Financial enterprises and social responsibilities Harvard Case Solution & Analysis

Financial enterprises and social responsibilities

Question no 1

In 2014Amazon recorded a loss and yet its share price rose substantially (until the last month or so). What caused this? In your view is Amazon a ‘buy’, ‘hold’ or ‘sell’ stock?

Answer no 1

Amazon is a company offering a number of products all over the Europe, Asia, North America and South America. It is one of the largest online selling companies around the world. The company’s sales are increasing on a yearly basis;however the profit margins of the company are low. The competitiveness of the company lies in the low profit margins of the company.

According to Amazon’s management, the first priority of the company is to grow more and the second priority is profits. There has been a tremendous increase in the sales of the company however, profits are also important to make the shareholders of the company stay with the company. The company expands heavily on the growth of the company; the company earns from the strong areas and invests in the weak areas of the company.

The company invests heavily in the research and development. The reason for increasing the share price is that the company is making growth and the losses that are shown in the financials of the company are mostly due to the research and development cost of the company. The shareholders of Amazon are having a confidence in the company’s operations and this is why even when the company is making loss, the share price of the company remains the same of rises. (Trefis Team, 2015)

Considering the growth of Amazon, the share prices of the company would increase in the near future as the increase in sales is expected and the research and development cost of the company will pay off its price.Therefore,it will be a wise decision to hold the shares of the company and to wait for the right time as the first ever dividend of Microsoft was announced after 17 years of getting registered on the stock exchange. (Clark, 2013)

Question no 2

Does Uber’s dramatic rise imply that, before its existence, the market for taxis was systemically uncompetitive? From a consumer’s viewpoint are there any possible downsides of Uber’s success? Overall, is the rise of Uber a net benefit to society?

Answer no 2

The idea presented by Uber is a people friendly business, which has helped the smartphone users to just download an app and get the service of a driver at their disposal. The application allows the users to submit their travel requests, which are then routed to the Uber’s drivers and then the service is provided by the nearest Uber driver. The Uber drivers use their own cars to provide the service to the customers of Uber.

After this step was taken by Uber the taxis are now a bit competitive because before the presence of Uber there was no other way to contact the cab drivers therefore,the customers had to go to the road and wait for the cab driver to come. The market was so saturated that there was no competition among the cab drivers. The prices that were being charged were dependent on the cab drivers.

Uber’s drivers charge less from their customers as they are competing with the local cab drivers of the city. The increase in the competition is due to the success rate of the company. The local cab drivers are now in a position where they have to compete with the Uber drivers in terms of cost. (Bender, 2015)

This change in the taxi market has made the competition intense and the net benefit is provided to the public at large. The competition in the market has caused the prices of travelling to reduce as Uber’s drivers will capture the market if the competition ends. This has provided the public a benefit by saving money and providing knowledge to its customers................

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