Running head: AMAZON CASE STUDY: WORKING CAPITAL AND VALUATION 1

Amazon Case Study: Working Capital and Valuation

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Amazon Case Study: Working Capital and Valuation

Amazon.com Inc. is a Fortune 5000 company established in 1994 as an online bookstore.

However, the company is more than a book store and has experienced an evolution from an

online bookstore to an E-commerce website with integrated systems. Online retailing constitutes

the company's core business. Amazon has also become a significant player in the electronic

device market with substantial investment in cloud computing services. It has integrated the

different components of its business using complex technology. The evolution of Amazon has

made the online retailing sector grow exponentially and have a presence in different parts of the

world. The company has developed important metrics to evaluate customer satisfaction. Such

mechanisms help evaluate both the customer's and sellers' behavior to understand the different

areas in the organization that has been improved. The company delivers products, but integration

enables it to offer customers more incentives than other companies making it more competitive.

For instance, a subscription to Amazon prime membership also affords the customer some

Kindle library e-books. The company has also made some successful and strategic acquisitions to

bolster its services and to remain competitive. For instance, the company acquired companies

such as Brilliance Audio in 2007 and Audible.com in 2008 to enhance its service. Currently,

Amazon has become one of the most influential companies in the world. Principally, the

company's convenience and products have made its stocks skyrocket, making it one of the

world's most successful companies. For every company to be successful, it must develop strong

leadership structure, understand its capital structure, and strategies to leverage financial strength

to improve its operations and increases its competitive advantage.

Amazon’s Organization Structure

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According to James Wilson, an organization's structure is an essential part of the

company's innovation. Principally, the lack of presence of task structure affects the rate at which

the company can innovate and generate new ideas. Wilson argues that an organization's diversity

is crucial in ensuring innovation since members will conceive significant innovation. Amazon is

one of the companies that has a structure that ensures innovation through team processes and

diverse projects.

Amazon has adopted a hierarchical organization structure. As a result, it has three CEOs

and senior vice presidents responsible for heading and overseeing different essential business

operations. They report directly to the CEO Jeff Bezos. The business's immense size has created

the need to develop a comprehensive hierarchical corporate structure since the company has

become one of the largest employers in the world, employing more than 600,000 people

worldwide. The company also has a reliable form of flexibility, enabling it to adapt to frequent

external market changes (Dolata, 2017). Due to rapid innovation in online trading and marketing,

the industry experiences high levels of disruption. Most companies with a hierarchical

organizational structure find it hard to be flexible enough to deal with such disruption. However,

Amazon's visionary leadership has made it easier for the company to adapt to the disruption and

ensure competition.

Amazon’s corporate structure enables it to enhance flexibility in its operations. In this

way, the company focuses on integrating small teams to handle a wide range of business

operations. The Pizza Rule, introduced by the CEO, encompasses a vital principle that small

teams, which could be fed using two pizzas, should hold meetings. The organizational structure

has significantly contributed stable leadership and management, especially at the top level.
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Specifically, the company has managed to retain its top talent, and there has been little turnover

amongst its essential players.

Amazon Leadership Principles

Amazon has a list of principles that employees within the company, starting from the

executives to lower-level employees, must follow. The fundamental principles include Customer

Obsession, Invent and Simplify, hire and develop the best, Insist on high Standards, think big,

and deliver results. The corporation has been built around the principles that ensure customer

satisfaction (Tritt &Teschner, 2019). Building around such principles has made Amazon be the

superpower company it has become. Since its inception, the CEO Jeff Bezos has built and

implemented a structure that ensures innovation and prosperity by providing guidelines for each

employee to strive. The company principle of ensuring the customer comes first has enabled it to

be disruptive and change different business segments making it very competitive in different

multitude and dominance in various sectors. One of the reasons for the company's extreme

performance over the decade is the sustainability of its cultural principles.

