Amazon.com: Business Model and its Evaluation Case Study Help
Opportunities:
- Through roll out the online system of the payment, Amazon upholds the capability of scaling up considerably. Thus, using own payment system would significantly bring a reduction in concerns such as privacy and securityin online shopping.
- Rolling out more products under the name of its own brand despite considering the third party-sellers would result in the increased products of its own.
- Improvement in the portfolio offerings which would be comparatively more than other competitors lead to the strengthening of the position resulting in higher revenue growth.
- In terms of global expansion, the launch of one or more websites in the evolving market would possibly provide it a competitive edge in the growing retailer industry.
Threats:
- The key threat in the way of Amazon’s success is its increased concern of the change in the trends of online shopping due to the identification of theft and hacking leading to exposure of consumer data.
- Theaggressive strategy of pricing has made the organization to face lawsuits from the publishers and the competitors.
- The cost leadership has been beneficial for the organization, but the obsessive focus associated with continuous investment would lead to financial stability.
- Due to the decrease in revenue growth, the stakeholders would demand the profits for which they had been patient so far.
Financial Analysis:
According to the comparison of the ratio analysis of Amazon for the years 2013 and 2014, the 2 percent increase in the gross margin of Amazondemonstrating growth in 2014 as compared to 2013 i.e. from 27 percent to 29 percent.The increase in the gross margin represented efficient management of operations by the organization as well as low production cost, an increase in the sales price. A significant decline in the profit margin from 0.4 percent to -0.3 percent had demonstrated a decline in the profitability and performance level. This is mainly due to the smaller difference in expenses and revenue.
Similarly, the operating margin of amazon has significantly represented a 0.8 percent decline as compared to 1 percent of 2013 in 2014. This is due to the increase in the general and administrative expenses and the proportion of selling based on the recent business expansion at the international level. (A. Ahamat1, 2017)On the other hand, the increase in the TIE ratio from 0.19 to 1.18 in 2013 and 2014 respectivelydemonstrated the ability of Amazon to meet its interest obligation due to increased earnings. But, for Amazon, due to increased interest expense as compared to the ratio of its earning which is mainly used for consistent investment opportunities.
Recommendation:
Based on the internal and financial analysis of Amazon, Amazon significantly demonstrates the capability to increase its revenue generation. Considering the fact that the consumer base of Amazon is quite large due to its global presence and low price of products. The key concern associated with the performance of Amazon mainly involves a decline in sales and low revenue growth. Due to the continuous changes of the retailer industry and high investment by the competitors in the market, there seems a requirement of arecord-breaking launch of product through the use of advanced and innovative technological approaches. This can significantly be done by thinking out of the box and taking the feedbacks, demands and needs of the consumers under consideration by conducting a survey. (IMRAN, 2014 )
Similarly, the maintenance of the relationship with Stakeholders is required for the strong working network. Although Amazon has significantly achieved the economy of scale through creativity, innovation and smart use of technology but the IT infrastructure require significant improvement to remain competitive. Additionally, bringing improvement in the General Data Protection Rules implementationwould lead to increased trust and loyalty of customers. Lastly, Amazon need to focus on the opportunity of investment before persuing it which would result in fewerexpenses and increased revenue growth. (Kandemirli, 2018 )
Action Plan:
Considering the recommendations with respect to the challenges faced by Amazon such as the decline in increased revenue generation. Amazon first needs to evaluate the organizational performance in order to be aware of the financial stability of the organization and determination of the key gap areas which restrict the revenue growth. After the identification of the key gap areas, Amazon should take measures inimproving the IT infrastructure to make it inimitable by the other players in the market. Due to increased competition and day by day changes in the trends of the retailer industry, Amazon should invest its time and money in the improvement and manufacturing of new, innovative products with respect to the needs and demands of the customers. Additionally, before the launch of the product, Amazon should do a prototype in terms of evaluating the consumer responseand this would result in the need to either modify or improve the product features before manufacturing a bulk amount.....................
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