AMAZON

- SHUBH18
PROJECT ANALYSIS SLIDE 2
Ratio Analysis Legal Form

AMAZO
N

STEEPLE Analysis CUGIES Analysis

 Amazon.com, Inc. is a limited liability company.
 A limited liability company (LLC) is a hybrid legal entity having
certain characteristics of both a corporation and a partnership
or sole proprietorship (depending on how many owners there
are). An LLC is a type of unincorporated association distinct
from a corporation.

LEGAL FORM
 Fewer corporate formalities. Corporations must hold regular meetings of the board of directors and
shareholders, keep written corporate minutes and file annual reports with the state. On the other hand,
the members and managers of an LLC need not hold regular meetings, which reduces complications
and paperwork.
 No ownership restrictions. S-corporations cannot have more than 100 stockholders, and each
stockholder must be a natural person who is a resident or citizen of the United States. There are no such
restrictions placed on an LLC.
 Ability to use the cash method of accounting. Unlike a C-corporation, which often must use the
accrual method of accounting, most limited liability companies can use the cash method of accounting.
This means that income is not earned until it is received.
 Ability to place membership interests in a living trust. Members of an LLC are free to place their
membership interests in a living trust. It is difficult to place shares of an S-corporation into a living trust.
 Ability to deduct losses. Members who are active participants in the business of an LLC are able to
deduct its operating losses against the member's regular income to the extent permitted by law.
Shareholders of an S-corporation are also able to deduct operating losses, but shareholders of a C-
corporation are not.

MERITS OF LLC
 Profits subject to social security and medicare taxes. In some circumstances, owners
of an LLC may end up paying more taxes than owners of a corporation. Salaries and profits
of an LLC are subject to self-employment taxes, currently equal to a combined 15.3%. With
a corporation, only salaries (and not profits) are subject to such taxes. This disadvantage is
most significant for owners who take a salary of less than $97,500 for tax year 2007.
 Owners must immediately recognize profits. A C-corporation does not have to
immediately distribute its profits to its shareholders as a dividend. This means that
shareholders in a C-corporation are not always taxed on the corporation's profits. Because
an LLC is not subject to double-taxation, the profits of the LLC are automatically included in
a member's income.
 Fewer fringe benefits. Employees of an LLC who receive fringe benefits, such as group
insurance, medical reimbursement plans, medical insurance and parking, must treat these
benefits as taxable income. The same is true for employees who own more than 2% of an S-
corporation. However, employees of a C-corporation who receive fringe benefits do not have
to report these benefits as taxable income.

DEMERITS OF LLC
 STEEPLE Analysis

PROJECT ANALYSIS SLIDE 3

Social Technologic Economic Political Legal Environmen

al • Economic • Political stability
• Increasing • Rapid stability of
• Rising product • Risingtal
interest
of developed
wealth technological developed countries, regulation in
obsolescence markets, especially the (opportunity) environmental
disparity
(threat & especially the U.S.A. and • Changing programs
(threat)
opportunity) U.S. and European import and (opportunity)
• Increasing European countries •
• Increasing export Rising emphasis
consumerism countries (opportunity) regulations on business
efficiencies of
in developing (opportunity) • Governmental (opportunity) sustainability
IT resources • Increasing support for e-
countries • Rising (opportunity)
(opportunity) disposable commerce
(opportunity) • Increasing incomes in environmental • Increasing
(opportunity &
• Increasing rates of developing threat) protection popularity of
online buying cybercrime countries • Increasing regulations on low-carbon
habits (threat) (opportunity) governmental businesses lifestyles
(opportunity) • Potential efforts on cyber- (opportunity) (opportunity)
economic security
recession of (opportunity)
China (threat)

PROJECT ANALYSIS SLIDE 6
CHANGE - Change refers
to the modification or
transformation in the way
business is conducted as a
response to internal
factors or external
influences.
GLOBALIZATION -
Globalization refers to the
process by which people,
ideas, goods and services
become increasingly
spread around the world,
creating greater
integration and
CUEGIS Analysis
CULTURE - Culture refers
to the norms, beliefs and
values of an organization
or a collective group of
individuals, which shape
its practices and
characteristics.
INNOVATION - Innovation
refers to the
improvements of a product
or process to better meet
the needs and wants of
customers, in a profitable
ETHICS - Ethics refer to
the moral principles and
values that form the basis
of how business activity is
conducted.
STRATEGY - Strategy
refers to planned actions
designed to achieve the
long-term goals or overall
aims of an organization.
From ordinary bookstore to the greatest superstore.
Jeff Bezos wanted to name his company after a magical phrase “Cadabra” . However, his lawyer at the time, Todd
Tarbert suggested that it sounded too familiar to other companies. Bezos then suggested the name, ‘ relentless.com’
however, that did not catch up. But, if you search ‘relentless.com’ in the internet today, you will be directed to
amazon.com, as a homage to the name that never made the cut. Eventually, Bezos decided on the name Amazon
because he liked that his company would be named after the largest river in the world, hence the river in the original
logo.
Other vital aesthetic changes to Amazon, include the several changes and updates to it’s website layout, and the
company’s logo. As amazon provided plenty more services, it’s website had to constantly change to house
everything amazon provides. As time passed, simplistic designs started to be considered modern, so Amazon
updated it’s website to look as simple as possible, while providing plenty of information at the same time, similar to
how it looks like today. The logo follows the simplistic design language, and has become more and more minimalistic
as the company grew. The website and logo is extremely important to Amazon. The website is the only way
customers are able to access amazon’s services and products. The logo is important as customers usually identify
and associate a company with it’s logo.
The company that started off in Bezos’ garage in Washington, gradually grew, to house 11 employees in a small
warehouse, to eventually employing millions of employees worldwide in several offices today. A company that was
initially just selling books, sought to sell as many goods as possible when the opportunity arose, which ended up with
Amazon selling every single product from A-Z today, just as the curved arrow in the logo suggests.

