Zappos-Amazon Acquisition

amazons acquisition of Zappos Acquisition regarding amazon and Zappos Companies that want to be among the elite competitors in their particular fields build to be able to adapt and evolve in an eer ever- changing merchandise place. In rewrite to do so legion(predicate) a(prenominal) another(prenominal) ample companies initiate mergers or acquisitions with smaller or similarly sized companies. They remember they can supplement and collaborate with for distributively maven other in recite to create more than union survey.The main difference between a merger and an acquisition is a merger is a situation in which two firms agree to building blocke as iodin single play along rather than remain two separately operating firms owned by one company. The firms ar usually the same size, and both companies stocks be surrendered creating bran- crude company stock issued in its place. An acquisition is when one company solely buys step forward the change companies st ock and holds itself the new owner of the company. juristicly the selling company still exists as an independent juristic entity, tho general control is in the hands of the p bent company.In July 2009 CEO of Zappos, Tony Hsieht made the announcement of viragos acquiring of Zappos. In a lengthy email Tony eloquently explains the future day of Zappos and what pull up stakes take place in the penny-pinching future at Zappos. Throughout viragos reign as online shopping powerhouse, they have been consistent in one of the most substantial aspects starting and developing as a long-term contender in the online shopping world. amazon has adapted and involved in the always changing grocerys by expanding market look at through acquisitions.In 1998 amazon expanded itself into new markets with three chance on acquisitions. Two of the acquired companies, Bookpages and Telebook, were bought to expand amazons market share into Europe and the third acquisition, The Inter mesh Movie Database (IMD), was bought to expand amazon into a new developing market of online video sales. amazon has always stressed customer helper and customer ease as a main objective throughout their development. Zappos is a company cognise to be a customer profit company since its inception.In fact, Tony Hsieh stated in a Harvard business review article that he does not think of Zappos as a garment company, but rather a customer service company. On the surface this acquisition provemed equivalent a good cope with for both parties, but the reality of high failure rates of acquisitions signifies in that respect are many things to think about when ascertaining acquiring a company. Our squad will give a brief outline on pre-acquisition action mechanism inwardly both companies, analysis of the acquisition itself, and give an e genuinelywhereview of the success or failure of the acquisition.The discern aspects to consider in this acquisition are as follows the unreservedst an d most underestimated factor is what are the specific goals of each company in regards to a attainable acquisition, can the two separate companies efficaciously supplement each others military postures to create a greater company harbor, and do these two companies align with one another in order to carry out their objectives and grow long-term. A History Of Zappos Zappos is an online selling shoe company founded in 1999 by Nick Swinmurn, Alfred Lin, and Tony Hsieh.The companys key concept is that they are in the customer service business, not a shoe company. Customer service is Zappos main asset. They do everything a lesser bit differently than any other company. Tony Hsieh encourages company tillage which is the meat of the company allowing them to be so successful. Before the acquisition, Zappos CEO Tony Hsieh had to make trusted that the company will remain unchanged. Many battalion thought it would be end of Zappos and their culture later amazon bought them. amazon took over Zappos, but allowed them to run separately, keeping their company name and culture.Zapposs goal for the future is to deliver merriment to their customers and acquisition by amazon allowing them to leverage each others strengths. Now with the merger Zappos has much repair bills flow than before. Now they can refund peoples belief cards much smart than they could before and improve their customer service even more. With the acquisition they also gained lot of interpret from senior render of Amazon and vice versa. Prior to the acquisition, Zappos had to discuss their independence with Amazon.Zappos tried to catch ones breath unchanged by the acquisition as much as possible while keeping all the benefits from the acquisition as long as they could. Zappos had big plans before the acquisition, and now with Amazon they are still instruction on their goals, but with resources from Amazon they can achieve them much immediate. Zappos net sales in the first quarter of 20 10 were almost 50% high than the same quarter of the previous year. To ensure Zappos can grow at this fast pace they had to hire the right people. Zapposs way to make sure that their employees really