Amazon: Leader in Online Distribution and Adaptive Pricing Strategies - Essay Sample

Introduction

Amazon is an American company that is currently one of the largest online distributors of products for the general public. It deals with electronic and computer products, books, products related to music, video games or DVD and Blue Ray, and finally, the development of web applications. Amazon's strength lies in its organization and strategy. Online commerce keeps fluctuating, where supply and demand are constantly changing. Amazon readjusts its prices several times a day on a multitude of products, depending on the reactions of the competition (Zhu & Liu, 2018). Amazon has a huge staff that has to be paid and the hiring process is also costly. Moreover, since it is an e-commerce company, the increase in cybercrime poses a major risk for the company.

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Risks and Challenges: Working Capital Management (WCM)

There are various challenges that financial managers encounter regarding WCM in short-term planning. First and foremost, there is no time to think about the matter and come up with the best solution for the long-term growth of the company. The decision has to be made hastily and if the manager gets it wrong, this may have adverse effects for the company. The second challenge is ensuring that the working capital can successfully manage the current assets and inventory (Galant & Simon, 2016). The stock has to be maintained to ensure the flow of production is not affected and current liabilities have to be covered. The third challenge is that financial managers have to ensure that the company remains liquid to avoid bankruptcy in the future. The cash flow has to be maintained in such a way that it pays all the operational costs and the short-term debts as well.

Risks and Challenges: Political and Economical

The labor legislation that increasingly protects workers is a threat for Amazon since Amazon uses a lot of low-skilled labor and increases in minimum wages that are occurring in many developed countries directly affects their costs (Verrone, 2019). The entry into force of the new law on European data protection affects very directly all those companies that take advantage of their data to make their businesses profitable and technology companies like Amazon are the most affected. If Amazon is deemed to breach any privacy laws or selling consumer's information, the company will be affected negatively and this will adversely affect the shareholder's value.

Risks and Challenges: Industry Specific

There may be new competitors although the risk is relatively limited. Amazon's main business, online sales, is not a business based on its own technology that is impossible to copy. Regarding technological risks, the threat of cybercrimes is growing as more and more devices are connected to the network and this is a trend that will be difficult to stop. Amazon should ensure their services, such as Amazon locker, are secure and one cannot hack into someone's account and steal the purchased goods before they reach to the owner. Amazon also introduced the Amazon key which is an in-care delivery service that allows customers to get their goods through cars capable of being locked and unlocked by codes sent to the customers' smart devices (Rouse, 2019). Although it is an innovative solution, someone may break into the car and steal the goods. All these risks can drive Amazon's stocks down and they have to be dealt with.

The main risk regarding the supply chain of Amazon is in the treatment of its workers. The working conditions of the employees of the multinational are being questioned in recent months, following the numerous strikes called by workers. Employees have to urinate in bottles since they fear being suspended or sacked for their 'downtime '(Sainato, 2019). Employees are encouraged not to seek outside medical care when they are injured or are told to attribute those injuries to pre-existing conditions, to avoid possible inspections. Employees must comply with exhausting work schedules and please their managers at all costs. All these paint a very bad image for the company and ruin its reputation.

Risks and Challenges: Company Specific

First and foremost, Amazon has an excessive portfolio including Amazon.com as online commerce, AWS (Amazon Web Services) as cloud storage, Alexa as a smart speaker for the connected home, Kindle as an ebook reader, Amazon Prime Video as an audiovisual content generation company, Twitch as a relay service Live video games, and Amazon Go as physical supermarkets among others. All these do not allow the corporation to focus enough on each of them to make them all profitable, resulting in a loss of focus that can harm each line of business and therefore to the corporation itself.

CSR and Ethics: Ethical Issues Involving Amazon's Inc. Stakeholders

As part of its corporate responsibility efforts, the company launched the Amazon Smile Foundation program in 2013, with which it is committed to donating 0.5% of the price of an item to the charity of the customer's choice (Dudovskiy, 2018). The sustainability efforts of the Amazon Company in recent times have focused on the creation of quality employment, innovation to satisfy the customer, packaging, renewable energy and social action in the communities where it operates.

CSR and Ethics: Impact of CSR Issues on Amazon Inc

The CSR responsibility is as an investment to increase the value of the organization even more and strengthen the competitive advantage. The treatment of Amazon employees has given the company a bad reputation. It is the responsibility of financial managers to ensure that there are safe and favorable working conditions for the employees. Amazon may be sued if the working conditions are not improved resulting in payment of high fees in damages. It is necessary to invest in the welfare of its employees and guarantee the satisfaction of their clients and/or consumers. When a company acts in an unethical way, investors are more likely to shun the company.

CSR and Ethics: Role of Financial Managers in CSR and Ethics Issues

Financial managers play a great role in the implementation of CSR and ethics. They are responsible for rethinking management, performance measurement and monitoring systems, the implementation of efficient strategies, all aimed at the accumulation of economic, social and environmental aspects to integrating economic-financial performance with social responsibility (Galant & Simon, 2016). They advise the company the best way to integrate socio-environmental variables into their management systems; thus, they establish a harmony between the economic-financial objectives and those of a social and environmental nature, with which they make possible a complementarity between the management of economic results and CSR.

CSR and Ethics: Financial Decision Making

Corporate Social Responsibility is important in its own right and is revolutionary because of its potential for a relationship with economic and financial performance. CSR reduces costs and risks, strengthen legitimacy and reputation, build a competitive advantage, and create win-win situations by creating simultaneous value (Galant & Simon, 2016). Investors do not want to be linked to a company that has no concern for CSR and ecological issues.

References

Dudovskiy, J. (2018). Amazon Corporate Social Responsibility: a brief overview. Retrieved from https://research-methodology.net/amazon-corporate-social-responsibility/ on 27th July 2019.

Galant, A., & Simon, C. (2016). Corporate social responsibility and financial performance relationship: a review of measurement approaches. Journal of Economic Research 30(1), 676-693. https://doi.org/10.1080/1331677X.2017.1313122

Rouse, M. (2019). Amazon Key. Retrieved from https://whatis.techtarget.com/definition/Amazon-Key on 27th July 2019.

Sainato, M. (2019). 'We are not robots': Amazon warehouse employees push to unionize. Retrieved from https://www.theguardian.com/technology/2019/jan/01/amazon-fulfillment-center-warehouse-employees-union-new-york-minnesota on 27th July 2019.

Verrone, S. (2019). Amazon has a history of mistreating its employees. Retrieved from https://www.thetriangle.org/opinion/amazon-has-a-history-of-mistreating-its-employees/ on 27th July 2019.

Zhu, F., & Liu, Q. (2018). Competing with complementors: An empirical look at Amazon. com. Strategic Management Journal, 39(10), 2618-2642. https://doi.org/10.1002/smj.2932