You have to put money into company operations to get profits out of it. It is basic common sense when any corporation seeks to grow and expand — especially into global markets. This situation inevitably leads to a balancing act of managing rising operational costs with an increase of revenue to not only keep the company out of the red, but also produce a substantial enough revenue stream to please investors.
For this reason, many corporations will be watching Amazon closely throughout this year. Amazon has made no secret of its intention to expand into other global markets, primarily China, as it seeks to invest into new technologies and services to outperform their competitors. Amazon’s strategies have become a business model for companies striving to grow their own sales, while confusing investors who are gnashing their teeth over the retailer’s nearly non-existent profit earnings.
Expenses For Expansion: What Amazon Is Doing To Stay Competitive
Financial experts all agree that Amazon is investing heavily in the future. Reuters reports Amazon is heavily promoting its hardware with its recently debuted Fire TV video streaming box and 3D Amazon smartphone. The company is also at the development stage for introducing their own line of video games and original television shows, as well as streaming older HBO shows for customers. With Amazon also dipping its toe into web services, they are trying to create a well-rounded market of products to complement its retail side to successfully compete on a global scale.
Yet with the opening of new warehouses and the ever increasing shipping costs it must face, the company has upped pricing for certain premium services. Back in March, Prime members saw their annual membership price go up from $79 to $99. Amazon will also be required to collect on sales taxes for certain states. With all this money spent on future investment and raising prices to offset these expenses, what type of balancing act is Amazon at in regard to revenue?
The company is walking a very tight line. They reported first quarter earnings of nearly $20 billion in revenue, according to Reuters. Amazon has also experienced a small net income improvement of $108 million. Yet the company has reported that it will have estimated operating costs of between $55 million to $455 million.
While investors are still waiting for Amazon to eke out a better profit with its flurry of development activity to boost revenue, Amazon hopes that aggressive investment in better technology and services promoted in global markets will push revenue to new heights. Expanding into other sales avenues for the near future is always a smart business move for any company to stay competitive. With stock value down nearly 15% over the last two weeks, Amazon needs to balance present revenue activity with operational costs to continue growing or they may see their stock value fall even further.
We are passionate about the work we do here at Broker Dealer. Sign up with us today to gain access to our incredible network of broker dealers, venture capitalists, angel investors, and more!