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AMAZON.COM INC

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AMAZON.COM INC Prepared by: Anh B. Ho, Ban Vuong, Bich Le, Henry Tse, Jimmy Sales IVc. Corporate Resource: R&D Lab126 An innovative consumer-focused startup company ... – PowerPoint PPT presentation

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Title: AMAZON.COM INC


1
AMAZON.COM INC
  • Prepared by Anh B. Ho, Ban Vuong, Bich Le, Henry
    Tse, Jimmy Sales

2
I. Company Review
  • Amazon.com, Inc. is a publicly traded e-commerce
    company with many diverse product lines.
  • Current Mission Their mission is to enable
    their consumer customers to find and discover
    anything they might want to buy online, and
    endeavor to offer the lowest possible prices.
  • Current Performance Objectives - Their current
    and long-term objective has been to sustain
    growth in free cash flows per share. This can be
    achieved by increasing operating income and
    efficiently managing working capital and capital
    expenditures.

3
Ia. Brief History
  • Amazon.com, Inc started in 1994, founded by Jeff
    Bezos.
  • They launched on the World Wide Web until 1995.
  • Amazon.com began as an online bookstore but soon
    diversified its product lines.
  • Since then theyve been seeking to become the
    worlds most customer-centric company for
    consumers, sellers, and developers.

4
Ia. Brief History
  • They have three primary customer sets
  • Consumers
  • Sellers
  • Developers
  • They serve consumers customers through their
    retail websites.
  • They offer programs that enable seller customers
    to sell their products on their website.
  • Lastly they serve their developer customers
    through their web services that provide access to
    technology infrastructure that developers can use
    to enable virtually any type of business.

5
Ib. Corporate Strategy
  • Throughout Amazons history they have maintained
    a high growth strategy through geographical
    expansion, and increased efficiency and
    satisfaction of their products.
  • They have been continuously enlarging their
    network capacity to accommodate their growing
    appetite.
  • This includes the acquisitions of many similar
    companies in different markets to help lift their
    expansion.

6
Ic. Competitive Strategy
  • Nature of Market
  • Consumers retail online store with wide
    selection of products
  • Businesses web developing tool for other
    e-commerce business
  • Geographic Coverage
  • Amazon covers all of North America and is
    expanding internationally.
  • Methods of Growth
  • They have expanded externally through broadening
    their markets both domestically and
    internationally.
  • Their technological developments have allowed
    them to grow tremendously and support more users
    internally.
  • Over the years theyve been investing and
    acquiring many businesses both publicly and
    privately to help them expand and better reach
    their markets.

7
Ic. Competitive Strategy
  • Cost Leadership
  • Broad Market market to the mass with
    competitive pricing
  • Degree of Customization
  • Amazon.com offers standard products to retail
    consumers
  • Amazon.com offers customizable e-commerce
    solution for their developers.
  • Pricing Level
  • Amazon exercises a competitive pricing level (23
    average margin), through the use of their
    numerous seller customers.
  • Credit
  • They do not own any of their real estate all of
    it is leased. This includes their corporate
    offices, werehouses, and customer service
    facilities both in North America and
    International.

8
Ic. Competitive Strategy Promotion
  • Advertising media - Amazon primarily advertises
    online and through their online affiliates
  • Print Although, only a small portion of their
    advertisement budget is in print media, they do
    endorse direct mail and newspaper advertisements.
  • Radio TV The first and last time they
    employed television advertisement was in 2002,
    since then they realized that their resources
    would be better allocated on improving customer
    experience.
  • Promotion emphasis - Amazon uses a combination of
    both a push and pull strategy
  • Push They pay commissions to participants in
    their associates program for their click-through
    customer referrals and customer referrals
    resulting in product sales
  • Pull They use a pull strategy that stimulates
    consumer demand directly through their many
    online advertisements

9
Ic. Competitive Strategy Finance
  • Source of funds
  • Short Term Liabilities They have a relatively
    higher amount of short-term debt comparatively.
  • Long Term Liabilities They have an average
    amount of long-term debt compared to its
    competitors and industry.
  • Retained Earnings They have a negative retained
    earnings, but not the most in its industry.
  • Net Stocks They have the most shares
    outstanding compared to its competitors and
    industry.
  • Dividend Payment
  • None Amazon does not pay out any dividends.

