Amazon.

com
 Vision Statement (proposed)

To be the largest mass merchandiser on

earth.
 Mission Statement (proposed)
We believe our first responsibility is to our worldwide (1) online customers.
(2) We pledge to make every effort to improve the level of customer service
throughout the e-commerce industry by using up-to-date hardware and
software (3) and by listening to our customers. We will offer customers
increased product selections (4) to fulfill their online shopping desires. We
strive to be the most used Internet e-commerce portal on the World Wide
Web (6), while conducting operations in a highly ethical (5) manner to
ensure the long-term profitability and growth for shareholders.(7) We pledge
to contribute to the economic strength of society and to function as an
exceptional corporate citizen in all countries that we do business. (8) We vow
to recruit, develop, motivate, reward and retain personnel of exceptional
ability, character, and dedication. In return, we will provide them good
working conditions, superior leadership, short and long term compensation,
and an opportunity for individual growth and employment security.(9)
 Mission Statement Components
1. Market
2. Customer
3. Technology
4. Product or services
5. Philosophy
6. Self Concept
7. Concern for survival, growth, and profitability
8. Concern for public image
9. Concern for employees
 Competitive Profile Matrix

Amazon.com Barnes & Noble,Inc. EBay,Inc.

Critical Success Weight Rating Weighted Rating Weighted Rating Weighted
Factors Score Score Score
Market Share 0.15 4 0.60 3 0.45 4 0.60
Price 0.15 3 0.45 3 0.45 4 0.60
Financial Position 0.15 1 0.15 3 0.45 4 0.60
Product Quality 0.10 3 0.30 3 0.30 3 0.30
Consumer Loyalty 0.10 3 0.30 3 0.30 4 0.40
Management 0.10 3 0.30 3 0.30 4 0.40
Advertising 0.10 4 0.40 3 0.40 4 0.40
Global Expansion 0.10 3 0.30 3 0.30 4 0.40
Innovation 0.05 4 0.20 3 0.20 3 0.15

Total 1.00 3.0 3.15 3.85

 EFE Matrix
Key External Factors
Weight Rating Weighted Score
Key External Factors
Opportunities
Continuous increase of internet users- 502.5 by 2003 0.08 3 0.04
Increasing business to consumer e-commerce 0.09 2 0.18
US Internet economy projection $1.2 trillion by 2002 0.08 4 0.32
European online projections 3.1 trillion by 2004 0.11 3 0.33
Brick & Mortar companies lack technology expertise 0.05 2 0.10
Growth of Spanish speaking population 0.03 2 0.06
Threats
People use Amazon to find information but dont buy 0.04 3 0 .12
Seasonality of internet usage & revenue generation 0.09 3 0.27
Economic downturn or recession imminent 0.11 4 0.44
Low consumer confidence levels 0.08 3 0.24
Competition 0.09 3 0.27
Security/ Privacy of information concerns 0.06 2 0.12
Internet taxation 0.04 2 0.08
Market valuation concerns 0.05 2 0.10
Total 1.00 2.67
 Ratios (July 2002)
Company Industry Sector S&P 500
Valuation Ratios
P/E Ratio (TTM) N/A 31.18 29.51 29.43
P/E High - Last 5 Yrs NA 51.43 49.86 50.40
P/E Low - Last 5 Yrs NA 18.47 18.15 17.64
Beta 3.31 1.16 0.90 1.00
Price to Sales (TTM) 1.85 1.30 2.35 3.13
Price to Book (MRQ) N/A 4.54 4.10 4.81
Price to Tangible Book (MRQ) N/A 5.60 5.85 7.47
Price to Cash Flow (TTM) N/A 20.44 17.55 19.20
Price to Free Cash Flow (TTM) 580.36 31.28 37.07 33.67
% Owned Institutions 48.72 58.05 46.66 60.64

Dividends
Dividend Yield 0.00 1.25 2.12 1.97
Dividend Yield - 5 Yr Avg 0.00 0.31 1.36 1.34
Dividend 5 Yr Growth Rate NM 12.38 5.79 8.09
Payout Ratio (TTM) 0.00 3.20 16.07 30.33

Growth Rates %
Sales (MRQ) vs Qtr 1 Yr Ago 21.00 13.06 8.97 -1.11
Sales (TTM) vs TTM 1 Yr Ago 13.19 9.95 9.63 1.28
Sales - 5 Yr Growth Rate 188.05 27.34 19.14 12.06
EPS (MRQ) vs Qtr 1 Yr Ago N/A 51.66 13.44 7.88
EPS (TTM) vs TTM 1 Yr Ago NA 22.86 6.30 -4.13
EPS - 5 Yr Growth Rate NM 21.03 11.37 8.42
Capital Spending - 5 Yr Growth Rate 106.66 22.57 16.81 10.48
 Ratios
Company Industry Sector S&P 500
Financial Strength
Quick Ratio (MRQ) 1.13 0.54 0.80 1.11
Current Ratio (MRQ) 1.45 1.84 1.39 1.65
LT Debt to Equity (MRQ) N/A 0.44 0.76 0.68
Total Debt to Equity (MRQ) N/A 0.55 0.94 1.06
Interest Coverage (TTM) -1.38 17.21 6.08 8.63

