Management Analysis of Amazon: Acquisition

In 2021, in the journey of its presence in the streaming business, Amazon snaps up James Bond Maker, Metro-Goldwyn-Mayer. In 2017, General Electric acquires Baker Hughes, the oil company, completing its acquisition in almost every industry possible. We know how it ends. In this article, we try to provide insight into the Management Analysis of Amazon. How good is its acquisition? How does it differ from GE? What similarities?

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Too Long, Didn’t Read

Management Analysis of Amazon: Lesson from Disney

Actually, the acquisition of Pixar by Disney is about survivability rather than expansion. In 2001, Disney movies like Fantasia, Atlantis, didn’t give the expected result. Meanwhile, Pixar with Toy Story and Finding Nemo was successful.

So, Disney did it and it turned out to be fantastic. Disney with its channel magnified the creativity of Pixar’s computerized animation¹. Pixar plays a role as a new and fresh character for the Disney business kingdom, Pixar becomes the heart of the story. And Disney is the one who makes it real through merchandise, theme park, and other business segments.

And through its global reach – something that Pixar or any other media company can’t.

History records Pixar acquisition is one of the most brilliant moves in business, even till today. This is our prelude, our question is: Can Amazon, with all its ambition and acquisition, follow the blueprint of Disney on Pixar?

Management Analysis of Amazon: How Amazon Transform Whole Food.

Before James Bond maker, MGM, Amazon’s big-name acquisition is Whole Food. Whole Food itself is the poster child of innovation, pleasant place, fun, great shopping experience.

Long story short, under Bezos, it becomes more and more likely as a fulfillment center for Amazon. The identity is surely eroded, but it doesn’t mean bad things. At least not yet.

The transformation of Whole Food becomes clear if we recognize Bezos’s vision. In the next 10 years, all grocery stores are online. More picker than the customer. The Whole Food turns to be The Whole Online with the pale look.

But the investor may be happy with it.

For us, seems that Amazon follows the clear path of Disney’s success: amplify its strength through acquisition.

Same case with MGM. The James Bond maker will get leveraged by Amazon Cloud infrastructure that brings them to the next level of scale. For Amazon, MGM could be included in its service bundle: Prime.

Mismanagement: How Acquisition Become so Bad

What are the similarities between Amazon and past GE? Both are symbols of innovation. Both have iconic founders, Alfa Edison and Jeffrey Bezos. Both become bigger by eating the other entity. Especially for its Aviation and Healthcare segment. Till today, Aviation and Healthcare have become propel for GE’s growth.

Try to visit these to get more insight on Aviation and Healthcare segment:

https://investingdeck.com/competitive-advantage-of-ge-aviation/

https://investingdeck.com/competitive-advantage-of-ge-healthcare/

The decline begins with the acquisition of nonrelated businesses like media, banks, and other financial services.

NBC, GE Capital that has Near Death Experience in 2008

Why on earth innovative company buys a business in a field that it does not has expertise in?

Since then, GE begins to become big and irrelevant. It transforms from corporate…to become more similar with the bureaucrat. GE’s failed acquisition tells us that this policy doesn’t always come with a great outcome.

Building Blocks of Our Management Analysis of Amazon: Factor That Makes Great Acquisition

As you have expected, in most cases, a great acquisition could be achieved if the acquired business has convergence with the acquirer. or, in the business term, it is called integrated. Pixar’s success is due to its compatibility with Disney, once acquired, the franchise from Pixar integrated into the Disney ecosystem: the theme park, merchandise, etc.

And they should not cannibalize each other.

Your nephew could watch Disney movies and Pixar. (before acquisition). Watching Disney doesn’t mean you don’t watch Pixar. The acquisition will be a little bit more complicated for Pharma. One brand drug could compete with its subsidiary making the profit is suboptimal. If you use one certain drug for a certain disease, it is rare that you will use another brand for the same purpose.

In specific cases, cannibalization doesn’t lead to problems. Like Google acquisition on Youtube that in the end buried its Google Video. And by the way, once again, you the “convergence” of Google business with Youtube. Youtube was built to become a search engine for videos.

Amazon is in the convergence with its Whole Food and MGM. Both will enjoy scalability and cloud support from Amazon. In this case, Amazon is in the same group as Google and Disney but with less rank.

So, please mark these two words: Compatibility and Convergence.

O ya, you can also find another interesting example on Apple, here is:

https://investingdeck.com/tech-mergers-and-acquisitions-apple-smart-move/

Final Though on Management Analysis of Amazon

In its early phase, Amazon seems to follow GE’s path. Both begin with a single business unit, GE with a lightbulb, and Amazon with the book. Then they become bigger and more powerful, GE controls a wide range of businesses, like finance, media, oil and gas, electrics, aviation, medical equipment. Then it begins irrelevantly. Amazon is not there yet.

Unlike other tech giants – Apple, Facebook, Google – Amazon has the ambition to exist in every industry it could be. We see the shadow of GE at a glance.

Actually, The worst is acquiring unrelated businesses and being paid with an expensive price tag. At the moment, Amazon is far from this situation. AWS will be fit for any industry, so irrelevant maybe not relevant here. But someday, if Amazon becomes too big, surely it will lose focus, concentration, and energy. Like GE and Alstom, it is a little bit disappointing that GE can exploit Alstom’s strength in electric transportation.

And it will be an alarm for us.

1. by Steve Job, by the way [↩]