Sie sind auf Seite 1von 5

Space Matrix for Amazon.

Internal dimensions
These are the dimensions that describe a firms internal strengths and weaknesses. The internal dimensions in space matrix are Financial strength (FS), Competitive advantage (CA).

External dimensions
These are the external threats and opportunities of a firms defined through Environment stability (ES), Industry strength (IS).

Financial strength (FS).

Net income Cash flow Earnings per share Working capital Debt issued

A decrease since 2004 makes is a weakness: +3 The cash flows have been constant side as sales have increased over the years: +5 Earnings per share has gradually decreased and so can be a bit of a problem: +2 The working capital management has been a problem with amazons currents ratios being below par: +2 Debt position of Amazon is awful with most of its assets financed by debt amazon faces a high risk of default: +1

Competitive advantage (CA).

High shipment quality Market share.

Ratings. is perhaps the successful because of its high shipment standards and security: -1 The only holds around 15% of American book market and has a very low market share as compared to its competitors: -4 provides high customer satisfaction and thus hold higher customer loyalty: -1 Amazon depends on quality personnel to maintain and improve its technology systems and handle customer issues: -2 the product offered by amazon is always high quality and better than the product quality of its competitors: -2

Customer loyalty Technological know-how.

Product quality.

Environment stability (ES),

Rate of inflation. Technological changes. Barriers to the market.

The inflation rate has been constant since 2004 and is an indicator of markets financial soundness: -1 The rapid technological improvement has been a key role in developing amazons business: -1 Being a corporation, amazon encounters many entry and exit barriers by both the legislation of USA and also its own shareholders: -3 As with any business there is risk involved with amazon as well but as amazon is expanding and treading into new business ventures. Since 2006 amazons business related risk is quite high: -4 Amazons competition in the form of eBay, Barnes and nobles, Book A Million are very influential in the market and hold a high market share which is problematic for Amazon: -5 Since the dotcom industry collapse in early 1990s the markets have shown remarkable stability and thus have led to many opportunities for innovative businesses like amazon: -1

Risk involved in business.

Competitive pressure.

Market stability

Industry strengths (IS)

Growth potential.

The dotcom market has great potential and as the online banking market increases so will the online retailing: +6 The profitably potential of online retailing is huge as advent of amazon and eBay has shown to the world: +4 many legislations, cultural and social barriers that limit entry into a market : +2 The online retailer industry is based on the advent of technology and thus hold a significant edge over the traditional brick and mortar or brick and brick firms: +5 the fear of theft and fraud and a somewhat traditional approach has retrained customers from buying online: +3

Profit potential.

Market entry barriers Technological advantage

Financial stability.

ES AVERAGE is -15/6 = -2.5 CA AVERAGE is -10/5 = - 2 IS AVERAGE is 20/5 = 4 FS AVERAGE is 13/5 = 2.6

Directional vector coordinates

x-axis: (-2) + (4) = 2 y-axis: (2.6) + (-2.5) = 0.1

Interpretation of Space Matrix

Based on the criteria stated above a space matrix was drawn for to analyze which strategies will best suit the amazons future business activities. After a thorough analyzes and relative rating and scoring based on the space matrix it can be concluded that aggressive strategies should be pursued by the amazon executives. The Amazon can either use integration, market penetration, and product development or diversification strategies. It can also be observed that amazon has been proactively involved and has been pursuing these strategies since the start of 2006.

Financial Ratio Analysis of

Liquidity ratios
Current ratio = current assets / current liabilities. Year Current assets 2005 $2,929 2006 $3,373
all amounts in millions

Current liabilities $1,899 $2,532

Current Ratio 1.54 1.33

Profitability ratio
Net profit margin = net income / sales Year 2005 2006 Profit $359 $190
all amounts in millions

Sales $8,490 $10,711

Net profit margin 0.042 0.017

Leverage ratios
Debt to total asset ratio = total liabilities /total assets Year 2005 2006 Total current liabilities $1899 $2532 Total longterm liabilities $1551 $1400
all amounts in millions

Total liabilities $3450 $3932

Total assets $3696 $4363

Debt to total assets ratio 0.93 0.90

Activity ratios
Total assets turnover = Sales / total assets Year 2005 2006 Sales $8,490 $10,711
all amounts in millions

Total assets $3696 $4363

Total assets turnover 2.29 2.45

Interpretation of Ratios
Liquidity ratios: Current ratio
The current ratio measures the extent to which a firm can meet its short term obligations. By standard current ratio of 2:1 is considered to be suitable but amazons 1.54 and 1.33 shows that amazon lacks the ability to overcome its short-term liabilities and thus its working capital management is lackluster.

Profitability ratio: Net profit margin

The net profit margin ratio evaluates the net profit after taxes on per dollar sales. The ratios of 0.42 and 0.017 shows that much of the sales revenue compensates excessive expenses and little is earned though sales have increased overtime.

Leverage ratio: Debt to total assets ratios

The debt to total assets show how much of the assets have been funded by the creditors. 93% (0.93) and 90% (0.90) of amazons assets have been funded by creditors; which shows a weak position and high risk of default.

Activity ratio: Total assets turnover

This ratio checks whether the firm is generating a sufficient volume of business for its assets investment. The ratios of 2.29 and 2.45 validates that amazon is generating enough volume of business to justify its assets investment.