Amazon.com is a multinational technology corporation based in Seattle, America, and mainly focuses on cloud computing, e-commerce, artificial intelligence, and digital streaming. It is among the world’s most influential brands and the big four technological corporations in America. Amazon offers a wide range of products under retail goods, Amazon prime, consumer electronics, digital content, Amazon Studios, and games. The retail section’s products and services include media, baby products, apparel, consumer electronics, kitchen items, musical instruments, beauty products, and sporting goods. Additionally, the company offers free shipping within the USA under Amazon prime that takes two-days for an annual subscription of $103 as of 2019 (Amazon.com Inc. – AnnualReports.com., 2020). Besides, the company offers consumer electronics services such as smartphones, television, and speaker in the global market. Hence, the company’s menu includes online shopping and merchant services through which payment and subscription platforms are provided for e-commerce, hardware, logistics, media, and data storage services to its global customers at the lowest favorable price.

Consequently, Amazon.com provides a variety of products to worldwide consumers and focus on excellent customer experience. The company’s strategizes embracing convenience, low prices, and a wide range of merchandise for its customers. This is enhanced through customer focus and being a disruptive force by taking the business risk in market leadership and technologically empowering its employees to ensure efficiency in its operations. Equally, its competitive advantage is attained via competitive prices on its products, compared to its rivals. More so, it provides a variety of merchandise, enabling the company to cut costs and maintain quality products. Simultaneously, accessibility to its products has been enhanced through a widely distributed network of stores and online shipping services facilitated through its key platforms, namely; Amazon Web Services, Amazon Prime, and the Amazon retail. Subsequently, this has facilitated the achievement of a wide customer base, thus increasing its revenue size overtime.

Regarding organizational structure, the corporation embraces a hierarchical management style with Jeff Bezos as the CEO. The senior management team also includes three CEOs and three vice presidents who report directly to Jeff Bezos. Besides, the company has a functional organizational configuration that focuses on business operations according to global hierarchy, function-based groups, and geographic divisions. The global function-based category is the strongest characteristic of the company, and every organizational structure is headed by a senior manager (Amazon.com Inc., AnnualReports.com, 2020). The team facilitates successful e-commerce operations in the entire company to achieve intensive and generic growth strategy. Further, the company embraces geographic segmentation that facilitates easier management of e-commerce operations specific to the locations. These segmentations are categorized into North America and international regions. In this way, therefore, it is easy to address business issues specific to the segmentation.

Furthermore, the company’s products and services are organized according to product groups, which eases shipping logistics. Besides, its retail products are diversified beauty products, fashion, toys, and food, among others. Most importantly, the company’s functional structure is designed to support international growth in e-commerce, which has ensured timely responses to technological advances. This is also coupled with a robust online retail market. Therefore, compounded by efficient implementation of managerial directives, Amazon.com has been rapidly expanding its business overtime besides becoming the most outstanding e-commerce company on the global market.

Recent Financial Performance

Consolidated Income Statement

Amazon.com has a strong financial performance that has been increasing tremendously in the last three years, from 2017 to 2019. This is indicated in the company’s consolidated income statements, as shown in appendix 1. The company’s net income increased from $3, 033 million in 2017 to $10, 073 million in 2018. The same trend was reported in 2019, where the net come outperformed that of 2018 to $11,588. This implies that the net income increased by $7, 040 million in 2018, and $ 1,515 million in 2019. This is 232% and a 15% increase in 2018 and 2019, respectively (Amazon.com Inc. – AnnualReports.com, 2020). Likewise, the company’s comprehensive income improved in the last three years, from $3,534 million in 2017 to $11,637 million in 2019. Thus, the comprehensive income increased by $5,992 million in 2018, equivalent to a 170% increase and $2,111 in 2019, equivalent to a 22% increase.

Consolidated Cash Flow Statement

The company’s cash flow statements also improved in the three years under consideration. For instance, cash increased from $21,856 million in 2017 to $32173 in 2018 and $36410 in 2019, as indicated in appendix 2. Therefore, the cash increased by $ 10308, equivalent to 47% in 2018, and $4237, equivalent to a 13% increase in 2019. Additionally, the net cash from operating activities also had an upward growth for three years. The cash from operating activities improved significantly from $18365 in 2017 to $30723 in 2018 and $38514 in 2019. Hence, this represents an increase of $12358 in 2018 and $7791 in 2019, which is equivalent to 67% and a 25% increase in 2018 and 2019.

