Introduction Of Accounting and Finance for Decision Making at Amazon
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The report mainly talks about the company Amazon, which has faced a lot of problems during this pandemic but maintained its sustainability and growth. With other companies facing a huge amount of loss it tried to gain the profit during this crucial pandemic time with the different type of investment proposal. Every information regarding the quantitative and the qualitative information has been discussed later in the report with every type of risk being suffered during that time of investment proposal. In addition to this the how the company has diversified its business is also explained below in the report.
Accounting and Finance Report At Amazon
- The pandemic has taught every business and every businessperson that profit is must for every organisation to sustain in the marketplace. The COVID-19 environment has affected the workings in every field of business and every person is trying out to figure something alternative to the business for the income. As we have seen that the online business has its peak demand during the pandemic because of the very less nearby shops being in operation, so here comes the necessity to expand the online business. With this ever changing and the uncertain environment Amazon has come up with the investment proposal to diversify its business into other segment which is Grocery. The demand for the necessity has increased drastically in the pandemic and to cater to this demand Amazon has took the first step forward.
The demand needs to be catered at a sooner pace which could only be done by a big giant such as Amazon. It is rightly said that the first mover advantage means a lot in this particular ever-changing and dynamic environment. With this the Amazon has diversified itself in every section in its electronic part and the fashion and well. Shein as we now is loved by all women across and it has come up with this too in the recent times because of the demand. Amazon has tried to spread its tentacles all over by analysing the needs and demands by every age group and making it there in the fastest time possible with the easy returns. The need for every part requires a in dept study about the market and the competitors which has been done on a huge scale and a proper way by the company (Etumnu et al, 2020).
- Amazon has its Investment proposal ready with the factors keeping in mind and also named this as Go Grocery Store in terms of physical outlet and a proper different section in its online segment and the section. It has opened the first store in August 2020, with all the stores all over across 28 cities operating. This milestone has been great success in terms of the first mover advantage and in the market. It is also planning to operate more stores and to diversify its business. With this it is also coming up with the own Label Branding Brand which will give a push up in the sales value of it making it grow more and more.
When we talk about the qualitative information which was required by the company in its investing terms, we can clearly see that the business model will be discussed and clearly depicted. In this case if we talk about the company has its business model in terms of operating online and diversified the operations in that as well as the retail stores also. And if we take the competitive advantage to be one of the factor in this it has been seen that it has taken the first mover advantage and has grown tremendously because of this.
The quantitative factors also play a vital role in the investment appraisal and includes the following major information:
- Statistical Analysis which will include a hypothesis
- Stock Value which is to be maintained in the initial days
- Amount Funded, the value of the equity or the loan amount to be pre decided
- The number of employees to be recruited for this initiative
- The value of the area and the assets which are to be required
- The amount of expenses to be predefined at the initial stage
Approximately $17.3B was the purchase by Amazon in the grocery segment by the Whole Foods. It has acquired 18 million square feet in terms of investment for operating this, with this it has also partnered with the many local delivery partners for its huge demand coming up on its way for the essentials. Approximately 45% of the funds were incurred in purchasing the warehouse by the company to store its large to be demanded grocery. With this it has also taken due care of time that is to be taken with the help of the drones especially in the case of the perishable items and other goods. With this not only it has saved the time but also the pollution, wages and many more things. The quick deliveries also tend to increase the sales in terms of loyalty of the customers and make them buy more and more goods from them. It has given the sense of belongingness among the customers and the Amazon. So, basically the company has target a large number of customers with this nearby two folds of it and a huge billion amount and the risk covered is to be approximately 15%. The factor that it has to cover approximately 210 acres of the land in the services providing is a huge factor in the investment appraisal. In addition to this with the 3 pillars it is targeting to acquire various segments in the customer and the logistics also. The acquisitions are also giving it a huge kick up in terms of investment and diversification (Wang et al, 2018).
- It is rightly said that there is no gain where there is no risk, and it is already clearly depicted by the great giant such as Amazon. Although it has taken due care about it but there are to be lot of factors which are to be considered. Among them risk is one and here when we talk about the risk in the grocery segment of it has been seen that it comprises of a small segment in the UK in the online deliveries nearly about 6-7%.With this it has also noticed that when the risk among it is to be compared to the profitability is completely doubled up to the great extent. The ever-changing environment has also pumped up the risk in the logistics when it is there in the grocery segment as a lot of risk is there but when run smoothly it can also yield to the great amount of profit. In addition to this it has also been seen that the risk as compared to the competitors in the segment is nearly about 5-10%.
