Amazon - External and Internal Audit - Case Study Example

Amazon Background study Amazon.com Inc is one of the pioneer online retailers that experienced expansion in the late 1990s. The company offers a number of product selection that include books, videos, CDs, electronics, DVDs, home appliances and apparel, toys and tools. These are provided through third-party agreements and at the same time the company sells products from well-known retailers such as Toysrus.com and Target Corporation amongst other companies. Amazon. Com Inc was founded by Jeff Bezos considered as one of the pioneers of e-commerce, since he found selling products over the internet as one of the greatest opportunities of lifetime. Online retail stores such as Amazon.com enable marketers to satisfy entire range of customers with different products and services within one-stop shop. Marketing mix differentiation involves provision of marketing mix that is distinct and better than what competitors offer. It includes fine-tuning all the elements of marketing mix to specific needs for the purposes of satisfying distinctive target market. The process of differentiation in a convenience store can be ensured through product pricing, packaging and features. However, differentiation within such stores is basically focused on services owing to similarity in standardized product and low prices irrespective of the location. The service determines to a larger extent the willingness of customers to switch from one place to another (Ha, 2004). Thus differentiation plays a key role in building of relationships between brand and consumers. Most consumers currently turn to internet for various shopping needs. This is referred to as online shopping. This concept has contributed towards opening of e-business opportunities. Consumers are capable of accessing and purchasing products due to their distinctive nature as displayed online. The process is of great benefit to consumers hedonic goods based on costs, since they no longer need to scramble for parking spaces at shopping malls. However, several barriers accompany online shopping which include security of search engines, privacy as well as trust. The online trend has brought complete changes within businesses based on distribution channels used. International marketing involves processes where companies define their goals and objectives based on extensive investments on resources within various market segments. In such cases companies focus on effective marketing strategies capable of utilizing current technological wave brought by internet. Research has been done on online brand trust based on consumer interests within different products market. Business online transactions can only be complete in the event that there is existing trust between customers and company’s brand. This makes online brand trust a very important aspect since it assist in creation of favorable attitude towards suppliers. It also helps in prolonging exchange relationships and at the same time increases competitiveness making trustworthy brands benefit more. This is much related to online trust which presents important model in business-to-business transactions. Many challenges are encountered in the process of establishing and maintaining online trust. Majority of the companies do not trade online with un-trustworthy clients. In a similar case online consumers feel reluctant to trade online since they do not trust most web providers with their personal information. This calls for online brands to establish some level of trust with customers for the purposes of engineering business processes. Trust is paramount for maintenance of customers within electronic market. Steady growth experienced in the number of online users creates some optimism within business field concerning consumer purchasing power. Internet presents a large audience which makes every company to take into account issues based on consumer perception on online brand trust. Online retails emphasizes on nature of branding attached on goods this is used to reinforce attraction consumer attaches to specified product. This assists in establishment of long-term relationship based on the benefits and qualities obtained in delivery processes. Brand trust on goods and services enables easier development of consumer’s commitment towards such online products as variety of shoes and clothing. Retail products brand extensions provide consumers with variety of options making it possible for customers to share information concerning their preferences, tastes and behaviors. Reliability is one of the first dimensions of brand trust, since it involves technical capabilities considered in the process of assessing extent to which the brand can satisfy consumer needs. Then there is attributes of good intentions based on consumer interests and welfare and in cases of uncertainties with range of products offered. Presence of value should be felt by consumers on the range of products offered based on development process, line of sales used and even in nature of advertisement. Despite many advantages, online branding of products operates in relation to some crucial purchase related factors which determines ultimate outcome. These include; status of security, privacy on personal details, and nature of information conveyed as well as past experiences. Word-of-mouth is one of the most known purchase-related factors used in building consumer trust. At the same time, factors affecting online branding of products and services can be categorized as web-site and consumer factors which apparently are related to various components of trust such as credibility of website and quality based on emotional