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HEMANTH (Cost Analysis) GG
HEMANTH (Cost Analysis) GG
Reg No.U18EC22C0193
Ms. Sowmya
DECLARATION BY THE STUDENT
I Hereby declare that” AMAZON COMPANY “,is the result of the project work carried out by
me under the guidance of Miss.Sowmya in partial fulfillment for the award of Bachelor Degree
in Business Administration /Commerce by Bengaluru City University
I also declare that project is the outcome of my own efforts and that it has not been submitted to
any other university or institution for the award of any other degree or diploma or certification
This is to certify that the project AMAZON COMPANY is based on the original study
undertaken by HEMANTH GOWDA.H.P bearing this project report is an authentic record of
research work carried out by her/him under my supervision and guidance.
This project report has not format a basic for the award/receipt of any other
degree/diploma/fellowship or other similar titles/prices of any other University / Instituion.
Date:
Place: Bangaluru
ACKNOWLEDGEMENT
I would like to expess my gratitude to the college management for giving me the opportunity to
continue working on my project .
I am greatly indebted to faculties of Krupanidhi College of Commerce and Management for their
encouragement, my dear and loving parents and friends. I really thank my family and friends for
being with me at every stage of my project and making me feel confident.
HEMATH GOWDA H P
U18EC22C0193
TABLE OF CONTENT
CHAPTER 1
INTRODUCTION AND COMPANY PROFILE
CHAPTER 2
LITERATURE REVIEW
CHAPTER 3
METHODOLOGY
BIBLIOGRAPHY
CHAPTERT 1
INTRODUCTION AND COMPANY PROFILE
Amazon company is an e-commerce company based in seattle, it was founded by Jeff Bezon in
1994, and launched in 1995. The company started out as an online bookstone and quickly started
adding other items, such as VHS tapes and DVDs music CDs, software , vedios games,
electronics, MP3s, clothing, furniture, toys and even food items. Currently they now own more
is than 345 trademarks.
Amazon company is known for its technical innovation. Its technology is said to be on the
cutting edge. The company’s engineers tackle some of the most complex challenges in large-
scale computing. Software development engineer, technical program managers, test engineer,
and user-interface experts works in small teams company-wide to contribute to the e-commerce
platform that’s used by a great number of customers, sellers and merchants
The IT Departtment at amazon company oversees an enormous system that is extremely reliable.
Amazon company describes their IT group as “System, and operate highly reliable, scalable
distributed system with terabyte-sized databases and intrastructure that can handle a massive
number of transaction.”
In many ways, Amazon.com is perhaps the company that is most closely tied with the E-
Commerce phenomenon. The Seattle, WA based company has grown from a book seller to a
virtual Wal-Mart of the Web selling products as diverse as Music CDs, Cookware, Toys and
Games and Tools and Hardware. The company has also grown at a tremendous rate with
revenues rising from about $150 million in 1997 to $3.1 billion in 2001. However, the rise in
revenue has led to a commensurate increase in operating losses leaving the company with a large
deficit. The company did make its first quarterly profit of $5.8 million in the fourth quarter of
2001. But, this was dwarfed by large cumulative losses.
Jeff Bezos was one of the few people to understand the special nature of Internet Retailing and
E-Commerce. This is how he compares E-Tailing to traditional retailing.
The key trade that we make is that we trade real estate for technology. Real estate is the key cost
of physical retailers. That's why there's the old saw: location, location, location. Real estate gets
more expensive every year, and technology gets cheaper every year. And it gets cheaper fast.
There were really two elements to his vision-
Our goal is to be Earth's most customer-centric company. I will leave it to others to say if we've
achieved that. But why? The answer is three things: The first is that customer-centric means
figuring out what your customers want by asking them, then figuring out how to give it to them,
and then giving it to them. That's the traditional meaning of customer-centric, and we're focused
on it. The second is innovating on behalf of customers, figuring out what they don't know they
want and giving it to them. The third meaning, unique to the Internet, is the idea of
personalization: Redecorating the store for each and every individual customer. If we have 10.7
million customers, as we did at the end of the last quarter, then we should have 10.7 million
stores. Interestingly, Amazon.com recently launched a “Your Store” service, thus translating this
vision into a reality. He strived to understand what was unique about the Internet in developing a
customer-centric company-
“In the online world, businesses have the opportunity to develop very deep relationships with
customers, both through accepting preferences of customers and then observing their purchase
behavior over time, so that you can get that individualized knowledge of the customer and use
that individualized knowledge of the customer to accelerate their discovery process. If we can
do that, then the customers are going to feel a deep loyalty to us, because we know them so
well”.
The value elements Amazon.com sought to deliver are illustrated in this Bezos quotes- "Bill
Gates laid it out in a magazine interview. He said, "I buy all my books at Amazon.com because
I'm busy and it's convenient. They have a big selection, and they've been reliable." Those are
three of our four core value propositions: convenience, selection, service. The only one he left
out is price: we are the broadest discounters in the world in any product category. But may be
price isn't so important to Bill Gates". Some of Bezos’ critics have said that the extent of
customer-centricism of the company is about the same as any other company. In other words,
Because has been seen as generating hype and nothing much.
Bezos’ vision has been translated into a large customer base and loyalty rate. Amazon.com‘s
customer base has grown rapidly over the past several years. Customer accounts grew from 1.5
million in December 1997 to 24.7 million in December 2001, the percentage of repeat customer
increased from 64% in 1998 to 78% in 2000. In the fourth quarter 2001, AMAZON spent $7 to
acquire a new customer and the average customer spending was $123.
In addition to customer-centricism, Jeff Bezos wanted Amazon.com to be the place where you
could buy anything and everything online. While the company started out as the world’s biggest
bookstore, it wanted to become the world’s biggest store in the long run. The company has
made some progress along these lines by expanding into new product categories such as
cookware and tools and also providing new services such as Auctions. However, he has
conceded that this is a “multi-decade proposition”.
Sales has grown from $147 million in 1997 to about $3.1 billion in 2001. Average
growth rate during this period was 141%.
Gross margin during this period has averaged 21.68%.
