Amazon is a popular online shopping platform all over the world. It started its business in 1995 and kept improving itself to fulfil customer's needs. Amazon.com, also known as Amazon, is an American electronic commerce and cloud computing company that came into existence on July 5, 1994, by Jeff Bezos and is based in Seattle, Washington. It is the largest Internet-based retailer in the world by total sales and market capitalization. Amazon.com started as an online bookstore, later diversifying to sell DVDs, Blu-rays, CDs, video downloads/streaming, MP3 downloads/streaming, audiobook downloads/streaming, software, video games, electronics, apparel, furniture, food, toys, and jewelry. The company also produces consumer electronics—notably, Kindle e-readers, Fire tablets, Fire TV and the Echo—and is the world's largest provider of cloud infrastructure services (IaaS). Amazon also sells certain low-end products like USB cables under its in-house brand Amazon Basics.
Amazon has separate retail websites for the United States, the United Kingdom and Ireland, France, Canada, Germany, Italy, Spain, Netherlands, Australia, Brazil, Japan, China, India, and Mexico. Amazon also offers international shipping to certain countries for some of its products. In 2016, Dutch, Polish and Turkish language versions of the German Amazon website got launched. In 2015, Amazon surpassed Walmart as the most valuable retailer in the United States by market capitalization, and is, as of 2016 Q3, the fourth most valuable public company.
“Our vision, at Amazon, is to be Earth's most customer-centric company; to build a place where people can come to find and discover virtually anything they want to buy online."
Several things show the success of Amazon, including its growth, competitive position and geographic scope.
Amazons biggest competitor is Alibaba Group and eBay. The three of them have the largest market shares of online shopping and are well known by people. But Amazon is in an advantageous position as Alibaba Group focuses more on China instead of the whole world, and the risk of shopping on eBay may be a bit higher than on Amazon due to the managing method.
Our businesses are rapidly evolving and intensely competitive, and we have many competitors in different industries, including retail, e-commerce services, digital content and electronic devices, and web and infrastructure computing services. Some of our current and potential competitors have greater resources, longer histories, more customers, and greater brand recognition. They may secure better terms from vendors, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing.
Competition may intensify as our competitors enter into business combinations or alliances with established companies in other market segments expand to become competitive with our business. Besides, new and enhanced technologies, including search, web, and infrastructure computing services, digital content, and electronic devices, may increase our competition. The Internet facilitates competitive entry and comparison shopping, and increased competition may reduce our sales and profits.
The balanced scorecard (BSC) is a strategy performance management tool – a semi-standard structured report, supported by design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions. The company will be under the measurement of four aspects, they are the customer, internal, innovation and growth and financial, according to the balanced scorecard.
Amazon promises to sell the pre-order product at the lowest price while the other two competitors don't. It gives Amazon a significant advantage. The automatic refund system will function when Amazon found that the shopping experience of the customer is not up to their standard.
Amazon employs a multi-level e-commerce strategy. Amazon started off by focusing on Business-to-Consumer relationships between itself and its clients and Business-to-Business relationships between itself and its suppliers, but it then moved to incorporate Customer-to-Business transactions as it realized the value of customer reviews as part of the product descriptions. It now also facilitates customer to customer with the provision of the Amazon marketplace which acts as an intermediary to facilitate consumer to consumer transactions. The company lets almost anyone sell almost anything using its platform. In addition to an affiliate program that lets anybody post Amazon links and earn a commission on click-through sales, there is now a program which allows those members build entire websites based on Amazon’s platform.
Customer relationship management (CRM)
Amazon has done a lot to keep its customer. It is giving out Amazon point for specific products and customers may use the position to pay next time. It may ensure the return of the customers because of the points they are holding. It will also send emails about the products that a customer has searched about and may be interested. The email will also update the client about the latest discount. There are some affiliate programs with Credit Card Company that allow customers to shop with the points of the credit card. It will also show the product a customer have seen before and some recommendations when accessing its home page.