comfort (Amazon.com, 2011). External Audit Opportunities Wide coverage of customers Faster means of reaching customers Convenience Provision of better marketing mix Fine-tuning all elements of marketing mix to specific needs Time Reaching the market with different products at the same time Shortened distsnce Reduced cost of travel Capability of using different languages at the same time Threats Security of search engines Privacy Online brand trust Maintenance costs Reliability Nature of information conveyed credibility of website Advancement in technology Branding mechanisms from other competitors Dispositional attributes Valuation of stock Economic downturn Presence of numerous mergers Competitive Profile Matrix EFE Matrix Internal Audit Strengths One of the most valued top brands in the world Operates under strategic relationships in many countries Have a wide network of operations in all regions. Boasts of having some of the most elite management team in the world Wide base of employees Higher sales margin Weaknesses Amazon lacks a clear mission statement. Net sales in media have been stable over the last 3 years. Only one woman in upper management. Goodwill has increased by 200% from 2008 to 2010 to $1.3 billion. Streaming movies for free to Prime subscribers hurts margins. Over $3 billion in inventory that must be stored and maintained. Financial Ratio Analysis Growth Rate Percent Amazon Industry S&P 500 Sales (Qtrvs year ago qtr) 44.1 36.50 12.40 Net Income (YTD vs YTD) NA NA NA Net Income (Qtrvs year ago qtr) -102.70 -44.40 66.60 Sales (5-Year Annual Avg.) 30.14 23.30 9.30 Net Income (5-Year Annual Avg.) 30.17 20.20 8.71 Dividends (5-Year Annual Avg.) NA NA 4.34 Profit Margin Percent Gross Margin 21.5 35.5 40.0 Pre-Tax Margin 2.7 7.6 18.2 Net Profit Margin 2.0 5.5 12.91 5Yr Gross Margin (5-Year Avg.) 30.5 38.5 38.66 Liquidity Ratios Debt/Equity Ratio 0.00 0.11 0.97 Current Ratio 1.3 1.4 1.2 Quick Ratio 0.9 0.6 0.8 Profitability Ratios Return On Equity 12.3 11.7 27.8 Return On Assets 5.3 5.8 8.8 Return On Capital 9.8 9.4 11.8 Return On Equity (5-Year Avg.) 25.7 19.6 23.9 Return On Assets (5-Year Avg.) 7.6 7.4 8.0 Return On Capital (5-Year Avg.) 17.1 14.0 10.8 Efficiency Ratios Income/Employee 26,083 44,745 126,738 Revenue/Employee 1 Mil 999,218 1 Mil Receivable Turnover 35.5 25.1 15.2 Inventory Turnover 10.7 7.2 12.3 IFE Matrix One of the most valued top brands in the world Operates under strategic relationships in many countries Have a wide network of operations in all regions. Boasts of having some of the most elite management team in the world Wide base of employees Higher sales margin SWOT There are a number of factors both external and internal of which external includes nature of products and culture within target regions. Internal factors comprises of consumer characteristics, experiences, perceptions, software apps qualities and legislations. The nature of consumer’s perceived risk may affect brand trust since it originates from economic and performance risks. Customers are capable of anticipating the kind of monetary loss they would incur in the process of using software applications. At times they risk in terms of performances whereby the kind of products shown in the business website do not meet their expectations as shown in the website pictures. Such perceived risk affects negatively the level of trust on particular brands. Some of the company strengths include the Image name, price and features that come along with the products. Weaknesses include hierarchy leadership that has slowed down innovation processes. Threats come from well-established firms such as Canon and the declining dollar value. Opportunities lie in the emerging African markets (Kotler and Armstrong, 2012). Business online transactions can only be complete in the event that there is existing trust between customers and company’s brand. Trust is paramount for maintenance of customers within electronic market. Steady growth experienced in the number of software and online users creates some optimism within business field concerning consumer purchasing power. Internet presents a large audience which makes every company to take into account issues based on consumer perception on online brand trust. Marketing mix The strategy summary focuses on providing customers with superior services through the use of modern technology channels. Application of integrated marketing communication mix calls for utilization of social sites, internet and public relations in the process of presenting the product to consumers. Amazon.commakes use of its experienced management team capable of developing good relations and company reputation within the market. Branding Strategy From technological aspect Amazon.comwill operate with high-tech facilities ensuring comprehensive digital coverage as well as providing consumers with convenience of effective development. The whole package on animation and posters will utilize modern technology from storage to retrieval of information. In line with such approaches, Amazon.comhas the capabilities of consolidating its relationship with potential customers within the market. Applications and services offered are considered of profound importance based on competitive advantages obtained within market environment especially in the effect that majority of competitors apply modern technology approach. Pricing Strategy The most appropriate pricing technique for Amazon.comAmazon.comproducts and services would be psychological pricing. This is since both local and international consumers attach so much importance on digital equipments. Within the current market all digitalized products and services are considered