnings. Amazons stock price has increased to 234% in the last five years thus elevating the value of the company to $ 120 billion. Amazons sales have tripled to over $60 billion each year whereby its profits stay flat. Jeff Bezos is committed to the long-term growth of the company. The company also grew from $4 billion in 2002 to almost $20 billions in 2008.

The third strategy employed is the investment in the type of infrastructure to make it swift in offering its services, for example offering of the same-day delivery of its products. The company is set to increase its fixed costs. The brick-and-mortar retail has enabled the company to leverage its main strength. The instant service makes Amazon unique thus attracting many customers.

Acquisitions and Investments Made by Amazon.com

Amazon.com Acquisition of Fabric.com (June 25, 2008)

Online Store Fabric.com offers cut fabrics, custom measured fabrics, patterns as well as sewing tools. The acquisition enabled Fabric.com to expand its selection further in order to supply its customers with a wide range of products.

Amazon.com Acquisition of Snap Tell (2009)

SnapTell was acquired by a subsidiary of Amazon.com, A9.com. Earlier on, SnapTell has been a leading visual product search technology and gave solutions that could in turn be used to deliver reviews, prices of products and relevant information to those interested customers. SnapTell solutions became the most downloaded Android and iPhone application.

 
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Amazon.com Acquisition of Zappos.com (July,2009)

Zappos.com is a leader in online footwear and apparel sales and strives to provide customers with the best service. Like Amazon.com, Zappos.com also embraces culture of innovation and setting of long-term goals. The terms of agreement saw the Amazon.com get all the outstanding shares and take up all the outstanding warrants and options of Zappos.com. Zappos.com received around 10 million shares of Amazon common stock, which is about $807 million, based on the average closing for 45 days of trading that ended on July 17, 2009. Additionally, employees of Zappos.com got $40 million in cash and restricted stock units.

Amazon.com Acquisition of Withoutabox (Jan, 2008) and Audible (March, 2008)

Withoutabox is global media company that aims to advance independent films and also creates a connection between artists and audiences.

Audible provides online audio information and entertainment. When the acquisition of Audible was closed, it was bought by Amazon.com at $11.50 per share thus Amazon achieved the whole ownership of Audible.

In Amazon, the goodwill for impairment is evaluated annually and when an event occurs. The goodwill for impairment is tested by first comparing net assets book value to the related operations fair value. Fair value is estimated through discounted cashflows of the reporting values (United States Securities and Exchange Commission, 2012 ). Amazon.com possesses strategic investments that warrant it to purchase equity securities of other companies.

The amount of compensation received by Amazon after its acquisition of other companies partially depends on the other companies sales volume. The alliances developed sometimes lead to disruption of its continuing business, impairment of relationship and difficulty of integration under commercial agreements made. Amazon can also suffer operating losses and expenses, while the acquired technology might be difficult to integrate. The company may acquire potential unknown liability through other companies and additional risks might also arise from foreign transactions due to varying culture, political ideologies and regulatory risks in the country where the company affiliated is based.

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European Market Growth and its Significance on Current Earnings and Profit for Amazon.com

The growth of European market has led to the appreciation of values for shares. Notably, the rise in demand for Amazons share supported by its competitive advantage over other companies will create a room for raising the value for shares without disappointing the buyers. Raising the share value will further increase the companys earning and profit while ensuring that buyers have a value for their money from the shares purchased.

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