Amazon Acquisition of Zappos

In: Business and Management

Submitted By flyover87
Words 5104
Pages 21
| Mergers & Acquisitions | Acquisition Case Study: Amazon’s acquisition of Zappos, November 2009 | | Stephen Greening | 26/04/2014 |

WORD COUNT: 2489
Contents
Executive Summary 3 Introduction 4 Amazon Overview 4 Amazon’s Previous Acquisitions 5 Zappos Overview 6 Acquisition of Zappos 9 Strategy 11 Why Amazon wanted to acquire Zappos 11 Regulation 14 Valuation 15 Comparable Company Analysis (Comps) 15 Discounted Cash Flow (DCF) Analysis 16 Precedent Transactions Analysis 16 Historical Stock Price & Next Twelve Months (NTM) Analysis 17 Financing 19 Defence Tactics 21 Implementation 23 Risk 25 Conclusion 26 References 27 Books 27 eBooks 27 Journals 27 Online Images 27 Presentation 28 Reports 28 Websites 28

Executive Summary
In November 2009, ‘Amazon, Inc.’ (Amazon) completed the acquisition of ‘Zappos.com, Inc.’ (Zappos) in a deal worth around $1.2 billion. Amazon announced in July 2009, that it had reached a deal to acquire Zappos in a deal worth $847 million. The deal was financed by 10 million shares of Amazon common stock (worth around $807 million) and $40 million of Cash and Restricted Stock units on the balance sheet.
Amazon is an American international electronic commerce (e-commerce) company, while Zappos is an online shoe and clothing shop. The acquisition of Zappos by Amazon was a friendly takeover; the public announcement, negotiation and acceptance of the acquisition deal are the characteristics of a friendly takeover. The deal was a horizontal merger, with Amazon acquiring Zappos to offset its failed online shoe retail market entry Endless.com.
The rationale for the deal was outlined as follows: * Amazon believed there was a tremendous opportunity to grow the Zappos brand. * Zappos was interesting in…...

Similar Documents

Zappos

...Zappos was founded in 1999 by Nick Swinmurn as an online shoe retail website. It offered more than 100 brands and by 2000 it had expanded to 150 brands. They distinguish themselves from the competition by providing free shipping and an outstanding customer service. In 2009 Amazon bought Zappos for $1.2 billion. Swinmurn is no longer involved with Zappos and Tony Hsieh has been the company CEO since 2001. Hsieh has been the driving force behind Zappos innovative “weird” culture or as some people may call it a “cult”. Zappos’ culture could be considered unconventional, but its formula has generated billions of revenues while keeping customers, employees and shareholders happy. In the following paragraph, I will explore the culture of Zappos and how it manages to be successful and stand apart from the competition. I will also review my own company’s culture and whether its culture helps the company to compete and be successful. Zappos’ philosophy is based on keeping customers happy with an outstanding customer service, but in order to provide an outstanding customer service you have to have a happy employee. Hsieh’s formula is very simple: happy customers + happy employees = profits. In order words, one cannot exist without the other. Because of Hsieh’s emphasis in providing excellent service to both customers and employees, Zappos’ organizational culture profile is of people-oriented and service. Hsieh understood from the very beginning and from past experiences that the......

Words: 1123 - Pages: 5

Zappos

...1. The original business model for Zappos was the drop ship model which is being the middle man (Brady, 2010). The easiest way to think about a drop ship business model is to think about your own retail web based or mail order business. In many ways they work the same. An order with payment comes in, is processed and then shipped to the purchaser. In both your retail environment and in the drop ship environment, the person receiving the package is your customer. The only difference to the customer is that in the one instance, the product is shipped directly from your location and in the other instance; the product is shipped from another location. (Steve, 2009). Over the past several years, drop shipping has emerged as the ‘go to’ strategy for most e-commerce retailers.  This method has become the de facto standard for most of the uber-successful e-commerce startups from the last several years. This method has 3 main advantages (1) positive cash flow, (2) reduces inventory risk and (3) reduces transportation expenses (Matthew, 2011). 2. In 2003, the founder of Zappos abandoned the drop ship model and instead decided to manage its inventory and take control of all their customer experience. The main reason behind this decision is that he wanted to be in control of the entire experience that Zappos gives to its customers especially that at that time a quarter of the inventory was out of control and because he felt that they needed to distinguish itself from the competition......