  Short-Term Liability / Total Assets Long-Term Liabilities / Total Assets Retained Earnings / Total Assets Net Stocks / Total Assets
Amazon 57.27 19.77 -21.20 0.06
Ebay 20.17 3.32 27.27 0.01
Overstock 38.60 42.38 -133.84 0.00
10
Ic. Competitive Strategy Research
  • Differentiation
  • They differentiate themselves through the use of
    the patented technology they offer to their
    developer customers.
  • Research Development Leader approach
  • Their aggressive research and development is the
    reason for their success and why they are the
    leaders in their industry.
  • They have continuously been able to develop new
    technology for the online retail industry that
    would make shopping online more consumer friendly
    and producer efficient.
  • Their best praise has been their development of
    the one-click process which, allowed for the
    remembering of returning customers.
  • This eliminated the hassle for the customers to
    re-enter their information every time they wished
    to make a purchase.

11
IIa. Review Stock Performance
Stock performance chart comparing Amazon with
SP500 eBay Duration 3 Years Frequency
Monthly
12
IIa. Review Stock Performance (cont.)
Stock performance chart comparing Amazon with
SP500 and Barnes Nobles Duration 3 Years
Frequency Monthly
13
IIb. Review Sales
14
IIb. Review Income
15
IId. Review Earning on Investment
16
IIe. Review Profit Ratios
17
IIf. Review Common Size Income
Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement Common Size Income Statement
  2007     2006     2005     2004     2003  
Amazon BN eBay Amazon BN eBay Amazon BN eBay Amazon BN eBay Amazon BN eBay
Operating Revenue (Revenue/Sales) 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Cost of Sales 77 69 23 77 69 21 76 69 18 77 73 19 76 73 19
Gross Operating Profit 23 31 82 23 31 85 25 31 88 24 27 87 25 27 85
RD 6 - 8 6 - 8 5 - 7 4 - 7 4 - 7
Selling, General Administrative Expense 13 23 40 13 22 44 14 22 40 13 19 39 12 18 40
Operating Income before Depreciation (EBITDA) 4 5 8 4 5 24 5 5 32 6 6 32 5 5 29
Interest Income 1 - 2 1 - 2 1 - 2 - - 2 - - 2
Other Income, Net - - - - - - 1 - - - - - -2 - -
Special Income/Charges - - -18 - - - - - - - - - - -1 -1
Total Income Available for Interest Expense (EBIT) 5 5 10 4 5 26 6 5 34 7 5 35 3 4 31
Interest Expense 1 - - 1 - - 1 - - 2 - - 2 - -
Income before Taxes (EBT) 4 5 10 4 5 26 5 4 34 5 5 34 1 4 31
Income Taxes 1 2 5 2 2 7 1 2 10 -3 2 11 - 2 10
Minority Interest - - - - - - - - - - - - - - -
Net Income Continuing Operations 3 3 5 2 3 19 4 3 24 9 3 24 1 2 21
Net Income from Disc. Operations - - - - - - - - - - - - - - -
Net Income from Total Operations 3 3 5 2 3 19 4 3 24 9 3 24 1 2 21
Extraordinary Income/Losses - - - - - - - - - - - - - - -
Income Cum. Effect of Acct. Chg. - - - - - - - - - - - - - - -
Income from Tax Loss - - - - - - - - - - - - - - -
Other Gains/Losses - - - - - - - - - - - - - - -
Total Net Income 3 3 5 2 3 19 4 3 24 9 3 24 1 2 20
18
III. Corporate Decision Makers
  • The ratio of the internal vs. external directors
  • 1 internal v.s. 7 external, 1/8 or 12.5 internal
  • Board committees their membership
  • Executive Committee Jeffrey Bezos (only
    internal member)
  • Audit Committee Tom Alberg, Thomas Ryder,
    Myrtle Potter
  • Leadership Development and Compensation Committee
    William Gordon, Patricia Stonesifer
  • Nominating and Corporate Governance Committee
    John Doerr, John Brown Ph.D.

