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Competency 2 Assessment

When we evaluate the economic conditions influencing company performance, we must consider a variety of factors: political dynamics; environmental impacts; currency fluctuations, particularly relevant for global organizations, worldwide economics and governmental influences on economic circumstances. Upon scrutinizing these elements in relation to Amazon's 2019 performance (WSJ, 2023):

1. Political Conditions:

   • Antitrust Scrutiny: Amazon encountered political scrutiny in multiple regions, particularly the United States and European Union, under the lens of antitrust examination; this intense focus raised alarm over potential market dominance and anti-competitive practices.

   • Impact on Amazon: Amazon's future operations and growth strategies potentially faced regulatory changes or investigations due to the political pressure: The impact on Amazon could have been substantial.

2. Environmental Conditions:

   • Sustainability Initiatives: Amazon, addressing environmental concerns with a commitment to sustainability, has set ambitious plans: it aims for carbon neutrality by 2040 and introduces initiatives such as "Shipment Zero"; these are part of its overarching Sustainability Initiatives. Amazon (2022)

   • Impact on Amazon: These initiatives, though aligning with environmental trends and consumer preferences, necessitated significant investments and logistics modifications; such actions could potentially impact short-term profitability.

3. Currency (Money) Conditions:

   • Exchange Rate Fluctuations: Amazon, operating globally, experiences impact on its international revenues and expenses from currency exchange rate fluctuations.

   • Impact on Amazon: In 2019, trade tensions, particularly the U.S.-China trade war, had a significant impact on Amazon: currency exchange rates underwent influence, potentially altering its financial results; this effect was particularly pronounced in international markets.

4. Global Economic Conditions:

   • Consumer Spending and Economic Growth: Amazon's business exhibits a close correlation with consumer spending and economic growth: concerns about a potential economic slowdown emerged in 2019.

   • Impact on Amazon: Despite economic uncertainties, strong consumer demand continued to benefit Amazon. Yet, a global downturn in the economy may reduce consumer confidence and alter purchasing behavior; such changes could potentially impact both sales and profitability at Amazon.

5. Governmental Influence:

   • Taxation and Regulatory Changes: Government policies and regulations--such as those related to sales tax collection and antitrust investigations--exerted an influence on Amazon's operations: this denotes the active role of Taxation and Regulatory Changes.

   • Impact on Amazon: Amazon could face pricing and competitiveness impacts due to the increasing pressure of collecting sales taxes in numerous U.S. states. The business strategy of Amazon may experience long-term implications from regulatory changes and government actions concerning areas such as data privacy and antitrust (Alshmrani, 2021).

Comparing these economic conditions to Amazon's performance in 2019

Amazon announced a remarkable growth in revenue: net sales surged by 20% compared to the preceding year. This upswing underscored Amazon's capacity to harness robust consumer demand--a feat accomplished despite prevalent economic and political obstacles. The company's dedication to sustainability and environmental initiatives demonstrates its swift response to evolving consumer expectations: specifically, those concerning corporate responsibility and climate change. Amazon's business persistently expanded, suggesting its successful navigation of enduring political challenges and regulatory pressures. This occurred while it faced consistent political and regulatory scrutiny. While political and regulatory scrutiny persisted, Amazon's business continued to expand, suggesting that it successfully navigated political challenges and regulatory pressures.

Amazon's 2019 performance bore significant influence from a myriad of economic conditions: political; environmental and governmental factors; currency fluctuations both global and local and overall, worldwide economic health. The challenges presented by these aspects were indeed formidable. However, Amazon displayed resilience in the face of adversity with robust revenue growth as testimony to its adaptability. Furthermore, through effective management of currency risks coupled with navigation through an intricate regulatory landscape, it highlighted not only their commitment towards sustainability but also emphasised why conducting evaluations on prevailing economic conditions is crucial when appraising corporate performances.

Interest Rates and Borrowing Costs: Implementing a series of interest rate cuts throughout 2019, the Federal Reserve significantly impacted the broader economic environment. Generally encouraging consumer spending and borrowing, lower interest rates proved beneficial to companies such as Amazon that heavily rely on consumer purchases; simultaneously, decreased borrowing costs facilitated their investments in infrastructure and innovation. Furthermore, lower bond yields inclined investors to seek higher returns in equities; this action potentially escalated the demand for Amazon's stock.

Monetary Policy and Economic Stability: Aiming to sustain economic growth and stability, the Federal Reserve implemented adjustments in its monetary policy: interest rate cuts and expansions of its balance sheet. Amazon, reliant on a stable and burgeoning economy for success as it stimulates consumer confidence along with spending; reaps benefits from a robust macroeconomic environment--an environment bolstered by supportive policies enacted by the Federal Reserve in 2019.

