Task-2
Amazon.com, Inc. (Amazon) is an online retailer (also known
as an 'e-tailer') and information source incorporated under
U.S. law in 1994. There are many advantages to the incorporated
business structure, including:
Reduction of personal liability
Owners (in this case, shareholders) are not personally responsible
for the finances of the company. An owner cannot be personally
prosecuted on matters relating to the company, and they can
only lose the amount of money they have invested in the organisation.
Tax advantages
An incorporated business enjoys tax benefits in the form of
deductible employee benefits such as health insurance, life
insurance, and travel and entertainment expenses. Additionally,
company contributions to certain employee retirement plans
are also deductible from income for tax purposes.
Capital Funding
A corporation has easier access to capital funding since funds
can be secured by the sale of stock. Shareholders are effectively
owners in the corporation, as they have paid for a unit of
ownership, or a 'share'. This form of raising capital is only
available to incorporated businesses.
 Enduring structure
Incorporation is the most enduring business structure. Regardless
of the comings and goings of CEO's, shareholders or staff,
an incorporation remains in existence, whereas in other business
structures, the departure of an owner or partner could result
in the termination of the business.
Transfer of ownership
Corporations enjoy easier transfer of ownership through the
sale of stock. This affords corporations the benefit of little
to no disruption of daily operations when a transfer of ownership
takes place.
Centralized management
Because corporations are run by a Board of Directors, all
large scale key decisions are made by this centralized governing
body, which can eliminate potential dissension between multiple
individual decision
makers.
Since its incorporation, Amazon has grown into an international
retail force represented in six major markets (see Figure
1):
Figure 1 - Amazon's international operations
Because of the enormity of Amazon's market, as well as the
differing needs of international market segments, Amazon is
divided into four principal divisions (see Figure 2 below).
Figure 2 - Amazon.com's four principal segments [1]
Through Amazon's website, consumers can buy products including
CD's, DVD's, books, magazines, apparel, household items and
electronics. [2] Resale programs such as Z-shops, Amazon Marketplace,
and Amazon Auctions allow other retailers to sell new, used
and collectible goods to consumers with Amazon acting as a
middleman and collecting a commission on each product sold.
Moreover, Amazon has formed the Merchants@ program, which
is an alliance with other retailers to offer exchange privileges
between Amazon's website and other well-known merchants such
as Borders Bookstores, Waldenbooks, Target and CDNow (all
U.S. based companies). These merchants will make their online
inventories available via Amazon's web site, and, if a consumer
purchases the outside merchant's goods through Amazon, Amazon
will receive a commission. Likewise, Amazon will receive a
dedicated link on the partner web sites that will be available
if Amazon carries a product that the partner retailer does
not. In this case, Amazon must pay a commission to the partner
web site for the 'referral' of business. Although the alliance
model has its critics [3], Amazon has successfully implemented
alliances that have proved profitable for all involved parties.
For international subsidiaries such as Amazon UK and Amazon
Japan, Amazon has created the Syndicated Store program in
alliance with vendors such as Waterstone's (UK) and Virgin
Media (Japan). [4] This program works in much the same way
as the Merchants@ program. Amazon also manages the web sites
of many international retailers trying to break into North
American markets. For example, Amazon has recently been awarded
the contract to manage HMV's North American web site.[5] Most
recently, Amazon has launched Amazon Web Services, an online
toolkit for website developers, which has already seen 25,000
developers sign up in the first week.[6] Amazon also owns
the Internet Movie Database (www.imdb.com), which is a complete
resource for information on entertainment titles. Entertainment
industry professionals can subscribe to IMDb Pro, which offers
special sector news and information for a subscription fee.
Amazon is also one of the few dot coms to have survived the
mass culling of internet 'e-tailers' in the late 1990's. While
most online retailers operate 'in the red', Amazon has decreased
its losses significantly over the last few years. In the first
quarter of 2003, revenues increased 28% to $1.08 billion,
and net losses fell 58% to $10.1 million. [7]
Amazon has identified several key objectives for the organisation
as a whole. First, and most importantly, Amazon wishes to
create shareholder value. According to the 1997 Letter from
the Chairman [8], "a fundamental measure of our success
will be the shareholder value we create over the long term."
Amazon's focus on creating and maintaining shareholder value
is reflected in their other corporate objectives, which all
stem from the creation of shareholder value. [9]
" Focus relentlessly on our customers.
" Make bold investment decisions in light of long-term
leadership considerations rather than short-term profitability
considerations.
" Focus on cash.
" Work hard to spend wisely and maintain our lean culture.
