Accounting for Managers: Business Economics and Investment Report

This report provides an in-depth analysis of Amazon's organizational structure, highlighting its functional design and global reach. It explores the company's revenue growth, influenced by demand and supply factors, and examines its expansion strategies in international markets like China and India. The report delves into business economics concepts such as competitive, fiscal, and supply-side policies, particularly in the context of the UK government's efforts to foster a favorable market environment. Furthermore, it covers investment analysis, financial intermediation processes, and the application of financial ratios, offering insights into the company's performance and strategic decisions. The analysis includes the impact of price fluctuations on demand and supply, and the role of government policies in managing economic variables like inflation.

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Accounting For managers
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Executive summary
This report focuses on the effectiveness of organizational structures on different organizations
like Amazon.com. It describes a system of interactions among different members of the
organizations and its structural design. The report also covers the revenue growth of the
company and the demand and supply factors in attainment of the revenue growth. It also defines
the economic concepts of the supply side policies, competitive policies and the fiscal policies of
the UK government in its ultimate desire to create a good market for its goods.

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Table of Contents
Introduction......................................................................................................................................2
Q1. Amazon organizational structure..........................................................................................2
Q2. Effects of price on Demand and supply................................................................................5
Q3.Business economics concepts of competition policy, fiscal policy& supply side policies....7
Question 4– Investment analysis of a company...........................................................................9
Question 6- Financial intermediation process............................................................................10
6a. financial ratio Analysis.........................................................................................................12
References......................................................................................................................................17

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Introduction
Q1. Amazon organizational structure
Amazon.com has got an organizational structure that enables it to have an extensive control on
global e- commerce operations. The structure establishes the system of interaction and design
among the members of the organization. For example, the structure of Amazon.com determines
how senior members of the management team influence and direct operational activities in
various business areas. The company maintains a business structure that supports the company’s
expansion strategy being that the company is a leading online retailer. The company’s
organizational structure enables managerial control(Goel, 2015).
The company has a functional organizational structure. The structures are important as they are
used to determine how the components of the organization interact with one another. The
characteristics of Amazon.com corporate structure are: The company has geographical divisions,
global hierarchy and a global function based groups which is the most significant feature.
Amazon.com has made a lot of headways globally, it has reached a point that people are
beginning to feel like the company is infiltrating everything from the traditional go to place for
books, cookware and electronics to many other merchandise. There are plenty of questions about
Amazon web services, its digital content creation and the growth of its computing offering. E-
commerce has always been and still is Amazon’s driving force. Globally, Amazon has not been
doing very well. For example in 2014, sales from revenues in the international market accounted
for only 37% of the total revenues for the company. The company’s net sales jumped by 22% in

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North America while international sales only increased by 12.5%(Capital Budgeting Valuation,
2013).
Image 1: Amazon.com revenue growth
Source: https://www.google.com/search?
q=amazon.com+revenue+indicators&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiVyv
OH2dbXAhXFvRQKHQtzDEsQ_AUICygC&biw=1366&bih=672

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The company has been eyeing China and India as the next frontier for their business. The
population of these two countries would propel the company to greater heights if they manage to
effectively penetrate these markets(Horngren, 2014). The challenge for this is competition from
other companies such as Alibaba in China. The company’s corporate structure has been
instrumental in supporting growth on the international front in the e commerce market. The
continuous success of the company when expanding globally is an indictment of how well the
organizations corporate structure is suited to the company.
One of the strategies that Amazon.com has used consistently for growth purposes is acquisition
or partnership with a range of companies in different sectors. Some of the companies that
Amazon has partnered with a pharmaceutical company known as Drudstore.com, a furniture
store known as Living.com, Wineshopper.com for wines, homegrocer.com for groceries. It is
evident that during this period , the company’s share price has been on a steady rise(Kieso,
Weygandt and Warfield, n.d.).
Due to this expansion, Amazons share have soared in the fourth quarter of the 2016, analysts
predicted that the shares would earn only 17 cents , however, the earnings have surpassed the
predicted earnings to 45 cents per share. Long term investors should not ignore this performance
trend, as it comes in the backdrop of heavy investment to increase its global market share.
Q2. Effects of price on Demand and supply

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Potatoes price index increases due to various factors which includes demand and supply,
inflation levels and the amount of potatoes that have been produced by the farmers. In March
2017, the potato prices were 27% higher than in march 2016. This is partly due to the demand
and supply of potato by farmers in the UK. The government however can put policies in place to
curb the high rates of inflation and to cap the prices of potatoes in UK though very unlikely due
to the liberal market. Change in prices occurs when the legal limit of any commodity price is
removed by the government. For example if the government puts in policies that are meant to
reduce the high rates of inflation and to increase the availability of potatoes as a commodity of
trade. A shortage in potato production occurs when the farmers do not harvest the projected bags
of potatoes and this leads to an increase in demand and a shortage in supply. The elastic supply
in price may change or may be affected by price and demand and supply.
The UK department for Environmental and Rural Affairs, states that growers confidence
continue to limit the demand and supply of the potatoes. Inflation is caused when there is too
much money circulating in the economy. It is worthy to note that in this report, the
macroeconomic concepts of inflation are only determined by the policies that the UK
government puts in place.
The growth confidence has limited the supply of potatoes in the market where the potato index
only rose to a paltry 3.2% between February and March this year as compared to 9.6% increase
on the same period last year. This can be attributed to various factors and not necessarily the
economic factors in the economy.
The hypothetical examples in the UK economy is that as the supply drops and the demand
increases or remains the same as it were, the prices increases which is part of the economic