Profitability Ratios %
Gross Margin (TTM) 25.66 31.11 39.74 46.77
Gross Margin - 5 Yr Avg 21.69 30.26 39.60 47.53
EBITD Margin (TTM) -1.50 7.84 22.09 20.55
EBITD - 5 Yr Avg -15.96 6.93 22.12 21.94
Operating Margin (TTM) -5.93 5.82 11.23 17.15
Operating Margin - 5 Yr Avg -24.27 4.76 12.11 18.26
Pre-Tax Margin (TTM) -10.34 5.10 9.08 14.30
Pre-Tax Margin - 5 Yr Avg -27.42 4.20 12.31 17.25
Net Profit Margin (TTM) -10.34 2.91 6.17 9.95
Net Profit Margin - 5 Yr Avg -27.42 2.00 7.95 11.35
Effective Tax Rate (TTM) N/A 36.66 36.59 33.60
Effective Tax Rate - 5 Yr Avg N/A 38.42 39.35 35.69
 Ratios

Company Industry Sector S&P 500

Management Effectiveness %
Return on Assets (TTM) -23.61 5.80 5.23 5.91
Return on Assets - 5 Yr Avg -37.41 5.49 6.88 7.95
Return on Investment (TTM) -45.69 8.12 7.24 9.61
Return on Investment - 5 Yr Avg -57.75 8.01 9.47 12.76
Return on Equity (TTM) N/A 14.98 11.59 17.13
Return on Equity - 5 Yr Avg N/A 14.93 16.06 21.65

Efficiency
Revenue/Employee (TTM) 419,167 297,426 773,576 641,912
Net Income/Employee (TTM) N/A 10,337 66,482 77,496
Receivable Turnover (TTM) N/A 37.54 16.70 9.49
Inventory Turnover (TTM) 17.41 5.64 15.64 10.21
Asset Turnover (TTM 2.28 2.33 1.24 0.98
www.investor.stockpoint.com July 2002
 Net Worth Analysis (year-end 2001, in millions)

1. Stockholders Equity $ (1,440)

2. Net income x 5 = $(567) x 5 $ (2,835)
3. Share price = $15 /EPS = ($1) x Net Income $ (8,505)
($567)
4. Number of Shares Outstanding X Share Price = $ 5,625
375 x $15
Method Average $ (1,788)
 IFE Matrix
Key Internal Factors Weight Rating Weighted
Score
Strengths
Customer satisfaction 0.10 4 0.40
Copyright to One-Click online shopping 0.08 3 0.24
Humanitarian efforts 0.03 3 0.09
Strong Research & Development 0.09 3 0.27
Exclusive agreements with Internet sites (Associates) 0.01 4 0.04
Ability to track cost interest through customized home page 0.02 4 0.08
Formation of strategic alliances with physical retailers 0.11 4 0.44
Agreement with AOL 0.09 3 0.27
Weaknesses
Accumulated deficits, anticipates further losses 0.11 1 0.11
Purchases through distributors rather than manufacturers 0.07 2 0.14
Slowing growth, core business, U.S. Books, Music & Video 0.08 2 0.16
Lawsuit with Barnes & Noble over patent to 1-click method 0.03 2 0.06
Class action suits filed by stockholders 0.04 2 0.08
Does not have a mission statement 0.05 1 0.05
Financial position 0.09 1 0.09
TOTAL 1.00 2.52
TOWS Matrix
Strengths
1. Customer satisfaction.
2. Copyright to one-click
method.
3. Humanitarian efforts.
4. Strong Research &
Development.
5. Exclusive agreements
with Internet sites.
6. Ability to track
customer interests.
7. Formation of strategic
alliances with physical
retailers.
Weaknesses
1. Accumulated deficits.
2. Anticipates further losses.
3. Slowing growth, core
business, U.S. Books,
Music, & Video.
4. Lawsuit with Barnes &
Noble over patent for one-
click method.
5. Class Action Suits filed
with stockholders.
6. Doses not have a mission
statement.
7. Financial position.
 TOWS Matrix

Opportunities S-O Strategies W-O Strategies

1. Continuous increase of 1. Expand European presence 1. Enter into more strategic
internet users. through strategic alliances agreements with U. S.
with established online
2. Increasing business to retailers or physical physical retailers possibly
consumer e-commerce. retailers Wal-mart
3. U. S. Internet economy (S1,O1,O2,O3,O5). (W2,W3,W7,O4,O5).
projections 3.1 trillion 2. Refocus on core business
by 2004. by taking full advantage of
e-books sales projection
4. Brick & Mortar (S1,S2,S6,O1,O2,O3).
companies lack
technology expertise.
5. European on-line
projections 3.1 trillion
by 2004.
 TOWS Matrix

