Amazon.com – 2002 Evaluation
An accurate analysis of Amazon.com can begin with a cash flow analysis (Viney, H., Wincherster, N. and Boojihawon, R. 2010, p. 254). The spring of 2002 had Amazon touting the first of a positive cash flow trend for a twelve month period (Amazon 2002, p. 2). Amazons long term strategy was slow to yield a return, but building the key points of the infrastructure allowed for a strong earnings season. Amazons marketplace innovation served to bolster the Dow stock by a factor of 52% for the year (Amazon 2002, 2). This is a very strong indication of the consumer reaction to the current strategy in place. With a continued perception of strength, the Amazon platform can build on this revenue foundation.
The breakeven analysis of Amazon will illustrate if the Amazon model has the capacity to generate revenue in excess of the initial outlay (Viney, Wincherster and Boojihawon 2010, p. 254). With the addition of a strong strategy since going public in 1997, Amazon platform has expanded far beyond the base strategy of book sales, branching out to include a wide variety of online offerings based around technology. One of the primary elements that makes Amazon.com so attractive to investors is the presence of very deep and sustained cash flow cycles that are directly associated with business operations (Amazon –2002, p. 3). This indicates that the ability to adequately cover the initial cost, with very strong returns, is very probable.
A companies borrowing ability has the potential to predict a company’s performance (Viney, Winchester and Boojihawon 2010, p. 254). Building on the marketplace model strategy, Amazon.com has positioned itself to be able to compete in a wide variety of consumer marketplaces using the same technology. Analysts predict that gross merchandise sales have the potential to grow up to 42% over the course of 2002 and 2003 (Amazon.com – 2002, p. 5). This is a very strong indicator that the marketplace will sustain the Amazon.com strategy and enable the successful negotiation of the financials. With a continued presence in the marketplace that is not only sustained but growing, adds further credibility to the ability of Amazon.com to meet or exceed all of their current obligations.
A financial ratio analysis provides a fundamental snapshot of the overall potential of a company to survive (Viney, Wincherster and Boojihawon 2010, p. 254). Amazon.com’s current strategy of considered development has the potential to significantly add to the value of the shareholders assets. The concept of evolving commerce models as a viable instrument to future partnerships enables a positive perception of the potential for continued positive revenue performance (Amazon – 2002, p. 6).
Amazon.com’s focus on international expansion will have an impact on the associated current analysis (Viney, Wincherster and Boojihawon 2010, p. 254). With international sales attributing for over a quarter of the revenue stream in 2012, the potential for a continued and growing contribution from this sector is a valid possibility (Amazon—2002, p. 12).
With the implementation of a considered and responsible expansion plan the potential for continued gain is very real. There is a demonstrated commitment to a working infrastructure, coupled with an astute grasp of the implementation of innovation and technology. Alongside the inherent capacity to add further markets to the online forums, there is a potential for long term growth and building revenue for the associated shareholders.
In the end, this assessment has demonstrated a clear and dynamic Amazon.com for the year 2002 and would recommend an investment in the company with recognition of the long term positive potential.
Amazon.com -- 2002. Harvard Business School, 1 (1), pp. 1-31.
Viney, H., Wincherster, N. and Boojihawon, R. 2010. The strategy Toolkit. Alton Hall: The Open University `, pp. 1-320.