" Focus on hiring and retaining versatile and talented
employees, and weight their compensation to significant stock
ownership rather than cash.
Task 3
Amazon's corporate objectives focus primarily on creating
shareholder value. Tesco, another retailer with a major online
presence (www.tesco.com), does not share Amazon's view regarding
the paramount importance of shareholder value. Tesco's corporate
priorities revolve around their ideas of corporate social
responsibility. Thus, their priorities focus on being a good
employer, making a positive contribution to local communities
and minimising environmental impact.[10] While both Amazon
and Tesco share a responsibility towards their employees and
customers, Tesco's other objectives reflect a more rounded
sense of responsibility on Tesco's part. Amazon is primarily
concerned with the financial aspects of ownership, whereas
Tesco sees themselves as responsible for their employees,
local communities and environment. Amazon's more limited scope
of primary objectives indicates less global vision and a lessened
sense of corporate and ethical responsibility. This could
be due to the nature of Amazon's retailing (online only) versus
Tesco's brick-and-mortar as well as online operations. Since
Amazon only operates online, they may see their impact on
the environment and on one specific community as inconsequential.
Leading worldwide retailer Wal-Mart (owners of Asda) is also
a competitor for Amazon. Wal-Mart's corporate objectives include
exceeding customer expectations, caring for the community
in which you operate, and being the low price leader in all
product lines.[11] Amazon and Wal-Mart both share a sense
of responsibility towards the customer. Additionally, Wal-Mart's
objectives are very similar to those of Tesco, so the same
issue of community and environmental responsibility exists
between Wal-Mart's and Amazon's objectives. Again, Wal-Mart
is focused on a more global sense of responsibility, whereas
Amazon seems to be primarily interested in shareholder concerns
regarding maximisation of value. As previously mentioned,
this is probably due to the fact that Wal-Mart has a more
pronounced brick-and-mortar presence, although they do also
have a strong online existence. This physical presence could
make companies like Tesco and Wal-Mart more conscious of their
community and environmental responsibilities, whereas Amazon's
sole online presence might diminish their perceived responsibility
in these areas.
Task 4
As seen from Figure 3 (below), there are a multitude of parties
with a vested interest in the operations and profitability
of Amazon.
Figure 3 - Stakeholders in Amazon.com, Inc
Shareholders/Owners
Shareholders are the actual owners of a corporation, and they
are primarily interested in protecting their investment in
the company as well as increasing their personal wealth. They
have invested in the organisation for the purpose of having
that investment repaid as dividends and capital appreciation
in the form of an increasing stock price. In order for stakeholders
to ensure their objective of investment appreciation is met,
they must monitor the company's performance and use their
shareholder vote to voice any concerns about the financial
or material operations of the organisation. To monitor the
company's performance, shareholders can refer to information
contained within the quarterly and annual reports and financial
statements, which will allow shareholders to measure if and
how the organisation has added value to their investment.
Shareholders can glean information about the future direction
of the company by reading the CEO's statement, contained in
the annual report, which explains to shareholders what the
organisation has achieved over the past term and how it perceives
the market will develop over the coming term. Although these
forward-looking statements are subject to change, the shareholder
has historical data with which to compare the organisation's
actual past performance with what management has indicated.
Lenders
An organisation can raise funds from multiple sources. Shareholders
supply a portion of funding in the form of capital investment,
but the remainder is usually borrowed from banks or other
external sources such as venture capitalists. The paramount
objective of lenders is to ensure they can recover any funds
lent to an organisation. In order to meet this objective,
lenders can utilize the annual report and financial statements
of the debtor, which will allow them to identify whether the
organisation has the ability to repay their capital investment
with interest and within agreed terms. Lenders can also review
the statements to identify whether appropriate collateral
offered on a loan exists. In addition to company-prepared
financial statements, lenders can also review analyst reports,
including quarterly estimates, ratings and buy/sell recommendations.
These estimates provide a snapshot of how professional financial
analysts expect the company to perform over the coming period.
Since lending is based on appropriate collateral, these predictions
could indicate to a lender if the necessary collateral will
be available when the loan is to be paid off.
Suppliers
Suppliers work with the company to ensure proper materials
are available. Often, materials are sold to corporations on
a credit basis, which means that suppliers must be sure that
the corporation has the money to pay the invoices for goods
when they come due. Thus, suppliers have many of the same
concerns as do lenders. Due to the credit relationship that
usually exists between a supplier and a corporation, a supplier's
main objective is to ensure their goods will be paid for when
an invoice comes due. In order to meet this objective, suppliers
can request that companies provide financial statements as
well as future period cash flow analyses so that future availability
of available funds can be determined.
