CH.9 Financial Analysis and E-tailing Business Models

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Questions and Answers

What is a primary challenge faced by startup ventures in online retailing?

Maintaining profitability (correct)

Expanding to new markets

Creating integrated shopping experiences

Achieving disintermediation

Which of the following is NOT a characteristic of the service sector?

Concerned with manufacturing tasks (correct)

Concerned with performing tasks in and around households

Accounting for 75% of economic activity

Employing 4 out of 5 U.S. workers

What is the primary goal of integrating online and offline operations in online retailing?

To disintermediate industries

To provide a seamless customer experience (correct)

To reduce market entry costs

To increase operating costs

What is a major category of service industries?

Transaction brokers Signup and view all the answers

What percentage of the total GDP does the U.S. retail market account for?

71% Signup and view all the answers

What is a key feature of services that makes them suitable for e-commerce applications?

Knowledge-intensity Signup and view all the answers

What is the primary advantage of e-commerce over traditional retail?

Reduced search and transaction costs Signup and view all the answers

What is a major driver of growth in online retailing?

Social, local, and mobile e-commerce Signup and view all the answers

What is the primary characteristic of a multi-channel firm?

Operates through multiple channels, including online and offline Signup and view all the answers

What is the percentage of personal consumption accounted for by services in the U.S. retail market?

66% Signup and view all the answers

What is a characteristic of services that requires personalization and customization?

Type of service, e.g., medical vs. financial Signup and view all the answers

What is a challenge faced by established merchants in online retailing?

Creating integrated shopping experiences Signup and view all the answers

What is the primary advantage of multi-channel integration for retailers?

Improved customer experience and increased efficiency Signup and view all the answers

What is a category of service industries?

Professional services Signup and view all the answers

What is the primary difference between general merchandisers and specialty retailers?

General merchandisers offer a wide range of products, while specialty retailers offer a narrow range of products Signup and view all the answers

What is the primary characteristic of the mail order/telephone order sector?

Sophisticated order entry, delivery, and inventory control systems Signup and view all the answers

What is the primary focus of Amazon's business strategy?

Maximizing sales volume and lowering costs Signup and view all the answers

Which of the following e-tailing business models is characterized by selling products directly to customers through a physical store and online platform?

Bricks and clicks Signup and view all the answers

What is the primary metric used to evaluate a company's financial viability in the context of e-commerce?

EBITDA Signup and view all the answers

Which of the following statements is true about Amazon's strategic analysis?

Amazon is a leading provider of web services Signup and view all the answers

What is the primary benefit of multi-channel integration in e-commerce?

Improving customer satisfaction Signup and view all the answers

Which of the following e-commerce companies is characterized by its direct sales model?

Dell Signup and view all the answers

What is a key aspect of Amazon's strategic analysis in terms of technology?

Maintaining a large collection of online retailing technologies Signup and view all the answers

What is a key challenge faced by Amazon in terms of its strategic analysis?

All of the above Signup and view all the answers

Study Notes

Financial Analysis Factors

Financial statements used for analysis include Statements of Operations and Balance Sheets
Key components of Statements of Operations: Revenues, Cost of Sales, Gross Margin, Operating Expenses, Operating Margin, Net Margin, and EBITDA
Key components of Balance Sheets: Assets, Current Assets, Liabilities, Current Liabilities, Long-term Debt, and Working Capital

E-tailing Business Models

Four types of e-tailing business models: Virtual Merchant, Bricks and Clicks, Catalog Merchant, and Manufacturer-Direct
Examples of each type:
- Virtual Merchant: Amazon
- Bricks and Clicks: Walmart, J.C.Penney, Sears
- Catalog Merchant: Lands' End, L.L.Bean, Victoria's Secret
- Manufacturer-Direct: Dell

E-commerce in Action: Amazon

Vision: Earth's biggest selection, most customer-centric
Business model: Retail, Third-Party Merchants, and Amazon Web Services (merchant and developer services)
Financial analysis: Continued explosive revenue growth, profitable
Strategic analysis/business strategy: Maximize sales volume, lower costs and cut prices, acquisitions, mobile shopping, Kindle
Strategic analysis/competition: Online and offline general merchandisers, Web services

E-commerce in Action: Strategic Amazon

Strategic analysis/technology: Largest, most sophisticated collection of online retailing technologies available
Strategic analysis/social, legal: Sales tax, patent lawsuits
Future prospects: Net sales growth, significant gains in customer service, speed, and accuracy

The Retail Sector

Most important theme: Integrating online and offline operations
U.S. retail market: $11.1 trillion (71% of total GDP)
Personal consumption: Services (66%), Nondurable goods (23%), Durable goods (11%)
"Goods" vs. "services" ambiguity

The Retail Industry

7 segments: Clothing, durable goods, etc.
Each segment uses the Internet differently
Information vs. direct purchasing
General merchandisers vs. specialty retailers
Mail order/telephone order (MOTO) sector is most similar to online retail sector

E-commerce Retail: The Vision

4 key points:
- Find lowest prices
- Reduced search and transaction costs
- Lowered market entry costs, lower operating costs, higher efficiency
- Traditional physical store merchants forced out of business

Common Themes in Online Retailing

Online retail is the fastest-growing channel on a revenue basis
Profits for startup ventures have been difficult to achieve
Disintermediation has not occurred
Established merchants need to create integrated shopping experiences to succeed online
Growth of online specialty merchants, e.g. Blue Nile
Extraordinary growth of social, local, and mobile e-commerce

The Service Sector: Offline and Online

Service sector: Largest and most rapidly expanding part of economies of advanced industrial nations
Concerned with performing tasks in and around households, business firms, and institutions
Employs 4 out of 5 U.S. workers
75% of economic activity

Service Industries

Major service industry groups: Finance, Insurance, Real estate, Travel, Professional services, Business services, Health services, Educational services
Two categories: Transaction brokers and Hands-on service providers
Features: Knowledge- and information-intense, Personalization and customization, Level differs depending on type of service

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Description

This quiz covers financial analysis factors including statements of operations, balance sheets, and e-tailing business models.