quality and worthy of high prices. This provides opportunity for Amazon.comCompany to base their prices on psychological mathematics instead of economic trends prevailing within the market. Quality products and services are usually rated higher in terms of prices. The fashion industry is believed to attract those below 40 years of age. Such age group usually measure product quality based on attached prices. Pricing strategy determines level of consumer influx towards Amazon.comcompany products and services. This determines level to which customers remain loyal to Amazon.combranded products. There is necessity for such business companies to implement processes having ability of matching current market needs. This provides opportunities for reinforcing strong reputation within global market. Additionally, application of psychological pricing technique contributes towards company’s international performance. This enables application of Business Score Card technique which guarantees clear focus on both current and future performance within every department. Promotional strategy Public relations, after-sale services and advertising agencies will be utilized in managing organization’s publicity based on brand. Use of IMC enables application of more strategic coordination on marketing activities. This is since integrated communication system enables efficiency in information sharing. Most consumers currently turn to internet for various shopping needs. This is referred to as online shopping. This concept has contributed towards opening of e-business opportunities. Consumers are capable of accessing and purchasing wide range of goods and services from any location since delivery services are efficiently available (Keegan and Green, 2002). The process is of great benefit to consumers based on costs, since they no longer need to scramble for parking spaces at shopping malls. However, several barriers accompany online shopping which include security of search engines, privacy as well as trust. The online trend has brought complete changes within businesses based on distribution channels used. According to Keegan and Green (2002), international marketing involves processes where companies define their goals and objectives based on extensive investments on resources within various market segments. In such cases companies focus on effective marketing strategies capable of utilizing current technological wave brought by internet. Amazon.com Company uses highly visible nature of advertising which plays major role in the development of company’s brand image. The kind of messages used, including consumer comments usually conveys strong messages within fashion industry. This is based on functional abilities while at the same time brands accompanied by aesthetic meaningful values portray some level of relevance to online purchasers. Evidently, the use of pop-up adverts within company’s website accompanying products and services assist in building customer base. This helps in reinforcing brand image since communication through company websites influences strong brand memories which ultimately can be linked to consumers’ past experiences with company’s products and services. G. SPACE Matrix H. Grand Strategy Matrix I. The Internal-External (IE) Matrix According to Kotler and Armstrong (2012), a market is made up of all people or organization and they all demand for a certain product depending on individual’s tastes and preferences. This also depends on customer’s ability to purchase them. This demands that the company segments the market according to level of demand. The chart below is a geographical segmentation of the market: The company have its operations in Europe, Asia, the United States America, Oceania, Middle East and Africa. Out of this wide coverage, Asia and Europe markets provide highest consumers of the company’s products and services with Africa being the least consumer. Product and Service development Amazon.com products and services undergoes various stages from introduction, growth and maturity stages. To attain to maturity level, the products have to pass the first two phases of the PLC that is the introductory and the growth stage as shown below. Sales and Sales Profits ($) Profits Growth Maturity Time Introduction Decline Product Development Losses/Investments ($) Figure: Product life cycle (Kotler & Armstrong 2012, p. 205) At the maturity stage, the products of Amazon.com Company exhibits the features of low cost per customer and high profits. The company should therefore emphasize on diversification of its brand and models and at the same time intensify use of distribution channels. The products should also have the best market prices as compared to the competitors profits are also supposed to be maximized while defending the market share. Revenues(in millions) Product Class 2010 2009 2008 Media $14,888 $12,774 $11,084 Electronics & General Merchandise 18,363 11,082 7,540 Other 953 653 542 J. QSPM K. Recommendations Add 10 new fulfillment centers financing by common stock at $30M x 10 = $300M Expand Kindle into 50 new countries in the next 3 years at $200M Hire 3 more top executives from leading companies at $25M Develop online payment system to rival PayPal at $300M L. EPS/EBIT Analysis (in millions) Amount Needed: $825M Stock Price: $217 Shares Outstanding: 454 Interest Rate: 5% Tax Rate: 24% M. Epilogue General expectancy on the products helps in reinforcing belief on their brand qualities which makes the website consistent, competent and responsible for every posting on its wall. Dispositional attributes determines consumers’ intentions and behavior towards product quality which makes it mandatory