I have made this document free as I believe you should know how I present my papers and whether they are for you or not. This document is intended for students studying the BTEC Level 3 Extended Diploma and need help on their 1st assignment in Unit 1 - Exploring a Business. The grade received on th...
Assignment 1 of 3: features contributing to
the success of contrasting businesses
Unit 1 – Exploring Business
,Amazon’s background information
Amazon is a multi-billion-dollar company that was founded by its current CEO Jeff Bezos. It
originally started in the year 1994 in Seattle, Washington after Jeff decided to leave his
career as a vice-president of D. E. Shaw &Co. The company was founded in Jeff Bezos’
garage in a home he was renting and was given a $250,000 start-up fee gifted to him by his
parents1.
Originally, Bezos wanted to name his company “Cadabra” but
after discussions with his lawyer who said it linked too closely
with “Cadaver”, he decided to drop it and not be associated with
dead bodies! This was not the only name Bezos wanted to name
his company as he liked the sound of “Relentless” but ultimately
decided on going with the name “Amazon” since he liked the idea
of having his company being named after the longest river in the
world hence why his original logo looked the way it did2. In July
1995, Amazon promoted itself as the “Earth’s Biggest Bookstore” which can also be seen on
its original logo and within its first month of launching, books had already been sold to
people in “all 50 states and in 45 different countries”3.
However, soon after opening the bookstore, Jeff realised a problem and it concerned the
amount of inventory he had to purchase. Book distributers required that all retailers who
purchase from them must buy 10 books at a time instead of buying as many as they wanted.
To overcome this financial loophole, Jeff cleverly discovered that you only need to order ten
but not receive them all so he would order one book he wanted and then ordered nine
others that were always out of stock effectively removing the barrier distributors had
placed. To this day, people still discuss how the “Obscure Lichen book” saved Amazon from
financial ruin a that was the book Bezos purchased that was always out of stock.
On May 15th, 1997, Amazon held its initial public offering of stock and went for $18 per
share on the 2nd largest stock exchange in the US being NASDAQ with a symbol name AMZN.
Although Amazon was a rapidly growing company, it struggled in the late 90’s and early
2000’s as facilities would shut down for hours cutting production, massive numbers of stock
would be untouched by workers and there were extreme danger hazards such as knives not
being in protective cases. In 2001, Amazon was one of the only e-companies to survive the
dot-com bubble burst which destroyed many other companies like Amazon, but they were
able to survive and reaped the rewards of the other companies’ losses and in the fourth
quarter of 2001, Amazon made their first profit with one cent per share which totalled in
revenue of over $1 billion.
,The 2010’s proved to really improve the company’s growth and development by being able
to increase its workforce twenty-six times over in the span of 9 years. Although the core
business point of Amazon was to be an online retailer, Jeff and other major shareholders
decided to branch out to other corners of the market. Examples of this include when in
2014, Amazon purchased the rights to the online streaming platform know as Twitch for
“$970 million” or how they acquired a USA supermarket chain known as “Whole Foods” for
“$13.4 billion”. The interesting thing that Amazon did during its time was that they did not
introduce their own individual companies but rather just bought smaller firms within the
markets they wanted to grow into. Apart from purchasing other companies, Amazon has
also improved and expanded upon their own product range such as the development of the
Amazon Alexa/Echo, Amazon Music, and their own online streaming platform Amazon
Prime.
When comparing the original stock value back in 1995 to now, the difference is enormous.
According to sources4, the average stock price in 1998 for a single Amazon stock was
“$15.6647” and in 2020 it is “$2620.0927” per stock. Furthermore, by looking at its yearly
revenue from 2005-2020 the difference it has achieved is incredible. On the 31 st December
2005, Amazon had made “$8.490B” in revenue over the previous 12 months which is less
than 3% of what it made from its “$347.946B” revenue as of the 1 st of October 20205.
Amazon’s ownership and liability
Amazon is listed as a Public Limited Company (PLC) which is a type of company where they
allow their shares to be openly bought on the stock exchange for the public. In the USA
Amazon is listed on the NASDAQ stock market6 (the 2nd largest in the USA behind the New
York Stock Exchange) and the London Stock Exchange within the UK 7. In a PLC, the buyers
have limited liability therefore if the company crashes or goes bankrupt their personal
assets are not able to be taken away. The ownership of any PLC is mostly found within the
shareholders who hold the greatest number of shares. So even if the original founder of the
company is still an owner, other companies can have more say and influence over the
business if they hold a larger portion of the company’s distributed shares.
The institutional stakeholder who owns the largest amount of Amazon shares is Advisor
Group Inc. who, from July 2020, have “35.4 million shares in Amazon giving them “7.1%” of
all the company’s outstanding shares. This is closely followed by Vanguard Group Inc. who
have a total of the 33.0 million shares giving them 6.6% of all company shares. The largest
individual stakeholder is Jeff Bezos who holds “10.88%”8 of all outstanding shares or “54.5
million shares” within Amazon as of August 2020. The second largest individual stakeholder
of Amazon is Andrew Jassy who owns only “94,797” of the company’s outstanding shares or
“0.01%” of all company shares. It is clear to see that the main owners of Amazon are much
, larger corporations with far more affluence and cash except for Jeff Bezos who has the
largest percentage of shares.
Owners of the business usually do not have direct control in how the business is run but
rather on other issues such as the direction they want the company to go in such as
investing into other markets. Managers of a company are the people who have direct
influence over how the business is run such as the responsibilities over different company
sections like finance or marketing direction. When it comes to the ownership of a company
such as Amazon, there is a distinct line when it comes to the ownership and management of
the company. For example, the Vanguard Group does not have any sort of say in how
Amazon is run and instead suggests ideas on how Amazon can gain future profits. In the
case of Jeff Bezos, he is not only the shareholder who has the most outstanding shares he is
also the head of Amazon’s management since he is the current CEO since the legal structure
of Amazon is based off being an PLC (Public Liability Company) a legal body stands between
company assets and the assets of the stakeholders and the CEO of Amazon meaning if the
company was to ever be sued or file bankruptcy, personal assets are protected since they
are a separate entity from the company.
Amazon Incorporated vs Unincorporated
Many companies are either listed as incorporated or unincorporated and there is a large
difference between the two. Incorporated also referred to as ‘Inc.’ is when a business
separates themselves from the owners and workers of the company. This legal body that
stands in-between the company and its internal stakeholders is a form of protection that
classes the company a separate entity therefore in the scenario the company was to be
sued, only company assets could be taken into consideration and not personal ones.
However, just because a business is incorporated does not mean that it covers all your
liability. For example, if your business is unsuccessful in being able to properly secure a loan
because of limited assets, the bank you are trying to receive a loan from might ask you to
use your personal assets to guarantee security and payment. Incorporated business is
usually very large and have high amounts of annual revenue unlike a sole trader or even a
partnership.
On the other hand, unincorporated businesses are those that do not have a legal body that
protects them from a lawsuit or any other ways to gain personal assets. Therefore, they
have unlimited liability and instead of having a separate identity from the business, the
individual(s) involved are recognised as being part of the company and their assets. Taxation
is also another difference as incorporated business do have the option to postpone their
taxes and usually pay fewer taxes overall. Furthermore, smaller incorporated businesses
might even be able to have deductions on the amount of tax that they must pay unlike an
unincorporated business.
Amazon is an incorporated company hence the name ‘Amazon.com Inc’ meaning that they
have the legal body that protects personal assets from banks and other claims. A possible
reason for this is the large amount of cash that the stakeholders possess and do not want to
put that at risk. Furthermore, Amazon has enormous amounts of cash already within the
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