Amazon

Amazon

Ohio Dominican University

Amazon

Amazon is possibly the company that is most closely tied with the E-Commerce phenomenon in the late 1990’s to the present time. The company has grown from a bookseller to a virtual super power of the Internet, selling many diverse products from toys to hardware and much more. The company has also grown at a tremendous rate with revenues rising from about “$610 million in 1998 to $1.6 billion in 1999 then to $2.8 billion in 2005. By 2000, over 75 percent of U.S. consumers recognized the Amazon.com brand, and Interbrand ranked the company as the 48th most valuable brand worldwide”(pp. 148). However, the increase in revenue has led to an equal increase in operating losses leaving the company with a large shortage and some questions to answer to its investors and stockholders. (Applegate, Austin, & Soule, 2009)

“First, would Amazon.com achieve its aggressive goal of becoming cash flow positive by the end of 2001”(pp. 155)? Bezos had an uphill battle but was determined to post a positive cash flow by 2001 year-end and with his new business models, expanded partnership roles, internal expansion and product diversification, he had the tools to lead the company towards the positive cash flow goal by the end of 2001. I believe that Amazon will be cash flow positive by the end of 2001 based on the facts that upward trends in sales will far exceed the operating expenses. Income from operations depends upon net sales, cost of sales, and operating expenses. A close analysis of Amazon’s operating expenses from 1997 to 2000 indicates that the company has experienced significant increases in fulfillment, marketing, technology, and restructuring costs. The overall operating expenses increased from about $61M in 1997 to about $1520M in 2000. These expenses were necessary for Amazon’s growth. In 1998 and 1999, Amazon spent $429M to build “a state-of-the-art digital business infrastructure and operations that linked nine...