for companies to identify various attributions which forms brand trust. The idea of trust and attractiveness assists in bridging the gap between determinants and consumer reactions towards product attributes. Website related factors influencing consumer online brand trust includes such processes as navigation across websites, dealing with privacy information, signing of trust seals and improved presentation. On the contrary, consumer factors include self-confidence, shopping experiences through the internet, level of entertainment as well as past behaviors. Low level of online purchases can be attributed to lack of trust between consumers and companies. Dayal et al (1999), focuses on the security issues, merchant legitimacy as well as fulfillment as some of the most important factors influencing online trust. At the same time Shankar et al. (2002), made distinctions based on broad conceptual framework of online trust which incorporates such constructs as; web site characteristics and user characteristics. Then there is inclusion of crucial characteristics such as application of appropriate online medium, level of consumer confidence towards the firm, various brand qualities based on firm’s size, performance within the market as well as communication mix. External and internal factors influencing Retail online branding on hedonic products There are a number of factors both external and internal of which external included nature of products and culture within target regions. Internal factors comprises of consumer characteristics, experiences, perceptions, website qualities and legislations. The nature of consumer’s perceived risk may affect brand trust since it originates from economic and performance risks. Customers are capable of anticipating the kind of monetary loss they would incur in the process of transacting purchases online. At times they risk in terms of performances whereby the kind of products shown in Company’s website do not meet their expectations as shown in the website pictures. Such perceived risk affects negatively the level of trust on particular brands. Online branding has got highly visible nature of advertising which plays major role in the development of company’s brand image. The kind of messages used, including consumer comments conveys strong messages towards clothes, shoes and handbags based on functional abilities while at the same time brands accompanied by aesthetic meaningful values portrays some level of relevance to online purchasers (Hofmeyr, 2001). Evidently, there are pop-up adverts within the website accompanying products. This helps in reinforcing brand image since communication through company websites influences strong brand memories which ultimately can be linked to consumers’ past experiences with the products (Hofmeyr, 2001). Such memories passes through the mind in line with real structuring which enables real interactions between consumers and products based on expectation levels. Online branding is basically action oriented with more appealing decorations of which at times can deceive online buyers. Level of brand trust determines how fast brand images fade from minds of consumers since it is dependent on competitive nature and functions of other related products. Most consumers are normally inclined towards nature of information accompanying products inclusive of price tags. Strategies implemented on the website seem important since the target market is defined based on the shoe and clothes sizes. This should basically be based upon identification of relevant market segments based on age, preferences and social classes. Planning done concerning various marketing strategies is basically aimed at improving level of organizational performance which would ultimately yields higher returns. Process of organizing brands used in e-business involves great allocation of resources for the purposes of attracting grater traffic based on satisfied needs. In the case of product brands, the nature of plan used on the site assists only in the identification and fulfilment of various consumer desires. In the process of posting customer comments alongside brands, creates strong desire within other buyers willing to try same products. Such comments create referral opportunities since they are always convincing based on the rating, which at times reflects true level of consumer satisfaction based on quality and expectations. There are many competitors within the textile industry, making each company to develop unique online strategies capable of driving higher traffic to their websites hence easily winning consumer trust. The kind of shoes and clothes displayed should enable consumers identify level of safety required based on weather conditions. However, the nature of display incorporates all the four P’s of marketing which includes identification of various prices and discounts attached suitable buyers and target markets. Proper utilization of marketing elements leads to realization of strong consumer base within the e-market. The level of online brand trust reveals the level of achievement attained by the current branding technique used by the company. Availability of online communities has provided consumers with opportunities of sharing experiences, opinions as well as various dimensions of knowledge with others. Online communities appear in-form of internet forums, bulletin boards as well as newsgroups. Such instances have enabled participation between the media and audiences, since consumers have the rights of creating media contents through texts, uploading of videos and pictures of products and services available in the market. Large percentage of Word of Mouth communication