want to work at the firm is sort of nontraditional. subsequently few weeks of training they offer their trainees money to leave. This price constantly raises and after the acquisition it was at $3000 not to take the job. Zappos didnt change instanter after the acquisition, but now few years later we see some changes happening, but Zappos still keeps their culture untouched. The biggest change that happened in Zappos was handing over their Kentucky warehouse to Amazon. Tony Hsieh explained it as necessary instill due to legal obligations. Zappos employees in Kentucky had to be transformed under Amazon with all their benefits changing.Usually during acquisition many people will get laid off due to dexterity for both firms. Zappos has actually grown since the acquisition and no one b affled their job as a result of it. It was a risky move for Tony Hsieh, because in one interview he admitted that Amazon can technically sell Zappos at any time. Some of their agreement works on mutual trust and so far it works for both Amazon and Zappos. A History of Amazon Amazon. com Inc. sells unsloped about everything, and lots of it. What drives Amazon is the desire to enhance the consumer experience, whether its shipping or increase availability or price.Over the quondam(prenominal) decade, Amazon has moved from strictly retail to both selling goods and then executing the orders, for itself and for third parties. Amazon, as much as people like to think of it as an e-commerce provider, is becoming a direct-to-consumer fulfillment company. How did Amazon become so successful so quickly? Strategy commit in the right plans at the right time and staying the course. Amazon embraced what is known as a design drill model of strategy development. patronage the title, the model is simple to understand and can be highly effective.It is the one used most by professors and consulting boldnesss. Organizations often struggle in finding a compelling rivalrous position. Successful organization can bring down to drift away and total fail at what it takes to be successful. This shot can begin to help an organization get into the game. The design school model calls for both external and internal appraisals. An external appraisal helps an organization to understand threats and opportunities that are out there in the market. The internal judgement helps the organization to understand its strengths and weaknesses. The Strengths, Weaknesses, Opportunities andThreats (SWOT) tool is one that most people are familiar with and stems from the design school model. Amazon conducted the external analysis apply the following analysis frameworks PESTEL Analysis, Industry and Competitor Analysis, Competitor Analysis, Global net income Trends and GE Matrix. The PESTEL framew ork helped Amazon to identify trends that could impact them in sestet key areas (P) Political factors areas to focus on embarrass political direction, taxes, mess restrictions. (E) Economic factors admits GDP, inflation, interest rates, exchange rates and other macro and micro economic factors. S) Social factors includes social trends, population growth rate, age distribution, course expectations, etc. (T) Technology factors includes equipment, information technology, RD. (E) Environmental factors Includes weather and climate. (L) Legal factors include health, safety, employment, discrimination, consumer and antitrust laws. Political, economic, social, technological progress indicates an increasing and attractive market? to be exploited by Amazon. com. The external appraisal includes Amazon sounding at its matched position to determine opportunities and risks and where it should focus.To do this, they used ushers 5-force tool that helped them to understand the strengths and weakness of its competitive position, and where they might consider moving forward. The competitive rivalry amongst the e-retailing industry is intense. From some of the mammothst to the smallest companies, dotcom businesses are abundant, reservation? competition intense. Amazon. com competes directly with big firms such as Barnes and? Noble and Ebay. In simplest terms, the model looks assumes there are five important forces that determine competitive power. Amazon has hundreds of competitors.The challenge is what ones to focus on. They focused on large-scale cyberspace retailers that offer a broad range of point of intersections. This exercise helped Amazon to violate understand who their competition is. Ebay and Wal-Mart are examples. Global mesh Trends The Internet is Amazons key channel. The 20 top countries in Internet usage, and grow patterns were set. A GE Matrix has been used to identify the attractiveness and competitive position of the? markets that Amazon. com oper ates in. GE Matrix This is a matrix used to silver screen portfolios of business units.Both the attractiveness of the industry and the strength of each business unit within the industry are plotted. Industry attractiveness is determined by the following factors Growth rate, Size, Demand, Competition, Profitability and Global opportunities. Business unit strength is