Final Group Case Project
(Report)
Amazon.com, Inc.
Report by: Olivia Singh, Olamide Esther Abraham, Abdul Moiz Tareen, Anthony Odushola,
Haitham Al Khalaf
Department of Holzschuh Faculty of Business Administration: MBA, Niagara University
Course: MGT 691 – Business Research, Strategy, & Planning
Instructor: Dr Radu Cureteanu
Due Date: December 10, 2022
I. History
Initially founded as an online bookstore, Amazon.com, Inc. is a multinational tech
corporation specializing in e-commerce, cloud computing, digital streaming, and artificial
intelligence. It was founded by Jeff Bezos in his garage on July 5, 1994. The company
went public on May 15, 1997, at US$18.00. A quick overview of the company shows that
it has a diversified business model, boasting … “over $469 billion in revenues and over
$33 billion in net profits” (Cuofano, 2022) in 2021 alone. A breakdown of its revenue
streams is provided below:
Image credit: FourWeekMBA (Cuofano, 2022).
Interestingly, Bezos wanted to name the company “Relentless” at first. However,
he settled on ‘Amazon’ as it is the name of the largest river in the world and hence, the
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inspiration for the company’s logo. If one types in relentless.com, they get redirected to
the US Amazon site (Hartmans, 2021).
Amazon’s Business Philosophy:
The company aims to provide value by offering “Selection, Price, and
Convenience at scale” (Cuofano, 2022). This philosophy is reflected in the company’s
mission statement, where the company strives to “serve consumers through online and
physical stores and focus on selection, price, and convenience” (Cuofano, 2022).
The company leverages two-sided network effects in the sense that the more
third-party sellers join the e-commerce marketplace, the higher the volume of a wide
variety of products at reasonable prices will be available to the customers. This method
also enables the company to generate repeat and loyal customers. By prioritizing third-
party sellers, Amazon measures its success by the number of transactions that take place
via third-party sellers on top of the marketplace. This allows the company to scale and
keep the e-commerce part of its business still functioning. A bigger advantage, perhaps, is
that this business model lets the company experiment with new products and services and
create new revenue streams (Cuofano, 2022).
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Image credit: FourWeekMBA (Cuofano, 2022).
The byproduct of leveraging two-sided network effects is the Amazon Web
Services (AWS) or Amazon AWS, launched in 2002 to manage the company’s e-
commerce infrastructure. This meant that it could … “make orders to the Amazon e-
commerce infrastructure and enable more and more third-party stores to be hosted on top
of it!” (Cuofano, 2022). In the 2000s, this technology may have been in its infancy and
may not have been the most organized feature of the company. However, this experiment
has paid off handsomely for the company over the years. In 2021, Amazon AWS
accounted for US$62.2B in the company’s revenue (Cuofano, 2022).
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Image credit: FourWeekMBA (Cuofano, 2022).
Further, by following the Cash Conversion Cycle financial model, the company is
able to generate cash flows quickly. Amazon maintains a high inventory turnover by
expeditiously converting it to cash and paying third-party vendors/suppliers within 30-60
days. In turn, this allows the company to gain short-term liquidity to invest in operations
(Cuofano, 2022).
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Image credit: FourWeekMBA (Cuofano, 2022).
II. Leadership/Management Style
Amazon's leadership style has been classified as ‘pragmatist’. Pragmatist leaders
set high standards and unapologetically expect those standards to be met by themselves
and by their employees. The company’s founder and first CEO, Jeff Bezos is an
exceptional and proven business leader. Bezos efficiently exercises visionary and servant
leadership styles and places exceptional customer service at the core of Amazon’s
business practice (Amazon Leadership: Visionary leadership focusing on Customer
Service - Research-Methodology, 2022).
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Jeff Bezos is widely recognized as a transformational leader, someone who
motivates and inspires team members to achieve more than they thought possible. Bezos
ensures that everyone on his team is committed to the vision for the organization and he
was able to transform his startup company into a billion-dollar household name. Though
such an accomplishment was a collective effort with employees, partner executives, and
thousands of employees, Bezos can be credited as the leader of the pack.
Amazon’s vision is to be Earth’s most customer-centric company and is constantly
being communicated by Bezos to hammer the message home. If you’re on team Amazon,
you know the customer always comes first. This mindset is a Bezos-born manifestation
(Jeff Bezos' leadership style at Amazon, 2021).
In July 2021, Jeff Bezos stepped down as CEO and assumed the role of the
company’s executive chairman. Andy Jassy, CEO of Amazon Web Services became the
new CEO of the online retail behemoth. It has been noted that although Andy Jassy
values Bezos’s leadership style the new CEO is “more mild-mannered, soft-spoken and
less prone to angry outbursts compared to Bezos” (Allyn, 2021)
Jeff Bezos’ leadership style, creativity and innovative spirit, help him challenge
ideas and forge new approaches, navigate potential obstacles, and develop smart
solutions (Jeff Bezos' leadership style at Amazon, 2021).
