Amazon.com is a well know company that was founded in 1994 by Jeff Bezos. The company started out only selling books. However, over time that has changed and they expanded to selling electronics, toys and so many other products. The company has been successful over the years and having good growth strategies in place contributes to their continued success. Porter’s model (also known as cost leadership) is the generic strategy that Amazon uses to have a competitive advantage over their competition.
“Amazon’s generic competitive strategy enables the e-commerce business to offer goods and services at affordable rates.” This strategy also helps minimize operational cost which in return enables Amazon to minimize the cost of online retail and other services. Amazon also uses Market Development, Market Penetration and Product Development as intensive growth strategies. “The intensive growth strategies help Amazon support continuing international growth.” The market development strategy allows the company to establish new online websites to correspond with the company’s new global market.
The Market penetration helps generates an increased revenue where Amazon operates because it implements marketing campaigns to engage more customers. The Product development helps Amazon develop and offer new products which contributes to higher revenues overtime. All of these strategies have proven to be helpful with the success of Amazon. “In 2011, Amazon acquired certain companies for an aggregate purchase of 771 million.” The reason for these purchases was to expand Amazon’s sales channel and customer base.
“In May 2012, Amazon acquired Kiva Systems, Inc for a purchase price of 678 million and the primary reason for this acquisition was to improve fulfillment center productivity.” This acquisition was not significant and the cost was expensed as incurred. Some of Amazon’s other acquisitions include Acebooks, Zappos and Shopbop. These acquisitions help Amazon.com expand its market base and allows them to offer a lot of products at low bargain prices. Amazon’s success has become competition to some big-name companies.
After acquiring several companies from 2010-2012 the company has reported an increase from 352 million in 2010 to 745 million in 2012 of Acquisitions, net of cash acquired on their consolidated statement of Cash Flows. This displays that the acquisitions influenced Amazon in a profitable manner from the accounting period of 2010-2012. As per the financial statements for the company, Amazon.com has revealed that for them to be successful with their present acquisitions and investment they may need to issue extra equity securities, spend money, or sustain some debit. The may also need to encounter some unexpected liabilities, or amortization costs identified with intangible assets because of the danger of profitability reduction. Amazon.com persistently screens any investments which are not being conveyed at fair value, or potential other-than-temporary impairments.
This is altogether situated inside other Assets on their consolidated balance sheets. As the market varies so can certain acquisitions and investments as of now held by Amazon.com, and this makes a potential for disabilities to happen. As of now the technique for checking the impairments made by any acquisitions and investments has demonstrated to work for Amazon.com. The organization is continually searching for any conceivable changes that could be inconvenient to the organization and what their long-haul objectives are. Any development in any market will clearly affect current income and benefits, regardless of whether on a positive or a negative aspect.
If Amazon.com is interested in raising their present profit and turning to a greater degree a profit than development in the European market would be invaluable for them. This is on account of a huge piece of the overall market share would be acknowledged out of development of the market. This would stipulate that more sales volume and consequently more profit is made. Such a positive macro development would duplicate itself to Amazon.com current income and profits. This method of reasoning will work if all factors stay consistent including the normal cost of products and services and different expenses.
Overtime Amazon has grown to be a successful company. Starting out just selling book and now they are selling almost anything you can think of. The company has acquired a lot of different companies over the years and they have all been for a beneficial reason and has help the company expand and offer more products. If is important for a company to understand how acquisitions will affect their company. Amazon has done well with utilizing some strong growth strategies. These strategies have helped cut cost to develop products and helped expand customer base. Expanding can result in more earnings and profits for the company.