Monthly Archives: October 2017

Just a few days ago, the CEO of Amazon Jeff Bezos, became the richest person in the world with a net worth of $93.1 Billion, a $3.1 billion margin over Bill Gates. In recent years, Amazon is recognized for its bold moves to expand: a $13.4 billion acquisition over Whole Food Market as a way to increase its online sales, Amazon Prime Air which allows drone – instead of human – deliver your online shopping goods at a much efficient rate to your living space, and just a week ago its announcement of Amazon key, which let Amazon staff to unlock your front door to deliver your package or even to offer house cleaning services. From an investor perspective, this massive conglomerate giant seems to want every piece of opportunities, which diversifies its risks but also attracts bigger competition at the same time. Other potential worries also include anti-trust action: what if Amazon becomes an e-commerce monopoly in the near future? These audacious acts reflect Amazon’s goal to expand globally and to position themselves in the new market. In this blog, I would like to emphasize the value of thinking long-term.

Figure 1.1. Statistics of Amazon’s Revenue and Net Income from 1997 to 2015.

In a business era where Investors focuses on short-term results, Amazon plays its game long-term. Jeff Bezos once said that its ultimate goal (or BHAG) is to make it ‘irresponsible’ to not be a Prime Member. On the surface, Amazon has already achieved at satisfying customer needs: an online engine that offers a bucket list of items. Below the surface, they are investing in new technology (20% more than Google), opening new warehouses as a way to expand its distribution channels, dumping a 5$ million investment in India for digital payment technology, and so on. However, Instead of setting growth goals quarter by quarter, Amazon plays it much more slowly but ambitious. Every strategic initiative is not a move to merely generate profits so that they can receive more funds from the investor, but a potentially revolutionary change to the existing environment. Not only are these moves long-term oriented, but they are also creating a loyalty cycle: every strategic expansion Amazon purses are in support of its BHAG of making a consumer more willing to purchase Amazon Prime Membership. From a value proposition perspective, Amazon’s long-term oriented moves are transforming their business model into an infrastructure of the massive marketplace, from e-commerce, payment and finally to logistics. Although this strategy may require Amazon to invest more times in R&D, every piece of Amazon’s technologies will become part of their comparative advantage.

 

While Amazon has already established itself as the fifth most valuable company, most investors believe Amazon’s value will increase even more as the room for growth is still huge.

Figure 1.2. Room for internet uses growth 2016.

 

Word counts: 450

Bibliography

Reuters, T. (2017, October 26). Amazon sales surge after Whole Foods acquisition, busy Prime Day. Retrieved October 29, 2017, from http://www.cbc.ca/news/business/amazon-earnings-1.4374005

Vinton, K. (2017, October 27). Bezos’ $10 Billion Day Boosts Net Worth To Record High, Cements Him As No. 1. Retrieved October 29, 2017, from https://www.forbes.com/sites/katevinton/2017/10/27/bezos-10-billion-day-boosts-net-worth-to-record-high-cements-him-as-no-1/#5f81c980454e

Why investors are so keen on Amazon. (2017, April 03). Retrieved October 29, 2017, from https://www.economist.com/blogs/economist-explains/2017/04/economist-explains

Alibaba and Amazon look to go global. (2017, October 28). Retrieved October 29, 2017, from https://www.economist.com/news/special-report/21730539-e-commerce-giants-are-trying-export-their-success-alibaba-and-amazon-look-go-global

Comments on Kameel’s blog

6 Replies

Upon reading Kameel’s blog on the topic of ethics, I not only strongly agree with his agreement but I also think this is a great example of a full-marks blog. A primary reason why his blog is full-marks arises from his coherent structure and effective resources. His writing is easy to follow and is backed up with evidence and a lot of personal opinions. At heart, I was really convinced by Kameel’s pragmatic argument that business needs to focus on business ethics because it directly correlates to its brand image and profit.

In his blog, Kameel argues that business should aim at more than simply increase shareholder value and backs it with an interesting example of Volkswagen’s emission scandal. One thing to note is that he only uses one small paragraph to summarise the news, which allows him to focuses more of his writing on his opinions. As for his evaluation of the news, he ties it to concepts from the Performance Management lecture. He notes that Volkswagen’s fast-growth oriented goals were one of the reasons why the scandal occurred. Additionally, Kameel’s blog also spurred up my thought on how short-term oriented business often fail to add any values. In Volkswagen’s case, focusing enormously on hitting the quarterly goal would ultimately disrupt its management culture. If Volkswagen were to focus more on long-term oriented directions, such as investing in electric and self-driving cars that are aligned with their value proposition, they would be much likely to be successful. Another thing to note is that when reading students’ blog is that their image isn’t effective. Often, other students use image of a brand logo/products, which is related to their chosen news, but not to their argument. For Kameel, his image is simple and direct: a diagram that shows Volkswagen’s stock plunge after the scandal. From the diagram, it shows that ever since the plunge Volkswagen was unable to recover and it also highlights the practical effects of undermining business ethics.

Another reason why I admire Kameel’s blog is the relevance of the topic. Recently, the Japanese corporate giant Kobe Steel admits falsifying data on 20,000 tonnes of metal, which has serious effects on many other businesses that rely heavily on metal (Boeing, Toyota, Ford and more). Although no accidents have yet occurred, Kobe Steel’s market shares dropped by a third, which is around $1.6 billion US dollars.

Figure 1.1. Kobe Steel market shares plunged after accusation of falsifying data.

These types of scandal occur more often than we expect. To me, the recurring theme seems to be a result of misleading short-term goals and transparent leadership.

Word Counts: 450 words

Citation

Kameel Ladak’s blog link

https://blogs.ubc.ca/kameelladak/2017/09/13/a-lesson-in-business-ethics-volkswagen/

Kobe Steel admits falsifying data on 20,000 tonnes of metal. (2017, October 12). Retrieved October 15, 2017, from https://www.economist.com/news/business/21730244-it-latest-long-list-scandals-have-befallen-corporate-japan-kobe-steel-admits

Image

https://finance.google.com/finance?q=TYO:5406