Group C3_Week 3 CLC Assignment

CLC - Financial Ratio Analysis and Internal Factor Evaluation (IFE) Matrix Reyna Barns, Kaiana Lewis, Raul Osete, Martha Sandoval Colangelo College of Business, Grand Canyon University MGT-660: Strategic Management Dr. Kevin Jones January 17, 2024

Part I: Financial Ratio Analysis - Historical Ratio Table Amazon.com, Inc. (AMZN) Historical Ratios 12/31/2021 12/31/2022 Current Ratio 1.14 0.94 Quick Ratio 0.91 0.72 Total Liabilities-to-Total-Assets Ratio 0.62 0.64 Long-Term Debt-to-Equity Ratio 0.34 0.40 Times-Interest-Earned Ratio 14 5 Inventory Turnover 12.36 12.97 Fixed Assets Turnover 2.17 2.03 Total Assets Turnover 1.12 1.11 Accounts Receivable Turnover 14 12 Average Collection Period 25.55 30.08 Gross Profit Margin % 14% 13% Operating Profit Margin % 5% 2% ROA % 4% 3% ROE % 13% 8% Part I: Research Report Upon examining important financial ratios for Amazon, we analyzed historical financial ratios as of December 31, 2021, and December 31, 2022. The ratios provide valuable insights into the company's liquidity, solvency, operational efficiency, and profitability. Understanding these ratios is crucial for strategic decision-making and evaluating Amazon's financial health. The current and quick ratios indicate Amazon's short-term liquidity. A decrease in the current ratio from 1.14 to 0.94 suggests a potential decline in the company's ability to cover its short-term obligations. The quick ratio also decreased from 0.91 to 0.72, indicating a reduced ability to meet immediate liabilities without relying on inventory. These findings emphasize the need for careful liquidity management in Amazon's strategy creation to ensure short-term financial stability (Yahoo! Finance, n.d.). Amazon's total liabilities-to-total-assets ratio increased slightly from 0.62 to 0.64, while the long-term debt-to-equity ratio rose from 0.34 to 0.40. These changes suggest an increase in

explored. This may involve cost-cutting measures, pricing adjustments, or innovations to drive revenue growth. Amazon should implement effective accounts receivable management strategies to maintain a healthy cash conversion cycle and optimize working capital. Amazon's financial ratios provide valuable insights into its financial performance and highlight areas for strategic consideration. A comprehensive strategy creation process should involve addressing liquidity challenges, optimizing the capital structure, enhancing operational efficiency, and implementing measures to sustain and improve profitability. By strategically addressing these aspects, Amazon can navigate challenges and capitalize on opportunities in an ever-evolving market landscape. Part II IFE Matrix Strengths Weight Rating Weighted Score A strong/positive brand valuation 0.08 3 0.24 Provide low-cost pricing to meet the needs of customers. 0.06 3 0.18 Always on the front edge of technology for e-commerce and delivery 0.05 3 0.15 Retail space expenses are minimal 0.01 4 0.04 Stronger logistics systems lead to increased efficiency and accuracy in goods delivery 0.08 4 0.32 The acquisition of Whole Foods dramatically increased the scope and revenues 0.04 2 0.08 Expansion of needed commodities (Marketplace, Prime, Prime Video) 0.07 2 0.14 Profits increase when volume is high and turnover is low 0.04 3 0.12 Accurate and prompt delivery of goods to the customer 0.10 3 0.30 Steady increase in eco-friendly methods 0.02 1 0.02 Weaknesses Weight Rating Weighted Score Strong competitiveness in e-commerce 0.05 4 0.20 Imitation of business procedures has become more frequent 0.02 3 0.06 Challenges in breaking into new markets using existing modeling 0.04 1 0.04 Leaving out customers who don't shop online 0.06 1 0.06 Diversification on a large scale results in higher costs 0.03 2 0.06 Failed or insufficient anticipation of certain supplies 0.04 4 0.16

Costly expenses for research and development 0.02 2 0.04 Transport expenditures; Free delivery 0.08 4 0.32 It can be expensive and difficult to locate counterfeit goods 0.03 2 0.06 Low margins 0.08 4 0.32 Total IFE Score 1.00 2.91 Part II: Brief explanation of IFE The Internal Factor Evaluation (IFE) analysis indicates that the company possesses notable strengths that contribute to its overall positive internal outlook. A strong and positive brand valuation (weighted score: 0.24) reflects the company's ability to establish and maintain a favorable brand image, fostering customer trust and loyalty. Providing low-cost pricing (weighted score: 0.18) aligns with meeting customer needs, enhancing competitiveness in the market. The company's commitment to staying on the front edge of technology (weighted score: 0.15) for e-commerce and delivery demonstrates adaptability and a forward-thinking approach. Efficient retail space management (weighted score: 0.04) and a robust logistics system (weighted score: 0.32) contribute to increased efficiency and accuracy in goods delivery. The strategic acquisition of Whole Foods (weighted score: 0.08) has significantly expanded the company's scope and revenues. Additionally, the expansion of needed commodities (weighted score: 0.14) and a focus on accurate and prompt delivery (weighted score: 0.30) contribute positively to the overall internal strength. However, the analysis also highlights certain weaknesses that warrant attention. Strong competitiveness in e-commerce (weighted score: 0.20) is a double-edged sword, requiring continuous efforts to stay ahead in a competitive market. Increased imitation of business procedures (weighted score: 0.06) calls for ongoing innovation to maintain a unique market position. Challenges in breaking into new markets (weighted score: 0.04) indicate the need for strategic planning and adaptation to diverse market conditions.

Strengthening the logistics and delivery network is crucial for maintaining Amazon’s commitment to fast and reliable shipping and continued investment in last-mile delivery solutions, drone technology, and partnerships with local delivery services can contribute to even faster and more cost-effective deliveries. This would not only meet customer expectations but also set Amazon apart from competitors ( Our Supply Chain , n.d.). Focusing on customer experience remains paramount. Amazon can achieve this by further enhancing Prime benefits, expanding the range of eligible products for faster shipping, and providing exclusive content through Prime Video. Prioritizing customer service and addressing issues promptly contributes to long-term customer loyalty. Diversifying into new markets or industries is another avenue for growth. Amazon Web Services (AWS) has already demonstrated success in cloud computing, and exploring opportunities in healthcare, entertainment, or other emerging sectors could further diversify the company’s revenue streams ( Our Supply Chain , n.d.). In summary, Amazon’s success lies in optimizing its e-commerce platform, embracing technological advancements, fortifying logistics, and exploring strategic diversification to capitalize on its major strengths and stay ahead in the competitive market. To address its major weaknesses, Amazon should focus on mitigating issues related to counterfeit products and ensuring better quality control. Implementing stricter measures, such as enhanced vetting of third-party sellers and investing in advanced counterfeit detection technology, can bolster consumer trust. Addressing concerns about workplace conditions is essential; Amazon should prioritize employee well-being, foster a positive work culture, and regularly evaluate and improve labor practices. Additionally, the company should work on

reducing its environmental impact by investing in sustainable practices throughout its supply chain ( Our Supply Chain , n.d.). Transparent communication regarding sustainability efforts can enhance Amazon’s public image. By proactively tackling these weaknesses, Amazon can not only improve its brand reputation but also create a more resilient and responsible business model. References: About Amazon (n.d.) Our Supply Chain Retrieved from https://www.aboutamazon.com/planet/supply-chain