III. Financials
The following stock market figures (3 mo., 12 mo., 5 yrs.) and sales figures show
a pattern of success and only suggest that the company is poised to grow further:
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Amazon’s stock market figures:
3 months:
Image credit: Barchart.com (Barchart.com, 2022).
12 months (1 year):
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Image credit: Barchart.com (Barchart.com, 2022).
5 years:
Image credit: Barchart.com (Barchart.com, 2022).
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Sales figures:
➢ On September 30, 2022, Amazon earned $127.101B in revenue, a figure
representing a 14.7% year-over-year increase.
➢ Amazon’s 2021 annual revenue was $469.822B, up by 21.7% from the previous
year.
➢ Amazon’s 2020 annual revenue was $386.064B, a whopping 37.62% higher than
in 2019.
➢ Amazon’s 2019 annual revenue was $280.522B, 20.45% higher than in 2018
(Macrotrends LLC, 2022).
Indeed, the company has steadily increased its revenue over the past decade. The
chart below confirms this trend:
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Image credit: Macrotrends LLC (Macrotrends LLC, 2022).
Stock valuation trend:
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Amazon Net Worth 2010-2022
Image credit: Macrotrends LLC (Macrotrends LLC, 2022).
The company’s financials show a constant increase in revenue. This profitability
is also indicative of the high valuation of the company’s stock. In fact, as recently as
December 7, 2022, Amazon has been valued at $902.44B (Macrotrends LLC, 2022).
IV. Company’s Impact on Business/Industry/Society
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Amazon has created economic ripple effects that go far beyond the customer’s
wallet. Amazon, directly and indirectly, impacts inflation, jobs, and investment.
➢ The Retail Giant
Amazon started with books and then added everything else until it became
"the everything store", and they added the convenience of having it delivered
promptly to your doorstep, and customers have rewarded Amazon with open
wallets (Review et al., 2013).
➢ How Amazon helps decrease Inflation
Amazon is not operating the traditional store so without storefronts, the
company’s overhead costs are significantly lower than other retailers. That gives
Amazon the edge to undercut rivals on prices and operate on a thinner profit
margin (Review et al., 2013).
➢ Creations of Jobs at Amazon
By the end of 2020, Amazon employed approximately 1.3 million
employees worldwide. In 2020 alone, the company added 400,000 jobs. This
includes both full-time and part-time employees. This is low by retail industry
standards because Amazon does not have a significant storefront presence
although over one million seems like a large number. A traditional store requires
far more employees. For example, Walmart (WMT) employs approximately 2.3
million people worldwide. Amazon also engages several third-party contractors
and companies for tasks like deliveries, these people go door-to-door, dropping
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off Amazon packages. However, they are not employees of the company and in a
way, these are jobs for people. Therefore, some credit could go to Amazon for job
creation. On the other hand, hiring contractual workers helps the company keep
its costs in check. Some have criticized the company for harsh working conditions
(Review et al., 2013).
➢ The Amazon Effect: Retail Jobs
Looking at this from another angle, Amazon is eliminating many jobs
considering how much the company is hurting other retailers, forcing them to
shutter stores and cut back on costs. Job gains at Amazon may not mean anything
for overall employment.
Amazon's quest for innovation and technology to achieve operational
efficiency is also a concern for people, they are worried about the elimination of
jobs. Those worries are not far-fetched considering that the company has
introduced cashier-less Amazon Go stores in several large U.S. cities.
➢ The Facilitator of Small Businesses
Amazon's logistics infrastructure helps another group of people like small
businesses. It helps them with listing their products on Amazon which helps them
increase their customer reach, and the delivery essentially becomes Amazon's
headache. According to Amazon, more job creation and spending are bound to
happen and as a result of the Amazon Marketplace, 1.1 million jobs have been
created outside of the company.
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➢ Amazon as a Taxpayer
Income Tax - Amazon is structured to minimize corporate income taxes.
The company reinvests profits into expanding its business instead. While some
think this policy makes Amazon the largest nonprofit organization in America,
reinvestment leads to increased market share and capital gains. Amazon's lower
tax bill helps the company to expand, and expansion helps Amazon to reduce its
taxes.
Sales Tax - Due to the lack of a physical presence or employees in many
states also saved Amazon from having to collect sales tax. The most
straightforward explanation in this context is that tax laws in many states need the
physical presence of an online retailer in the state to collect sales tax. Therefore,
Amazon saved on taxes by not having its warehouses or employees in certain
states (Krishna, 2022).
➢ Investing in Amazon
Amazon became the second trillion-dollar company by market cap on
September 4, 2018. As of July 2021, it holds third place behind Apple and
Microsoft, boasting a $1.875 trillion market cap. Another milestone, in July 2020,
the company crossed the $3,000 mark for its share price, which has been steadily
increasing since. The multi-year run for Amazon shares has been phenomenal.
The company made its stock market debut in 1997, and $100 invested then would
have turned into six figures. Amazon has significantly outperformed the S&P 500
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over the last several decades, but it has been a rocky road at times (Krishna,
2022).