However, the net cash used in investing activities depicted a different trend with the year 2017 having a bigger share than 2018, reporting a decrease, but increased again in 2019. The cash used in investing activities in 2017 is $27,084, while only $12,369 was invested in 2018. However, this increased to $24,281 in 2019. Therefore, it implied a $14,715 decrease in 2018 but a $11,912 increase in 2019 in investment, showing an equivalent of 54% decline in 2018 and a 96% increase in 2019 (Amazon.com Inc. – AnnualReports.com., 2020). Finally, cash used for financing activities also had a mixed trend in the three years. In 2017, financing activities provided cash of $9,928, but cash of $7,686 and $10,066 was used in financing activities in 2018 and 2019. Therefore, from the cash flow statements, it can be observed that Amazon spent substantial funds in financing and investing activities in the financial year 2018 and 2019, which could be attributed to the launching of self-driving cars and internet satellites.

Financial Performance

The company has a strong financial performance indicated by the income and cash flows statements for the period between 2017 and 2019. Equally, it is a global leader in the technology industry and has been investing in logistics, self-driving cars, and Internet satellites. Besides, in the year 2017, Amazon shocked the market by acquiring Whole Foods Market that would offer brick and motor in the grocery store chain for $13.7 billion, a deal that was sealed on 16th June 2017 (Amazon.com Inc. – AnnualReports.com, 2020). Hence, the company is a disruptive force that is exceeding the industry and market expectations.

Current Financial Health

A review of the consolidated balance sheet statements of Amazon.com depicts a robust financial position and health. The corporation has adequate cash to cater for financial obligations such as payroll and other liabilities. This is demonstrated by positive cash and cash equivalents for 2018 was $31750 million and $36092 million in 2019. The company shareholders’ equity as of 2018 was $43,594 million, which improved dramatically to $ 62,060 million as of 2019. The debt financing from long-term debt stood at $23,495, according to the 2018 report, but slightly increased to $23,414 in 2019, majorly to cater to new investments. The current ratio that shows the business ability to meet short-term financial responsibilities and given by the division of current assets and liabilities is 1.09811 and 1.097048 in 2018 and 2019, respectively (see Appendix 4). In this case, it implies that the business can meet its short-term financial responsibilities as the current assets are more than liabilities (Amazon.com Inc. AnnualReports.com, 2020). Besides, the company’s debt/equity ratio is 1.85546 for 2018 and 2.650551 for 2019, as shown in Appendix 5. This implies that the company has enough funds for its operations as shareholders’ equity is greater than debt financing. Therefore, Amazon.com should invest any additional cash to generate more returns for the company. Besides, it is a great investment opportunity for an investor, especially because of the highest current market value of $3,167.46 million with a P/E ratio of 121.75. Thus, an investor can expect constant dividends in the future on investment in the company.

Final Project Milestone Two – Module Five

Success Factors and Risks

Strategic Priorities

The management of Amazon.com has tolerance for risk and view risk as part of its sustainable growth strategy. The company focuses on a cost reduction strategy consistent with its investment policy to offer a wide variety of merchandise with the lowest cost possible and excellent customer focus.

Capitalization on Non-Financial Factors

Amazon.com is a global market leader with a wide customer base, worldwide geographical presence, and robust brand on the global market. Also, the company can better capitalize on non-financial factors such as human resources by having a diversified human capital and avoid overdependence of a few employees, suppliers, or customers (Kumar, 2020). Equally, the company can attract more investors by maintaining a good reputation, brand, and market share. The company should have a distinct development strategy to expand products, customer base, and markets. Finally, the company should mitigate significant internal risks such as competition, slowing revenue growth, profit uncertainty, and highly speculative valuation.

Significant Internal Risks

The appetite for risks that comes with increasing exploitation of the market opportunities is a risk by itself within Amazon’s internal management team. Besides being an opportunity, the rapid changes in technology that the company bases on to disrupt the market can adversely reflect its financial stability. The reason is that other emerging companies could ignite competition to benefit from the same, thus undermining their profit expectations.

Final Project Milestone Three – Module Seven

Projections

Projected Consolidated Financial Opportunities

Amazon.com’s consolidated financial performance is forecasted to grow at an average of 35% per annum based on the financial statements of 2018 and 2019. This will apply to the balance sheet, income statement, and cash flow statements items. The growth projections are shown in appendix 6.

Projections for the best and worst-case scenario

The worst-case scenario assumes that the company’s financial performance will improve by 50% in the next three years. Therefore, the corporation’s financial statements are forecasted using 50%, as shown in Appendix 7. On the other hand, Amazon.com’s best-case scenario is projected using 20% for the next three years, as indicated in Appendix 8.

