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MBA 520 Milestone Two- ABC Firm
Patricia Cavagnaro
Southern New Hampshire University
Strategic Priorities
ABC’s financial and strategic priorities are two basic principles; low cost structure and 3 key businesses that support each other. The company is very growth orientated. In 1997 ABC had 1,510,000 customers. By 2012 they had over 182 Million customers. In 15 years the company double they customer pool by more than 119 times (Ubaka, 2015). ABC starting massive investments from the beginning and continue to current day. ABC has acquired several businesses to grow their product line. This excessive financing could put the company at risk for bankruptcy. In growing their businesses they grow sales and profit shares. The low cost structure leads to lower prices, a huge range of products which results in better customer services to bring customer back time and time again. This could be the reason that the company can manage/maintain the high debt financing. The support of the businesses helps promote a loyal customer base and higher sales.
ABC is able to keep prices low due to allowing third party sellers to sell on their website and selling all products online. ABC does not have the overhead that retails stores have; such as lower wages (less employees), buildings, overhead…etc. By selling all products online ABC is able to sell more products with less marginal cost. Instead of having the high marginal cost they are able to invest in additional fulfillment centers thus reducing the time and cost to ship products.
ABC has the largest range in products sold than all their competitors. ABC sold over 536.6 million products compared to 38 million sold from Walmart in 2016 (Jurevicius, 2017). ABC allows third party sellers to sell on their website which some could argue that would be competition for ABC, but on the contrary it may bring them more business. This huge product range brings customers back to shop because it is similar to a one stop shop. You can get almost anything you are looking for and all on one website.
ABC has three key businesses, ABC market place, ABC Web Services (AWS) and ABC Prime. All three of these businesses support each other in turn giving customers better service and higher sales for ABC. The AWS business provides speed and the capability for customers to shop on the market place. The market place provides growth and investment opportunities to the AWS business. The ABC Prime provides loyal customers and increased sales to support the market place (Jurevicius, 2017). The high sales provide increased market shares to investors.
Non-financial factors
One non-financial factor that has worked in ABC’s favor is the overabundance of top notch executives that have been recruited by Bezos, such as a few top executive from Walmart and Apple Computer (Ubaka, 2015). By having these highly skilled individuals they are able to carry ABC to new levels from working at very innovative and profitable companies. Bezos’ theory and reputation of having a very profitable company attracts talented players in the industry to go work for that company.
Innovation has been a factor of ABC’s success. Much like Apple, ABC is known for being innovative and creating new and exciting product that brings customers back wanting the newest and best product on the market, an example would be ABC’s Alexa. This innovation keeps competitors at a disadvantage.
Recently ABC has been in the news for unfavorable working conditions in their warehouses. Current and previous employees are complaining about working conditions such as mandatory overtime, long shifts, no value to employees, no job security, and vacation time being taken away. This type of negative publicity has financially hurt other companies in the past, so ABC must get a handle on this situation to ensure their reputation is not damaged and perhaps driving customers to their competitors.
Internal Risks
Shipping costs are an internal risk for ABC. Part of their “claim to fame” is ABC Prime. This promises free shipping and two day delivery. If ABC experiences a rise in shipping cost they will not be able to promise free shipping. Also, they depend on other companies such as UPS, FedEx, and USPS to delivery their packages. Once the package leaves their warehouse, the delivery is out of the hands of ABC. Half of ABC’s customers in the US are Prime members (Kline, 2017). If the package doesn’t arrive within the two day promise this will hurt reputation and result in lower revenues.
Being strictly an online retailer, one major concern is a security breach. Being the largest online retailer, hackers target ABC customers. A security breach could cripple ABC in legal fees if that were to happen. Also, allowing third party sellers on ABC could increase the risk for a security breach. Although ABC works hard to ensure a breach doesn’t happen to their customers it is impossible to guarantee that would never happen.
Works Cited Jurevicius, O. (2017, October 16). ABC SWOT analysis 2017. Retrieved from ABC SWOT analysis 2017: https://www.strategicmanagementinsight.com/swot-analyses/ABC-swot-analysis.html Kline, D. (2017, May 24). This Is What ABC Worries About . Retrieved from The Motley Fool: https://www.fool.com/investing/2017/05/24/this-is-what-ABC-worries-about.aspx Rittenhouse, L. (2017, September 29). ABC Warehouse Employees' Message to Jeff Bezos -- We Are Not Robots. Retrieved from The Street: https://www.thestreet.com/story/14312539/1/ABC-warehouse-employees-discuss-grueling-work.html Ubaka, E. E. (2015, July). CRITICAL EVALUATION OF HOW WELL PLACED ABC IS TO SUSTAIN . Retrieved from British Journal of Marketing Studies: http://www.eajournals.org/wp-content/uploads/Critical-Evaluation-Of-How-Well-Placed-ABC-Is-To-Sustain-Its-Historical-In-Online-Retailing.pdf