Words: 764 - Pages: 4

Zappos

...Discuss the concept of motivation and Zappos You will use your Group Discussion Board to conduct your analysis of this case study. Discuss the approach used by Zappos. Why is the approach not used very often? What are the challenges and the benefits? Zappos was acquired by Amazon in 2009. What organizational changes do you believe occurred due to the acquisition and would continue to occur over time? Discuss the concept of motivation and Zappos. Would Zappos be a motivating place to work? Why? Why not? Your analysis must include supporting evidence. Motivation is defined as “the desire to achieve a goal or a certain performance level, leading to goal-directed behavior (Erdogan; Chapter 5, P.1 paragraph).” Motivation can mean a lot such as a company trying to accomplish a set goal, or a soldier trying to complete a physical fitness test, in some type of form a person is trying to reach an obtainable goal. Motivation and Zappos is another thing, they encourage employees to be, themselves, just be to be regular people. The concept of support goes further in at zappos than just in its core values, it goes into its Performance, such as no time table on customer service calls, the point of that is to make the customer feel very important and to build a relationship with the customer, and also other motivating effects could be a compressed workweek, and a nice benefits package, which offers full healthcare coverage. Motivation has a lot to do with this organization, in......

Words: 261 - Pages: 2

Zappos

...GM 591: Leadership and Organizational Behavior Project Proposal Overview of Organization The Organization I will be researching is ZAPPOS. Zappos is an Internet based shoe company that has blossomed over the years since 1999. They have ventured on to more than just shoes, servicing the public with offering things like accessories, handbags, watches, clothing, and even home goods. If there was an award for the best company in the U.S., I believe ZAPPOS would receive this award. This company is not committed to gaining profit from its products, they would rather be known for their great service, and to “just so happen to sell shoes”. They go above and beyond for their consumers and employees. Offering great benefits and even gifts to their customers. Zappos has developed their own company culture and core values and it has in return made them one of the most successful businesses of our day and age. A man named Nick Swirnmurn went searching for a pair of brown air walks at the mall one day and was reluctant to find nothing. Out of frustration he called up one of his business partners with the idea of selling shoes online. Nick was interested in providing shoes for all walks of life in all styles, shapes, and sizes. He wanted to sell not just regular shoes, but also shoes that weren’t easy to find. He knew that in the US shoe sales totaled a profit of $40 billion dollars and 5 % of that came from shoes being sold in traditional catalogs. Nick pitched this......

Words: 1376 - Pages: 6

Zappos Concept of Motivation

...Discuss the approach used by Zappos. Why is the approach not used very often? What are the challenges and the benefits? Zappos was acquired by Amazon in 2009. What organizational changes do you believe occurred due to the acquisition and would continue to occur over time? Discuss the concept of motivation and Zappos. Would Zappos be a motivating place to work? Why? Why not? Your analysis must include supporting evidence. Zappos has a very unique approach to motivating its employees, which is spearheaded by its CEO Tony Hsieh. This approach includes a study of happiness, respect, and the company is centered on the idea of “a corporate culture of caring a priority”. Zappos is able to accomplish this using David McClelland’s acquired-needs theory; they motivate employees by taking a strong interest in each employee. This allows each of their employees room to grow, and if they employees see and feel this way then it is reflected in their performance and in how they treat each of their customers. This approach is very difficult to emulate and not used very often because a company has to invest a lot of time training, and trust in each of their employees to make this successful. This approach is a product of a couple of things: First, the CEO cares about his employees. This is made possible, largely because the company only employs around 1,500 people, and they are all located in a central location. Second, it is extremely difficult to measure the value of happiness.......