Ratio of marketing expenses to sales revenue has decreased from 16.33% in 1997 to
4.43% in 2001.
Interest expenses have risen from $326,000 in 1997 to $139 million in the year 2001. !
Loss from operations has increased from $32,595 in 1997 to $412,257 in the year 2001.
Sales from book, music and video have leveled off. But, this is a very profitable
segment. On the other hand, the electronics, tools and kitchen segment is growing
rapidly but it is not very profitable. Given its diverse set of products and services, it is
hard to identify appropriate competitors.
BN.com is frequently thought of as a strong competitor in the books, music and
videocategories. Its operating statement for 1998,1999 and 2000. Note that the level of
sales is much lower than Amazon. Moreover, it spent a much greater percent of its sales
on marketing and fulfillment-nearly 42% in the year 2000. Amazon.com has also been
praised for its innovative financing strategy using a convertible bond issue. Prof. Ufuk
Ince from the University of Washington, Bothell provides a detailed explanation that is
attached as Appendix at the end.
AMAZON COMPANY started out as an online bookseller. Indeed, to some, Amazon.com will
always be a bookseller. Selling books on the Internet made sense at many levels.
Books are incredibly unusual in one respect, and that is that there are more items in the book
category than there are items in any other category by far. There are more than 3 million
different titles available and active in print worldwide. When you have this huge number of
titles, a couple of things start to happen.
First of all, you can use computers to sort, search and organize. Second, you can create a super-
valuable customer proposition that can only be done online, and that is selection. There are lots
of categories where selection is proven to be important: books, in particular, with the book
superstores, but also in home construction materials, with Home Depot, and toys with Toys ‘R
Us. Online, you can have this vast catalog of millions of titles, whereas in the physical world, the
largest physical superstores are only about 175,000 titles, and there are only three that big".
The traditional nature of the publishing industry is also illustrated in an amusing anecdote
provided by Jeff Bezos-
"The wholesalers had 10-book minimum orders. I tried to negotiate with them and said, “Let us
just pay a small fee, and you waive the 10-book order,” and so on. But they wouldn’t go for it.
So we figured out a loophole. It turned out that you just had to place an order for 10 books; you
didn’t actually have to get 10 books. We found an obscure book on lichens that none of our
wholesalers actually carried.
So whenever we wanted to order one book, we ordered the book we wanted, and then nine
copies of this lichen book. They would deliver the one that we wanted, along with a very sincere
apology about not having been able to to fulfill the nine copies of the lichen book order. That
worked very well for exercising our system. I’ve Since talked and joked at length with the people
at these companies about this. They actually think its very funny”.
The dominance of Amazon in the book market was made abundantly clear by the capitulation of
a major competitor, Borders. "In April 2001, Amazon made an astonishing alliance - with rival
Borders. For years now the Borders Group has sought in vain to offer a Web site that would
compete effectively with Amazon. Borders became a force in book retailing thanks to its
superior computerized inventory management system dating back to the 1970s. It never figured
out how to translate its computer expertise into an effective Web site. In April, Borders
eliminated all staff positions in Borders.com, and announced that Amazon will front-end its
online bookselling.
Cross selling
Amazon wanted to get a greater share of each customer's overall shopping basket. They felt that
they had already established a relationship with the customer with books. All that remained was
to leverage this trust in persuading consumers to buy everything else from them.
Economies of Scale
From a technology standpoint, the company had already incurred the fixed costs of developing
software for the online storefronts. Expanding into other product categories would allow the
company to spread these fixed costs across a larger pool of transactions leading to greater profits.
As Bezos put it
When we open a new category, it's basically the same software. We get to leverage the same
customer base, our brand name, and the infrastructure. It's very low-cost for us to open a new
category, whereas to have a pure-play single-line store is very expensive. They'll end up
spending much more on technology and other fixed costs than we will just because our earlier
stores are already covering those costs.
Forever Small
Selling books alone would not catapult Amazon as the leading E-Tailer and a cutting-edge firm.
They would forever be constrained by the small market that they operated in. Moving into other
product categories allowed them to be thought of as a dominant retailer as opposed to a ho-hum
business. The operating statement of BN.com attached in Table 4 can be cited as evidence for
this. BN.com chose to focus its energy on the book, music and video markets. As a result, its
revenue is much smaller and it may never be as large as Amazon. The data from Table 6 is also
consistent with this. We see that visitors to Amazon.com increased from 14 million in March
2000 to 18 million in March 2001. On the other hand, visitors to BN.company decreased from
5.4 million to 4.9 million.
On the other hand, many arguments have been made against expanding into new product
categories-
BrandAmazon established a relationship with its first customers on the basis of being a
bookseller. Redefining this relationship in terms of other product categories is a non-trivial task.
A typical customer reaction can be stated as- “Many of us old customers have a hard time
thinking of Amazon as a place to buy a set of Polk home theater speakers or a set of Calphalon
cookware. For me, the Earth's Biggest Bookstore moniker has occupied a spot in my mind since
it began appearing in those tiny bottom-of-page-one advertisements in the New York Times New
Products Lead To New Challenges
As mentioned earlier, books provided certain unique advantages to Amazon. Moving into new
product areas provided new challenges-
Bulky products- Consider cookware items such as pans, blenders and grills. These items
are hard to stock, expensive to ship and return. !
Non-informational products- Books are informational products that lend themselves to
features such as reviews and sample chapters. Except Music and Video, all other
products Amazon sells are non-informational products that do not have these advantages.
As a result, the advantage of selling them online may be limited.
In the consumer electronics business, for example, Amazon.com has not been able to buy
directly from leading manufacturers such as Sony, Panasonic and Pioneer. As a result, Amazon
is forced to buy products from distributors leaving it with a hefty competitive disadvantage that
may be hard to overcome. In addition, selling at prices lower than what the manufacturer wanted
strained relationships with such giants as JVC.
There are many reasons for this. In the electronics business, manufacturers have a stringent set of
requirements on how a retailer will display and sell their products. Only retailers who pass this
are pronounced authorized dealers. Authorized dealers get lower prices, money for cooperative
advertising and the right to sell warranties. Large manufacturers did not want to jeopardize
existing relationships with retailers by selling through Amazon- whom they feared will sell at
lower prices. At the same time, some manufacturers wanted to set up their own online stores.