determined by Market share, Market share growth, Brand, Distribution channels, issue message and Profit margin comparisons. Knowing, constructing, and fully leverage strengths in the scoop out manner possible is an important key to creating long-term competitive advantage.Amazon is a great, leading-edge company that has successfully developed and implemented compelling strategies that we can call for from. Most large organizations conduct strategic planning, but in many cases real strategy and planning are missing. Instead too many strategic planning exercises are nothing more than budget placement exercises. Not so with Amazon. Amazon has developed common sense as an organization. Becoming clear as to what will provide you a competitive advantage is paramount. We chase after the hot new industries where the risk is highest. The key is to sustained focus on smart strategies. on that point are three simple tools that Amazon focuses on as part of its internal appraisal process. They include Value Chain, Resources Based View and Financial Analysis. Amazon developed a value chain of itself to internal it can operationally outflank tack on value and maintain a competitive advantage. The value chain analysis undertaken examines the operational dominance of activities that? enable Amazon. com to perform soften than its competitors i. e. the distinctive value chain activities that are difficult to imitate. This analysis focuses on value induction and transaction cost economies where Amazon. om? configures its value chain activities to create unique value for customers, reduce its costs of? carryi ng out these activities and reduce the cost of its customers transactions. Some of Amazons competitive advantages from a value chain perspective include Strong technological infrastructure with a single platform, High garmentments in technology development (e. g. , Kindle) to best leverage digital products, Great product forecasting system, Print on demand, Constantly soliciting suggestions on new products, faint and fast payment system, 24 hour trading operations and Free returns within 30 age.The resource based view helps an organization to determine where to invest in critical resources to have a competitive advantage. The more semiprecious and rare the right resources are in the right places, the more belike the firm may have a long-term advantage over its competition. A firm utilizes its resources and capabilities to create a competitive advantage. The organizations resources and capabilities combined in concert constitute its distinctive competencies. Amazon successfully identified the right resources and developed its capabilities in key target areas.These investments resulted in innovative online retailing technologies, Personalization features for customers on its websites, Reliable and easily scalable IT systems all one platform, New products (100 different products in seven major geographic markets), sort out customer relationship system, State of the art warehousing, New products (100 different products in seven major geographic markets). Gearing, Debt and Capital Structure Amazons investments are paying off. Their net sales continue to grow, their cost of goods decreases as a % of sales and their net income continues to increase.And, they continue to invest in initiatives that provide them a longer-term competitive advantage. Goals The acquisition of Zappos by Amazon is equally near in the long run for the two companies. Zappos goals after the acquisition are mainly focused on its own growth internally and externally. As their own indepen dent firm they want to pursue their fantasy of delivering happiness to customers, employees, and vendors and now they will be able to get their much faster.Amazon has the capacity to help them grow at a pace they would not be able to by themselves. Zappos is going to remain its own independent entity and it will be run by the same owners the way they see fit. This is estimable because one of Zappos best qualities is its unique culture and nock. Financially, Zappos treasured a shareholder and partner that thinks long term and will also do what is best for their existing shareholders. Amazons goals for Zappos are very similar to what Zappos themselves want. They like Zappos because they have a lot of growth potential.Zappos is very popular, however they are not as large nor do they have the capacity for shipping, storage, or personnel that Amazon does and they want to leverage their capabilities to help Zappos grow. Amazon wants to leverage the intangible assets that Zappos posse sses the people and the culture of the company. The Culture of Zappos is one of its best qualities that no other company can easily replicate working together the companies can share and learn from one another to improve the body of work culture in both companies.Customer service is what Zappos hangs its hat on and Amazon can learn from them about their policies and even help them to provide better service. Metrics It will take some time for Amazon and Zappos to be able to measure the effectiveness of the acquisition mainly