Abdullah Mahmood: Research

Report: AMAZON an organizational review of an e-commerce company

Abdullah Mahmood 222004041 MBA İSTANBUL OKAN UNIVERSITY (DATED 4 Dec 2022)

Supervisor: Dr. Mustafa Cenk Uludağ

NOTE//

For full report in .PDF format (with photos, SWOT and PESTLE analysis) write me an email. publishing and re-using this research without permission is not allowed. This is only for study purpose.

Table of Contents

Introduction
Amazon current board of directors
Customer relations and their need
Business Model of Amazon
Customers of Amazon
Customer Relationships of Amazon
Cost Structure of Amazon
Revenue Stream of Amazon
Financial report and Income report of Amazon
Year 2021 - 2022
Sustainability of Amazon
Amazon Investments in Environment
Amazon area of service
Global position of Amazon
SWOT Analysis
PESTLE Analysis
Conclusion of the research
References

______________________________________

Introduction:

Amazon is an American company. Founded by Jeff Bezos in 1994, from his garage in Bellevue. Since than Amazon progressed so much that providing services in Ecommerce, cloud computing, advertising, streaming and artificial intelligence. This assignment is about Amazon, its history and organizational review. It is going to talk about the future of Amazon and what we can expect from the company in the coming years. Amazon has had a very long and successful history. From the time of its founding, it has had many ups and downs but has been able to persevere through them all. Amazon was established in 1994 and has grown to become a major player in the retail industry. The company is headquartered in Seattle, Washington. It has diversified operations, from online retail, electronics and consumer products. In 2017 Amazon invested $4 billion into developing Prime Video, that offers original content as well as shows from outside networks and movies on its streaming service. It is reported that Amazon generates more than half of their revenue from America and about one third of their revenue comes from Germany. Amazon ships over 500 million items worldwide each year. They sell a range of products from digital services to fashion apparel - even fresh food items like meat, produce, dairy and other groceries - can be found at the site every day. The future for Amazon looks bright with many new innovations coming for consumers like home delivery by drone service that will deliver packages to some customers within 30 minutes of placing an order according to Jeff Wilke CEO Worldwide Consumer at Amazon.

Amazon current board of directors included:

Jeffrey P. Bezos as Executive Chair.
Andy Jassy as President and Chief Executive Officer.
Brian T. Olsavsky as Senior Vice President and Chief Financial Officer
Douglas J. Herrington as Chief Executive Officer, Worldwide Amazon Stores
Shelley L. Reynolds as Vice President, Worldwide Controller 3
David A. Zapolsky as Senior Vice President, General Counsel and Secretary
Keith B. Alexander as CEO, President, and Chair of IronNet, Inc.
Jamie S. Gorelick as Chair of the Nominating and Corporate Governance Committee
Judith A. McGrath as Chair of the Leadership Development and Compensation Committee
Indra K. Nooyi as Chair of the Audit Committee
Wendell P. Weeks as Chairman and CEO of Corning Incorporated
Edith W. Cooper as Member of the Leadership Development and Compensation Committee
Adam N. Selipsky as Chief Executive Officer, Amazon Web Services

Customer relations and their need: There is no doubt that the emergence of the Internet has changed things dramatically. The supply and demand of goods has been turned on its head, consumers can access anything they want in a matter of seconds and of course they do not pay for all of this with money which has made a huge impact on how businesses need to be run to survive. Amazon were one of the first companies to take advantage of these new opportunities by offering an entirely new way to shop. Thanks largely to their gargantuan scale as a distribution partner. Opening up ecommerce for both independent resellers and smaller retailers. Amazon's growth has been based on low prices, low costs, vast selection and fast delivery. In other words meeting the needs directly, or in some cases even anticipating the needs before others are realized. By developing technologies such as product exchange for Alexa users; anticipatory shipping or Alexa home automation experiences; Amazon have tried very hard to bring about a seamless customer experience with which internet shopping evolved.

Business Model of Amazon:

1. Customers of Amazon:

Among Amazon's customers are people who buy and sell online. People using the service of Amazon Prime which is an online movie, drama, music streaming platform. Amazon customers also include users who read and write books online. In addition to these services, Amazon also provides an online cloud storage service.

