Zappos-Amazon Acquisition

viragos Acquisition of Zappos Acquisition regarding amazon and Zappos Companies that emergency to be among the elite competitors in their particular fields absorb to be satisfactory to adapt and evolve in an always changing commercialise place. In order to do so many a(prenominal) large companies instill mergers or accomplishments with sm whollyer or similarly sized companies. They deal they great deal supplement and collaborate with all(prenominal) former(a) in order to manufacture much than than bon ton look upon.The all important(predicate) difference between a merger and an erudition is a merger is a situation in which dickens steadys agree to unite as iodine single club kind of than remain two separately operating firms stimulateed by i fri discontinueship. The firms argon usually the aforesaid(prenominal) size, and twain companies stocks argon surrendered creating new telephoner stock issued in its place. An science is when one go with complet ely buys bulge the tradeing companies stock and makes itself the new owner of the keep friendship. Legally the selling company still exists as an independent legal entity, but everyplaceall restrict is in the hands of the parent company.In July 2009 CEO of Zappos, Tony Hsieht made the announcement of amazons acquiring of Zappos. In a lengthy e-mail Tony eloquently explains the time to come of Zappos and what impart take place in the near future at Zappos. Throughout viragos reign as online shop powerhouse, they have been consistent in one of the approximately important aspects out increment and developing as a vast-term contender in the online obtain world. Amazon has adapted and involved in the always changing markets by expanding market plow finished attainments.In 1998 Amazon expanded itself into new markets with common chord severalise acquisitions. Two of the acquired companies, Bookpages and Telebook, were bought to expand Amazons market share into Europe and the third acquisition, The Inter give the sack Movie Database (IMD), was bought to expand Amazon into a new developing market of online video gross r dismantleue. Amazon has always express guest service and customer ease as a main objective throughout their development. Zappos is a company k recompense awayn to be a customer service company since its inception.In fact, Tony Hsieh stated in a Harvard logical argument review article that he does not think of Zappos as a fit out company, but rather a customer service company. On the surface this acquisition seemed corresponding a good fit for both parties, but the currentity of high hardship rates of acquisitions signifies there are many things to think about when considering acquiring a company. Our team will give a brief analysis on pre-acquisition activity inwardly both companies, analysis of the acquisition itself, and give an overview of the success or failure of the acquisition.The key aspects to consider in this acquisi tion are as follows the simplest and most underestimated factor is what are the specific goals of each(prenominal) company in regards to a possible acquisition, stub the two separate companies effectively leverage each an early(a)(prenominal)s strengths to create a greater company appreciate, and do these two companies align with one another in order to guide 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 fantasy is that they are in the customer service production line, not a shoe company. Customer service is Zappos main asset. They do everything a little bout differently than any other company. Tony Hsieh encourages company last which is the core of the company allowing them to be so successful. Before the acquisition, Zappos CEO Tony Hsieh had to make convinced(predicate) that the company will remain same(predicate). Many muckle thought i t would be end of Zappos and their culture after(prenominal) Amazon bought them. Amazon took over Zappos, but allowed them to pull in separately, keeping their company name and culture.Zapposs goal for the future is to redeem happiness to their customers and acquisition by Amazon allowing them to leverage each others strengths. Now with the merger Zappos has much better cash carry than before. Now they abide refund peoples credit cards much luxuriantinger than they could before and ameliorate their customer service thus far more. With the acquisition they besides gained lot of experience from senior staff of Amazon and vice versa. Prior to the acquisition, Zappos had to discuss their independence with Amazon.Zappos tried to stay unchanged by the acquisition as much as possible duration keeping all the benefits from the acquisition as long as they could. Zappos had full- self-aggrandising plans before the acquisition, and now with Amazon they are still focusing on their g oals, but with resources from Amazon they grass achieve them much sudden. Zappos net sales in the first quarter of 2010 were almost 50% higher than the same quarter of the previous year. To ensure Zappos terminate grow at this fast pace they had to hire the advanced people. Zapposs way to make sure that their employees really want to work at the firm is quite nontraditional.After hardly a(prenominal) weeks of training they project their trainees money to leave. This price constantly raises and after the acquisition it was at $3000 not to take the strain. Zappos didnt change immediately after the acquisition, but now few years later we see about 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 move 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 efficiency for both firms. Zappos has actually grown since the acquisition and no one lost 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 shared trust and so far it works for both Amazon and Zappos. A History of Amazon Amazon. com Inc. sells skilful about everything, and lots of it. What drives Amazon is the want to enhance the consumer experience, whether its shipping or product availability or price.Over the away decade, Amazon has moved from strictly retail to both selling goods and indeed executing the orders, for itself and for third parties. Amazon, as much as people exchangeable to think of it as an e-commerce provider, is becoming a direct-to-consumer fulfillment company. How did Amazon nonplus so successful so quickly? Strategy Investing in the right plans at the right time and staying the course. Amazon embraced what is known as a design school sit around of strategy development. Despite the title, the puzzle is simple to infer and can be highly effective.It is the one employ most by professors and consulting disposals. Organizations often struggle in finding a compelling competitive cast. Successful organization can begin to throw away away and total fail at what it takes to be successful. This tool can begin to facilitate an organization get into the game. The design school pose calls for both external and internal appraisals. An external appraisal helps an organization to determine threats and opportunities that are out there in the market. The internal assessment helps the organization to understand its strengths and weaknesses. The Strengths, Weaknesses, Opportunities andThreats (SWOT) tool is one that most people are beaten(prenominal) with and stems from the design school model. Amazon conducted the external analysis using the quest analysis frameworks PESTEL Analysis, Industry and Competitor Analysis, Competitor Analysis, Global Internet Trends and GE Matrix. The PESTEL framework helped Amazon to identify trends that could impact them in six key areas (P) Political factors areas to focus on complicate political direction, taxes, trade restrictions. (E) scotch factors includes GDP, inflation, interest rates, change rates and other macro and micro economic factors. S) Social factors includes social trends, population growth rate, age distribution, career expectations, etcetera (T) Technology factors includes equipment, information applied science, 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 looking at its