It has also come up with some application in the mobile application to facilitate the time and inconvenience of the customers. It has come up with the two dozen Amazon Go stores which are a big risk because the customers need time to change their outlet of purchasing. The risk of technology has never been issue by the giant like Amazon ad the risk also because it has been flaunting it over the years. The risk that it will be a success or not has been the major risk but, during the pandemic the customers has shown the immense amount of trust on the company with increasing the profit in the grocery segment by two folds (Kuijpers et al, 2018).
The locations of the stores has also proven to be the big advantage to the company as the customers were finding it to grab the things from the nearby outlet from them during the situation. Although the online delivery were a huge success but, the retail outlets were also to be given higher priority by the company in the market of the UK.
Financial performance of the Amazon company
In addition to this there has been a great impact in the financial performance of the company after it has entered into the grocery segment as the operating cash flow has increased by 72% and also leading to the increase in the free cash flow. With this after coming in these segment net sales has increased by 38%, and making the employees feel more lively and satisfied by giving them timely wages and bonus during the crucial time such as pandemic also. So, it is rightly said that Amazon its gaining much importance and profit as it already knows about the customer demands pReferences, demands and need and try to cater them accordingly resulting in a huge amount of profit. So, it has to collaborate and try to have maximum amount of products available with it so that the customers have everything related to the necessity at one place only. The various systems for this also is a huge risk and cost bearing which is taken due care by the giant in terms of quick supplies like cooling, storage and packaging (Roberts et al, 2020).
The report had a brief understanding about the Grocery segment which was operated to the maximum limit in the pandemic times. The risk which the giant has faced during that time has been clearly depicted above in the report. The various factors which lead to the growth by the company have also been discussed above. The factors which the company has taken care are also mentioned above.
By analysing all the above facts and figures it can be stated that, following recommendations could be followed by the company so far to get success in the long run
- If the customer is in the nearby location a prime and the quick delivery could be done within few minutes making them feel more special which will lead in increase of sales by them.
- Some additional discount to those who buy frequently the grocery form Amazon could be done
- Grocery which are of utmost perishable in nature could be sent by drone as the first place and then the remaining could be sent to the customers
- The Delivery vans could also be a recommendation to give the bulky orders and the customers in the surrounding areas of each other (Hillen, 2021).
- With this the app could have some referral codes to increase the amount of sales in the first place and the belongingness of the customers are also increased by this.
- Some additional discounts could be there who visit the stores frequently leading to the increase in the amount of sales.
Etumnu, C.E., Foster, K., Widmar, N.O., Lusk, J.L. and Ortega, D.L., 2020. Does the distribution of ratings affect online grocery sales? Evidence from Amazon. Agribusiness, 36(4), pp.501-521.
Hillen, J., 2021. Online food prices during the COVID?19 pandemic. Agribusiness, 37(1), pp.91-107.
Kuijpers, D., Simmons, V. and van Wamelen, J., 2018. Reviving grocery retail: Six imperatives. December, available at: https://www. mckinsey. com/industries/retail/our-insights/reviving-groceryretail-six-imperatives (accessed 28 October 2019).
Roberts, V., Vowden, D., Allen, R. and Geeurickx, K., 2020. The UK Competition Authority announces its provisional clearance of a proposed acquisition of a stake in a food delivery company in its first application of “failing firm” defence during the COVID-19 pandemic (Amazon/Deliveroo). e-Competitions Bulletin, (April 2020).
Saskia, S., Mareï, N. and Blanquart, C., 2016. Innovations in e-grocery and logistics solutions for cities. Transportation Research Procedia, 12, pp.825-835.
Wang, J.P.C. and Gutierrez, A., 2018, October. An In-Store Mobile App for Customer Engagement: Discovering Hedonic and Utilitarian Motivations in UK Grocery Retail. In European, Mediterranean, and Middle Eastern Conference on Information Systems (pp. 225-243). Springer, Cham.