Customer Obsession

Customer obsession is the foremost leadership principle of the company. The company's

focus is to work to ensure the end customer's satisfaction. The company’s culture of focusing

primarily on customer’s demand instead of developers’ ideas contributed to the development of

various products, such as Amazon Kindle tablet. The company CEO Jeff Bezos in an interview

in 1999, stressed the need for the company to be a customer-centric company. The company

obsession is with the customer value rather than the stock value. The company stresses the need

to deliver value to the customer rather than fulfilling other corporate goals. The company's focus

is on ensuring shared responsibility to focused on the customer. Amazon has also adopted agile
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management that encompasses a pervasive customer-obsessed mindset that runs from the top

management, sales associates, and marketers (Culpepper & Kathleen, 2020). The company

requires everyone to enhance the impact of what the customer does and its decisions to focus on

focused customer metrics. Customer metrics are built in every aspect of the company, and the

management requires an extensive review of documentation concerning how decisions affect the

customers. The obsession with customers leads to better ideas since it enhances communication

and feedback with the customers. Customer reviews are taken seriously, thereby creating a

much-needed clarity of ideas in the company. Better conversation and interaction with the

customers enhance the company's ideas and help identify the specific areas where innovation and

design calibration are needed, thereby ensuring its growth and development.

Competency

The company has spent billions of dollars over the years in building sustainable

infrastructure and technical knowledge. Amazon has one of the most extensive and reliable

competencies that ensure E-business solutions' continuous development. The initiatives to drive

the firm up and satisfy the customers have made Amazon more experienced and better

understand the E-commerce market. The company has a substantive competitive advantage over

other firms. Investments in various competencies highlight the dynamic capability of Amazon

that ensures an open innovation strategy. Large companies have a robust knowledge base and

value network that makes them easier to develop and acquire various competencies than SMEs

(Lima & Carlos 2017). The company competency has led to the development of service

technologies that are language and environmental neutral, thereby enhances application

integration (Denning, 2019). Open innovation enhances robust responses to systematic issues

and creates a better relationship with customers and business partners. The company has to build
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reliable web services centered on solid innovation models that enhance communication and

integration of knowledge and services.

Conclusion

As illustrated by the case of Amazon, innovation is essential in capturing and imposing

control on customers and the organization. Additionally, the company's adherence to business

diversification in an aggressive manner has made it easier for the organization to remain

dynamic. Moreover, the solid organizational structure has made the company easier to adapt to

regulatory and market changes in a more effortless manner. The evolution of technologies has

also contributed to its growth and development as it plays an essential role in creating a

connection with the established environment. The company has been useful in ensuring users'

satisfaction by being an essential player in providing e-services and digital devices. The

evolution of the company’s technology has also provided a reliable platform where there is

sufficient infrastructure to ensure the supply of commodities required by the different internet

users. The company's infrastructure has made it possible to develop a platform where a supplier

can turn into a partner or a consumer. The company continues to reconfigure its businesses in

new and innovative areas such as E-commerce. It uses the same technology to develop

traditional aspects of the business, such as logistics.

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References

Culpepper, P. D., & Thelen, K. (2020). Are we all Amazon primed? Consumers and the politics

of platform power. Comparative Political Studies, 53(2), 288-318.

Denning, S. (2019). How Amazon uses metrics to drive success. Strategy & Leadership.

Dolata, U. (2017). Apple, Amazon, Google, Facebook, Microsoft: Market concentration-

competition-innovation strategies (No. 2017-01). SOI Discussion Paper.

Lima, V. A., & da Silva Müller, C. A. (2017). Why do small businesses innovate? Relevant

factors of innovation in businesses participating in the Local Innovation Agents program

in Rondônia (Amazon, Brazil). RAI Revista de Administração e Inovação, 14(4), 290-

300.

Tritt, L. F., & Teschner, R. S. (2019). Amazon Delivers Diversity: Geographical & Social

Influences on Corporate Embeddedness. Berkeley Bus. LJ, 16, 1.