Strengths

Amazon constructed an expansive supply chain and logistical platform for warehouse,
fulfillment centers, carriers, and shipping. It is in a position to provide quick shipping to clients
throughout its worldwide operations. Moreover, the company extends its distributional
advantages by providing Fulfilment by Amazon services to third-party suppliers.

Also, the firm is famous for having a wide range of products that are sold at relatively lower
prices. The company offers very cheap goods ranging from grocery items to clothes that
undercut most of its brick-and-mortar competitors including those in cloud computing services.
Scale of Amazon means that its bargaining power vis-à-vis vendors and suppliers is substantial
such that savings are passed onto customers who in turn tend to be loyal.

Along with affordable products, Amazon also created a branded customer culture for its
costumers. Customers, with particular reference for Amazon prime members have a strong faith
with this brand due to trustworthiness, pricing, products assessment through reviews among
other factors that contribute to reliable deliveries from Amazon.

Lastly, innovation is one of the key aspects of Amazon’s culture. There are many instances
including Amazon web services offer online cloud computing services as a new trend, Kindle is
the world changing device in E-readers and E-books, warehouse robotics lead to improved
operational efficiency of operations, there are also check out free convenience stores known as
Amazon Go and acquis

Weaknesses

Some vulnerabilities are also associated with its global level of operation. Technology and
automated systems are crucial for Amazon. Sales may be significantly affected by prolonged
downtime of websites, server problems, and severe software glitches. The inherent redundancies
of most enterprise systems only cover so much, though.

There are occasional capacity constraints associated with fulfilment centres, storage space and
even available freight for shipping that may result in intermittent lapses in Amazon’s ability to
match up to customer expectations regarding delivery timelines. These are usually temporary but
still erode goodwill during holiday peak seasons for example.

Opportunities
Global expansion initiatives provide windows into booming e-commerce spaces such as India
and Middle East. Strong foundations include localization efforts around culture, channel
partners, payment methods and inventory tailored to each country. Consumers demand both
world class products and homegrown offers.

The use of personalization algorithms using search history, purchase history and browsing
patterns have been the hallmark of amazon. Additional investment into the predictive analytics
utilizing AI and machine learning models should fine tune recommendations that keeps
customers engaged across Amazon’s retail and media range.

Amazon seeks for adjacent growth in high growth industries such as cloud computing and other
related areas of e-commerce. They make Amazon expand as far it can go as it keeps its
technology, operations and innovations sharp.

Threats

Traditional retail giants are moving onto e-space and competition for larger share of the “bigger
retail cake” is heating up. Today, mass market leaders such as Walmart and Target give discount
prices, a large variety of products, and even curbside pickup or shipped directly at homes on
ordered online items. Some nichers attack also by focusing like, for instance, in Hardware (Niche
Retailers).

Other potential threats include increasing regulatory oversight. Consequently, due to Amazon’s
massive size and influence in just about every sector, it is possible that antitrust regulations will
be implemented to stimulate more competition. Others have demanded more worker protections
and unionization efforts in Amazon’s extreme warehousing operations. The implementation of
any regulation adds operation and compliance cost of risk.
Margins

Gross Profit Margin

Gross profit margin for amazon has hovered around 12 – 13% throughout 2020 to 22. The
gradual improvements (2020: COGS as a percentage of net sales for the periods 2020, 2021, and
2022, that is, (12.54%,12.24%,13.17%) indicate Amazon’s operational excellence in holding
down COGS as a percentage of revenue is 6 – 41% in absolute dollars.

These healthy, gross margin levels are made possible by several factors. First and foremost, the
huge scale of Amazon enables it to negotiate with the vendors and suppliers and as such receives
the discounts or rebates that go down directly to the retail bottom line. The second cost saving
component that will be considered is the efficient logistics and distribution infrastructure that
lowers inbound/outbound shipping and handling costs as part of COGS. Finally, efficient stock
management involves keeping appropriate product inventories that support forecasted sales and
minimize wastage. This, therefore, increases net profit for a company as the costs are not
reflected in every sale a company makes. Lastly, it is worth mentioning that in diversifying the
non-retail core revenue streams like cloud computing services or even food delivery, Amazon
expands its revenue bases yet does not proportionately increase its COGS – thereby increasing
revenues to margins ratio.

As Amazon keeps COGS low and maintains higher-margin revenue streams, this should keep
gross profitability strong. When relative cost of goods sold starts going up due to the rising costs
of materials, energy and transporting, this can severely reduce profit margins. However, costs
pressures from external sources are absorbed by Amazon’s supply chain efficiencies and scale
effects.

Current Ratio & Quick Ratio

The decrease over three years of the current ratio was from 1.15 to 1.04 in 2020 to 2022
respectively. Meanwhile the quick ratio shows a similar downward slope - 2020: 0.83, 2021:
0.86, 2022: 0.67.
Lower growth of liquid assets, compared with that of current liabilities, explains why the
decreasing trend is moderate. For example, accounts payable increased by slightly more than
half, while accrued expenses expanded even faster. Moreover, both of these factors surpassed
current assets, which experienced a 27% increase for the period under consideration.

This is in line with strategic steps taken by Amazon to exploit their excess cash flow as well as
enhance their power bargains over vendor payment terms. Secondly, in terms of risk tolerance, it
is also high as Amazon can still service its current debt level in relation to other ratios. This
leaves healthy buffers for cash without piling up idle capitals.

Going forward, if operating cash flows remain strong (cash flow increased by a striking 49% in
the period from 2020 to 2022), and debt positions stay moderate, the overall liquidity picture
looks adequate relative to the rapid development of amazon. Inventory levels contributing to
current assets would also offer an upside buffer, if at all necessary.

Earnings Per Share

Revenues from 2020 to 2022 are $127.58(m) $116,444(m) $108,518(m)

Amazon’s core business benefited greatly in 2021 with sales exploding as consumers flocked to
online shopping due to coronavirus. Additionally, some growing areas like cloud computing
contributed to lift overall profit levels across the organization.

However, there are other forces that impacted on earnings per share for the year ended 2022. The
excess capacity had been accumulated in relation to warehouse facilities and transportation
channels, making them overhead costs that were not matched by the 2021 volume peaks.
Secondly, hikes in inflation, fuel as well as labor costs cannot be adjusted in products pricing and
supply chains immediately leading to tremendous price pressure on margins. Other geopolitics
challenges like the Russian-Ukrainian war and Chinese zero-COVID strategy were another
factor adding to this problem, with excess supply leading to idleness of some assets. Fall of EPS
demonstrates that cost can be improved.

Inventory Turnover
Amazon had inventory turnover rates ranging between 8-9 times a year until 2020-2022. That
speed guarantees the continuous refreshment in goods flowing through the distribution centers
for the purpose of shipping prompt orders procured from the vendors. As evidenced by a slight
decline from 9.08 times in 2020 to 8.27 times in 2022, this was probably deliberate as it involved
taking into consideration stockout costs and being overly conservative with inventory. Possibly,
in the supply chain crunch issues of transport capacity may have required to holding more
inventory.

The present turnover rates even by industry standards suggests that working capital is applied
effectively. Volatility of demand is supposed to stabilize as pandemic resolves and turnover rate
of firms should stabilize. Other productive operations might have cash released from working
capital practices. A balance of procurement, production and fulfillment should be adjusted
toward the projected demand forecasted for consumers.
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