For example, Sony sells electronics through sonystyle company and deals with the online
counterparts of established players such as best buy and circuit city.
Moreover, some manufacturers felt that Amazon did not have a long-enough history in the
business and were turned off by its string of losses. Amazon may have appeared as too
unconventional for them to feel comfortable- e.g. Amazon’s reliance on e-mail as the primary
customer service tool did not please some manufacturers.
In the final analysis, the company has showed an inability to grasp the intricacies of some of the
businesses it entered into. Interestingly, BN.com did not diversify beyond books, music and
videos.
Competition
Amazon.com was the de facto first-mover in the book market. But, this was not the case in most
other product categories. For example, E-Tailers such as CDNow were already in place before
Amazon.com appeared in the music category. As a result, Amazon exposed itself to new levels
of competition creating new vulnerabilities. In many cases, established players in the brick and
mortar space had also established a presence in the online arena. Moreover, as brick-and-mortar
stores such as JC Penney and Circuit City expanded to the online arena, Amazon was faced with
escalating levels of competition.
Cost of Complexity
Amazon company business is not driven by technology costs alone. Rather, its costs are
significantly dependent on handling of physical goods and inventory. As the magnitude and
variety of good increase, the cost of real estate, labor and inventory also increase. This increased
cost dragged the company down to some degree.
Amazon pioneered the concept of the associates program- what is now also referred to as
affiliate programs. The basic idea here was-
Small sites would act as traffic generators for the company.
These sites would post content on their site with a link to Amazon.
Each site would receive a commission of 15% for any referred purchase and 5% for any
other purchase made by that consumer.
The company would benefit not only by traffic generation, but also by branding. Since
the small sites would carry an Amazon logo, it would enhance the online presence of the
company.
The company paid for the customer traffic after the fact as opposed to traditional
advertising where companies pay ahead of time without knowing the level of traffic that
will take place.
However, it has become challenging to run affiliate programs because of new software. When an
individual visits software maker XYZ to download a program, the program marks the person’s
PC. After that point, if this individual goes to a affiliate ABC and visit’s Amazon’s site, the
program will disguise this to make it look like Amazon actually got this business from XYZ’s
site. As a result, money that must rightfully go to ABC goes to XYZ.
Moving Beyond Retailing: Partnering, Auctions and the Zshops Initiative Up to this point,
Amazon.com mainly had a product focus- i.e., it was focused on selling products to others.
However, the company realized that in order to grow further it had to move into services. This
was the motivation behind entering auctions and launching the Zshops initiative. To allay the
fears of the loyal fans of Amazon.com, Jeff Bezos explained this in this way-“It's not a shift in
the model. It's something we had always thought about. For at least a year, we've been talking
about ourselves as a "platform." It's a foundation or a workbench from which you can do a lot of
things. In our case, it consists of customers, technology, e-commerce expertise, distribution
centers, and brand”. Amazon company also entered into partnership agreement with other e-
tailers With each of these initiatives, the company leveraged its reputation and minimized its
risk, but is also relinquished control over the consumer experience. In addition, it created layers
of complexity and cost due to issues of due diligence and monitoring partners and participants in
Auctions and Zshop
Partnerships
The basic idea with the partnering approach was to let another firm bear the risk of selling
products that had unique problems and yet share in the potential upside from such a venture.
Specifically, Amazon acquired ownership stakes in many companies including: Drugstore.com,
HomeGrocer.com, Pets.com, Ashford.com, Gear.com, Audible.com, Greenlight.com,
Living.com and Della.com. According to various estimates, Amazon spent at least $160 million
in those investments29. In some cases, the investment was sizeable- Amazon owned a 46% stake
in Drugstore.com and 50% in Pets.com.
Jeff Bezos’ comments on the deal with Drugstore.com are particularly relevant-
“Take Drugstore.com as an example. That is a very complicated business, because you have to
be regulated in all 50 states in a very careful way. You have two payers because you pay the $5
copay, and the insurance company takes care of the rest. That leads to a different set of
technology systems to make that work. So, it becomes clear very quickly that because they're up
and running and they have that customer experience nailed, it would be much better for our
customers to offer them that experience than to put our energy and time into trying to replicate
it”.
Auctions
On March 30, 1999 Amazon.com announced that it was introducing Amazon.com Auctions36.
This was a bold move on the part of Amazon to overthrow the large Internet auction house-
eBay.
Cross-selling: Amazon wanted to leverage its large customer base and encourage them
become buyers or sellers on its auction service.
EBay’s focus was almost exclusively small business and collectors. The thinking at that
time was that Amazon mayintroduce new kinds of buyers and sellers leading to a
different market dynamic.
Competition
At this point, variable price mechanisms such as auctions were being projected as the
dominant form of E-Commerce in the future. As a result, a number of companies
introduced auctions. Consider the moves made by Amazon’s competitors in March 1999
o Price Line.company, the reverse auctioneer went public on March 30, rocketing 57 to
close at 70.
o eBay forged a $75 million deal with America Online on March 25 to promote its eBay
auctions on AOL.
o Catalogue retailer Sharper Image began offering online auctions of new and excess
merchandise on march 1st
o Computers E-tailer cyberians outpost launched a site on march 16
International Growth
Even without opening web sites and distribution centers abroad, Amazon.com had consistently
served a global audience. In July 1995, the customers of the company came from 45 different
countries39. Currently, the company sells to over 150 countries40. As shown in Table 3, in the
year 2000, about 13.8% of all revenues came from the International market. The company
realized that by more closely targeting some markets, revenue could be increased even more.
