• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

HBS Case Study - Amazon.com

Extracts from this document...

Introduction

Amazon.com Business Model: Amazon started off as an online bookseller and later expanded its product offerings to include music, DVDs, videos, toys electronics, software, videogames, home improvement products etc. The Company purchases products from a network of manufacturers/publishers. For the orders that cannot be fulfilled through inventory, the company has a proprietary software that fulfils orders via electronic interfaces and in some cases forwards the order to special order groups. Features: 1. Amazon had its own distribution centres to have more control over the distribution system and thus facilitate reliable and timely delivery to its customers. 2. Fulfilment costs represent - operating and staffing the distribution and customer service centres. 3. Operating and staffing costs shown as Marketing and Sales Costs 1. ...read more.

Middle

$1010 $ (11259) As is evident from the tables above the gross profit has reduced due to the reclassification of fulfilment costs as cost of sales instead of marketing and sales expenses. Gross Profit Margin 1999 1998 1997 Before Reclassification 17.72% 21.92% 19.5% After Reclassification 6.23% 13.67% 11.31% Effect on Inventory: Cost of Production before adding fulfillment costs to Cost of Sales: Cost of Sales 1349194 Add: Closing Inventory 220646 Less: Opening Stock 29501 Cost of Production 1540339 Cost of Production after adding fulfillment costs to Cost of Sales: Cost of Sales 1349194 Add: Fulfillment costs 188400 Add: Closing Inventory 220646 Less: Opening Stock 29501 Cost of production 1728739 2. As the CFO of Amzon.com, the preferable option is to classify all the fulfilment costs as a part of marketing and sales expenses. ...read more.

Conclusion

Hence the company CFO would always prefer to show the fulfilment costs as a part of marketing and sales expenses. However, as a member of FASB, we would recommend the fulfilment cost classification as follows: Cost of Sales: > Receiving cost > Inspecting and warehousing inventory > Picking Cost > Packaging Cost > Preparing Customers order for shipment Administration/ after Sales Cost: This cost is in the nature of follow up cost and not directly related to the production or selling efforts of the company. This is therefore classified as such > Responding to inquiries from customers This shows the true financial position of the company to the shareholders and investors. However, it needs to be noted that FASB allows the member companies to opt for any classification of the fulfilment costs. But SEC recommends use of uniform method of classification so as to avoid any confusion of the investors and shareholders. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Case Studies section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Here's what a star student thought of this essay

3 star(s)

Response to the question

In summary, the report is quite basic. The report describes a little regrading the business model alongside three features. In addition, the report gives financial data and a little explaining this. However this is lacking in-depth understanding. The student could ...

Read full review

Response to the question

In summary, the report is quite basic. The report describes a little regrading the business model alongside three features. In addition, the report gives financial data and a little explaining this. However this is lacking in-depth understanding. The student could justify why the business may implement a number of features to make the business as effective as it is. The report states that the business has a number of 'distribution centres', although where are these? The report could state the locations of each centre and describe why the business would want the location there. For example, having a warehouse within London would allow the business to focus on the area of London, as this is a large area. Or there could have one within York to cover the areas of Yorkshire and Humber. The student could explain how the centres could be placed to cover the demand from the website. The tables of data is displayed well and I've done a quick check to Amazon's official document and this does appear accurate figures.

Level of analysis

The report states Amazon's business model, however this is limiting. The student could go further in explaining how the business generates their profits. The report could include 'Amazon's profit margin's on the vast majority of their products are small, and there don't receive a large amount of profit per unit. However Amazon does receive vast orders, and the small amounts of profit per unit adds upto their profit figure. Competitive prices alongside an outstanding customer service allows the business to acquire these vast sales'.

Quality of writing

The report doesn't include an screenshot of Amazon.com, and this should be in-putted into the report. This will allow the examiner to visualize the report, which would support the student's writing.


Did you find this review helpful? Join our team of reviewers and help other students learn

Reviewed by danielbeal 19/03/2012

Read less
Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Case Studies essays

  1. Marked by a teacher

    Business in the UK case study. Adidas PEST analysis

    5 star(s)

    The UK's interest rate isn't very stable at the moment because it is quickly increasing, meaning that it may affect Adidas in regards to their sales. This helped me decide on my pricing strategy of competitive pricing, where I set my price in line with my competitors', as if their

  2. Marked by a teacher

    Customer service at Thorpe Park visitor attraction.

    3 star(s)

    However the ride attendant won't tolerate lack of discipline and only has a set amount of fast tracks to offer. If the offer isn't accepted then the ride operator could offer a fast track to any ride within the park.

  1. (AQA) MORRISONS, UNIT 2, (SECTION B)

    Lastly to have regular meetings with the employees and check progress. Also with being a supervisor will need to carry out daily activities. Firstly ensuring the department is set up correctly and is well presented, keeping record that staffs are present for work and carrying out a good job.

  2. Business studies Coursework - Study of a small established local business

    This would probably mean that in a recession. What things would cause you to change your prices? If I put something at a certain price and only a small amount of people bought it, I would put the price down so that more people will buy it.

  1. British Airways case study

    * Access to distribution channels The existing airline companies have established their distribution channels for years, which is difficult for new entrants to break into. Threats of substitutes Since the 11th September, the airline industry has been suffering from the loss of customer confidence.

  2. EVALUATE THE EFFECTIVENESS OF APPLES APPLICATION OF THE MARKETING MIX WITHIN THE UK MARKET

    The Company sold 11,011,000 iPods during the quarter, representing 12% unit growth and 7% revenue growth over the year. iPhone units sold were 717,000 compared to 270,000 in the year. Apple reported the best June figures for both revenue and earnings in Apple's history, They set a new record for

  1. SWOT analysis for Samia's Special Pizzas.

    Samia?s Special Pizzas should be able to sustain a financial backing so that if anything happens they still have enough money to keep the business running. The business could be faced with many obstacles such as the business could be in a loss because another business which has become more

  2. Case Study of a Franchise Pizza Business

    opportunities so Samia?s Special pizzas to make it expand and that financial institutes are willing to larger companies. Banks will be more likely to loan money to Samia?s Special Pizzas if it were a public limited company than if it were a franchise.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work