We’ve grown Prime two-day delivery selection from 1 million items to over 30 million, added Sunday Delivery, and introduced Free Same-Day Delivery on hundreds of thousands of products for customers in more than 35 cities around the world. We’ve added music, photo storage, the Kindle Owners’ Lending Library, and streaming films and TV.
Prime Now offers members one-hour delivery on a significant subset of selection and was launched only 111 days after it was dreamed up. In that time, a small team built a customer-facing app. Secured a location for an urban warehouse, determined which 25,000 items to sell, got those items stocked, recruited and on-boarded new staff. They also tested, iterated, designed new software for internal use – both a warehouse management system and a driver-facing app – and launched in time for the holidays. Today, just 15 months after that first city launch, Prime Now is serving members in more than 30 cities around the world. Prime Video offers exclusives from some of the world's most passionate storytellers. We want brilliant creators like Jill Soloway, Jason Schwartzman, and Spike Lee to take risks and push boundaries. Our original series have already earned more than 120 nominations and won nearly 60 awards, including Golden Globe and Emmy awards. Many of these are stories that might never get the opportunity for airing in the traditional linear programming model. In the pipeline and coming soon are new series and movies from creators like Jeremy Clarkson, David E. Kelley, Woody Allen and Kenneth Lonergan.
Amazon derives many of its sales from third-party sellers who sell products on Amazon (around 40% in 2008).] Associates receive a commission for referring customers to Amazon by placing links to Amazon on their websites if the referral results in a sale. Worldwide, Amazon has "over 900,000 members" in its affiliate programs.] In the middle of 2014, the Amazon Affiliate Program gets used by 1.2% of all websites, and it is the second most popular advertising network after Google Ads.[ It is frequently used by websites and non-profits to provide a way for supporters to earn them a commission. Amazon reported over 1.3 million sellers sold products through Amazon's websites in 2007. Unlike eBay, Amazon sellers do not have to maintain separate payment accounts; all payments are the mandate and duty of Amazon.
Associates can access the Amazon catalog directly on their websites by using the Amazon Web Services (AWS) XML service. A new affiliate product, aStore, allows Associates to embed a subset of Amazon products within another website, or linked to another site. In June 2010, Amazon Seller Product Suggestions got launched (rumored to be internally called "Project Genesis") to provide more transparency to sellers by recommending specific products to third-party sellers to sell on Amazon. Products suggested are based on customers' browsing history.
Operating Expenses, Excluding Stock-Based Compensation
Operating expenses with and without stock-based compensation is provided to show the impact of stock-based compensation, which is non-cash and excluded from our internal operating plans and measurement of financial performance (although we consider the dilutive impact to our shareholders when awarding stock-based compensation and value such awards accordingly). Besides, unlike other centrally-incurred operating costs, stock-based compensation is not allocated to segment results, and therefore, excluding it from operating expenses is consistent with our segment presentation in our footnotes to the consolidated financial statements.
Disclosure controls and procedures
We carried out an evaluation required by the Securities Exchange Act of 1934 (the "1934 Act"), under the supervision and with the participation of our principal executive officer and chief financial officer of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934 Act, as of December 31, 2015. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2015, our disclosure controls and procedures were effective to provide reasonable assurance. That information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules. And forms to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Innovation and Growth
Amazons try their best to collect all the new products available in the market. They also try their best to improve customers shopping experience.
In 2011, Amazon had 30,000 full-time employees in the USA, and by the end of 2016, it had 180,000 employees. The company employs 306,800 people worldwide in full- and part-time jobs.[Amazon Provides a sponsor up to 95% for an employer to take courses that are related to their business to attract an employer to see their role in Amazon as their career. On the other hand, they respect the manager that just see Amazon as a stepping stone and try their best to help them gain the new skills that are necessary for further development. It contributes to increased employer's productivity as they feel more secure and appreciated by the organization.