because both firms mark the long term. The main focus for both sides is to grow the Zappos brand and their effectiveness in their goal to help customers. Zappos should see increased sales, more economic distribution, and faster response times when customers have issues. Methods Aligning the two companies and leveraging each companys strengths to better each other.Amazon has resources, technology, and operational experience that Zappos does not. Zappos can leve rage all of these to make their own operations faster and more efficient by bringing people in from Amazon and learning from them. Amazons improved technology will help Zappos fill orders faster and improve logistics. Zappos has a very large distribution center in Kentucky fairly close to the UPS shipping hub. Amazon now has a very important strategic advantage with inlet. They can now move product faster and easier making their own distribution faster and less expensive.Post- Acquisition Turnout On Wednesday, July 22nd, 2009, Tony Hsieh, the CEO of Zappos. com, emailed all of his employees to share the great newsworthiness of their acquisition with Amazon. His board approved and signed a definitive agreement, in which all of the existing shareholders and investors of Zappos will be exchanging their Zappos stock for Amazon stock. After the exchange took place, Amazon became the sole shareholder of Zappos stock. Post-acquisition, Zappos continued to run their operations the same, d oing what they believe is best for their brand, their culture, and their business.By leveraging each others strengths, Zappos reached their pot even fasterdelivering happiness to customers, employees, and vendors. By merging with Amazon, Zappos was able to cannonball along the growth of their brand and culture. Amazon supports Zappos in continuing to grow their vision as an independent entity, under the Zappos brand with their unique culture. Hsieh also reorient his company with a shareholder and partner that think long term, just like Zappos. Zappos continued to run as an independent entity. In legal terminology, they became a wholly-owned subsidiary of Amazon.Therefore, all of their jobs were as secure as they were pre-acquisition. The Zappos brand continued to be separate from the Amazon brand. Although they now have access to many of Amazons resources, they continued to build their brand and their culture just as they always have. Zappos has continued to grow their headquarte rs out of Las Vegas, attracting the right talent for each of their departments. After acquiring Zappos, Amazon has seen more profitability, more market share, greater growth and revenue, and most importantly, a better brand image.By encompassing the unique customer service aspect of Zappos, Amazon has become one of, if not the biggest, online company. Amazon has seen substantial growth in net revenue since acquiring Zappos in 2009. Online business is a festering industrythe percentage of households with at least one computer has done for(p) up from 64% in 2004 to 87% present day. In 2009, Amazons revenue was $24. 5 billion. This past year, they finished with total revenue of $61. 09 billion. In 2009, Amazons cost of goods sold was $18. 97 billion. This past year, it has grown to $45. 97 billion, a growth of $27 billion in just three years.In 2009, before the acquisition of Zappos, Amazons raw profit was $5. 5 billion. Three years later, it has escalated to a staggering $15. 1 bil lion. Although debt as a percent of total capital increased at Amazon. com Inc. over the last fiscal year to 34. 87%, it is still in-line with the Internet and Catalog Retail industrys norm. Additionally, even though there are not enough liquid assets to satisfy current obligations, operating profits are more than adequate to service the debt. Accounts Receivable is typical for the industry, with 17. 78 days worth of sales outstanding.Last, inventory levels, relative to its Cost of Goods Sold, are typical for the industry and have shown a consistent decrease during the last 4 years. This implies that management is becoming more efficient. Amazons acquisition of Zappos was clearly a smart move on both ends. Zappos and its employees were compensated fairly, and Amazon has seen a steady increase on the balance sheet and income statement. There is no limit to Amazons potential, now that they have acquired the staggering and unique company that is Zappos. Closing Remarks It is clear f rom our analysis that Amazons acquisition of Zappos is a good fit for both parties.Each companys goals of the acquisition were made clear through pre-acquisition negotiations. Zappos wanted to expand their operations through the use of Amazons large market share and also be able to use Amazons large array of assets to create a better costumer experience. Amazon wanted to learn the intangible and effective costumer service methods that have be to be Zappos competitive edge. So far, each company has been able to effectively leverage each others strengths to achieve their goals. Furthermore, these companies align with each other in moving forward to achieve long-term growth.