First of all, Amazon took a fundamentally different approach to developing an online store. As
described by Salon.com's Scott Rosenberg- "Five years ago, entrepreneurs thought the way to
duplicate the retail experience online was to build virtual replicas of physical stores: the theory
was that you had to orient users spatially; the Holy Grail was the 3-D walk-through. Amazon
never went down that path. Its founder, Jeff Bezos, and his talented crew of site builders seemed
to understand from Day 1 that information organized thoughtfully can create its own experience
-- one entirely different from the familiar store geography of aisles and shelves. They started
with a vast but bare database of books in print and kept adding new layers of valuable
information to it". Second, Amazon was a pioneer in introducing new ways to enhance the
shopping experience. Here is a partial list of their innovations-
One-click shopping: Amazon.com recognized that one of the most important ways in
which it could value was to reduce the transactional burden on customers. If the company
could remember all relevant
information about the customer, the individual could breeze through the ordering process.
This also established switching costs making it a hassle to switch to other online stores
that may or may not have any given customer's information. In a controversial move, the
company also obtained a patent on its one-click shopping system and successfully stalled
its usage by its rival- BarnesandNoble.com45.
Product Review Information:
All products on Amazon can be reviewed. In the case of books, editorial reviews by
leading magazines are provided by the company. For all products, customer reviews are
available. Moreover, customers can rate each other's reviews. A rating figure is placed
against each review so that customers can decide whether to read it or not based on that.
Purchase Circles:
Suppose you are interested in learning about the books being read by your rival firm or
scientists at MIT, Amazon provides you to do this. In the company's words46- "We group
the items we send to particular zip and postal codes, and the items ordered from each
domain name. We then aggregate this anonymous data and apply an algorithm that
constructs bestseller lists of items that are more popular with each specific group than with
the general population. No personally identifiable information is used to create Purchase
Circle lists. The regularity with which a Purchase Circle is updated depends on its size and
activity of a Purchase Circle group. Large Pur
E-Mail Alerts:
Amazochase Circles are updated weekly; smaller ones are updated monthly".
n allows consumers to keep tabs on their favorite author or musician. Individuals can
enter the name of their favorite author, for example, and when that person's next book
comes along, Amazon e-mails the customer with an alert. In some cases, customers are
alerted before the book is available to the public.
Recommendations:
The company uses collaborative filtering and other personalization techniques to
recommend books and music to users. The company remembers the name of each
customer and the web site greets each individual as they log in. Then, when the user picks
a book(say), the system recommends a few other books that may be of interest. Clearly,
this encourages the users to browse and buy more than what they had originally
intended .
Wish List: Each individual can create a wish list of items that they would like to
acquire. This list is open to the world and if a friend or acquaintance wants, he or she can
make sure that the items you want are ordered and sent to you.
The Page You Made-
The web site creates a special page that consists of recently viewed portions of the site.
Consumers who have forgotten something that they looked at a few minutes ago can
conveniently go to this page and locate the item of interest.
The result of these innovations manifests itself in the leadership role of Amazon dominates
others in multiple product categories based on how well it serves its customers.
The company continues to add innovative features on its web site. It added the “millions of tabs”
feature in September. Customers now have a tab that is their own and is completely customized
to their needs.
Poor investments
As shown earlier, Amazon.com rapidly diversified into a number of product categories and
added new services such as Shops and Auctions. The company may not have fully understood
the impact on the cost structure as it added these products and services. Some observers have
pointed out that with only the book, music and video segments being profitable, the company
may be forced to re-evaluate other products
LITERATURE REVIEW
1) Darren Filson (April 2004) in their analysis stated that to estimate "the impact of e-
commerce strategies on firm value lessons from Amazon.com and its early competitors" This
article applies event study methodology to analyse strategies announced by the leading internet
retailer amazon.com and three of its early competitors, Barenesand Noble.com, CDNOW, and
N2K, from their IPO dates until exit or the end of 2001. The article focuses on six types of
strategies that are of particular interest in the e-commerce environment (1) promotional
activities, (2) offline customer service centre and distribution centre expansion, (3) pricing. (4)
product line expansion, (5) service improvement, and (6) foreign expansion. [CITATION fil04 |
16393)
2) Irina V. Onyushev & Tanatthon Seenalasataporn (Feb 2018) in their study titled.
"Strategic analysis of global e-commerce and diversification technology: the case of
amazon.com Inc.", considered that the strategic issue of the Amazon.com development,
presenting in detail the strategic analysis of external business environment of this company in its
current situation, suggesting also the alternative strategy for the future. That is why strategy is
supposed to combine critical thinking with exploratory analysis and detailed investigation. Thus,
the company will have to broaden its development strategy in every single business area,
specifying more clearer the direction in which Amazon is planning to maintain its competitive
advantages so that only to survive and but also keep its leading market position
3) Dr S.Chandrasekar & Dr. C. Vethirajan (Feb 2020) in their study titled "a study on digital
marketing a case study with special reference to amazon com" analyses that how Amazon.com
has bought in an array digital and online marketing strategies to succeed and make it big in the
digital marketing sector. This case also
discusses how Amazon has had huge success in the online marketing sector as they brought in
new insight into the digital. marketing field Digital marketing is a broad term that refers to
various and different. promotional techniques deployed to reach customers via digital
technologies. Its objective is engaging customers and allowing them to interact with the brand
through servicing and delivery of digital media
4) Samrat Bhardwaj (Oct 2019) in their analysis called "The Engineering Behind A
Successful Supply Chain Management Strategy: An Insight Into Amazon. Com" highlight that
the pivotal role SCM plays in any e-commerce retailing activity
7) Vijay Govindarajan is one of the world's leading experts on strategy and innovation. The
biggest opportunity in India is e-commerce. Why? Three important factors will drive this:
8) Dr. A.B Santhi (2017) "A study on the customer satisfaction towards Online Shopping in
Tirupati Town". This research was been undertaken to know the factors influencing customer
satisfaction. The objective of this study is to understand the demographic factor affecting
customer satisfaction with respect to online shopping in India and also descriptive research used
in this research, in findings they come out with result that the respondents are becoming more
internets savvy every day and also they are ready to purchase the high quality product as well.
9) Goswami et.al (2013) studied "Customer Satisfaction towards Online Shopping with Special
Reference to Teenage Group of Jorhat Town". The author concludes that buyers are satisfied
with the factors of online shopping such as price, quality, ease of use, timely delivery etc. It also
shows that customers give highest importance to price factor and after sale services.