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situation.The various factors that that influence the price elasticity of demand is generally the
micro and macro-economic factors. The macroeconomic is the basic external environment of the
economy where things such as government policies(Wild, Shaw and Chiappetta, n.d.). The 9.6 %
increase in production cost in 2016 means that the economy is somehow saturated by potatoes
therefore making the prices of potatoes reduce as many people will highly access the potatoes
without a lot of hindrances.
All this favored the existence of a simple concept of competence based exclusively on the final
price of the product as a competitive advantage compared to the rest of the producers present in
the same competitive environment, this situation originated as a logical consequence that
strategic policy of costs was to be the ultimate goal of strategic planning, while facilitating the
emergence of more rudimentary theories derived from such a cost strategy as the study of the
experience curve as a mechanism for achieving cost reduction. Increase in inflation means that
the supply of money in the economy is high and the price of potatoes will increase.
Subsequently, the government of UK will help in taming the prices of potatoes by implementing
fiscal and budgetary policies to enable the farmers produce more potatoes for the 2017 fiscal
year(Kieso, Weygandt and Warfield, n.d.). The UK has found the best policies in terms of
curbing inflation and increasing the supply of potatoes to the market at areduced price.The
growth confidence has limited the supply of potatoes in the market where the potato index only
rose to a paltry 3.2% between February and March this year as compared to 9.6% increase on the
same period last year (Kortmann, 2012).

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Q3.Business economics concepts of competition policy, fiscal policy& supply side policies
For the UK government to be prosperous and have a vibrant economy, the following policies
should be put in place. The first is the competitive policy , where there should be healthy and
fair competition in all business. The business concepts in economics in a competitive policy is a
derivative of the government that seeks to provide fair fiscal policies and supply side policies
that enhance businesses in the country. This should make sure that there is no monopolization of
a particular industry. Unfair competitive practises in business leads to monopolization of an
industry which will result to dominant player dictating the prices at the market and therefore
leading to closure of businesses (Lee and Hales, 2003).
Fiscal policies are used by the governments to help revamp the economy. Examples include;
cutting taxes by the government. When taxes are reduced, it means that there will be more
money circulating in the economy and therefore the need to make prudent fiscal policies.This
two policies increase the aggregate demanded while also making contributions to deficits and
drawingdown of surpluses by government and influencing the supply side of the
Distinguishing between the various activities that formed the value chain of that industry or
company, in order to define in a more precise and weighted way the real importance of each
phase of production in the final result obtained and the costs generated by it, in order to see the
concrete possibilities of action in the policy of cost reduction, achieving more efficient results in
the reduction of the final cost and the increase of added value; it can be said that at this stage, the
cost strategy establishes much more complex and precise mechanisms of study destined to

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obtain a much greater precision than previously existing, this period begins with the analysis of
activities of the McKinsey business system and culminates with the great theoretical
contribution of Porter's value chain (Lee and Hales, 2003).
The new visionaries of strategic management intuit that differentiation is the only possible tool
to create an effective competitive advantage, once the competitive advantages based on the
reduction of costs have been exhausted, since the very concept of differentiation is related to
those other phases of the production chain (technology, marketing, logistics, research) that still
have some flexibility and scope for action in the economic structures of the more developed
countries. Labor had become the great competitive burden of business in developed countries
because it was the phase of the value chain more onerous for the whole of production, to the
point of displacing the rest of the elements of production (technologies, marketing, logistics).
Stiffness was one of the characteristic elements of this phase of the production chain and the
labor force, due to events outside of business management (labor legislation, trade union power,
high purchasing power of the Western countries), which meant that the phase of the production
chain that most affected in the final cost of the product was at the same time the element with
less margin of variation or possibilities of modification (Graubner, 2006). The savings that could
be co to continue through the greater efficiency of the organization of the remaining phases of
the production chain, as well as the introduction of new technologies, successful marketing
campaigns or the definition of more economical logistic flows, all this was not enough to
compensate for the influence negative that had the labor factor or human resources in the final
output of a production to the market. So, we see as the appearance of an availability of a good
supplier.

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Unfair competitive practises in business leads to monopolization of an
industry which will result to dominant player dictating the prices at the market and therefore
leading to closure of businesses.
Question 4– Investment analysis of a company
The process of deciding and analysing the best long-term investment that a company should
undertake is known as capital budgeting decisions. On the other hand financial planning is the
process in which the management estimates the required capital for a certain project and
determining its competition. Financial planning is the process of enabling the company to frame
the best financial policies in relation to procurement, administration of funds and investment of
the said funds. Financial planning and control enables the management to make decisions with
regards to the requirements of capital in terms of short term and long term
requirements (Graubner, 2006).
Financial planning and control enables the company to make investment to get maximum
returns. The concept of financial planning is applied in the following ways by the management:
expansion and growth programmes which are carried out in the long run are made on the basis of
financial planning and control concept. Second, the management is able to reduce uncertainties
by having enough funds in regard to changing market trend. This helps in ensuring that
profitability and stability is achieved in the company (Kortmann, 2012).
For example, when making capital budgeting decisions, the management must consider time
value for money. This concept is premised on the notion that a dollar received today is more than