Shareholders’ Analysis of Amazon.com Inc.

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Following the incorporation of Amazon.com, Inc. in 1994, the company has been dedicated to improving its public image. Amazon seeks to emerge as the best customer-centric company worldwide, guided by customer obsession, focus on operational experience, desire for invention, and long-term thinking. In every operation segment, customer service is key since it forms the basis of the organizational mission and vision. The International, North America, and Amazon Web Services (AWS) segments show how the firm has evaluated its performance and managed its operations over time (Amazon.com, 2020). The company’s capacity to serve customers through online and physical stores has enabled it to expand its consumer base across the world. Amazon’s customers always prefer the selection, pricing, and convenience of the stores’ unique products. The fast, timely, and easy-to-use functionality improves the customer experience on the web-supported programs. The unprecedented role played by shareholders cannot be overlooked because it is vital to the overall company’s success. This report provides an in-depth evaluation of the economic and market conditions that affected the company.

Amazon.com considers a broad range of products, services, and delivery channels that are ideal of competition and the market dynamics. For instance, the producers, vendors, manufacturers, distributors, and retailers of the company’s products are its current and potential competitors. The quality, speed, and reliability of the tools and services on Amazon.com and customer base will remain the major competitive elements from such considerations (Baker, Filbeck, & Kiymaz., 2020). However, some competitors have better resources and more customers, enabling them to secure convenient terms from suppliers, acquire aggressive pricing, and implement restrictive distribution. In such regards, shareholders must admit the need for rapid changes and new business models to gain a competitive advantage. The prevailing market trends have contributed to the seasonality of business activities with the fourth. For instance, the fourth quarter marked 32.0%, 34.0%, and 31% of the total annual revenues in 2016, 2017, and 2018, respectively (Amazon.com, 2020). The employment record fluctuations due to seasonal business factors create the need for temporary personnel and independent contractors to supplement the workforce.

Amazon is exposed to various risks that can adversely affect its operations. The company acknowledged that it faces stiff competition from different industries and partners, which requires formulation and modification of the existing business models. Locally, local firms are gaining a significant competitive advantage in the local markets because of a better understanding of and focus on the customer, limiting the company’s international growth potential (Baker et al., 2020). Like India and the People’s Republic of China, different nations have also imposed regulations and licensure requirements that restrict foreign investments, especially in the Internet and media. Amazon.com is likely to attract a fine, penalty, or have its license revoked in such regards. Therefore, the company must seek to optimize and operate its fulfilment network to avoid adverse effects on its activities. As an international store operator, Amazon.com is exposed to the risk of foreign exchange due to fluctuations. The company’s chief executive officer, Jeffrey Bezos, is a highly dependable shareholder whose loss can adversely affect Amazon.com. Risks associated with occasional system interruption are also likely costly to the company since fulfilling customer orders will be a challenge. Amazon.com indicates that its information technology (IT) systems are not fully redundant, especially in managing system interruptions.

The company’s financial obligation is to ensure long-term, sustainable growth in cash flows, which is achieved by enhancing the operating income and management of the working capital. The company’s mission should be lower prices, promote access, provide fast delivery, improve selection, expand product categories, and increase reliability to amplify customer experience (Amazon.com, Inc, 2021). In compliance with the generally accepted accounting principles (GAAP) in the US, Amazon.com needs to estimate and assume some elements reported in assets and liabilities, revenue and expenses, and contingent liabilities disclosure as part of the consolidated financial statements.

The first-in-first-out approach is used to account for the products available for sale primarily. For example, each 1% of the additional inventory valuation as of December 31, 2018, signified an extra cost of sale of about $190 million. The company is also exposed to several income taxes in the US and foreign jurisdictions. The cash flow information from operations, the principal source of liquidity for the end of 2018 estimated at $41.3 billion (Amazon.com, 2020). In such regard, the sale of additional equity would have a diluting effect on stakeholders. According to Yahoo Finance (2021), Amazon had a total revenue of 232, 887,000 and 280,522,000 by the end of 2018 and 2019 respectively, indicating an increase. On valuation measures, the Trailing P/E and Forward P/E were estimated 80.37 and 50.81. During the financial year, the Price/Book was high at approximately 18.11. While determining management’s effectiveness, the Return on Assets and Return on Equity stood at 5.24% and 27.44% (Yahoo Finance, 2021). Such figures indicate the profitability of investing in Amazon for the specified period.

Overall, from the Annual Reports on Form 10-K, Amazon.com can develop forward-looking statements to guide, identify prospects, and predict future results. The statements showcase the shareholders’ current expectations and uncertainties. However, the actual results could differ from those reported in the forward statements due to foreign exchange fluctuations, changes in international economic conditions, shifts in consumer spending, and world events, among others. For instance, the current COVID-19 pandemic has significant impacts on how customers consume products. Sales of the products and customers are the primary source of revenue in the company. Through increased product selection, shareholders purpose to increase their unit sales across the stores.

References

Amazon.com, Inc. (2020). Annual report 2019. Web.

Baker, H. K., Filbeck, G., & Kiymaz, H. (2020). Equity markets, valuation, and analysis. E-Book: John Wiley & Sons.

Yahoo Finance. (2021). Amazon.com, Inc. Web.

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BusinessEssay. (2023) 'Shareholders’ Analysis of Amazon.com Inc'. 23 January.

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BusinessEssay. 2023. "Shareholders’ Analysis of Amazon.com Inc." January 23, 2023. https://business-essay.com/shareholders-analysis-of-amazon-com-inc/.

1. BusinessEssay. "Shareholders’ Analysis of Amazon.com Inc." January 23, 2023. https://business-essay.com/shareholders-analysis-of-amazon-com-inc/.


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BusinessEssay. "Shareholders’ Analysis of Amazon.com Inc." January 23, 2023. https://business-essay.com/shareholders-analysis-of-amazon-com-inc/.