CHANGE
Amazon does not have the best reputation when it comes to human
resource management as it a very male dominated business and has been
known to be very stiff when it comes to performance.
Recently, Amazon has been very invested in changing it’s attitude and
starting to concentrate on applying a training programme called pivot that
ensures to keep employees happy, and simultaneously ensure they work
very efficiently.
On the other hand, Amazon is very organised and makes sure to award
their employees who over perform and give deserving consequences to
those who are underperforming.
So, it is safe to say it is extremely challenging to work at Amazon, and the
working environment is healthy with constant motivation and competition .

CULTURE
Many people have called Amazon evil or unethical, for killing
smaller businesses, but other than these allegations, Amazon
follows several ethics, with all of them putting the customer first
and giving them the benefit of the doubt
Amazon has a strong relationship with it’s customers, with
several technicians readily available to cater to the customer’s
needs. Amazon mostly gives the customer the benefit of the
doubt, by providing an option to return the product, and many
warranty options available.

ETHICS
Amazon is now one of the most renowned brand throughout the world. Marketing
that targets the local audience has played a vital role in Amazon’s International
Growth. It’s cultural awareness of the particular country contributed to its
popularity and growth worldwide. However, in 2014, 37% of Amazon’s sales came
from international markets, but this percentage has not received a big increase in
quite some time. In the same year, Amazon’s North American sales increased by
22%, while international sales only increased 3%. CFO of Amazon, Tom Szkutak
could not come up with a definitive explanation as to why the international markets
are not performing as well as the American markets. However, he provided the vital
statistic that stated internationally, Amazon’s unit growth rates were far more
better than it’s revenue growth rates. This could be due to taxes, tariffs or lower
exchange rates. Amazon’s focus of adding infrastructure and fulfilment capacity
overseas contributes a lot to Amazon’s costs, which could be a potential reason for
revenue growth rates to be comparatively low.

GLOBALIZATION
Since starting out as an online bookseller in 1998, Amazon.com has
expanded year on year, and it now offers customers over 100 million
products spread over 30 categories, ranging from health and beauty
to electronics. The company’s phenomenal growth is due to its
technological innovation.
Amazon ensured that it did not stick to just being an online shopping
website. It further expanded to produce goods under its own name,
e.g. kindle, Alexa, fire series, etc. Most of the products sold under the
brand of amazon is a brand new, unique item, which was not widely
available before, Amazon’s innovation to bring its customers brand
new products has played a massive role in making the company more
than just an online shopping website.

INNOVATION
Amazon’s mission statement is as follows, “ Our vision is to be the earth’s most customer-centric company, to build a place where people can
come to find and discover anything they might want to buy online.
Other than extensive marketing, and advertisements aimed at the locals, amazon follows a few core values that have been the roots of the
mammoth company that it is.
The core values are:
 Customer Obsession
 Ownership
 Invent and simplify
 Hire and develop the best
 Insist on the highest standards
 Think Big
 Bias for action
 Brand image is formed by what you do, not what you say
 Embrace Failures
 Earn Trust
 Dive Deep

STRATEGY
 GPM (2017) = 37.07%
 GPM (2018) = 40.25%
 NPM (2017) = 2.31%
 NPM (2018) = 5.33%
 The GPM increased be 8.58% and the NPM increased by
130.74%. These show an improvement in the financial position
of Amazon.com. The increase in NPM suggests the there was a
relative decrease in the expenses.

PROFITABILITY RATIO
 Current ratio (2017) = 1.04:1
 Current ratio (2018) = 1.10:1
 Acid test ratio (2017) = 0.76:1
 Acid test ratio (2018) = 0.85:1
 These liquidity ratio shows an improvement in the ability of
Amazon.com for paying back its current liabilities with its
current assets. Though still both the ratios are not ideal for an
e-commerce company like Amazon.com. The level of stock
held has decreased relatively.

LIQUIDITY RATIO
 ROCE (2017) = 7.82%
 ROCE (2018) = 18.51%
 The increase in ROCE indicates an increase in the profit
returned to the investors on the capital that they invest. The
ROCE are higher than the interest rates, which keep
fluctuating near 1%. This helps Amazon.com to attract more
investors by provide an incentive of higher rate.

EFFICIENCY RATIO
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