Task 5
In an age of growing awareness of corporate responsibility,
any corporation, including Amazon, has both internal and external
responsibilities. Internal issues include items such as providing
equal opportunities and a safe working environment for employees,
investing in staff development, acting in accordance with
all legal requirements, and protecting consumer privacy. External
responsibilities include making financial statements publicly
available, acting ethically towards suppliers and lenders,
and being socially responsible in their interaction with local
communities, as well as acting in an environmentally responsible
manner regarding packaging and materials.
Amazon seeks to meet internal responsibilities such as providing
equal opportunities for applicants and employees by complying
with the Equal Opportunities Act (U.S.), and by making it
clear that diversity and training are important aspects in
the Amazon hiring process. According to Amazon, they "hire
people from vastly diverse backgrounds.[12]" Regarding
the responsibility of staff training and development, Amazon
works to offer employees the opportunity to "work with
and learn from an unusually high proportion of smart, focused
people who are passionate about their work."[13] Staff
development is important to Amazon, which is reflected in
their promise to employees to reward "hard work, initiative,
and smart decisions.[14]" Protecting consumer privacy
is another key responsibility that Amazon takes very seriously.
Amazon offers the Amazon.com Safe Shopping Guarantee, which
protects consumers transmitting their credit card details
through the Amazon web site. Amazon guarantees "that
every transaction you make at Amazon.com will be safe. This
means you pay nothing if unauthorized charges are made to
your card as a result of shopping at Amazon.com.[15]"
Using tools such as SSL technology, Amazon strives to ensure
consumer's private details are not accessible by third parties.
Amazon also takes steps to ensure their external responsibilities
are met. One key external responsibility Amazon must meet
is making financial statements publicly available. They do
this by ensuring all statements required by U.S. law are timely,
correct, and available to any member of the public requesting
a copy.
- Amazon.com, Inc. 2002 Annual Report
- Amazon.com, Inc. 2002 Annual Report
- Millard, E. (2003) 'Are affiliates all washed up?', EcommerceTimes.com
- Amazon.com, Inc. 2002 Annual Report
Dow Jones Business News Press Release (2003) 'HMV Group:
Amazon To Manage, Operate HMV.com
- Web site', 29 April 2003
- Amazon.com Press Release (2003) 'Amazon.com Web Services
Announces Trio of Milestones - New Tool Kit, Enhanced Web
Site and 25,000 Developers in the Program', 19 May 2003
- Amazon.com, Inc., First Quarter 2003 Report
- Amazon.com, Inc. 1997 Annual Report
- Amazon.com Investor Relations, 'A Message to our Shareholders',
www.amazon.com/ir
- Tesco (2003) 'Corporate Social Responsibility Review',
www.tesco.com/corporateinfo
- Wal-Mart, Inc., 'About Wal-Mart', www.walmart.com/cservice
- Amazon.com Online Job Center, 'Why Choose Amazon.com?',
www.amazon.com/jobs
- Amazon.com Online Job Center, 'Why Choose Amazon.com?',
www.amazon.com/jobs
- Amazon.com Online Job Center, 'Why Choose Amazon.com?',
www.amazon.com/jobs
- Amazon.com Online Help, 'Safe Shopping Guide', www.amazon.com/help
- BIBLIOGRAPHY
- Amazon.com, Inc. 1997 Annual Report
- Amazon.com, Inc. 2002 Annual Report
- Amazon.com, Inc. 2003 First Quarter Report
- Amazon.com Investor Relations, 'A Message to our Shareholders',
www.amazon.com/ir
- Amazon.com Online Help, 'Safe Shopping Guide', www.amazon.com/help
- Amazon.com Online Job Center, 'Why Choose Amazon.com?',
www.amazon.com/jobs
- Amazon.com Press Release (2003) 'Amazon.com Web Services
Announces Trio of
- Milestones - New Tool Kit, Enhanced Web Site and 25,000
Developers in the Program', 19
- May 2003
- Dow Jones Business News Press Release (2003) 'HMV Group:
Amazon To Manage,
- Operate HMV.com Web site', 29 April 2003
- Millard, E. (2003) 'Are affiliates all washed up?',
EcommerceTimes.com, 16 May 2003
- Tesco (2003) 'Corporate Social Responsibility Review',
www.tesco.com/corporateinfo
- Wal-Mart, Inc., 'About Wal-Mart', www.walmart.com/cservice
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