2. Value Proposition of Amazon: Amazon provides a secure platform. Due to which consumers turn to Amazon for online shopping. According to users, they not only get variety on Amazon's platform, but they can determine the quality of any item through user reviews. Amazon ensures stock availability. This is the reason why people are now preferring Amazon over physical stores. Where they don't have to queue and prices are lower than the market. Amazon sells products directly from the company, hence the middle-person concept is gone. Below is the screenshot of an email. I received when I questioned about a payment option here in Turkiye. I used Amazon when I was in United Arab Emirates. Amazon launched its services here in Turkiye three years ago. This email response shows that how much Amazon cares about its customers.

3. Channel of Amazon:

Amazon used to provide its services through its official website from the beginning. But innovating with time, Amazon currently has its own official mobile apps, multiple websites and affiliate services that sell Amazon products. As the year 2022 comes to an end, Amazon has generated more than $510 billion in revenue through its services.

4. Customer Relationships of Amazon:

Amazon cares about its customers. This is the reason why users who use Amazon's services turn to Amazon again and again. This shows that Amazon has a very strong relationship with its customers. This relationship is a relationship of trust and confidence. This is why Amazon's business has always grown over time. Amazon provides its customers with choice and price control. For this reason, Amazon has always been looked upon favorably by its customers.

5. key Activities of Amazon:

Among Amazon's key activities is their constant stock availability. Standardize products. Keeping your platform which consists of many websites and apps available and active at all times. Maintain a strong relationship with your suppliers and sellers. Striving to provide better service than competing companies in the market. Ensure new content is delivered on Prime Video service.

6. Key Resources of Amazon:

Construction of warehouses is being ensured in every area of Amazon where they are providing their services. Currently, there are thousands of warehouses around the world where Amazon provides its services. Amazon has built 33 new modern warehouses in the US these days. Due to which it is possible to send the products to the customers within a few hours.

7. Key Partners of Amazon:

Amazon's Key Partners include sellers and dealers who help deliver products to Amazon. All such companies that sell their products on Amazon are considered Amazon Best Partners. Amazon cares about its key partners that's why Amazon currently has more than three hundred thousand’ key partners.

8. Cost Structure of Amazon:

Amazon's cost structure includes its IT sector and physical warehouses. Amazon also accepts currency and e-payments in transactions for products on its services. This is the reason why a decent number of customers are buying anything from Amazon on a daily basis.

9. Revenue Stream of Amazon: Among the revenue streams Amazon has its Prime Video service. Which is always there to be used (opened for new users 24 hours) and users pay monthly. Also, any seller who sells their item on Amazon pays a commission. The revenue from digital sales also holds a decent amount.

Financial report and Income report of Amazon: (3rd quarter 2022):

Net sales increased 15% to $127.1 billion in the third quarter, compared with $110.8 billion in third quarter 2021. Excluding the $5.0 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 19% compared with third quarter 2021.

• North America segment sales increased 20% year-over-year to $78.8 billion.

• International segment sales decreased 5% year-over-year to $27.7 billion, but increased 12% excluding changes in foreign exchange rates.

• AWS segment sales increased 27% year-over-year to $20.5 billion, or increased 28% excluding changes in foreign exchange rates. Operating income decreased to $2.5 billion in the third quarter, compared with $4.9 billion in third quarter 2021.

• North America segment operating loss was $0.4 billion, compared with operating income of $0.9 billion in third quarter 2021.

• International segment operating loss was $2.5 billion, compared with operating loss of $0.9 billion in third quarter 2021.

• AWS segment operating income was $5.4 billion, compared with operating income of $4.9 billion in third quarter 2021. Net income decreased to $2.9 billion in the third quarter, or $0.28 per diluted share, compared with $3.2 billion, or $0.31 per diluted share, in third quarter 2021.

• Third quarter 2022 net income includes a pre-tax valuation gain of $1.1 billion included in non-operating income from the common stock investment in Ravia Automotive, Inc.

• Operating cash flow decreased 27% to $39.7 billion for the trailing twelve months, compared with $54.7 billion for the trailing twelve months ended September 30, 2021.

• Free cash flow decreased to an outflow of $19.7 billion for the trailing twelve months, compared with an inflow of $2.6 billion for the trailing twelve months ended September 30, 2021.

• Free cash flow less principal repayments of finance leases and financing obligations decreased to an outflow of $28.5 billion for the trailing twelve months, compared with an outflow of $8.8 billion for the trailing twelve months ended September 30, 2021.

• Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations decreased to an outflow of $21.5 billion for the trailing twelve months, compared with an outflow of $3.9 billion for the trailing twelve months ended September 30, 2021. 9 So; Financial results shows: Net sales = Quarter 3rd $127.1 Billion with 15% increase Net Income = Quarter 3rd 2.9 Billion

Sustainability of Amazon:

Amazon plans to launch 100,000 electric vehicles in its next eight years. Which means a carbon-free atmosphere, about two million deliveries a day. It can be estimated that how much the same number of vehicles with fuel are spreading dangerous carbon in the atmosphere. Amazon also plans to make 50 percent of its deliveries zero carbon by 2030. The most notable project is Amazon's plan to use 100% of its projects with renewable energy. Amazon has pledged zero carbon emissions in the Paris Climate Agreement. Which is a very commendable act.

Ground Shipments: In ground transportation, Amazon plans to use one hundred and thousand vehicles. Which will be electric vehicles. Amazon has also started using it in many locations in the US in 2021. Amazon wants to shift 50 percent of its operations to electric transportation within a few years. Which will be the best addition to the sustainable project.

Air Shipments: By adopting air delivery, Amazon is able to emit 20% less carbon than land transport. Ground vehicles that run on fuel takes longer time due to which higher pollution emitted than air transport. Amazon wants to make more use of air delivery.

Packaging Material: The material required while packing the package should be safe but plastic free. Amazon plans to use less plastic in the future. Rather, more paper and environment-friendly materials should be used.

Amazon Investments in Environment: Amazon has recently made significant investments in the environment. In which electric vehicles are at the top. Amazon also plans to make deliveries using drone technology. Apart from this, a lot of investment has been made in solar energy. Amazon plans to outsource most of its operations to solar. Amazon has a substantial stake in the 2030 Sustainable Energy Plan.

Amazon area of service: Amazon has more than 185 warehouses worldwide. 110 warehouses are in the US. There are a number of warehouses in Canada and Mexico. In Europe, Amazon is present in Spain, Slovakia, Slovenia, Germany, France, Italy, Poland and Turkey. In Asia, Amazon is present in Japan, India, Pakistan, China, Singapore, Saudi Arabia and the United Arab Emirates.

Here I will consider it necessary to summarize the Amazon of Turkiye. Because the university I am studying in is located in Istanbul, Turkiye. Amazon Turkiye: Amazon launched services in Turkey three years ago. The service was almost launched by the end of 2019. Amazon launched all its services in Turkey including Shopping, Amazon Prime (which is a video platform), Amazon Books and Amazon Storage. Amazon got quite a good response from here. 60% of Amazon Turkey users are women and 40% are men. Amazon has become the third most used online shopping service in Turkey. In the year 2021, Amazon sold $200 million in electronics alone. Overall, Amazon's sales were $486 million. Amazon sees a lot of expansion in the year 2022. In the 3rd quarter, Amazon achieved more than 190 million sales. Amazon is seeing less competition in Turkey. It is rumored that in the next few years, Amazon will buy its rival companies.

Conclusion of the review and research:

One thing is clear from all the research done. That is, change is coming very fast in the present era. If we do not adapt our company or business to this change, we will be left behind. One of the great things about Amazon is that the company embraces innovation. This company is making timely and accurate use of all the technology that comes with time. Currently, Amazon is considered to be the strongest company financially. This is why when a company is very famous it has to maintain its reputation. Amazon took an oath in Paris to become environmentally friendly. Which is a very welcome thing. But as we mentioned in PESTLE, Amazon faces tough competition in China. The reasons we have seen include political and legal reasons. China has a very large market. Amazon is trying to establish itself as the best company in China. As the idea of future homes becomes more realistic, our daily tasks can be handled by chatbots in the comfort of our own home. But, who will provide all required products for these futuristic households? It could come from some companies like Amazon. They have built their own fulfillment centers for shipments and by using automated machine to fulfill shopper’s order instead of human staff.

References:

1. Aldrich, H.E., 2008. Organizations and Environments. Stanford University Press: Stanford.

2. Baltzan, P. and Phillips, A., 2008. Business-driven Information Systems. Mc Graw-Hill: Maidenhead.

3. The Everything Store: Jeff Bezos and the Age of Amazon 2013 by Brad Stone

4. Amazon Unbound: Jeff Bezos and the Invention of a Global Empire Simon and Schuster, 11 May 2021

5. Research Paper, Amazon.com - A Comprehensive Case History by Sandeep Krishnamurthy University of Washington Bothell February 2005