Financial Analysis of Amazon.Com
FIN 534: Financial Management
Dr. James Glenn
March 11, 2013
The company, its operations, locations, markets, and lines of business
Amazon.com, Inc. (AMZN) is a leading global Internet company and one of the most visited Internet retail destinations worldwide. Amazon is one of the first companies to sell products at steep discounts by housing them in numerous warehouses and distributing products from many partner companies. Amazon directly sells or acts as a platform for the sale of a broad range of products. These lines of business include: an online bookstore, DVDs, CDs, MP3 downloads, software, video games, electronics, …show more content…
Amazon also offers a service called Amazon Prime which allows customers to pay a yearly fee and receive free two day shipping on products fulfilled by Amazon. Although good for the consumer, it is not the best for Amazon if the consumer purchases many products in single shipments which raise the company’s shipping costs. Amazon's products are also diverse, and seem to be surprisingly inelastic in terms of demand. This implies a degree of immunity to recessions. The only problem is that Amazon.com as a company is heavily invested in the Kindle line, which could be vulnerable to cuts in consumer spending as in all retail business. If consumers suffer during a recession, retail will suffer.
Threat 2: Direct Competition to the Kindle Amazon.com places a high importance on its e-book reader, the Kindle. Since Amazon builds the Kindle and sells digital books, Amazon is placing a large bet on the success of its Kindle franchise. Unfortunately, other companies like Barnes and Noble NOOK, Sony’s e-Reader and Kobo’s e-Reader all have released or are currently releasing competitor e-book readers and the direct competition threat is fairly moderate and should not be overlooked. While Amazon was not the first company to create an e-book reader, it was the first company to successfully launch an e-book reader and gain consumers' acceptance. That is because Amazon