competitive position to determine opportunities and risks and where it should focus.To do this, they used Porters 5-force tool that helped them to understand the strengths and weakness of its competitive position, and where they might consider despic fitting forward. The competitive rivalry amongst the e-retail sedulousness is intense. From some of the largest to the smallest companies, dotcom businesses are abundant, making? disceptation 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 Internet retailers that offer a broad range of products. This exercise helped Amazon to better understand who their competition is. Ebay and Wal-Mart are examples. Global Internet Trends The Internet is Amazons key channel. The 20 top countries in Internet usage, and g row patterns were identified. A GE Matrix has been used to identify the attractiveness and competitive position of the? markets that Amazon. com operates in. GE Matrix This is a matrix used to screen portfolios of business units.Both the attractiveness of the persistence and the strength of each business unit at heart the industry are plotted. Industry attractiveness is mulish by the sideline factors Growth rate, Size, Demand, Competition, Profitability and Global opportunities. Business unit strength is determined by Market share, Market share growth, Brand, Distribution channels, Production ability and Profit margin comparisons. Knowing, constructing, and fully leveraging strengths in the best panache possible is an important key to creating long-term competitive reward.Amazon is a great, leading-edge company that has successfully developed and implemented compelling strategies that we can analyze from. well-nigh large organizations conduct strategical planning, but in m any cases real strategy and planning are missing. Instead too many strategic planning exercises are nothing more than budget positioning 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 carry on focus on smart strategies.There are three simple tools that Amazon focuses on as part of its internal appraisal process. They include order Chain, Resources Based View and Financial Analysis. Amazon developed a value grasp of itself to internal it can functionally best add value and maintain a competitive advantage. The value chain analysis undertaken examines the operational effectiveness of activities that? enable Amazon. com to perform better than its competitors i. e. the distinctive value chain activities that are difficult to imitate. This analysis focuses on value creation and feat cost economies where Amazon. om? configures its value chain activities to create eccentric value for customers, tighten its costs of? carrying out these activities and reduce the cost of its customers transactions. Some of Amazons competitive advantages from a value chain perspective include loyal technological infrastructure with a single platform, High investments in technology development (e. g. , Kindle) to best leverage digital products, Great product divination system, Print on demand, Constantly soliciting suggestions on new products, Easy and fast payment system, 24 hour operations and Free returns within 30 days.The resource based view helps an organization to determine where to invest in critical resources to have a competitive advantage. The more valuable and rarified the right resources are in the right places, the more likely the firm may have a long-term advantage over its competition. A firm utilizes its resources and capabilities to create a competitive advantage. T he organizations resources and capabilities have together constitute its distinctive competencies. Amazon successfully identified the right resources and developed its capabilities in key target areas.These investments resulted in Sophisticated online retailing technologies, Personalization features for customers on its websites, Reliable and easily scalable IT systems all one platform, natural products (100 different products in heptad major geographic markets), Top 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 beneficial in the long run for the two com panies. Zappos goals after the acquisition are mainly focused on its own growth internally and externally. As their own independent firm they want to pursue their vision of delivering happiness to customers, employees, and vendors and now they will be able to get their much winged.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 beneficial because one of Zappos best qualities is its unique culture and bulls eye. Financially, Zappos wanted a shareholder and companion that thinks long term and will also do what is best for their living 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 staff office that Amazon do es and they want to leverage their capabilities to help Zappos grow. Amazon wants to leverage the nonphysical assets that Zappos possesses 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 workplace 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. rhythmic pattern It will take some time for Amazon and Zappos to be able to measure the effectiveness of the acquisition mainly because both firms emphasize 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 efficient distribution, and faster response times when customers have issues. Methods Aligning the two companies and leveragin g each companys strengths to better each other.Amazon has resources, technology, and operational experience that Zappos does not. Zappos can leverage all of these to make their own operations faster and more efficient by bringing people in from Amazon and learnedness from them. Amazons improved technology will help Zappos fill orders faster and improve logistics. Zappos has a very large distribution center in Kentucky evenhandedly close to the UPS shipping hub. Amazon now has a very important strategic advantage with access. They can now move product faster and easier making their own distribution faster and less expensive.Post- Acquisition swindle On Wednesday, July 22nd, 2009, Tony Hsieh, the CEO of Zappos. com, emailed all of his employees to share the great news 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 t he exchange took place, Amazon became the sole shareholder of Zappos stock. Post-acquisition, Zappos proceed to run their operations the same, doing what they believe is best for their brand, their culture, and their business.By leveraging each others strengths, Zappos reached their vision even fasterdelivering happiness to customers, employees, and vendors. By merging with Amazon, Zappos was able to accelerate 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 aligned his company with a shareholder and partner that think long term, fair(a) 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 Am azons resources, they continued to build their brand and their culture just as they always have. Zappos has continued to grow their headquarters out of Las Vegas, attracting the right talent for each of their departments. After acquiring Zappos, Amazon has seen more salaryability, 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 fabricate 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 growing industrythe percentage of households with at least one computer has gone 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 gross profit was $5. 5 billion. Three years later, it has escalated to a staggering $15. 1 billion. 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 compile Retail industrys norm. Additionally, even though there are not plenty 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 cost 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 circumspection 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 amazing and unique company that is Zappos. Closing Remarks It is clear from 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 part of assets to create a better costumer experience. Amazon wanted to learn the intangible and effective costumer service methods that have proven 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.