Amazon Capital Decisions Essay

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There are many firms that exist and operate within the capital management realm. Some companies operate and expand via their internal income and operations. There are other firms that are not currently self-solvent. However, the latter is commonly able to expand through capital investment and fundraising. The goal with such firms, of course, is to ramp up business levels, pricing structures and so forth so as to get to a profit at some point, even if it takes a few years. Indeed, many firms start off relying on capital investment and resource allocation at first and then become able to expand organically with no outside support, budgeting or investment. While firms like Amazon are a behemoth right now, there was a time where their operations and capital structures were quite thin internally and thus they needed a lot of investment and support through the capital investment and budgeting process.

Analysis



There are definite variations and differences when it comes to capital budgeting and resource allocation. Amazon typifies one of the outliers that exists. Of course, that would be the valuation and other fiscal perceptions related to internet companies. The “dot-com bubble” that happened around 2000 proves that there has been some blowback and static when it comes to the proper valuation of internet companies. It is much more of a refined art nearly a generation removed from that bubble. However, Amazon faces a lot of questions and challenges to their capital spending and budgeting. Perhaps that skepticism is not as present as it was when Amazon was much more of a nascent and non-solvent company. However, it does persist to this very day. For example, Amazon has mostly hit proverbial home runs when it comes to their business decisions. Like other internet firms like Apple and Google, they have their tentacles in a lot of different markets. They monopolize none of them yet they do very strongly in most situations. Even so, they sometimes do not do as well as they would hope (e.g. the smartphone they issued a few years ago) and many anlysts and more than willing to bring out the proverbial long knives when that comes to pass. Even with the perceived volatility when it comes to internet stocks, Amazon still does very well overall because their revenue is strong, their growth rate is quite high and the other financial metrics that are assessed by analysts, internet company or not, show a firm that is in a very good position. The market and industry paradigm in which a firm operates is important. After all, an operation like Amazon that is mostly online in nature will operate differently than a firm like Wal-Mart, which is mostly a ground-based operation. However, the lines between these firms is blurring as many firms, including both Amazon and Wal-Mart, realize that a blended approach that deals with both online and ground-based operations is necessary. This means that the capital structures and budgeting involved, regardless of the source of funds, needs to address both front concurrently and in a way that is effective (Doffou, 2014).



Because of the increasingly complexity of firms and how they often have to operate in both online and ground-based ways, it is important to understand that capital budgeting and resource allocation must consider the scope and performance of the firm as a whole.
It is not unwise to consider that a firm may be stretching itself too thin by working on several fronts of operations at the same time. In this case, that would be online and in physical stores. As noted already, however, this is a necessary part of doing business in some industries. Retail would obviously be one of those industries. Online shopping is become larger and larger. At the same time, there are still people that prefer to buy certain goods in physical stores, for whatever reason. Further, there are some goods that are hard to purchase online. Perishable food and other groceries would be a good example. Regardless of the marketing and retail mix in question, the characteristics of the assets involved, how they are allocated and how all of this aligns with the strategic management plans of the firm is all important to consider. Since the presence of online-dominant firms is still fairly new in many ways, pinning down what is healthy what is going to be problematic and the long-term prospects of any given firm, even a firm like Amazon, is not unfair to consider or ponder. Even so, there are some firms that are clearly doing better than others. Firms like Amazon, not to mention the aforementioned Google and Apple, are great exmaples. There are other firms that have been around a long time in the ground-based sphere that are now having to shift to more of an online presence due to changes in the market and society. Wal-Mart, as was mentioned before, is a good example. That company has a substantial amount of resources and capital capabilities. However, those resources are very much still invested in the ground-based capital structures of the past. This will have to change as the market shifts, as it has been for years. While those other changes are going on, it must be understood that the proper budgeting for, deployment of and leveraging of information technology and information services assets is growing more important by the day (Ray, Ling & Barney, 2013).



Concurrent to that is the fact that Amazon is seemingly doing the same thing as Wal-Mart, albeit in reverse. This is easily proven when it is noticed that Amazon is slowly entering the ground-based retail sphere after being a mostly online operation in the past. Bookstores and their recent acquisition of Whole Foods are just two examples. Amazon seemingly knows that while their capital investments and budgeting in the online sphere is paying huge dividends for them, the online shopping sphere is not completely dominant of the whole market. Further, this will likely not change. As mentioned above, there will always be situations where shopping in person and in a physical location is preferred or even necessary. Amazon, in addition to shifting to a blended model, is themselves working to keep the online frameworks they have in full effect as they shift to a blended….....

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References

ACCELERATING RESOURCE ALLOCATION IN VIRTUALIZED ENVIRONMENTS USING WORKLOAD CLASSES AND/OR WORKLOAD SIGNATURES. (2013).

Doffou, A. (2014). The Valuation of Internet Companies. Journal of Applied Financial Research, 172. Grocery Game-changer? Amazon's Whole Foods buy could have far-reaching implications for food industry. (2017). Quality Progress, 50(8), 8-10.

Vargas-Leon, P. & Kuehn, A. (2015). The Battle for Critical Internet Resources: South America vs. Amazon.com, Inc. Revista De Direito Setorial E Regulatório, Vol 1, Iss 1, Pp 1-22 (2015), (1), 1.

Ray, G., Ling, X., & Barney, J. B. (2013). Impact of information technology capital on firm scope & performance: The role of asset characteristics. Academy of Management Journal, 56(4), 1125. doi:10.5465/amj.2010.0874

Verhoef, C., Bhulai, S., & van der Mei, R. (2011). Optimal resource allocation in synchronized multi-tier Internet services. Performance Evaluation, 68(Special Issue: Performance 2011), 1072-1084. doi:10.1016/j.peva.2011.07.020

Xiao, Z., Song, W., & Chen, Q. (2013). Dynamic Resource Allocation Using Virtual Machines for Cloud Computing Environment. IEEE Transactions On Parallel & Distributed Systems, 24(6), 1107. doi:10.1109/TPDS.2012.283

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