V. Company’s Future Direction
Amazon has been one of the few businesses that got a major boost from the
COVID-19 pandemic. For example, its Q4 2020 earnings of $125.6 billion soared past
the $119.7 billion Wall Street forecast: for that period, the company saw a 42% increase
in earnings (Motley Fool, 2021). These gains come at the tail of a $4 billion expenditure
for coronavirus measures. This goes to show that Amazon has not only the foresight to
build e-commerce to what it is today, but it has earth-shaking events paving the road to
its retail shopping domination ever smoother.
Thus, if you’re actively selling online, keeping up with Amazon trends is not an
option: it’s downright compulsory. It doesn’t matter if you do marketing, retail, or music.
Bezos has his fingers in so many pies. What Amazon is doing and will be doing is going
to affect you one way or another.
To spice things up, even more, Amazon is doing all it can to reduce click-to-door
time by exercising full control of the supply chain and mastering last-mile delivery—the
most challenging aspect of fulfilment and delivering total customer satisfaction in its line
of business. To that end, it has purchased 11 more Boeing 767 jets for global delivery
operations, which should bring its fleet to a total of 85 by the end of 2022. The effect is
immediately felt: Amazon Air flights surged 27% from April to August 2020.
Meanwhile, its Amazon Delivery Service Partners and drone delivery should tighten its
control of the market even more (Jay, 2022).
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These highlights are just the tip of the iceberg. The second quarter was a busy one
and it sheds some light on the current direction that the online commerce giant is going.
➢ Expanded Features for Brand Registry:
Counterfeiters and brand hijackers abound in the e-commerce market. For
brands to protect themselves, Amazon offers the Brand Registry. This ensures
accurate product listings and enables businesses to find and report violators.
Additionally, through this service, brands can take advantage of premium
business tools and features.
Though the current set of capabilities is great, it is predicted that Amazon
will expand those to include gatekeeping and advanced advertising features
(Jungle Scout, 2020). The former will allow brands to let only approved sellers
list their goods. In this way, they could control listings and prices with less effort.
Meanwhile, the latter would let approved sellers embellish their listings
with videos. It is possible that this expansion would enable the inclusion of A+
content and other similar video advertising solutions. With these, even smaller
brands can protect themselves against black-hat sellers.
➢ Strategic Use of Technologies:
Also, in the 2nd quarter of this year, Amazon launched its new Artificial
Intelligence (AI) conference. It is ready to establish itself as the leader in AI
innovations if it hasn’t yet. They called it Re: MARs which stands for Machine
Learning, Automation, Robotics, and Space. Jeff Bezos is a well-known advocate
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of high-tech advances, especially with his Blue Origin venture. It was shown in
2019 Re: MARS.
At the conference, Amazon featured talks and workshops conducted by
Amazon and industry experts. Furthermore, Amazon showcased an electric
adventure vehicle from Rivian that can integrate with Alexa. Also, they
announced Prime Air’s new drone delivery design. This is one of the best
innovations to improve transportation and delivery time. Moreover, they featured
the Pegasus Drive sortation robot being used in Amazon sortation centres. All of
these and many more remind us of the company’s commitment and obsession
with advanced technology (Jay, 2022).
➢ Online Grocery Big Player:
Experts project that by 2024, 82% of online food and beverage transactions will
be from grocers with omnichannel marketing (Multichannel Merchant, 2019).
This is a staggering number compared to the projection of 15% of sales coming
from pure retailers and 3% from third-party marketplaces. Amazon will be a big
part of the first kind as it has made aggressive moves in the sector.
Its acquisition of Whole Foods Market in 2017 is something that we should
expect to be leveraged here. Also, with its current competition with Walmart, we
should expect more aggressive moves from the e-commerce giant.
Currently, e-commerce only accounts for 3% of food and beverage sales around
the world. However, given the competition and development in the industry, this
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is expected to grow to 4.5% by 2024. Amazon and Walmart are both fighting to
be at the top spot in the coming years (Jay, 2022).
➢ Killing the Middlemen: Ad Industry Disrupt:
Do you want to increase efficiency and improve user experience? One strategy
that can help with this is to kill the pesky middlemen. This has been Amazon’s
long-term strategy (Marketing Dive, 2019). This has helped it in various ways.
Firstly, this helped it eliminate competitors when it comes to retail goods.
Amazon went about this via mergers and acquisitions. Sometimes, they even
instigated price wars.
VI. Conclusion
What started as a humble marketplace to sell books has evolved into a tech behemoth,
and seems to show no signs of stopping, not yet. Amazon’s growth and vision are
consumer-centric, and it is this focus that has allowed the company to grow as it has. By
focusing on e-commerce, cloud computing, digital streaming, and artificial intelligence,
Amazon has experimented in the market and created multiple revenue streams. Its ability
to use data analytics to marry the digital and physical world has helped it tremendously in
its expansion efforts.
After all the analysis, from a long-term perspective, Amazon has already taken the lead in
many physical industries, especially in the three years of COVID-19, Amazon’s online
shopping operation mode is successful, which means that Amazon has a long-term
investment vision. In future, cooperation between the technological projects they invest
in will likely also be successful.
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