AmazonCom Strategic Objectives - Research Paper Example

? Amazon.com In business plan Amazon.Com in Business Plan 6. Quantified strategic objectives (including completion dates): Indicate both financial (e.g., rates of return, sales, cash flow, share price, etc.) and non-financial (market share, being perceived by customers or investors as number one in the targeted market in terms of market share, product quality, price, innovation, etc.) goals. Amazon Inc. has its future well focuses through quantified strategic objectives. To make it more competitive in future, plans for acquisitions have been laid down. Amazon Inc. hopes to up its game and venture into chains like Staples. This will be met by tough competition from firms like CPG. To sustain this new venture, Amazon Inc. has a good start off, as its traffic is attractive to buyers and sellers into Amazon market place. Firms likely to be acquired in this endeavor include Diapers.com, Zappos and Soap.com. Amazon intends to buy Quaidis, the parent company to Soap.co and Diapers.com for $540 million. The capital that was collected to fund this acquisition amounts to $78 million. In another strategy for up its competition with CPG companies, Amazon Inc. intends to acquire Zappos at a projected price of $1.1 billion. To compete with Google and Apple, Amazon Inc. intends to upgrade its Kindle to support mobile phone applications and functions. This will enable the incorporation expand from just providing physical goods to digital goods. The low margins strategy has been employed by Amazon regardless it is downcast by other companies. Amazon is offering its products and services at low prices as a strategy to attract more customers and increase its market share. This is a strategy aimed at increasing value to customers rather than increasing its value through high prices and high profits. Increased market share will see Amazon reduce its costs through economies of scale, as the costs will be spread through many customers. For instance in 2011, Amazon had operating expenses of 91% expressed as a fraction of revenues. This demonstrated its big market share compared to Walmart. Amazon had revenue streams of up to $48 billion. Most of this is attributed to online retail store where it has managed to attract millions of shoppers and sellers to its website. This has led to a cost advantage for Amazon in relation to Walmart and Costcos. Amazon has grown from just a book retailer to be the largest online retail shopping for physical and digital goods and services. This has not stopped the company from further growth and development. The company is seeking to contract Google, which will see it use the Android technology. Although Amazon and Google are market rivals, Amzon seeks to cross the gap between the two and build its new devices on the Android operating system. 8. Implementation strategy: From a range of reasonable options (build or “go it alone” strategy, partner via a joint venture or less formal business alliance, license, minority investment, and acquisition), indicate which option would enable the acquiring firm to best implement its chosen business strategy. Because of the nature of the course, you must indicate that an implementation strategy involving an acquisition is preferred to the other options and why. An acquisition is the best strategy for implementation. The acquiring firm’s stands an advantage of running a business that is well established compared to building up a new business. With an established business, the acquiring firm can use the existing financial records to forecast future performance to determine if the new firm to be acquired is profitable. This is not the case with a new firm being set up. Setting up a new firm may require more capital and time. The business’ future performance may not be correctly forecasted because there are many unseen occurrences, as the business has no experience. Partnerships on the other had result in legal disputes, as the partners are likely to disagree on decisions and business issues. Acquisition remains the best strategy to implement as it gives the acquirer the chance to begin running the business after commencement. Since management of the acquired firm rests on the acquiring firm, there are no disagreement issues in decision-making. 9. Acquirer’s business plan valuation: Provide projected five-year income, balance sheet, and cash flow statements for the acquiring company and estimate the firm’s value based on the acquirer has projected cash flows. State key forecast assumptions underlying the projected financials and the valuation. If the projected cash flows are negative for the first five years, continue to project these cash flows until they turn positive. Projected financial performance Income statement Item 2012 (given) 2013 2014 2015 2016 2017 revenues 61,093.0 62093 65909 67434 69888 70121 total revenues 61,093.0 62093 65909 67434 69888 70121 Cost of goods sold 45,971.0 46999 46788 47898 44567 54678 Gross profit 15,122.0 15678 15867 17890 18909 19890 Selling and general admin.expenses 9,723.0 9877 9899 9900 9788 9099 R&D Expenses 4,564.0 4656 4768 4567 4356 3456 Other operating expenses 159.0 156 257 250 243 178 Total operating expenses 14,446.0 Operating income 676.0 Interest expense -92.0 Interest and investment income 40.0 No operating income (expenses) -245.0 Total non- operating income (expenses) 5.0 Gain (loss) from sale of investment 10.0 Total unusual items -- Earning before tax 389.0 Income tax expense 428.0 Earning from continuing operations -39.0 Net income -39.0 Net income including extra items -39.0 Net income excluding extra items -39.0 Balance sheet Valuation of Amazon.com Inc. Historical figures Forecasted figures 2010 2011 2012 2013 2014 2015 2016 EBIT 7,283 7,824 7,178 7,719 8,282 8,779 9,823 less tax 2265 2607 2280.978197 2399.470351 2597.837938 2776.786439 3123.647402 earning after tax 5018 5217 4897.0433 5319.820476 5684.0764 6002.0304 6699.7355 add depreciation 1014 1331 1350.23 1346.145161 1345.070239 1375.41072 1381.888155 less changes in fixed assets 1282 20 -39 -20 433 122 129 less changes in WC 2504 -1212 -236.8787678 -83.17146847 -82.9219328 -75.80097378 -182.655326 free cash-flow 2246 7740 6523 6769 6679 7331 8134 Using the discounted cash flow method, the present value of amazon.co can be estimated as follows: PV = Co/(1+d)n Where Co is cash flow for year one, d is the rate of discount and n is the number of years. Using the above figures, the fair value of Amazon becomes 60039.81 + 6725.95+ 6675.58 + 7330.7 + 8133.97 = 34906.01 The underlying assumption includes: 1. The prevailing market conditions do not change 2. The financial trend that has been depicted in the previous year is maintained. Reference Amazon.com Inc. (2013). Financial Performance. Retrieved on November 18 2013 from, Read More