Words: 1498 - Pages: 6

Zappos

...1. What is the business of Zappos and what are its critical success factors (CSF’s)? [lists] Business of Zappos: Zappos is an online shoe store, providing customers with a great number of sizes, styles and brands. What Zappos applies is the Loyalty business model, which reflected in two ways. a. The loyalty of Zappos employees: the firm proposed “the offer” as a bonus to employees if they quit, which is an incentive for employees to quit. However, the employees that stay will be very committed to Zappos. b. The loyalty of Zappos’ customers: the services that Zappos offers to its customers are very attractive and beneficial to customers. For example, free delivers, 4-day delivery window and a 365-day return guarantee. All these services help Zappos gain more loyal customers. Their revenues are mostly come from its repeat customers. Critical Success: a. Timeliness of shipment: because as the business of Zappos grew, Zappos was confronted with the issues that their customers’ orders can’t be shipped on time. So Zappos opened its own warehouse and fulfillment centers, and of course hiring more employees to satisfy this high demand. Therefore, by implementing this set of actions, Zappos can offer the best selection of shoes available everywhere online. b. Training of employees: new employees must complete an intensive four-week training program, which let them better understand the company’s culture, business strategy and process. By training them, employees...

Words: 1285 - Pages: 6

Zappos

...MESUT KABAER 9501123507 1) SWOT analysis for Zappos Strenghts • Free shipping (Very important issue for returns, selling shoes online is tough job to do and i think this what makes them sucesseful beacuse the shoe size would be a big concern when buying them online but if customers can order many shoe size and colours and return them as they like, this is a great example of competetive advantage over other online retail business) • Customer focused business model (Long term customer relationships providing great service and happiness to customer which leads to make customer re-purchase) • Customer service ( in call center they see this as an opportunity to make the customer happy so they want people to call them to establish personel, emotional connections with the customers to serve best way and provide great service) • Strong corporate culture and work environment ( talented people and employees enjoy their work, great service and brand power, relaxed and wacky atmosphere such as nap room, wellness center, open mic, open door policy to management etc) • Unique hiring and training process (hiring right people for the job, five week training program through out the whole line of business, 200 hours of clasees) • Benefits ( benifts that it provides to its employees such as entensive health plan, medical benefits dental, visioni and life insurance, flexible spending account, pre-paid legal services, free lunches and snacks, life coaching, car pool program......

Words: 1224 - Pages: 5

Amazon

...Nguyen Quoc Khanh BUS 103 Case 3: Amazon: One E- Store to Rule Them All. 1. In what way does Bezos’s decision to develop and deliver the Kindle show systematic and intuitive thinking? First, Bezos has shown his intuitive thinking in the decision of unveiling Amazon Kindle, a new device that is completely outside Apple’s catalog though Amazon still sold Apple’s iPod. Furthermore, he introduced to Medias his product, it seemed like a declaration to Apple. Because Apple is a giant of technological industry, so the situation would be complex to be its competitor. However, it was the only way to make a technological evolution by Kindle. As a result, this situation required Bezos to have a quick and broad evaluation for making the decision. Besides, the systematic thinking of Bezos was shown by introducing the free application “Kindle for iPhone and iPod Touch” when he realized the benefit of allowing readers to read books on a variety of devices. After, in order to upgrade Kindle, Amazon acquired Touchco Company, which specialized in touch screen technology. These decisions are systematic because Bezos had to analyze the situation step- by- step, thoroughly and carefully with full of information towards an effective and logical decision. 2. How do you describe the competitive risk in Amazon.com’s environment as it leads the market for digital book downloads? Being the leader of digital book downloads market; Amazon.com is likely to face to the competitive risk from another...

Words: 1019 - Pages: 5

Zappos Analysis

...In what ways does Zappos’ culture help and/or hinder the company’s performance? * As an organization grows, it is imperative to have quality talent. Zappos strength was in its hiring practices that focused on organization-fit apart from skill-fit. With a strong people oriented culture already in place, they were adept in judging the fit based on the criteria they created for the culture which in turn led to long term success for the employees. This vision reflected in their extensive hiring practices. * Their strong culture paved the way to become a marketable brand on its own in the industry resulting in talent pool augmentation. * The biggest advantage posed by their strong culture was the ease of buy-in among the new and current employees which resulted in better assimilation and integration of their core principles and vision. The culture was pervasive at all levels of the organization that buy-in was evident in a short span of time. * The culture at Zappos made it possible for the management to delegate and share responsibilities among the peers. This was evident in the vision created by the CEO of a boundary-less organization. * Their egalitarian culture and empowerment aided them in being innovative and helped the management in tapping and maximizing the creative potential of their employees. This was evident in their strong emphasis on cross-training of employees as part of the new hire process and at making it available for various career......

