Case Study: Amazon Essay

1601 Words Jan 18th, 2013 7 Pages
Case study : Amazon

1. What is the business model for Amazon.com? How does their business model differ from that of Barnes and Noble or Borders? How would you value Amazon.com?

Amazon is a relatively small player in the bookstore industry, and its main competitors are Barnes & Noble and Borders. Despite the difference in scale, the company shows great promise, because its business model overcomes many of the competitors’ drawbacks.

Amazon operates using a web-based platform to sell books. The web-based model targets a global market, has reduced overhead costs and a shorter operating cycle as compared to brick and mortar businesses such as Barnes & Noble and Borders. Amazon’s online model has a superior inventory
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Going public can be a good opportunity for Amazon. The first consequence for the firm would be an increase of capital. Even though Amazon doesn’t need extra cash at the time of the IPO, additional capital would help its long term plans by facilitating its expansion and sustaining its growth. Later, the company will more easily access capital markets, in more advantageous terms, for future financing needs.

Another advantage of the IPO is that it will give a nominal value to Amazon company, based on rational market theory dynamics. Amazon’s valuation is very hard to determine while it remains private, as its business model is unique.

Unquestionably, the biggest advantage of an IPO is to increase the awareness of the firm. The company will gain public recognition and a better brand image, which is one of the key drivers of the company’s future success as it attempts to develop its customer base.
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On the other hand, the bearish market surrounding technology IPOs is obviously a downside for Amazon, as skiddish investors have pushed down the entry price on several recent listings. Furthermore, the decision to go public will have huge consequences on the firm. Indeed, going public is a very expensive process and bears the risk of the offering not succeeding. In 1997, the market began to soften regarding e-commerce. The downward trend raises the question whether this is the good timing for an IPO, as Amazon’s potential public valuation relies on investor

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