Amazon Case Study: Theories of Corporate Reporting and Strategy

This case study analyzes Amazon's corporate reporting decisions through the lens of classical political economy, institutional theory, and stakeholder theory. It examines how Amazon utilizes these theories to manage its relationships with stakeholders, anticipate earnings announcements, and interpret share price fluctuations. The study explores the Brunswik lens model to understand investor decision-making processes based on cues such as financial data and earnings reports. The analysis highlights how Amazon's strategies are shaped by market forces, institutional pressures, and its focus on long-term growth. The study also considers the impact of earnings announcements on stock prices and market reactions, providing a comprehensive overview of Amazon's business development and financial strategies.

Running head: AMAZON CASE STUDY
Amazon Case Study
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Table of Contents
Question 1............................................................................................................................2
References............................................................................................................................4
Question 2............................................................................................................................5
References............................................................................................................................7
Question 3............................................................................................................................8
References..........................................................................................................................10
Question 4..........................................................................................................................11
References..........................................................................................................................13
Question 5..........................................................................................................................14
References..........................................................................................................................16

2AMAZON CASE STUDY
Question 1
Classical political economy theory is used by Amazon in explaining its corporate
reporting decisions. It is gathered from this theory that Amazon Company follows the concept of
Laissez-faire economic market that is a free market which needs less or no government
intervention. Institutional theory can be understood as a theory that offers deep and highly
resilient social structure aspects (Wasko, 2016). Amazon considers the processes through which
structures encompassing rules, schemes, structures, routines and norms that have turned out to be
established as authoritative guidelines regarding social behavior. Considering corporate reporting
decisions of Amazon Company, it is observed that Classical political economy theory is derived
from a cluster of theoretical models which indicates that an individual perceives its surrounding
through a set of improper cues and acting accordingly. Use of this model can facilitate
explanation of an investor’s decision regarding buying or selling decision of shares after Amazon
Company’s announcement (Orquin, 2014). This is for the reason that the investors will use
relevant accounting information as input cues that take place on an input level particularly on:
 The type of accounting information used
 The type of accounting information that is not used
 The place and the way such accounting information is presented
Institutional theory is focused on explaining that the institutional surrounding that can impact
the formal structures development of Amazon more profoundly in comparison to market
pressures (North, 2016). The theory explained that the major impact of institutional pressures is
to enhance homogeneity of company structures within an institutional surrounding (Collier,
2015). Amazon might not adopt similar structure of a different company due to three major

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pressures such as coercive pressures that is influence from companies that they are relied upon,
mietic pressures to be identical successful forms taking place from increased uncertainty and
normative pressures that arrives from identical approaches of professional groups or association
brought into the company. This theory makes sure that Amazon must be focused on developing
innovative structures which enhances technical efficiency in case the organization has early
adopting nature and are legitimized in the environment. Institutional theory makes sure that
Amazon follows institutional theory in adopting formal structures of legitimacy that can decrease
efficiency along with restricting competitive position of the company within technical
surrounding. After following this theory, Amazon noticed that there exist a high level of
cooperation and consensus n the institutional surrounding and moreover the company’s
innovative structure diffusion remained long lasting and steady (Fernando & Lawrence, 2014).
However, the company must be aware that if the institutional environment is contentious ad
unfocussed innovative structures implementation will be tentative and slow.

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References
Bristow, D. N., Mowen, J. C., & Krieger, R. H. (2015). The quality lens model: A marketing tool
for improving channel relationships. In Proceedings of the 1994 Academy of Marketing
Science (AMS) Annual Conference (pp. 397-401). Springer, Cham.
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Deegan, C. (2014). An overview of legitimacy theory as applied within the social and
environmental accounting literature. Sustainability accounting and accountability, 248-
272.

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Question 2
Managerial branch of stakeholder theory intends to explain when corporate management
is supposed to address expectations of a company’s specific shareholder group. Moreover, this
theory is highly company focused and considers stakeholders recognized by the company. In
addition, this theory also explains an extent to which a company perceives that there is a need to
manage relationships in the organizations; interest (Deegan, 2014). Considering this theory and
observing the case study of Amazon, it can be stated that the company does not respond to all its
stakeholders equally and just responds to the most powerful ones. Moreover, major role of
Amazon’s management is to evaluate the relevance of addressing stakeholder’s demands in order
to attain strategic organizational objectives. From the case study of Amazon, it is gathered that
expectations and power relatives of several stakeholders change with time. The company must
gradually adapt certain disclosure and operating strategies along with considering the role of
information. In consideration to this theory it can be said that Amazon is highly responsive to
concerns associated with government regulators and financial stakeholders. Moreover, this
theory suggests that either of the two perspectives of stakeholder’s theory is considered by any
company. Among them one is to remain ethically aware and another one is focused on the
survival of the firm. Case study of Amazon indicates that it applies theory for its survival. This is
evident from a scenario of the case study that explains Amazon always focused on growing its
revenue on 20% annual clip (Oliveira, Rodrigues & Craig, 2013). However, considering that it is
not enough for the market it made attempts for buying more stocks till gross profits drop to
operating income for organization’s profitable survival.

