Investment activities are crucial for every organization because they allow businesses to generate revenue, promote future growth and development, and many others. That is why companies typically consider many factors and features to decide when and how to invest their funds. On the one hand, a business can rely on financial indicators, including return on investment, price-earnings growth ratio, and others, to decide whether to invest. On the other hand, non-financial features can also be essential because innovation, competitiveness, and the presence of employee training can also determine whether a firm wants to invest its funds. As for Amazon, this company’s investment decision-making is influenced by innovation, a desire to grow, competition, and customer needs.
Innovation is a significant non-financial factor that Amazon considers while making its investment decisions. This statement justifies the attention that the organization draws to artificial intelligence companies. For example, Amazon invested $20 million in Harvest.ai in 2017 and $500,000 in TrackR in 2016 (Henry, n.d.). It is possible to suggest that the organization under analysis decided to give its money to these firms because they offered innovative solutions. Amazon predicted that these products and services would make a difference in the market, which resulted in the decision to invest in them to obtain benefits in the future.
A desire to develop and grow can also be considered an influential factor that fosters investment. According to Rikap (2020), Amazon wants to establish an intellectual monopoly in the market, which makes the organization improve its research and development sector. Addressing this area can provide the business with many essential benefits. In particular, the given approach can allow Amazon to generate internal value and resources that will help the company develop. As a result, this organization is willing to invest many resources to create new and unique products and services that can attract potential customers and beat the existing competitors.
Competition is another non-financial factor that affects the investment decision-making of Amazon. The rationale behind this statement is that the organization operates within a highly competitive market where significant rivals are Walmart, Netflix, Apple, and others. For example, Amazon invested in artificial intelligence to create a digital assistant Alexa that could compete against Apple’s Siri (Henry, n.d.). Simultaneously, Amazon purchased a video service to challenge Netflix’s position in the market (Henry, n.d.). This information demonstrates that the desire to overcome powerful rivals can be considered an influential factor that makes Amazon invest money in different startups.
One can also mention that drawing attention to customer needs also impacts Amazon’s investment activities. Since the company understood that media production and entertainment would face increased demand, sufficient resources were allocated to develop that sphere. That is why the organization launched Amazon Video, a digital streaming site, in 2006 and opened the retailer’s production studio in 2010 (Henry, n.d.). The prediction of customer needs and behavior allowed Amazon to gain significant advantages. Furthermore, the COVID-19 pandemic resulted in the fact that the entertainment sphere became more requested among the general public, providing Amazon with more considerable revenue.
In conclusion, financial indicators are not the only phenomena that can guide investment decisions. The case of Amazon has demonstrated that a business can benefit from relying on non-financial factors. The given organization has managed to generate value from focusing on innovation, internal development and growth, competition, and customer needs. Since Amazon drew sufficient attention to these spheres, the company has managed to generate value and compete with major rivals. This information demonstrates that the four areas under consideration can be influential factors for an organization to make investment decisions.
References
Henry, Z. (n.d.). Amazon has acquired or invested in more companies that you think – At least 128 of them. Inc. Web.
Rikap, C. (2020). Amazon: A story of accumulation through intellectual rentiership and predation. Competition & Change. Web.