Amazon Web Services
Just over ten years ago, AWS started in the U.S. with its first major service, a simple storage service. Today, AWS offers more than 70 services for computing, storage, databases, analytics, mobile, Internet of Things, and enterprise applications. We also offer 33 Availability Zones across 12 geographic regions worldwide, with another five areas and 11 Availability Zones in Canada, China, India, the U.S., and the U.K. to be available in the coming year. AWS started with developers and startups, and now is used by more than a million customers from organizations of every size across nearly every industry – companies like Pinterest, Airbnb, GE, Enel, Capital One, Intuit, Johnson & Johnson, Philips, Hess, Adobe, McDonald's, and Time Inc. AWS is bigger than Amazon.com was at ten years old, growing at a faster rate, and – most noteworthy in my view – the pace of innovation continues to accelerate – we announced 722 significant new features and services in 2015, a 40% increase over 2014.
Amazon has 13 websites for different countries including China, Japan, India, France, Germany, Spain, Italy, UK, Canada, Brazil, Australia, Mexico, and the USA. An extensive trading network helps it attract customer with different needs.
New Products, Services, Technologies, and Geographic Regions Subjects Us to Additional Business, Legal, Financial, and Competitive Risks
We may have limited or no experience in our newer market segments, and our customers may not adopt our new offerings. These offerings may present new and difficult technology challenges, and we may be subject to claims if customers of these offerings experience service disruptions or failures or other quality issues. Also, profitability, if any, in our newer activities may be lower than in our old activities, and we may not be successful enough in these newer activities to recoup our investments in them. If any of this were to occur, it could damage our reputation, limit our growth, and negatively affect our operating results.
Starting from 1995 in the US, Amazon sold books online. It finally becomes a global online shopping platform selling an extensive range of products and record over 107 billion sales (2015). The net sale has a growth of 20% when comparing with 2014's data.
Cost of sales
The cost of sales primarily consists of the purchase price of consumer products, digital media content costs where we record revenue gross, including Prime Video and Prime Music, packaging supplies, sortation and delivery centers and related equipment costs, and inbound and outbound shipping costs, including where we are the transportation service provider. Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of sales upon sale of goods to our customers. The increase in the cost of sales in absolute dollars in 2015, 2014, and 2013, compared to the comparable prior year periods, is primarily due to increased product and shipping costs resulting from increased sales. The growth in 2014 got impacted by the expansion of digital offerings and Fire phone inventory valuation and supplier commitment costs. Costs to operate our AWS segment are primarily classified as "Technology and content" as we leverage a shared infrastructure that supports both our internal technology requirements and outside sales to AWS customers.
Foreign Exchange Risk
During 2015, net sales from our International segment accounted for 33% of our consolidated revenues. Net sales and related expenses generated from our internationally-focused websites, and from www.amazon.ca and www.amazon.com.mx (which get included in our North America segment), are primarily denominated in the functional currencies of the corresponding websites and primarily include Euros, Japanese Yen, and British Pounds. The results of operations of, and certain of our intercompany balances associated with, our internationally-focused websites and AWS are exposed to foreign exchange rate fluctuations. Upon consolidation, as foreign exchange rates vary, net sales and other operating results may differ materially from expectations, and we may record significant gains or losses on the measurement of intercompany balances. For example, as a result of fluctuations in foreign exchange rates during 2015, International segment revenues decreased by $5.0 billion in comparison with the prior year.
We have foreign exchange risk related to foreign-denominated cash, cash equivalents, and marketable securities ("foreign funds"). Based on the balance of foreign funds as of December 31, 2015, of $7.3 billion, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in fair value declines of $365 million, $730 million, and $1.5 billion. All investments are under the classification "available-for-sale." Fluctuations in fair value get recorded in "Accumulated other comprehensive loss," a separate component of stockholders' equity.
We have foreign exchange risk related to our intercompany balances denominated in various foreign currencies. Based on the intercompany balances as of December 31, 2015, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in losses of $190 million, $405 million, and $905 million, recorded to “Other income (expense), net.” See Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Results of Operations—Effect of Foreign Exchange Rates” for additional information on the effect on reported results of changes in foreign exchange rates.