Discussion of Finding

The base case scenario assumes that the company will grow at a constant rate of 35% per annum in the next three years. Additionally, the best scenario assumes a growth rate of 20%, while the worst scenario assumes 50%. The assumptions affect the company’s projection accuracy as the growth rates may be more or less the projected percentage. Besides, the rates may not remain constant in the three years under consideration and can vary from one period to another. Finally, the rates are consistent with the company’s growth strategy as its objective is to be customer-centered and increase the market base through business expansion and cost reduction strategies.

Final Project Submission – Module Nine

Business Opportunities

Likely Investment Opportunities for the Organization

The biggest investment opportunity of Amazon.com lies in the retail market. The company has a huge customer base in its online and physical stores, enabling it to adopt cost reduction strategies on its products due to huge sales.

Cost and Benefits of the New Investment

Additionally, Amazon is penetrating the market with Amazon Advertising Services, which is one of the fastest-growing business sectors in the company. Equally, the entry into the advertising services is another revenue stream to the company that could increase its sales revenues and the overall income to the corporation.

Impact on Budgeting Decisions

According to Miller (2018), budgeting is a crucial finance management technique adopted by a company to determine its future short, medium, and long-term financial goals. Thus, the company can establish short-term cash deficits, investment opportunities, and reduce costs, thereby improving its business income.

Executive Summary

Amazon.com is a global leader in retail, cloud computing, and e-commerce. The company had adopted a business model of disrupting the market and adopting cost reduction strategies. Even during the COVID-19 crisis, the business will still make huge sales from online shopping and home deliveries due to its massive investment in e-commerce. At the same time, the company is a good investment opportunity because of its stability. The investors will be guaranteed a constant return on investments. Therefore, the company can become a dominant force in the industry over the next five years based on a huge customer base, low-cost leadership, and worldwide presence through e-commerce and cloud computing.

References

Amazon.com Inc. – AnnualReports.com. (2020). Amazon.com Inc. – AnnualReports.com. Retrieved 9 August 2020, from https://www.annualreports.com/Company/amazoncom-inc.

Kumar, R. (2020). Principles of management (Vol. 2). Jyothis Publishers.

Miller, G. (2018). Performance-based budgeting. Routledge.

Appendices

Appendix1- Consolidated statements of comprehensive income

Appendix 2- Consolidated statements of Cashflows

Appendix 3 – Consolidated Balance sheets

Appendix 4- Current ratio

Year	2018	2019
Current assets	75101	96334
Current liabilities	68391	87812
Current ratio	1.09811	1.097048

Appendix 5- Debt/equity ratio

Year	2018	2019
Shareholder’s equity	43594	62060
Long term Debt	23495	23414
Debt/equity ratio	1.85546	2.650551

Appendix 5- Growth Projections – ideal scenario 35%

Forecasts
Year	2019	2020	2021	2022
	Million	Million	Million	Million
Net income	11588	15643.8	21119.13	28510.83
Comprehensive income	11637	15709.95	21208.43	28631.38
Cash and cash equivalents	36410	49153.5	66357.23	89582.25
Cash from operating activities	38514	51993.9	70191.77	94758.88
Cash from investing activities	24281	32779.35	44252.12	59740.37
Current assets	96334	130050.9	175568.7	237017.8
Current liabilities	87812	118546.2	160037.4	216050.4
Shareholder’s equity	62060	83781	113104.4	152690.9
Long term Debt	23414	31608.9	42672.02	57607.22

Appendix 5- Growth Projections – Worst scenario 50%

Forecast- 50%
Year	2019	2020	2021	2022
	Million	Million	Million	Million
Net income	11588	17382	26073	39109.5
Comprehensive income	11637	17455.5	26183.25	39274.88
Cash and cash equivalents	36410	54615	81922.5	122883.8
Cash from operating activities	38514	57771	86656.5	129984.8
Cash from investing activities	24281	36421.5	54632.25	81948.38
Current assets	96334	144501	216751.5	325127.3
Current liabilities	87812	131718	197577	296365.5
Shareholder’s equity	62060	93090	139635	209452.5
Long term Debt	23414	35121	52681.5	79022.25

Appendix 5- Growth Projections – Best scenario 20%

Forecast- 20%
Year	2019	2020	2021	2022
	Million	Million	Million	Million
Net income	11588	13905.6	16686.72	20024.06
Comprehensive income	11637	13964.4	16757.28	20108.74
Cash and cash equivalents	36410	43692	52430.4	62916.48
Cash from operating activities	38514	46216.8	55460.16	66552.19
Cash from investing activities	24281	29137.2	34964.64	41957.57
Current assets	96334	115600.8	138721	166465.2
Current liabilities	87812	105374.4	126449.3	151739.1
Shareholder’s equity	62060	74472	89366.4	107239.7
Long term Debt	23414	28096.8	33716.16	40459.39

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