Words: 635 - Pages: 3

Zappos

...1. Merging with Amazon 2. Expanding into the clothing and merchandise market 3. Being voted Top and #1 in many categories including customer service Threats 1. Amazon 2. Payless, Famous Footwear, etc. 3. Any walk in stores that people can go into 4. Overseas markets available for cheaper prices Problem Statement: How can Zappos keep their repeat clientele and new clientele, both in the US and overseas, while merging with other companies such as Amazon? Alternatives 1. While Zappose is making merges, they should also stay an individual company with their logos on their products. 2. Zappos should incorporate free return shipping for customers outside of the US. 3. Zappos should provide their services in store locations. Evaluation Criteria |Criteria |Weight |Justification | |Financial Considerations |0.4 |What is the most cost effective way to keep customers happy while merging? | |Competitors Response |0.3 |How are competitors responding to Zappos products and their delivering methods? | |Ease of Entry |0.3 |Given the numerous competitors in the market and the lack of awareness of the brand,| | | |would Zappos benefit in the......

Words: 895 - Pages: 4

Zappos Analysis

...In what ways does Zappos’ culture help and/or hinder the company’s performance? * As an organization grows, it is imperative to have quality talent. Zappos strength was in its hiring practices that focused on organization-fit apart from skill-fit. With a strong people oriented culture already in place, they were adept in judging the fit based on the criteria they created for the culture which in turn led to long term success for the employees. This vision reflected in their extensive hiring practices. * Their strong culture paved the way to become a marketable brand on its own in the industry resulting in talent pool augmentation. * The biggest advantage posed by their strong culture was the ease of buy-in among the new and current employees which resulted in better assimilation and integration of their core principles and vision. The culture was pervasive at all levels of the organization that buy-in was evident in a short span of time. * The culture at Zappos made it possible for the management to delegate and share responsibilities among the peers. This was evident in the vision created by the CEO of a boundary-less organization. * Their egalitarian culture and empowerment aided them in being innovative and helped the management in tapping and maximizing the creative potential of their employees. This was evident in their strong emphasis on cross-training of employees as part of the new hire process and at making it available for various career......

Words: 635 - Pages: 3

Zappos

...team at Zappos? The very first significant management skill that Tony Hsieh practices is his conceptual skills. Having conceptual skills means that Tony is able to see the ‘big picture’ by analyzing and interpreting information. When Tony started serving as the co-CEO of Zappos, he understood that in order to stand out among their competitors, the company cannot focus solely on shoes and profit. His conceptual skill has allowed him to look at a bigger picture and shift his focus to Zappos’ famed corporate culture and employee happiness. In Boone and Kurtz’s book, Tony Hsieh has shown exceptional conceptual skill that has helped Zappos in growing their sales to more than $1 billion annually. Furthermore, Zappos also has won numerous accolades under Tony Hsieh for his efforts in making the company an excellent place to work. Moreover, Tony Hsieh also helped engineer the sale of Zappos to Amazon in a deal worth $1.2 billion. (Boone & Kurtz, 2006) From an online shoe retailer that does not concentrate on shoes alone, these have shown that Tony Hsieh is able to ‘look at the big picture’ and conceptualize the future of the company. Furthermore, from the case study, we can also learn that Tony Hsieh is having extraordinary communication and human relation skills. The way how Tony Hsieh is conveying his messages and ideas to his company and colleague and it has shown us that Tony has very effective communication skills and interpersonal skills. In the early years in Zappos,......