Positive Market Sentiment: In 2019, positive market sentiment dominated; this was especially true for technology companies such as Amazon. The company's robust financial performance and promising growth prospects fostered an optimistic outlook among investors--a factor that directly elevated Amazon's stock price: a mirror reflecting investor confidence in its capacity to persistently expand business operations while reaping profits.

Regulatory Challenges and Market Resilience: In 2019, regulatory scrutiny and calls for antitrust investigations potentially introduced uncertainty and risk to Amazon. Nevertheless, the market seemed to perceive these challenges as manageable for the company. The resilience of Amazon's stock price suggested that investors held a belief in minimal disruption of its operations or long-term growth potential from impending regulatory actions. Romm (2019) 

Consumer Confidence and E-commerce Growth: Amazon's performance significantly influences consumer confidence, which in turn propels spending on e-commerce platforms. In 2019, despite the prevailing concerns over global economic conditions, United States' consumers displayed a relatively robust level of confidence. This continuity of trust bolstered Amazon's revenue growth continuously as consumers persisted in their online shopping habits and reliance on the services offered by the company. (Mitchell & , 2021).

Analyzing year-over-year performance from 2018 and 2019.

Enhancing Revenue:

Revenue Growth: Amazon recorded a total revenue of $280.52 billion in 2019, observing a significant increase by 20.45% from its previous year's earnings at $232.88 billion; this substantial growth evidences not only the company's continued expansion but also marks an escalating success story in seizing more of the e-commerce market.

Operating Income: From a base of $12.42 billion in 2018, Amazon escalated its operating income to an impressive $14.54 billion by 2019 - an evident growth rate of 17.07%. This robust increase illuminates not only the efficiency with which the company manages its operations but also its capacity for generating enhanced profits at scale.

Net Income: In 2019, Amazon demonstrated a 15.04% increase in profitability and effective cost management as it translated its revenue into higher net income; specifically escalating from $10.07 billion to $11.59 billion: an impressive rise. Please note that this sentence is already written in active voice with appropriate graduate-level punctuation, including colons and semi-colons.

Earnings Per Share (EPS): In 2018, Amazon reported earnings per share (EPS) of $20.14; however, by the following year - specifically in 2019 - this figure had escalated significantly to stand at $23.01: a growth rate indicative of substantial improvement and enhanced profitability. Consequently--thanks to its bolstered financial position--the company disbursed higher profits among its shareholders during that period.

Return on Assets (ROA): In 2018, Amazon demonstrated a return on assets (ROA) of 4.87%; however, this figure rose to 5.17% in the subsequent year. This improvement implies that Amazon enhanced its efficiency in leveraging its assets for profit generation .

Return on Equity (ROE): In 2019, Amazon's shareholders reaped an elevated return on their investments in the company as the Return on Equity (ROE) improved further- escalating from a modest 20.42% in 2018 to a substantial 21.59%.

Conclusion

From 2018 to 2019, Amazon demonstrated several positive trends and key financial metrics: notably, both its trailing and forward Price-to-Earnings (P/E) ratios saw significant increases in valuation. Reflecting investors' readiness to allocate a higher premium for Amazon's earnings; the trailing P/E ratio escalated from 70.9 in 2018 to an even more pronounced rate of 82.5% by the close of 2019. In 2018, the forward P/E ratio stood at 49.1s; however, it surged to 58.5 in the subsequent year, a signal of optimistic forecasts for future earnings growth within the company. Moreover, Amazon showcased improved efficiency in asset utilization, a higher Return on Assets (ROA), rising from 4.9% in 2018 to 5.2% in 2019; this signifies heightened effectiveness at profit generation via its assets and underscores operational excellence.

References

Alshmrani, H. M. (2021). An analytical view of amazon success in the worldwide. Life Science Journal, 18(6).

Amazon. (2022). Driving Climate Solutions - 2022 Sustainability Report. https://sustainability.aboutamazon.com/climate-solutions#:~:text=Climate%20scientists%20agree%20that%20the,partners%20to%20broaden%20our%20impact.

Amazon, (2023). AMAZON Retrieved from https://s2.q4cdn.com/299287126/files/doc_financials/2020/ar/2019-Annual-Report.pdf

Mitchell, C., & (2021, October 31). Amazon Effect: Definition, Statistics, Impact on Consumers. Investopedia. https://www.investopedia.com/terms/a/amazon-effect.asp

Romm, T. (2019, June 1). Amazon could face heightened antitrust scrutiny under a new agreement between US regulators. The Washington Post. https://www.washingtonpost.com/technology/2019/06/02/amazon-could-face-heightened-antitrust-scrutiny-under-new-agreement-between-us-regulators/

WSJ, (2023). Market Data. Retrieved from https://www.wsj.com/market-data/quotes/AMZN/financials/annual/balance-sheet