Introduction
The choice of an effective distribution channel is crucial to a product’s further development and market success. The first entry offering should be supported with a practical product distribution approach. Thus, Amazon is viewed as one of the best possible options for running the business.
Partnership Considerations
Several factors justify the choice of a partner. First, it is one of the prominent corporations offering numerous opportunities for growth and development. Second, it provides marketplaces for all brands, regardless of size or nature, enabling them to use their offerings. Ultimately, Amazon continually evolves and attracts new clients, making it a viable option for businesses. For this reason, it is essential to consider the financial aspects of the proposal.
Annual Minimum Volume
First, the annual minimum volume should be considered. Thus, the annual minimum volume refers to the quantity of product a seller must maintain in stock for a specific period (Kotler et al., 2021). Preliminary research indicates that, in this case, it is necessary to consider special numbers for a period of 3 years.
Thus, for trail shoes, the total over three years is $75,000; for hiking boots, $45,000; for athleisure sneakers, $150,000; and for athleisure walking boots, $105,000 (see Appendix). This means that cooperation with Amazon will require increasing manufacturing capacity to produce the required number of products. It will also require expanding plant space to ensure a stable and timely supply of products. This means that cooperating with Amazon may require additional expenditures.
Revenue vs. Expenses
However, the financial statement analysis indicates that potential revenues may exceed spending and justify the cooperation. Thus, the 3-year contract pro forma income indicates that, considering the totals mentioned above, it is possible to expect a net profit of $1,997,000. At the same time, the total fixed costs amount to $1,858,000.
In this way, the potential expenses will be offset by the income generated from the cooperation with Amazon. That is why it is possible to admit that cooperation with the brand is the best possible option. It will help the company become profitable within the three-year term and continue the brand’s development.
Financial Analysis
Finally, analyzing the financials of working with Amazon can clarify the costs of collaboration and the required investment. The required investment comprises the costs of equipment, buildings, and plant expansion, as well as personnel and utility costs. In this way, it is expected that around 1,858,000 will be required. However, choosing Amazon helps avoid additional spending on physical stores, which can amount to significant sums.
Moreover, online distribution channels are becoming increasingly popular, offering new marketing opportunities (Kotler et al., 2021). Additionally, payments for sellers and personnel of physical shops are also excluded from the final result. In this regard, using the given option can help save costs and ensure the accepted 3-year plan is successful for the project.
Conclusion
Overall, the financial statement analysis indicates that Amazon is a potentially strong partner. The proposal might be beneficial, as expected spending is lower than income. The net profit will help compensate for all necessary investments in plant expansion and personnel costs. At the same time, the generated income can be used to support the project’s further development and ensure it continues to evolve. It will also help ensure products are delivered to clients without delay.
Reference
Kotler, P., Keller, K., & Chernev, A. (2021). Marketing management (16th ed.). Pearson.
Appendix