10) Nandhini Bala Subramanium (2017) "A comparative study on customer satisfaction
between Amazon and flipkart customers in an education institutions". The objective of this study
was to identify the respondents perception towards amazon and flipkart shopping and also to
compare the customer satisfaction level and the post graduate student of the educational
institution have been taking for the study and in the finding they found that Amazon has highly
quality and product variety when compared to flipkart and the evident that they convey was both
provide equal service in terms of payment facility . In the final quarter of 2022, Amazon reported
net sales of over $149.2 billion. This seasonal spike is typical of Amazon's quarterly reporting,
but the growth is undeniable as this was the company's highest quarter ever
Objectives:-
Challenges:-
Amazon has consumer market in United States but it is a growing online consumer market in
India having different challenges. The first and foremost challenge in India faced by the amazon
was restrictions on foreign companies using e-commerce to sell their products directly to the
Indian consumer. The Indian government, however, plans to allow foreign companies that
manufacture their products in the country to sell them directly to consumers over the Internet.
But Amazon would have to start making its products in India to take advantage of the change in
the law. Another difficulty that Amazon India faced was the limited infrastructure available to
get the goods to consumers.
In India, less than 12% of people uses plastic cards ie. credit or debit cards, so Amazon has had
to adapt to a "Cash on Delivery" model, which isn't yet available in all the areas. There is no
shortage of goods produced by Indians, but most vendors in the country are small. Three years
ago, relatively few retailers there sold their products online because they believed e-commerce to
be too complex and time consuming And India's cash economy did not facilitate online
transactions
SWOT ANALYSIS
AMAZON STRENGTHS
Consumers’ familiarity with both Amazon’s logo and name attests to the company’s excellent
brand recognition and reputation. The company’s history in the market and successful
advertising campaigns are both contributing factors to its current position of dominance. Amazon
has established itself as a trusted and reliable brand in the eyes of consumers through its
customer-centric approach, which includes a focus on providing excellent customer service and a
wide range of convenient delivery options. The value of strong brand recognition and reputation
for a company cannot be overstated. When consumers are familiar with a brand and have
positive associations with it, they are more likely to consider purchasing products or services
from that company.
Amazon’s ability to appeal to a broad variety of customers and address the demands of those
customers is a major asset of the company. The company offers a broad variety of products, such
as clothing, books, electronics, household goods, etc. This diverse product offering has played a
significant role in the company’s success, as it has helped the company capture a significant
share of the e-commerce market and remain competitive in the face of changing consumer
preferences and market trends. Amazon’s partnerships and collaborations with other businesses
are the primary reason for the company’s continued success in providing such a wide selection of
products. The company has formed partnerships with numerous brands and manufacturers,
which allows it to offer a wide range of products to its customers. Amazon has also leveraged its
technology and data capabilities to identify and respond to changing consumer preferences,
which has allowed the company to adapt its product offerings to meet the needs of its customers.
This combination of partnerships and data-driven decision-making has helped Amazon remain a
leader in the e-commerce industry and maintain its diverse product offering.
4. Cutting-edge technology
One of the key ways that Amazon has leveraged cutting-edge technology is through its use of
data analytics and artificial intelligence (AI). The company has invested heavily in data analytics
and AI to optimize its operations and improve its customer experience. For example, the
company uses data analytics to predict demand and optimize inventory management, as well as
to personalize recommendations and advertisements for customers. The company has also
implemented AI-powered chatbots and virtual assistants to improve customer service and
support.
5. Strong financial performance
Among the top reasons for Amazon’s success is the sheer variety of goods it sells. The
company’s success in the e-commerce sector may be attributed in large part to the breadth of its
product selection, which has allowed it to attract and retain customers from a variety of
demographics. In addition, Amazon’s strong brand recognition and reputation, as well as its
customer-centric approach, have helped the company attract and retain customers. Another factor
that has contributed to Amazon’s large customer base is the company’s strong distribution
network, which allows the company to efficiently deliver products to customers all over the
world. This convenience and reliability have helped the company attract and retain customers.
Amazon Weaknesses
Amazon relies on third-party sellers to provide a large portion of its product offerings, which can
create certain risks for the company. One of the main risks associated with this reliance is the
potential for fraud or low-quality products to be sold on the platform. If customers have negative
experiences with these products, it could damage Amazon’s reputation and lead to lost sales.
Additionally, Amazon’s reliance on third-party sellers can also create challenges in terms of
product control and customer satisfaction. While Amazon sets certain guidelines for sellers, it
does not have complete control over the products that are sold on its platform. This can lead to
issues with product quality, availability, and delivery, which can impact the customer experience.
Ensuring that third-party sellers meet Amazon’s standards and provide high-quality products is
essential to maintaining customer trust and satisfaction.
Ensuring the security of customer data is essential for any company that handles sensitive
information, and Amazon is no exception. The company handles a large amount of customer
data, including personal and financial information, which can make it a target for cyberattacks. If
this data were to be compromised, it could lead to significant issues for Amazon and its
customers, including identity theft and financial losses.
To address these data security concerns, Amazon has implemented various measures, including
encryption and secure servers, to protect customer data. However, the risk of cyberattacks is
constantly evolving, and Amazon must remain vigilant in its efforts to protect customer data.
Failure to do so could lead to lost customer trust and potentially damaging consequences for the
company.
This lack of uniqueness can make it more difficult for Amazon to differentiate itself from
competitors and maintain its market position. It also means that the company must continually
innovate and evolve its business model to stay ahead of the competition.
4. Regulatory issues
Amazon has faced regulatory scrutiny in various markets, which can create risks and challenges
for the company. Some of the main regulatory issues that Amazon has encountered include
concerns about its business practices and potential antitrust violations. For example, Amazon
has faced criticism for its treatment of third-party sellers on its platform and allegations that it
has used its data to gain an unfair advantage in the marketplace. The company has also been
accused of engaging in anticompetitive practices, such as using its dominance in the online retail
market to squeeze out smaller competitors. These regulatory issues can result in costly legal
battles and damage to the company’s reputation, which can impact its profitability and growth.
