Question

a) Provide a summary discussion of Amazon’s key business areas (at least 3 areas)? (b) What do you understand by ‘Inventory turnover rates’? (c) How does Amazon’s inventory turnover rates compare to other leading retailers? (d) How has this affected Amazon’s ability to compete on price?

Answer 1

a). Under the leadership of the Founder and CEO of Amazon, Jeff Bezos, today amazon is the world's largest growing business.

Product sales, advertising, and subscription services are growing fast.

Amazon's key business sectors or what are the main key takeaways of this successful business?

AWS (Amazon web services)-

AWS provides cloud computing platforms to various individuals, governments and companies. It is a subsidiary of Amazon. It provides services on a paid subscription basis. It is very helpful for any kind of businesses as it provides numerous services like, servers, storage, networking, remote computing, security etc.

Amazon's international business-

It contains business for consumer products, internationally focused online subscriptions.

Net sales for the International segment grew 38.5% to $22.7 billion. Which is 25% of the company's net sales.

Amazon advertising-

If we talk about advertising, amazon earned revenues from ads of $4.8 billion for the quarter, an increase of 41% year over year.

b) Inventory Turnover rates- Inventory turnover shows the rate at which the company sells its inventory or stock or replaces its stock. For most industries and companies, a good turnover rate ranges between 5 and 10.

c). High inventory is the sign of strong sales or efficient management of business operations.

Whereas, low inventory can be a sign of poor management.

Amazon's turnover ratio has been increased to 9.89 in the second quarter 2020, below company average. Previous year it has been 8.

As if compared to walmart, Amazon stock has increased from $308.52 on January 2 to $659.37 on November 6,

a 114% increase, while Walmart has decreased from $84.28 to $58.78, a 30% decrease.

d). Amazon has built an algorithm which recognizes any change in price. The four types of pricing strategy for amazon includes-

Economy strategy, premium strategy, skimming and penetration.

Two types of prices at amazon

• Item price- which only includes the cost of the product.
• Landed price- which includes everything, from product price to shipping charges.

Buy Box is displayed on individual product pages and is the quickest and easiest way for a customer to buy.

Amazon always decides through algorithm that which seller should buy which buy box.

Through this algorithm it can keep the check on prices, and can compete with other retailers.