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Value Minus Cost Paper

2155 Words9 Pages

Value minus Cost The willingness to pay framework is the highest price that a customer is willing to pay if there are no other competitors with the same product. When considering this framework for Amazon, it is easiest to look at the Amazon Prime membership. The membership fee currently is $99 a month, which includes unlimited space to store pictures, Amazon videos, free shipping, and certain discounts on Amazon products. For the purpose of this evaluation, let's just look at the free shipping aspect. No other competitors offer this free shipping option for the price of a membership fee. Therefore, willingness to pay is very low. If a person orders twenty items a year that puts shipping costs per unit at $4.95. Amazon has an estimated 63 million …show more content…

When comparing the retail companies Overstock.com, EBay, and Amazon, EBay prevails due to its 2015 ROA of 5.48%, which has grown over the past five years. Amazon and Overstock.com has 2015 ROA’s of .99% and .3% in 2015, which means they are not effectively using their assets compared to a slightly higher utilization that EBay has. The industry average is 7.16% which none of the retail companies exceed. When comparing the shipping competitors UPS comes out on top again due to its 13.14% ROA in 2015, which is higher than Amazon’s ROA. FedEx is still better than Amazon is but not by much with its 2016 ROA of 4.41%. Exhibit #7 depicts the ROA’s of all companies over the past five …show more content…

If a company has a ratio at one or greater that means they will be more than likely to pay current debts. All companies that are being compared are above one except Overstock.com, which is at .96 for 2015. They had a 1.06 in 2014 so a continuous decrease of this ratio needs to be monitored over the next couple of years. EBay has a 3.49 current ratio in 2015, which is much higher than Amazon's 1.08. Amazon, however, is in line with FedEx at 1.50 and UPS at 1.23 in 2015. Amazon has been constant at right above one for the last five years, which is a good sign but further analysis needs to be considered in coming years to make sure that they do not fall under the safe zone of

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