19
III. Corporate Decision Makers
  • Executive Officers their Positions
  • Jeffrey Bezos, President, CEO and Chairman of
    Board
  • Jeffrey Blackburn, Senior VP, Business
    Development
  • Sebastian Gunningham, Senior VP, Seller Services
  • Andrew Jassy, Senior VP, Web Services
  • Steven Kessel, Senior VP, Worldwide Digital Media
  • Marc Onetto, Senior VP, Worldwide Operation
  • Diego Piacentini, Senior VP, International Retail
  • Shelley Reynolds, VP, Finance and Controller
  • Thomas Szkutak, Senior VP and CFO
  • Brian Valentine, Senior VP, Ecommerce Platform
  • Jeff Wilke, Senior VP, North America Retail
  • Michelle Wilson, Senior VP, General Counsel,
    Secretary

20
IIIa. Directors Compensation 2006
  • Tom Alberg
  • 46,544 30,000 shares vested Nov. 2007
  • John Seely Brown
  • 195,930 12,500 shares vested by June 2009
  • L. John Doerr
  • 46,544 30,000 shares vested Nov. 2007
  • William B. Gordon
  • 110,705 30,000 shares vested April 2008
  • Myrtle S. Potter
  • 173,858 12,500 shares vested by April 2009
  • Thomas O. Ryder
  • 54,301 35,000 shares vested Nov. 2007
  • Patricia Q. Stonesifer
  • 46,544 12,500 shares vested by June 2009

21
IIIb. Officers Compensation 2006
Summary Compensation Table Summary Compensation Table Summary Compensation Table Summary Compensation Table Summary Compensation Table Summary Compensation Table Summary Compensation Table Summary Compensation Table
Name and Principal Position Years Salary Bonus Stock Awards Option Awards Other Total
Jeffrey P. Bezos (CEO) 2006 81,840 - - - 1,200,000 1,281,840
Thomas J. Szkutak (SVP and CFO) 2006 150,000 450,000 1,255,700 - 2,993 1,858,693
Richard L. Dalzell (SVP CIO) 2006 211,502 - 1,615,718 1,642,614 - 3,469,834
Diego Piacentini (SVP, International Retail) 2006 175,000 - 1,512,893 404,748 55,905 2,148,546
Jeffrey A. Wilke (SVP, North America Retail) 2006 155,000 - 1,818,005 404,748 3,162 2,380,915
22
IIIc. Efficiency Sales per Employee
23
IIIc. Efficiency Account Recievable
24
IIIc. Efficiency Inventory
25
IIIc. Efficiency Asset
26
IV. Internal Environment
  • Corporate Culture
  • Technological innovative driven
  • Customers oriented
  • Corporate Structure
  • Started as Simple then changed to Divisional
  • Divisions include
  • Seller Division
  • Consumer Division
  • Developer Division

27
IVa. Corporate Resources Physical
  • Physical Resources
  • Buildings lease only(14 million square foot)
  • Inventory only 19 of its total assets
  • Employees 17000 by Dec 2007

28
IVa. Corporate Resources Organizational
  • Organizational Assets
  • Differentiation attained a good brand name
    recognition plus a customer oriented culture
  • Cost leadership offer free shipping and low
    markup price.
  • Focus strategy Amazon primarily focuses on
    outstanding customer service as a niche to
    enhance its competitive advantage and expand its
    growth.

