Amazon.com is one of the most recognized company, known primarily for its online retail business throughout the world. The growth rate of the firm is substantial, and it is not coming from a single source. The company has an effective strategic plan to ensure a sustainable growth rate. For this reason, the firm uses merger and acquisition as a tool for growth. The Ansoff Growth Matrix analysis of the firm’s activities shows that the company is intensively diversifying its portfolio. It is well known that diversification reduces operational risks and optimize profits and therefore growth of a company.
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From the history of Amazon.com merger and acquisition operation, it is found that the company is actively acquiring new firms from different industries. In the year 2013 Amazon.com acquired a software production firm named Ivona Software, afterthat it gained Goodreads, which is online based bookselling company. Liquavista and Tenmarket Education companies were also purchased by Amazone. The same sort of acquisition practices can be seen in the following three years (2014, 2015, and 2016) when the company acquired 13 new companies from different industries such as gaming, books, and online television, etc. The most interesting thing can be noticed is that Amazon.com purchased 11 companies during the year 2017, which is very rare. This evidence is clearly stating that Amzon.com is growing through merger and acquisition, which is having a positive impact on its growth strategy. According to Xu (2017), assets reallocation process through merger and acquisition activities has a significant positive impact on growth rate and productivity of firms. Hence, it can be concluded that Amazon.com has been following an effective strategy to grow its business over the time.
The company also tried a market development strategy to grow in number, they have taken its services and products in different countries of the world. Amazon.com is consistently expanding its business operations in different countries of the world. From the sales data it is seen that the company has been generating a significant growth in its international sales in 2014, 2015, and 2016 (14%, 21%, and 26% subsequently). Along with the merger and acquisition technique, it was another great way of expansion.
In addition to that, a product development strategy was also followed. The company kept offering new products with the help of its acquired production facilities and businesses. It has also helped the firm to increase its domestic and international sales.
From the financial statements of the company, it is seen that the firm has invested 5.1 billion dollars in 2014, then 6.4 billion in the year 2015, and it increased to 9.9 billion dollars in 2016. The company had to finance around 4.4 billion in 2014, 3.8 billion in 2015, and 2.9 billion in 2016. These particular points shows that the firm has been performing great at the time. The investment has been increasing significantly while the requirements for external financing were going down. It implies the firm was making more profits in the recent years. Therefore, it can be concluded that the merger and acquisition strategy of Amazon.com is effective for its sustainable growth rate. This finding is also consistent with Xu (2017).
To measure the impact of the acquiring strategy of Amazon.com precisely it is important to analyze the financial performances of the company for the given period. The financial performance statement is showing that the overall profit of the company has increased from 178 million (2014) to 2.2 billion (2015), which rose to 4.2 billion in 2016. Evaluation of the growth of operating incomes show 12 times growth in 2015 and 2 times growth in 2016 compared to the respective previous year’s performance of the company. The acquisition data is showing that it has been increasing gradually also the financial performance has been increasing in the same time frame. Therefore, it can be asserted that the growth strategies, especially merger and acquisition strategy of Amazon have a positive impact on the financial performance of the firm.
The profitability of a firm is dependent on the growth of an industry, especially if it is an online retail industry like Amazon.com. The growth of a firm usually influenced by the external conditions of the market however, the company should have a level of operational capability (Feng, Morgan, & Rego, 2017).
As we can see Amazon is capable enough to absorb a significant growth in the market, hence it can be said the growth in European market will have a significant positive impact on the current income of the company. From the profit loss account of Amazon, it can be found that the firm is suffering from a loss in the international market (600 m, 700m, 1.2 billion) in the year 2014, 2015, and 2016. Majority of the international market of Amazon would fall under the European zone. Due to the economic crisis in the zone, the retails consumption has plummeted and it has affected the profit of Amazon, pushing it to the loss. A growth in the European consumer market would increase the sales of the company in that region and therefore would help the firm to make a substantial profit.
Feng, H., Morgan, N. A., & Rego, L. L. (2017). Firm capabilities and growth: The moderating role of market conditions. Journal of the Academy of Marketing Science, 45(1), 76-92.
Xu, J. (2017). Growing through the merger and acquisition. Journal of Economic Dynamics and Control, 80, 54-74.