Amazon must navigate these regulatory challenges to maintain compliance and avoid negative
consequences.
While Amazon has a large customer base, some customers may be more loyal to specific brands
or products than the Amazon platform itself. This limited customer loyalty can be a weakness for
the company, as it may be more difficult to retain these customers if they have other options
available to them. One potential consequence of limited customer loyalty is that customers may
be more likely to switch to competitors if they feel that they are not receiving the best value or
service from Amazon. This could lead to lost sales and decreased market share for the company.
Additionally, limited customer loyalty may make it more difficult for Amazon to expand into
new markets, as it may face greater competition from established brands that have a stronger
customer base.
As a marketplace, Amazon does not have complete control over the products that are sold on its
platform. While the company sets certain guidelines for third-party sellers, it cannot guarantee
the quality or availability of all products listed on its site. This limited product control can create
challenges for Amazon in terms of customer satisfaction and product safety. For example, if
customers purchase low-quality or defective products from third-party sellers on Amazon, it can
lead to negative reviews and lost sales for the company. Additionally, if products sold on
Amazon do not meet safety standards, it could lead to customer injuries and legal liability for the
company. Ensuring that all products sold on its platform meet quality and safety standards is
essential for Amazon to maintain customer trust and satisfaction.
AMAZON OPPORTUNITIES
Expanding into new markets is a key opportunity for Amazon to increase its customer base and
revenue. This can involve entering new geographic regions, both domestically and
internationally, as well as expanding into new product categories or customer segments
Expanding into new markets can help Amazon diversify its revenue streams and reduce its
dependence on specific markets or products. It also presents the opportunity to capture a larger
share of the overall retail market and increase its competitiveness. To successfully expand into
new markets, Amazon must carefully evaluate the potential risks and rewards of each market and
develop strategies that are tailored to the unique needs and preferences of those customers.
Expanding its physical store presence is an opportunity for Amazon to reach new customers and
create a tangible shopping experience. While the company has a limited number of physical
stores compared to other retailers, it has been experimenting with various formats, such as its
Expanding its physical store presence can also help Amazon better compete with traditional
retailers and capture a larger share of the overall retail market. This can be particularly beneficial
in markets where e-commerce penetration is lower, as it allows Amazon to reach customers who
may not be comfortable shopping online.
To successfully expand its physical store presence, Amazon must carefully evaluate the potential
risks and rewards of each market and develop strategies that are tailored to the unique needs and
preferences of those customers. This may involve adapting its store formats, offering a wide
range of products and services, and leveraging technology to enhance the customer experience
3. Investment in new ventures
Investing in new ventures is an opportunity for Amazon to diversify its revenue streams and
drive growth. This can involve investing in or acquiring companies in complementary industries,
such as cloud computing, advertising, or healthcare, to expand their capabilities and reach.
Investing in new ventures can also allow Amazon to take advantage of emerging trends and
technologies, such as artificial intelligence or the Internet of Things, to create new products and
services. This can help the company stay ahead of the competition and maintain its position as an
industry leader.
One of the main ways that Amazon plans to enter the cryptocurrency market is by offering
cryptocurrency payment options for its products and services. This would allow customers to use
cryptocurrencies, such as Bitcoin and Ethereum, to purchase products on the Amazon platform.
Offering cryptocurrency payment options could help Amazon attract new customers who are
interested in using cryptocurrencies for online payments. It could also help the company capture
a larger share of the e-commerce market as more consumers begin to use cryptocurrencies for
online payments.
5. More acquisitions
1. Intense competition
Amazon faces intense competition from both online and offline retailers like eBay and Walmart,
which can impact its market share and profitability. Competitors can range from small startups to
large, well-established companies, and they can offer similar products and services at
competitive prices. To succeed in this competitive environment, Amazon must continually
innovate and evolve its business model to maintain its competitive advantage and attract
customers.
2. Regulatory issues
Regulatory issues are a potential threat for Amazon, as the company has faced regulatory
scrutiny in various markets. This can create risks and challenges for the company, as it may be
required to make changes to its business practices or pay fines or other penalties. Regulatory
issues can also damage the company’s reputation and impact its ability to operate in certain
markets.
3. Cybersecurity threats
4. Economic recessions
This is a threat to Amazon, as it can impact consumer spending and result in decreased sales and
profitability for the company. During times of economic uncertainty, consumers may be more
hesitant to make non-essential purchases, which could negatively impact Amazon’s sales.
Additionally, economic downturns can also lead to increased competition as companies try to
maintain market share, which could further impact Amazon’s profitability.
5. Natural disasters
Natural disasters, such as hurricanes or earthquakes, can pose a threat to Amazon’s operations
and supply chain. These disasters can disrupt the company’s ability to fulfill orders, as well as
damage its warehouses, transportation networks, and other infrastructure. This can lead to delays
in delivery and customer dissatisfaction, which can impact Amazon’s sales and profitability. To
mitigate this threat, Amazon must have contingency plans in place to handle natural disasters and
ensure that its operations and supply chain are as resilient as possible.
Current asset:
Cash and Cash equivalent 432,307 822,435
Marketable securities 235,793 278,087
Inventories 130,739 174,553
Prepaid expenses and other current assets 71,437 86044
Total current asset 870,276 1,361,129
COST ACCOUNTING
Cost Accounting is the process of recording, classifying and suitable allocation of expenses for
the dedication of the prices of merchandise, offerings & for the presentation of suitability
organized statistics for the cause of steerage of management and control. Cost accounting
consists of the ascertainment of the task settlement, cost of every order system, service or unit as
can be suitable and additionally offers with the cost of distribution, promotion and
manufacturing.
Cost sheet means a statement that is gathered all the expenses and costs related with a
manufacturing process. This is mainly used for collect together the margin of profit earned on a
product and can form the supporting to set price on identical products in future.
Cost sheet also can be used for the support for different cost control techniques and measures. A
cost sheet can be created on paper as well as through computer.