29
IVa. Corporate Resource Financial
  • Common Size Balance Sheet 2003-2007

Dec-07 Dec-07 Dec-07 Dec-06 Dec-06 Dec-06 Dec-05 Dec-05 Dec-05
Amazon EBay BN Amazon EBay BN Amazon EBay BN
Cash and cash equivalents 39 27 11 23 20 12 27 11 16
Short-term investment 9 4 0 23 4 0 27 7 0
Receivable 11 6 3 9 6 3 7 5 3
Inventories 19 0 42 20 0 42 15 0 38
Other current assets 2 9 4 2 7 2 2 4 3
Other Non Current Assets 9 2 4 8 2 4 7 7 5
Net Property and equipment 8 7 25 10 7 26 9 7 24
Intangible assets 3 45 11 4 54 11 4 59 11
Dec-04 Dec-04 Dec-04 Dec-03 Dec-03 Dec-03
Amazon EBay BN Amazon EBay BN
Cash and cash equivalents 40 17 7 51 24 14
Short-term investment 15 10 0 14 6 0
Receivable 6 5 1 6 5 2
Inventories 15 0 34 14 0 44
Other current assets 2 5 15 0 2 3
Other Non Current Assets 10 16 14 2 19 1
Net Property and equipment 8 9 21 10 10 20
Intangible assets 4 38 7 3 34 17
30
IVa. Corporate Resource Financial
  • Liquidity Ratios Strength

31
IVa. Corporate Resource Financial
  • Leverage Ratios Weaknesses

32
IVb. Corporate Resource Operation
  • Operational Strength
  • Computerized and Automated Shipping and Handling
    process
  • Computerized tracking of Inventory

33
IVc. Corporate Resource RD
  • Research Development Strength
  • Make a products or line of products that will be
    interest by customers
  • Attempt to come up with new technology applied to
    solve real problems.
  • Concentrate on the developer customer section
    which provide them many good products

34
IVc. Corporate Resource RD
  • Lab126
  • An innovative consumer-focused startup company
    located in Cupertino, CA. We design and develop
    easy-to-use, highly integrated consumer products
    to serve Amazon customers.
  • The degree of RD intensity intense
  • Spent 818 662 mil in 07 06 respectively which
    is 5.51 and 6.18 of total sales

35
IVd. Corporate Resource Marketing
  • Marketing Strength
  • Products
  • Retail Books, Electronics, Apparels, etc.
  • Developers Business solutions and services
  • Price Competitive, average margin 23
  • Promotion
  • Retail Free Shipping on many items
  • Developers Free web services with purchase of
    business solution
  • Place Amazon.com has warehouses located all over
    the world at high traffic, high population
    locations.
  • Marketing Weaknesses
  • Weak brand association, too many products and
    specialties

36
IVe. Corporate Resource Human
  • Human Resources
  • Diversity
  • Equal Opportunity Employment
  • Not Unionized
  • Quality of Work Life
  • 2007 Fortune 100 Top MBA Employers Companies

37
IVe. Corporate Resource Human
  • Employees at Amazon.com are well compensated
  • Amazon gives employees ownership in the company

Median Salary by Job at Amazon.com
Median Salary by Job in Industry
Median Salary by year of experience at Amazon.com
38
Training of Customer Service Representative (CSR)
39
IVe. Corporate Resource Info. Tech.
  • Information Technology Strength
  • Leader in e-commerce
  • Easy to use and innovative website
  • Secure encryption to protect customer
  • Leader in e-business solutions/services

40
V. External Environment
  • Task Environment
  • Competitors
  • Potential Entrants
  • Substitute Product/Services
  • Customers (Buyers)
  • Suppliers
  • Other Interest groups
  • Societal Environment
  • Socio-cultural Forces
  • Political/Legal Forces
  • Technological Forces
  • Economic Forces