takes place offline, however, online communication is on the growing trend since consumers currently consider internet to be a reliable source of information. Online communications enable consumers to create fully formed impressions of products, services and people using both written and pictorial content. Theory of social comparison and that of reasoned action are used to elaborately explain effects of eWOM and the extent to which it influences purchase intentions of various designer products. The following diagram shows a frame work used in identifying blog opinion leaders within the social sites. There has been significant advancement in technology and enhanced availability of online resources in the last few years, allowing for lower costs on public relations; communication and advertising. Thus many companies are now finding novel ways to enhance their intellectual properties and sale of products at lesser costs. A major advantage of implementing and utilizing Instagrams within marketing network is for the purposes of achieving synergy, whereby the combined knowledge of all employees proves to be greater than individual knowledge levels of different employees. Specific programs providing marketing and communication skills development opportunities are known to have succeeded in the provision of employment within Thai’s fashion apparel industry. In comparison, countries of Latin America, such as Honduras, Peru, Dominican Republic, Colombia, Chile and Argentina, the Joven programs that were created to address employment problems faced by young people resulted in the creation of positive economic outcomes for them. The same results were produced in the US, primarily because training and vocational education was very helpful in widening opportunities, particularly for young females. This was because women are generally reluctant to join programs providing training and skills enhancement in male dominated areas such as technological disciplines. Instead, when provided opportunities to train in female dominated areas such as sewing, beauty care and secretarial work, many women are found to be forthcoming. However, such initiatives can at best be initiated by the government in fulfilling social duties by making citizens self dependent and appropriately qualified to do well paid jobs. These initiatives by the government are welcomed since they remove the actual as well as perceived discrimination in the labour markets. On the other hand, the initiatives of employers in skills enhancement through creation and execution of such programs goes a long way in achieving better results for all including those that believe they are being discriminated against. This is because they get the required opportunities to hone their capabilities and perform better while advancing their careers (Adams, 2011). According to Adams (2011), people in the lower economic strata tend to demonstrate higher returns on investments since they intend to have higher purchasing power in comparison with people belonging to higher income levels. In other words, when fashion apparel industry provides for training and communication skills development, boost within economic cycles will be experienced based higher level of on-line purchases. This also presents a boost to the economy in terms of growth and higher standards of living as more disposable income come in the hands of the lower classes. Adams (2011) has cited research outcomes in which students pursuing vocational courses were found to contribute much more to the economy than students pursuing purely academic courses, meaning that there is a strong case for the government to introduce more skills development courses. The author concluded that the cost benefit ratio for skills enhancement programs was much higher because increased demand for such courses was directly associated with increasing demand for high skills. In different countries, there are diverse communication skills development programs, but their fundamental goal remains the same in terms of creating a skilled working force with advanced knowledge and experience achieved through a particular period of training or by participating in several months’ courses or diplomas. The trained employees can then get higher ranking by way of salaries and benefits than other workers. It is apparent that enhanced financial benefits of the trained employee would facilitate them in enjoying higher standard of living in the concurrent recessionary economy. In addition, the improved skills of the employees would positively generate smooth and timely production than before, while workers efficiency would improve at all levels of the national economy. Moreover, the flows of foreign direct investment would increase in that country and the promotion of the trained employees at superior levels would generate new vacancies at entry level that ultimately create new employment opportunities in the economy. Summary With the rapidly increasing use of smartphones, online software applications are emerging immensely than ever. Instagram is one of the latest mobile apps used by Amazon.com that has hit the waves. The application will follow an Instagram trend which is an online social network application founded in 2010 and focuses on sharing information amongst individuals. Such applications allow users both to follow and to be followed making it more distinctive from other apps. The company’s software apps provides easier means to upload pictures hence attracting many users like instagram attracted over fifty million users since its inception. This has made instagram to outstand within the market with good positioning based on its tremendous valuation. The