CIMA London defined cost sheet as ‘a statement which provides for the assembly of the
detailed cost of a Centre or a cost unit’
The costs are usually listed in cost sheet by following categories
Direct labour
Direct materials
Administrative overhead
Factory overhead
Direct expenses
Selling and distribution
The costs that are listed on cost sheet include labour cost and actual material cost incurred.
Anyway it is also possible that those costs are only listed in their standard cost. The
development of cost sheet is very important, typically if it is prepared by hand.
The format of the cost sheet is typically a standard one that should be either setup within the
computer accounting system or manually rolled from past reports when the report is printed.
Another purpose of the cost sheet is that it can be used as the support for the quote to a
customer, basically for the production of a custom product. In this situation cost sheet includes
the best prediction of the company’s prediction for the requested product, with the details for
each of the past indicated expense line items.
Cost sheet indicates the breakup of the total cost by each elements like labour, material,
overhead etc.
Cost sheet facilitates the comparison of each costs in different years.
Cost sheet helps the management to fix the selling price.
Cost sheet can act as a guide to the management to formulate the production policy.
It helps the management to have control over the cost of production.
DIRECT MATERIALS
In simple word, it is the material that is used during the production of a product and it can be
directly identified with the product. Other names for the direct material are productive material,
raw stock, store and raw materials. The cost of direct material can be easily fount with the unit of
production.
DIRECT LABOUR
Direct labour is the employees or workers who are directly involved in the production process of
goods. The cost which is assigned to a specific cost center or product is known as direct labour
cost. This includes
The cost of the fringes and wages given to the direct worker or employee.
The cost of the temporary helper who work directly on the production or
manufacturing process.
FACTORY OVERHEAD
Other names for the factory overhead are work overhead and manufacturing overhead. Factory
overhead is the total cost involved in an operation of all manufacturing facility in a production
business that can’t be discovered directly to a product. Factory overhead is usually applies to
direct labour cost and indirect cost. It include all the cost included in production excluding the
cost of raw material..
Example: production supervisor salary, factory rent, depreciation, equipment setup cost, factory
utilities, fringe benefit etc.
It is the costs that are not involved in the production or development of goods or services.
ADMINISTRATION OVERHEAD
Administration overhead is considered as a period cost. It means the benefit of this kind of cost
don’t carry forward into future periods. It is also known as general overhead.
Example: office supplies, sales travel and entertainment, administration travel expenses, salary
and commission, wages etc.
These are the expenses that are normally incurred to enhance the service and sales to the
customer. So normally the expenses like salesman salary, travel expenses, advertisement cost,
commission, banner and billboard, brochure and catalogue, bad debt, showroom expenses, free
gift etc. are included under this.
Distribution expense is the expenses which are sustained for storage and warehousing, making
goods available to delivering to customer and packing of goods that are going to send.
PRIME COST
Prime cost is the cost which is directly assigned to the production of each goods. It is direct cost
which includes the cost of direct material and direct labour in production of goods. The
companies use the prime cost to price their products.
Prime cost is calculated by adding the cost of labour to the cost of raw material that are directly
related to the manufacturing process. The formula for prime cost only takes into account those
variable expenses are directly associated to the production of each goods. The formula for prime
cost is as follows Prime cost = Raw material + Direct labour
WORK COST
Work cost is the aggregate cost of the direct resource involved in performing the work. It can be
also said that sum of all expenses incurred by a contractor during the performance of a contract
or work.
Inventory control
Labour control
Overhead control
Budgetary control
CHAPTER – 3
METHODOLOGY
Research design is the framework of research methods and techniques chosen by a researcher to
conduct a study. The design allows researchers to sharpen the research methods suitable for the
subject matter and set up their studies for success
This project identified problems and practices associated with cost analysis .this organization so
many studies are going on but only few has studied about cost analysis. So I tried to fill this gap
of study beyond my best level. The main problem of the Company is increasing cost of
production. If they are not using effective cost techniques then it will become a huge problem for
the company.
Cost is an important thing for all the company and when it comes to thepower generating
company its important is much higher. In this era of power starving world, the need for the better
performance of power generating company is crucial.
This study is very relevant because it shows the impact of fluctuation of cost on the performance
of the company. The need for reducing the cost of a company is very important and we can’t just
under estimate its impact. If a company wants to perform well, compete successfully and make
good profit, then the company should reduce its cost. High cost incurred means there will be less
profit and lower performance. And low cost incurred means good profit and better performance.
If a company is performing badly and losing the profit then it has to generate more cash. For this
the company and management have to decide, in which area we can reduce the cost. And it
should be done effectively and efficiently. And if the company wants to cut the cost
immediately, they should not cut the expenses that are directly attached to the production
process. Because, sudden reduction of cost of production may leads to bad quality of products
and it will affect the company negatively. So the cost reduction should be planned on some other
cost which are not directly related to the production.
To achieve the high competitive edge, the company needs high performance with less cost. Then
only they can compete successfully against the competitors. Company can overcome the
competitor’s new offers with the help of cost reduction by providing goods and services for a
low price to the customers. In order to cop up with the new technology and changes, the cost
reduction is very important. If the company could not cop up with the new changes in technology
and methods, then the company will be out performed by the competitors.
So it is clear that need for cost analysis and cost reduction is very important for any company. It
will enables the company to perform well, increase the profit and compete successfully against
the competitors.
Cost analysis has a wide scope in the companies operation. The cost incurred by the company
will determine the performance of the company. For a good budgeting program the cost analysis
plays an important role. The manager can fix the price for a product by understanding the cost
incurred for each products. Less cost means good performance and good profit. The study can
help the managers to make changes in their cost structure.
The study helps to identify and classify various cost overheads, which will helps the
management to fix the selling price of products effectively and efficiently.
The study cover the effect of cost control techniques.
Main areas of the study are labor, material, sales and fixed overheads.
RESEARCH METHODOLOGY
The research type used for this project is descriptive in nature. The important data for this report
has been collected from the secondary sources.
The project is mainly focuses on analysis of each cost. For the report the trend analysis has been
used. The data are collected by informal interview and direct observation. The collected data is
analyzed and interpreted.
For this project both primary and secondary data are used. For analysis and interpretation Charts,
Tables and Graphs are used.