41
Va. Task Environment
  • Threats
  • Competitors
  • Ebay
  • Barnes Nobles
  • Buy.com
  • Substitutes
  • Overstock.com
  • Halfprice Bookstore
  • Many can start an e-commerce website with a
    computer and internet access
  • Customers and clients
  • Loss of direct physical interaction
  • Approaching recession
  • Suppliers
  • Transportation price increase
  • Opportunities
  • Competitors
  • Offer partner opportunities
  • Consumers can be sellers on Amazon.com
  • Acquisition
  • Customers and clients
  • More people have access to internet
  • Low interest encourage credit cards usages
  • Suppliers
  • Outsource and globalization

42
Vb. Societal Environment
  • Threats
  • Economical
  • Inflation in U.S.
  • Low Disposable Income in U.S.
  • Higher energy cost
  • Recession in U.S.
  • Technological
  • Data Security
  • Political-Legal
  • Environmental protection
  • International regulation
  • Online Taxation
  • Privacy Proprietary shared
  • Socio Cultural
  • Green consumers
  • Older population in US/Japan
  • Opportunities
  • Economical
  • Low Dollar Value encourage oversea business
  • New emerging overseas market
  • Technological
  • Rapid internet availability
  • Cheaper broadband
  • Political-Legal
  • Chinas complete foreign ownership
  • China moves toward high tech manufacturing
  • Indias ownership partnership
  • Socio-cultural
  • Online lifestyle
  • Population growth rate

43
Vc. Threats Summary
  • Short term
  • Slowing Economy in U.S.
  • Retailers saw lowest sales in 7 years in March
    2008
  • Increase Transportation Cost to Suppliers
  • Gas price is more than 4.00 in many cities
  • High inflation in U.S.
  • 4.28 in January 2008
  • Long Term
  • Aging Population in U.S.
  • By 2010, only 1/3 of US population will be under
    35, majority will be over 45 years old
  • Low Barrier to Entry
  • Low cost to start e-commerce business
  • Free open source e-business solutions

44
Vd. Opportunities Summary
  • Short Term
  • Low Interest Rate
  • Federal base rate of 2.25 after March 18, 2008
  • Rapid Growth in Internet Accessibility
  • 70.2 of US population has internet access
  • 20.8 of that have access to broadband
  • Long Term
  • New Emerging Markets
  • China, Vietnam and India are growing rapidly
  • China surpassed U.S. in Internet usage
  • India disposable income expect to reach 3,033 in
    2008 (Economist Intel. Unit)
  • Online Lifestyle
  • Mobile phone internet access growth with double
    digits
  • More people spend more time online

45
Ve. Threat Mitigation Actions
  • Aggressive competition
  • Improve on end-user experience/relationship
  • Widespread substitutes
  • Employ customer-focused practices
  • Loss of physical interaction and sense of loyalty
  • Streamline transaction process build on
    relationship
  • Increased cost of transportation
  • Vigilant on events/performances implement
    real-time management

46
VI. Alternative Solutions
  • Alternative 1
  • Amazon.com should strengthen their company's
    name/image by strengthening their
    developer-customer department by partnering with
    University and large businesses in training
    programs and text books.
  • Alternative 2
  • Currently, Amazon.com, Inc. do not have life
    insurance on Jeffrey Bezos. Amazon need to have
    a plan to ensure smooth continuation in case
    anything happened to Jeff
  • Alternative 3
  • Expand into emerging markets such as Asia and
    India, with low interest rate and rapid increase
    in internet accessibility worldwide, this is a
    good time to capture more market shares in new
    markets.

47
VII. Recommendation
  • We recommend that Amazon.com, Inc. should take
    this opportunity to expand their reach into
    emerging markets.
  • Risk uncertainty, newly developing countries,
    higher cost to build infrastructure
  • Gain new market with large population, less
    competition

48
VIII. Implementation
  • Invest in local infrastructure to increase
    internet access
  • Partner with local school and businesses to
    provide training and books to build skilled work
    force
  • Provide E-business solutions to manufacturers to
    sell their goods directly to consumers worldwide
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