Threats S-T Strategies W-T Strategies

1. Seasonality of internet 1. Establish direct order link 1.Reduce fulfillment costs by
usage & revenue with reduction in number of
fulfillment centers
generation. publishers/manufacturers (W1,W2,W3,W7,T1,T2,T3,T7).
2. Economic downturn & (S5, T4).
global recession. 2. Enhance attractiveness of
3. Low consumer confidence platform
levels. (S1,S2,S4,S6,T4,T7).
4. Competition. 3. Promote ease of use
5. Security/Privacy of (S2,T4,T5).
information concerns.
6. Internet Taxation.
7. Market valuation .
 SPACE Matrix

Y axis
Financial strength +1 +1 worst to + 6 best Y axis: 1 + (-2) = -1
Environmental stability -2 -1 best to 6 worst

X axis
Industry strength 3 +1 worst to +6 best X axis: 3 + (-2) = 1
Competitive advantage -2 -1 best to -6 worst
 SPACE Matrix
FS
Conservative Aggressive

CA IS

Defensive ES Competitive
 Grand Strategy Matrix
RAPID MARKET
GROWTH

Quadrant II Quadrant I

Amazon

WEAK STRONG
COMPETITIVE COMPETITIVE
POSITION POSITION

Quadrant III Quadrant IV

SLOW MARKET
GROWTH
 IE Matrix
The IFE Total Weighted Score

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
High I II III
3.0 to 3.99 3 1

Medium IV V VI
The EFE 2.0 to 2.99
Total
Weighted
Score
Low VII VIII IX
1.0 to 1.99

Segments Revenue EFE IFE

1. U. S. Books, Music-Dom $1,700 million 2.5 1.9
2. Early-Stage Businesses and 683 million 3.5 2.5
Other
3. International 381 million 3.6 2.5
 QSPM
Strategic Alternatives
Enter into strategic Expand European
Key Internal Factors Weight agreements presence through
w/physical retailers strategic alliances
Strengths AS TAS AS TAS
Customer satisfaction 0.10 4 0.40 2 0.20
Copyright to One-click online shopping 0.08 - - - -
Humanitarian efforts 0.03 - - - -
Strong Research & Development 0.09 - - - -
Exclusive agreements with Internet sites (Associates) 0.01 2 0.02 4 0.04
Ability to track customized interests through 0.02 - - - -
customized home page
Formation of strategic alliances 0.11 4 0.44 2 0.22
Agreement with AOL 0.09 3 0.27 2 0.18

Weaknesses
Accumulated deficits/Anticipates further losses 0.11 1 0.11 2 0.22
Financial position 0.07 3 0.21 2 0.14
Slowing growth, core business-U.S. Books, & Music 0.08 2 0.16 4 0.32
Video
Lawsuit with Barnes & Noble over patent to 1 click 0.03 - - - -
method
Class action suits filed by stockholders 0.04 4 0.16 3 0.12
Does not have a mission statement 0.05 - - - -
SUBTOTAL 1.00 1.77 1.44
 QSPM
Enter into strategic Expand European
Key External Factors Weight agreements presence through
w/physical retailers strategic alliances
Opportunities AS TAS AS TAS
Continuous increase of internet users502.5 mill by 2003 0.08 3 0.24 4 0.32
Increasing business-to-consumer e-commerce 0.09 3 0.27 4 0.36
US Internet economy projections $1.3 trillion by 2002 0.08 4 0.24 2 0.16
European online projections 3.1 trillion by 2004 0.11 2 0.22 4 0.44
Some Brick & Mortar companies lack online technology 0.05 4 0.20 2 0.10
expertise
Hispanics fastest growing population 0.03 - - - -
Threats
People use Amazon to find information, but dont buy 0.04 3 0.12 4 0.16
Seasonality of internet usage & revenue generation 0.09 2 0.18 4 0.36
Economic downturn or recession imminent 0.11 3 0.33 2 0.22
Low consumer confidence levels 0.08 3 0.24 2 0.16
Competition 0.09 2 0.18 4 0.36
Security/Privacy of information concerns 0.06 - - - -
Internet taxation 0.04 2 0.08 4 0.16
Market valuation concerns 0.05 1 0.05 2 0.10
SUBTOTAL 2.35 2.90
SUM TOTAL ATTRACTIVENESS SCORE 4.12 4.34
 EPS/EBIT Analysis
$Amount Needed: $500
Stock Price $15
EBIT Range $ -400 to $0
Tax Rate = 0%
Interest Rate 5%
#Shares Outstanding 375

Common Stock Financing Debt Financing

High Low High Low
EBIT $0 $-400 $0 $-400
Interest (5%) 0 0 25 25
EBT 100 -400 -25 -375
Taxes 0% 0 0 0 0
EAT 100 -400 -25 -375
# of Shares Outstanding 408 408 375 375
EPS .245 -0.98 -0.07 -1.00