SOURCE OF DATA
Secondary data
Secondary Data are the second hand information. It is already available and the same collected
from the existing records.Data collected from secondary sources are.
Because of the restrained information furnished by the Esteem, it was not possible to
have a depth observe.
Due to the compatibility of the facts provided by the company, simplest variances
evaluation has been decided for the study, even though there are different cost analysis
techniques available.
Problem to get crucial corner of the company records due to corporate secrecy.
This study doesn’t clearly show how the company is moving on in this vast world with
large number of competitors.
This study totally depends upon the data given in the yearly reports and recorded
information and all the audited financial report statement of the company.
CHAPTER 4
ANALYSIS AND INTERPRETATION
PRIME COST
195000
190000
185000
175000
170000
165000
160000
2019-20 2020-21 2021-22
INTERPRETATION :
In prime cost ,In the year 2019-20 , the total prime cost was 1,73,000 and in 2020-21 it
got increased to 1,92,000 because company decreased production capacity
And in 2021-22 the cost got deceases to 1,90,000 due to company production capacity
was low. But it is more better than the first year that is 1,73,00
WORK COST \ FACTORY COST FOR THREE YEARS
FACTORY COST
240000
235000
230000
225000
220000
FACTORY COST COST
215000
210000
205000
200000
195000
190000
2019-20 2020-21 2021-22
INTERPRETATION :
In work cost or the factory cost, we can see the graph increasing that means the
production or the profit has been increased year by year. In 2019-20 the factory cost was
low 2,08,000 due to starting of the year and there is the sudden increase in the year
2020-21 that is 2,31,250 and in the year 2021-22 it got even more better so the growth
of the company is good .
COST OF PRODUCTION FOR THREE YEARS
COST OF PRODUCTION
30000
25000
20000
10000
5000
0
2019-20 2020-21 2021-22
INTERPRETATION :
In cost of production , in the year 2019-20 the cost of the production is 26,600 it has
good cost in the starting itself . and in the 2020-21 the cost has been decreased to the
20,700 because of the low capacity and low production level and finally in the year
2021-22 the cost of production was 18000. In cost of production the company was
undergoing through loss
SALES FOR THREE YEARS
SALES
2500000
2000000
1500000
SALES COST
1000000
500000
0
2019-20 2020-21 2021-22
INTERPRETATION :
In the above table , the cost of sales in the year 2019-20 is 15,00,000 and the year
2020-21 the sales decreases to 9,00,000 due to the low production and in the year
2021-22 the cost of sales has been totally increased with 20,00,000 more over is also
due to more production and more capacity . So in the cost of sales we can see that in
every year there is no proper consistency .
PROFIT FOR THREE YEARS
PROFIT COST
1800000
1600000
1400000
1200000
800000
600000
400000
200000
0
2019-20 2020-21 2021-22
INTERPRETATION :
In the above table , the cost of sales in the year 2019-20 is 10,92,400 and the year
2020-21 the sales decreases to 4,56,050 due to the low production and in the year
2021-22 the cost of sales has been totally increased with 15,55,220 , more over it is
also due to more production level and more capacity . So in the cost of sales we can
see that in every year there is no proper consistency .
CHAPTER - 5
FINDINGS
The range of articles of amazon can be differentiated into products and services.
Amazon offers trade products and also own product.
The offer of services also contains mediation platforms.
A change from pure provider to developer of entertainment services has taken place in
the entertainment area.
The market for IT-S ervices has experienced a large increase, where could service play an
important role.
Nowdays the first product category “book” is expanded by several additional services.
With the takeover of several logistic services, amazon enters the ,market of the transport
and logistic industry.
With “amazon prime” the company succeeded to a unique selling point on the market.
Amazon want to be the biggest collector of data in the world.
From retailing to data space provider.
Optimizing the sales through delivery and storage services.
Maximum software backup to handle the big data.
Artificial intelligence in our homes.
Description is the main strategy of amazon.
Growth is the basic of amazon strategy .
Amazon is one of the biggest services provider.
Acquisition are necessary to complete, to improve and to acquire new knowledge.
Growth achieved through customers, disruption, acquisition, internationalization and
products .
CONCLUSION
However, the company stands at a critical juncture today. Profits have proven to be elusive.
For the longest time Jeff Bezos has argued that focusing on profits would mean giving up on
growth opportunities and is not in the interest of the company. However, this has now changed
with Bezos saying- “This is the right time to focus on the fundamental economics of our
business, even if it means sacrificing growth”. He forecasted that the company will turn an
operating profit in the fourth quarter of 2001 and delivered on that promise. After achieving this,
he has promised to focus more on growth next year, which is likely to result in further losses.
In addition, Amazon has aggressively expanded into new product categories. A snapshot of
Amazon’s different products and services is shown in Figure 2. Many of the products and
services shown here are being offered on a trial basis. Only time will tell if they are profitable.
One problem that analysts have identified is that the growth in the number of customers has
slowed down. One analyst has been quoted as saying- “Everyone who wanted to buy a book
online has already heard of Amazon”. An expert within Amazon has come up with this solution-
“Amazon should increase its holdings of best sellers and stop holding slow-selling titles”55. He
sees this as the way to reduce costs and move towards profitability. However, this has not been a
popular view within Amazon.
Perhaps, the most significant new development has been the entry of Amazon into web services
on July 16, 2002. The company has now allows developers to incorporate content and features
from Amazon’s site into their own. For instance, with this new service, it will be possible to
search Amazon’s database from a third-party site. Jeff Because dubbed this a “welcome mat for
developers” and developer groups greeted this positively.
The company has attracted a $100 million investment from America Online fueling speculation
that this may be the first step towards a merger56. Moreover, there is some sentiment that the
long-term future of the company may be as a technology provider. This is really based on the
alliance with Toys R Us where Amazon runs the online storefront and Toys R Us controls
inventory and logistics.
The future of the company is unwritten and will prove to be as its past
Websites :
.https://www.amazon.in
.https://s2.q4cdn.com
.https://www.wsj.com
.https://www.scribd.com
.https://www.goodreads.com