Respond to…
Using the annual report from Amazon, discuss the risks the company faces and the actions they take to mitigate those risks. Refer to the Management Discussion and Analysis section of the annual report for this information.
According to Kim (2019), there are 4 risks that could affect Amazon. 1) the law of large numbers: Amazon is so big that it would become harder to impress investors with rapid growth rates. He stated, for example Amazon needs $2.3 billion of additional sales just to generate 1% growth. 2) Succession: What is going to happen when Jeff Bezos decides to step down? It could lead to a significant succession risk. 3) Competition: In order to sustain its growth rate, Amazon will have to enter new, large markets, where more competition awaits. 4) Regulation: the US Government could stop Amazon if it steps up antitrust or other regulatory scrutiny of the company. The company’s huge market influence could draw additional regulatory pressure.
References:
Kim, E. (2019, May 30) CNBC. “One of Amazon’s biggest bulls explains four risk that could cause the ‘demise’ of the company. Retrieved from
Respond to…
Discuss the risks the company faces and the actions they take to mitigate those risks.
Google LLC is a multinational technology company. While the company is the largest and most used search engine it faces a variety of risks. For instance, because the company is the largest search engine in the internet sector it has to deal with the threat of government regulation. According to Hong, Bandyopadhyay, Lim, Yang & Cheng (2017), in 2010 the FCC proposed net neutrality rules consisting of four core principles: transparency, no blocking, no unreasonable discrimination, and reasonable network management (p. 354). If this regulation goes into effect it could have an enormous effect of Googles content operation by limiting its search engine results and advertising. These actions could be detrimental as the majority of the companys profits come from these factors. An additional issue could from the advancements in technology. Search engines are slowly becoming antiquated as the versatility of mobile applications grow.
Risk mitigation techniques include; avoidance, diversify, control, reduce, transfer, and accept (McNamee, 2000). Mitigating risk when it comes to government regulations is going to be difficult as the government is going to eventually achieve in some way or manner its objective of having some control over the internet. Lessening the effects of this risk financially is going to the best method of minimizing the impact of this risk. For instance, Google should continue its current efforts in other business opportunities, such as driverless cars and biotechnology. Investing on application and new technology is also going to help mitigate the risk of becoming outdated and less use as it will make it more competitive in the technology market. In both case the best course of action may be the techniques of acceptance and diversify
As part of your response consider whether you think the risk mitigation techniques are reasonable. Discuss what others concerns or advice you would offer if you had the opportunity.
In my opinion the risk mitigation techniques are reasonable. Certain risks are just unavoidable and uncontrollable, such as government regulation. When companies become too large, government is always going to step in to control and avoid a monopoly. My advice in regard to government regulation would be to accept as there are no other options. However, diversification is going to be Googles best option as it will present other avenues that could be highly profitable and will aid in Google staying competitive in the tech industry. From 2017 to 2018 the company had decreased its investing and research activities by 6%. The company should increase its investing activities back to previous levels in a way to create other avenues of revenue.
References:
Hong, G., Bandyopadhyay, S., Lim, A., Yang, Y.-C., & Cheng, H. K. (2017). Effects of Competition among Internet Service Providers and Content Providers on the Net Neutrality Debate. MIS Quarterly, 41(2), 353-A29. Retrieved from http://search.ebscohost.com.proxy-library.ashford.edu/login.aspx?direct=true&db=bsh&AN=123148192&site=eds-live&scope=site
McNamee, D. (2000). Targeting Business Risk. Internal Auditor, 57(5), 46. Retrieved from http://search.ebscohost.com.proxy-library.ashford.edu/login.aspx?direct=true&db=f5h&AN=3845099&site=eds-live&scope=site
