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Investment Analysis Report: Amazon versus eBay - Research Paper Example

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Investment Analysis Report: Amazon versus eBay

This report analyzes the micro- and macro-level factors that will determine which firm is the most viable for investment opportunity. Company Backgrounds Since the time of its initial public offering, Amazon.com has evolved from primarily an online book and music seller to an extremely diversified business that now offers a broad range of products and services to business and consumer segment buyers. In 1997, Amazon had achieved significant consumer interest in online shopping for over 1.5 million books that revolutionized the process of ordering products online. This led to an initial public offering at a stock price of $18, which in a single day of trading jumped to $30 per share due to the high investor confidence in the firm’s cash flow, intentions for improving the online sales model, and consumer sentiment about the evolving online shopping environment. After receiving considerable capital growth from the IPO, which equated to $900 million on 30 million shares initially released, the company was now equipped to build new distribution facilities, expand its marketing presence, and allow the company to acquire established book-sellers such as Telebook, Bookpages and The Internet Movie Database (Advameg, 2013). These acquisitions expanded the company’s international presence and allowed the company to establish barriers to new market entrants in the online book sales industry by essentially monopolizing the sales environment. By 2002, the company was boasting a whopping $3.9 billion in sales, though the firm was unable (in 2002) to reduce its high costs of operations which led to reporting of negative net income between 1998 and 2002, which worried investors about the future of the company. Between 2000 and 2004, Amazon.com expanded its offerings to include partnered sellers that were allowed to promote and sell non-book merchandise on the Amazon.com website. This allowed Amazon to expand not only its brand presence, but also get consumers familiar with the perception that Amazon was a leader in not only books, but in technology, customer service, music and video. Opening the doors for a new distribution channel through third-party sales significantly improved its revenue production capabilities, allowing the company to recuperate initial losses while the business was developing its more diversified business model. Today, Amazon provides cloud computing, a wholly self-managed opportunity for customers to use innovative software packages without having to invest in these systems independently. Cloud computing is giving customers access to shared technologies and server storage, an on-demand network of computing resources (Kundra, 2011, p.4). This opened the doors for Amazon.com to cater to not only the consumer segment, but business professionals that had neither the resources nor talents to develop their own information technology architecture. Other diversified services as a product of aggressive innovation and research and development talent internally include the Kindle Direct Publishing business unit, allowing inspired musicians, authors and application developers to market their products using Amazon.com as a platform (Yahoo! Finance, 2013). Coupled with its countless millions of diverse consumer-centric products ranging from home decor to video services, Amazon is now established as a company with considerable brand loyalty in ...Show more

Summary

Before making an investment recommendation, it is necessary to examine the stock performance of both businesses, gain insight into recent events occurring within the business model of both firms, consider an in-depth analysis of the financial position of the firms, and fully understand the company backgrounds and their products and services…
Author : langworthleora
Investment Analysis Report: Amazon versus eBay essay example
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