question of how much this new technology can impact the decision making of the consumer to actually have the intentions to purchase the product has been a topic of debate for researchers, as well as marketers. Numerous studies have research on the impact of other form of social network toward consumer purchase decisions. The main mission is to deliver quality products ranging from software apps, creation of whole packages on character animation and posters. The company’s mission vision would be to develop an application providing one of the major forces capable of driving social and economic development within the fashion industry. The study reviewed the theoretical framework of knowledge and skill development, internet-related marketing programs common within international market, the position of social sites in sales and marketing industry. At the same, time relationship between effective marketing through apps and productivity. A comparison was made between the training and skills development initiatives in different nations following the global financial crisis of 2008. In addition, an analysis was made of the emerging patterns in terms of increase in marketing and purchases within fashion industry by use of other applications. Similarly, research shows that in the US and many Latin American countries, government efforts worked wonders in allowing the use of celebrities and third party endorsement figures in the process of reinforcing product brand images within fashion industry. Although the global economy has not yet recouped to the pre-crisis era, there are positive signs that introduction and implementation of up-to-date software applications within fashion apparel industry through social media, and involving training and skills enhancement will lead to creation of confidence amongst users hence result into better economic outcomes. Costs and Budgets The operations of Amazon.com is not looking at incurring any serious costs besides legal counseling of contracts. The costs depends on the provisions of the contract between Amazon.com and internet providers. Some examples of scenarios that might happen depending on the contract include enforcement of a fixed monthly percentage of profit or a fixed monthly fee. The contract could state that the business incurs the costs on innovations done for the project which would be approximately $ 25,000. Expected Results If the project is implemented, consumers benefit numerously and the project of Amazon.com seems to be a huge success both financially and socially. Expectations are that the project can be very successful and the demand on software apps, designs and posters very high. Feasibility The proposed business idea is feasible in every manner. Financially, the business is not expected to engage in any serious financial obligations because Amazon.com operates on its own products and services, therefore, delivering its own products and training its own employees. This business plan is intended to give a full picture about the need, benefits, feasibility, and method that businesses can utilize to make consumers lives easier through innovation of such applications. Conclusion Well-designed company websites usually provides potential capabilities in conveying timely information to online purchasers. This provides the intended satisfaction levels hence reinforcing brand online trust. Quality information helps in increasing consumer knowledge and awareness concerning online products making it easier for them to make concrete decisions concerning brands. At the same time online brand trust is based on product reputation whereby consumer’s level of trust is based upon level of brand reputation within the market. However, understanding consumer perceptions based on online brand trust proves a little difficult task capable of creating challenging situations to retailers hence the need for effective e-marketing strategies. Consumers usually show more range insensitivity in the process of determining goods for high-end and low-end consumers. Products recognized as affecting only the rich are known to evoke valuation through distinctive feelings while on the other hand, products affecting more of the poor are valued through calculation. Relying on sensible feelings makes consumers be sensitive on value than variations in range. However, those relying on calculations are basically sensitive towards variations in range. Majority of consumers tend not to pay much attention on prices in the process of purchasing goods with hedonic characteristics as opposed to products’ functionality. Consumers are not usually sensitive to saving cash when it comes to consumption of luxurious goods especially based on decisions. Infrequent consumption of hedonic items makes people be more willing to purchase such items. Donations of hedonic goods are normally accompanied with low sensitivity as compared to frivolous products. References Amazon.com Inc. 2011. Company History and Profile. Retrieved from http://www.amazon.com/ Dayal, S, Landesberg, H & Zeisser, M 1999, How to Build Trust Online, Marketing Management, Fall, London Ha, H.2004. Factors influencing consumer perceptions of brand trust online. Journal of Product & Brand Management, vol. 13, no. 5, pp. 329-342 Keegan, M & Green, K 2002, Global marketing management, NY: Prentice hall Khan, U & Dhar, R 2005, “Licensing Effect in Consumer Choice,” Working Paper, Yale University Kotler, P. & Armstrong, G. 2012. Principles of marketing. 14 edn. New Jersey, NJ: Prentice Hall. Shankar, F, Sultan, G, Urban, L &Bart, I 2002,The Role of Trust in online Customer Support, Working Paper, Sloan School of Management, MIT, Cambridge Read More