Amaz

Amazon – AMZN

Group 7

Fina 4200 – Dr. Ian Liu

Theme

Amazon’s competitive advantage over the e-commerce industry is due to several key factors: The three variations of types of customers made up of consumers, sellers, and developers, low-cost operations, and customer loyalty. The wide economic moat that Amazon possesses is supported by the combination of these key components and Amazon’s relative small asset business model yielding in high returns on capital. In our valuation we will show various ratios and projections to properly value AMZN.

Low-cost operations are the primary advantage that keeps it on top of its competitors. Throughout the early years of Amazon, its revenue was mainly composed of selling products such as books, DVDs, CDs, movies at very low prices in order to compete in its industry, e-commerce. This created losses through the starting cycle of the company as it struggled to find its distribution network. Later on as its distribution network became solid, the costs of maintaining this type of network became lower than actually maintaining a physical warehouse which in turn generated profits.

Amazon differentiates from its competitors by providing quality, convenient, and user-friendly services through low prices. Also, customer reviews, product recommendations, and wish lists are other unique features of Amazon that call the attention of online shopping customers. The ability for sellers to sell their products at Amazon.com or to use Amazon to fulfill their orders and the ability for developers to use technology infrastructure through

Amazon Web Services drives in more customers and revenue for Amazon. By these, Amazon gains more ground to be familiarized with online purchases than its leading competitors.

Throughout the years, the industry barriers have increased for other competitors to join the industry. However, it faces...