Words: 1650 - Pages: 7

Amazon

...and collectible items through their zShops and Amazon Commerce Network (ACN is the name given to the strategic associations with selected e-commerce companies. Amazon.com makes a minority investment in the companies and entry into commercial agreements that involve sale of products and services.) or going to Amazon Auctions or sothebys.amazon.com. The first of the products offered by Amazon.com were books, as we early noted, starting in July 1995. Then music and DVD/Video were added in 1998. In March 1999, they introduced Amazon.com Auctions including today sothebys.amazon.com and zShops. Other retailing businesses in development are electronics, toys, home improvement, software and video games. This broader spectrum of products and services is related with the company goal of being the most customer-centric firm where customers can find and buy anything they may want on line. [pic] Companies Amazon Has Acquired: Amazon has made over 44 notable company acquisitions over the years. It’s first Acquisition was in 1998. 1998: PlanetAll, Junglee, Bookpages.co.uk (later became Amazon UK). 1999: Internet Movie Database (IMDb), Alexa, Accept.com, and Exchange.com 2004: Joyo.com, an e-commerce site in China. 2005: BookSurge, Mobipocket.com, and CreateSpace.com. 2006: Shopbop, a women’s luxury retailer. 2008: Audible.com, Fabric.com, Box Office Mojo, AbeBooks, Shelfari, and Reflexive Entertainment. 2009: Zappos, Lexcycle, SnapTell, Stanza (Kindle......

Words: 668 - Pages: 3

Zappos

...Zappos Case Study Amber Jennings May 05, 2016 OAD 31863: Principles of Marketing Ottawa University Zappos Case Study Who does not love shopping? Better yet who does not love shopping while sitting at home? Online shopping is a growing trend that has made shopping easy to do from the convenience of your home. Zappos is an online shoe and clothing shop based in Las Vegas, Nevada. It has grown tremendously over the past 17 years and leaves customers striving for more on a daily basis. The unique customer service emphasis offered by Zappos keeps customers coming back for more. Timeline of Zappos * 1999- Zappos was founded by Nick Swinmurn * 2004- Gross sales of Zappos doubles to more than $184 million * 2006- Nick Swinmurn leaves Zappos * 2007- Zappos expand its product categories to include eyewear, handbags, clothing, watches, and kid’s merchandise * 2008- Gross sales at Zappos hit $1 million * 2009- Sold to Amazon.com for $1.2 billion (Zappos, 2016) Market Offering Zappos is one of the few companies that offer free shipping, 365-day return policy, and 24/7 customer service. Zappos offers many different popular brands of shoes, clothing, and handbags. While Zappos is not always the cheapest retail store the service makes up for the price difference. The main target customer of Zappos would be an online shopper. Zappos strives for the best customer experience and do whatever they can for customers to get the best out their shopping......

Words: 533 - Pages: 3

Zappos

...Son site d'e-commerce, Zappos, numéro un mondial des ventes de chaussures en ligne, basé à Las Vegas, réalise 1 milliard de dollars de ventes par an. Avec des chaussures mais aussi des vêtements, des sacs, des accessoires... Diplômé de Harvard, Tony Hsieh est un passionné de culture client et de... poker ! Ce petit génie américain du business a revendu sa première société, LinkExchange, à Microsoft à l'âge de 24 ans pour 265 millions de dollars ! En 2005, il investit à titre personnel dans Zappos et en devient manager. Quatre ans plus tard, Amazon rachète Zappos pour la coquette somme de 1,2 milliard de dollars. Tony Hsieh (prononcez Shay) en reste le président. Au Top 100 des entreprises où il fait bon travailler Zappos est régulièrement classée dans le Top 100 des meilleures entreprises où il fait bon travailler. Si le bonheur de ses collaborateurs lui tient tant à coeur, c'est qu'il fait sa fortune ! Il y a quelques mois, il a publié un livre de management, Delivering Happiness (éd. Business Plus), pour raconter comment Zappos a su conjuguer profits et bonheur des clients et des salariés. Un best-seller pendant six mois sur les listes du New York Times ou du Wall Street Journal et un exemple de la singularitéde Zappos. La société est l'un des rares sites d'e-commerce au monde dont le centre d'appel basé aux Etats-Unis, "trop important pour être expédié en Inde", ne "flique" pas ses salariés. "Chez Zappos, écrit Tony Hsieh, nous disons que nous délivrons du......

Words: 293 - Pages: 2