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PAT (Positive Accounting Theory) attempts to make effective real world predictions
along with converting them into accounting transactions. Through consideration of PAT,
Amazon Company attempts to maximize their survival prospects so they are capable to organize
themselves in a better manner. Through abiding by PAT, Amazon considered to decrease costs
related with its contracts through negotiation and monitoring costs (Collier, 2015). According to
the provided case of Amazon, it has been found that the second quarter earnings of the
organisation have jumped to 23% in terms of sales in contrast to the past year. However, the
shares of the organisation have declined by 11%, after it has lost 27 cents per share in contrast to
the consensus estimate of 15 cents. In this case, the investors would consider the rising sales
margin and fall in the share price of Amazon. Hence, although there is increase in revenue base
of the organisation, there is a fall in the share price (Oliveira, Rodrigues & Craig, 2013).

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References
Dillard, J. (2014). 14 Legitimating the social accounting project. Sustainability accounting and
accountability, 233.
Fernando, S., & Lawrence, S. (2014). A theoretical framework for CSR practices: integrating
legitimacy theory, stakeholder theory and institutional theory. Journal of Theoretical
Accounting Research, 10(1), 149-178.
Hirschmüller, S., Egloff, B., Nestler, S., & Back, M. D. (2013). The dual lens model: A
comprehensive framework for understanding self–other agreement of personality
judgments at zero acquaintance. Journal of Personality and Social Psychology, 104(2),
335.

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Question 3
Current share price is useful for Amazon Company in anticipating future earnings
announcements. This is evident from the Amazon case study as it is gathered from the case study
that Aaron Kessler decreased the rating to market perform along with remaining bullish o
Amazon’s long term prospects as he anticipated the shares to remain stuck in a trading range.
Such current share price consideration facilitated in anticipating future earnings announcements
regarding continuous high levels of investment associated with slowing unit growth. From
analysis of the case study it is gathered that earnings announcement serves as an official public
statement of Amazon’s profitability for a particulate time period over a year (Collier, 2015). On
the share price announcement date, Amazon reveals the type of security or investment that is
supposed to be issued. This offers analysts with new expectations of the aspects planned by
organizations as information regarding the cause for raising fund is included in the
announcement. Earnings announcement information has a vital role in the stock market
functioning at both institutional and individual investor stock market reaction level’s reaction to
earnings announcements (Oliveira, Rodrigues & Craig, 2013). Amazon’s current share price
announcements indicated that its shares have returned more than 700% over the last few decades.
From such information, certain earnings announcement was made possible that explained that
the revenue growth is decelerating and the margins are heading in the working direction and
accordingly the stocks might remain on a bumpy side.
From such statement gathered from Amazon case study it is evident that positive surprise
earnings announcements is deemed to increase the company’s stock price through indicating a
positive signal to its investors regarding future cash flows of the company (Dillard, 2014).

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However, negative earnings are deemed to surprise announcement indicates to drive up the
company’s stock price through sending positive signal to the investors. This is also deemed to
exert pressure on the share prices as Amazon’s investors perceive an adverse signal about future
of the company. Amazon case study evidenced that earnings announcements of the company is
focused on anticipating the amount of profit that is produced by the company over a specific
period that is generally defined as a quarter.
Amazon Company’s current share price situation explains it lost 27 cents per share that is
worse than decreasing gross margins and profits that might be considered under the firm’s
focused investment in new aspects increased concern for the analysts of the company (Deegan,
2014). Such situation of Amazon evidenced that business earnings serve as a key determinant of
its share price as earnings and circumstances are associated with them that can signify whether
the business can be successful and profitable in the long run. Moreover, from the case of
Amazon, it is gathered that stock trading is gradually followed by the company’s investors as
they are increasingly sensitive to quarterly earnings reports. This indicates that market reactions
to Amazon Company’s earnings report is stronger as it has bigger market capitalization as
institutional investors react to surprises which can dictate short-term direction of any stock
because of the company’s sheer size investment decisions (Oliveira, Rodrigues & Craig, 2013).

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References
North, D. C. (2016). Institutions and economic theory. The American Economist, 61(1), 72-76.
Oliveira, L., Rodrigues, L. L., & Craig, R. (2013). Stakeholder Theory and the Voluntary
Disclosure of Intellectual Capital Information. Caspian Journal of Applied Sciences
Research, 2(3).
Orquin, J. L. (2014). A Brunswik lens model of consumer health judgments of packaged
foods. Journal of Consumer Behaviour, 13(4), 270-281.

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Question 4
The Brunswik lens model (BLM) is derived from a group of theoretical models called the
lens models. This model is of the belief that an individual perceives the environment through a
group of imperfect cues and acts accordingly (Orquin, 2014).
Figure 1: Brunswik Lens Model
(Source: Bristow, Mowen & Krieger, 2015)
The right-hand side of the model explores the ways the decision-maker utilizes cues like
inputs and prompts for making a decision and the types of cues used. The left-hand side depicts
the association between the actual phenomena or outcome and the related cues. It uses a statistic
modeling for attempting and providing a prediction model. This model provides three types of
investigation on making decisions. The input level is the first level, in which the investigators
take into account the nature and form of the cues utilized for informing decision-making
including measurement capabilities, the ways they are presented and in the type of context
(Oliveira, Rodrigues & Craig, 2013). The second level is the information processing level, which
ascertains the characteristics of the investors and the rules needed to make decisions. The final