Challenges and Strategies for Amazon Inc in the Evolving Online Market

Introduction

Background

Amazon Inc. is the world’s leading online retailing company with over 100 million subscribers and over 310 million active users (Business Strategy Hub, 2020). The company enjoys high popularity, wide spread market reach and high capitalization due to its position as one of the largest companies for information technology and associated online services. The online market however, keeps changing and presents with it, new challenges for Amazon Inc. The company therefore, needs to continually address these challenges by maintaining competence and resilience, so as to fulfill its corporate mission and vision statements (Greenspan, 2019). For businesses looking in place to understand such strategies better, seeking business dissertation help could offer the needed insights into the adaptive tactics of Amazon.

The company’s decision makers employ reliable analytical model such as PESTEL and SWOT tools to assess and identify the various significant threats and opportunities in the business’s remote or macro-environment that are associated with the internal and external factors. The significance of expansion of Amazon Inc.’s operations into more markets for support of global ecommerce growth is revealed through the PESTEL analysis (Amazon.com, 2021).

Scope

The content of this paper is limited to the PESTEL and SWOT analysis of Amazon Inc. based on the company’s creativity and innovation, opportunity identification, business strategies, ethics and sustainability. Amazon Inc.’s performance is affected by a number of internal and external factors as shown in the PESTEL-SWOT (Amazon.com, 2021)analysis relating to its remote and macro-environment industry. The factors discussed include political, economic, social/sociocultural, technological, ecological/environmental, and legal. These impact the remote or macro-environment of an ecommerce enterprise, which in this case is Amazon Inc. Other markets and areas from the company that are also captured in this analysis include retail services, consumer electronics and cloud computing services (Greenspan, 2019).

Competition

Amazon Inc. needs to address the issue of competition from potential competitors like Walmart who are also constantly growing and prove to be consistently aggressive. In terms of use of technology, companies like Google, Microsoft, Apple and IBM among others prove to be worthy competitors for Amazon despite its well established cloud network and technological services. Other potential competitors include Intel considering their involvement in creating and use of microchips and cloud infrastructure (Greenspan, 2019).

PESTEL and SWOT Analyses

A number of internal and external factors impact Amazon Inc.’s performance and are shown using the PESTEL and SWOT analyses as discussed below:

Political Factors

These include activities of different governments and their impact on Amazon’s business and its environment. The company operates alongside and is greatly influenced by political will, which determines the growth of its e-commerce industry. The political factors impacting Amazon Inc.’s operations include:

Political stability – especially in developed countries including the United States of America and countries within the European Union. This is a considerable opportunity for Amazon’s e-commerce.

Support for ecommerce from the government. This may go either way for Amazon in that it allows a good environment for the company to thrive (opportunity), but it may also attract competition from other companies enjoying the same environment (threat).

Increased fight against cyber-crime by the government. This ensures improved security on the online platform over which Amazon operates (opportunity).

Beside other things, amazon thrives on political stability (Shabanova, 2015), which enables expansion and diversification of its ecommerce in the developed countries. For instance, the political stability of the United States allows for expansion of Amazon’s Brick-and-Motor operations within the country thus complementing its ecommerce services. Support for ecommerce from the government also allows Amazon to expand in the relevant markets.

However, competition from other online companies such as the constantly expanding Chinese retail firms pose threat to Amazon’s online business. The promotion of cyber-security on the other hand, improves business conditions thus giving Amazon an opportunity to exploit and increase its resilience in the market through the use of the ecommerce industry and information technology platforms (Greenspan, 2019).

Economic Factors

The economic condition of the countries within which Amazon operates its businesses greatly affects the company’s performance. The trends and changes associated with economies of remote and macro-environment that affect online business and non-online business performance are analyzed herein. The economic factors affecting Amazon include the following:

Economic stability especially for developed economies such as the United States and the European Union. This is a great opportunity for thriving of Amazon.

Increase of disposable income within developing economies. This is another possible opportunity for Amazon to expand.

Possibility of recess in China’s economy. This is a threat to Amazon’s business.

High brand valuation. This is one of the company’s strengths.

Stabilization in developed countries’ economics holds a great potential for the success of Amazon. This is so because a stabilized economy is associated with reduced risks thus minimizing issues in macro-environment and remote business platforms. For this reason, Amazon is able to comfortably expand its online retail business. In developing countries, the increasing amounts of disposable income grants Amazon a good ground for growth by boosting its financial performance (Greenspan, 2019).

The company’s strategic plan should therefore, include growth opportunities in developing countries. However, possibilities in China’s economic recession pose a threat to Amazon’s business considering China’s sizable market in which the company enjoys increasing penetration. The company’s brand was valued at $200 billion ranking second to Apple according to the 2020 ranking by the Interbrand Global Brand (Business Strategy Hub, 2020).

Social and Sociocultural Factors

These greatly influence Amazon’s performance and they vary from place to place. Analysis is hereby done based on impact of sociocultural trends and/or changes on Amazon’s online retail business and provision of information technology goods and services. The following sociocultural factors affect the company based on the remote and macro-environment consideration:

Positive shift in the online buying tendencies. This marks a great opportunity for Amazon.

Increasing protection of consumers in developing economies. This also shows an opportunity for growth of Amazon.

Widening gaps between social classes. This is a threat for Amazon.

Increasing tendencies of online buying implies more benefits to Amazon considering its widespread online operation. Preference of over-the-internet purchasing will give the company chance for better performance and growth. This will enhance its expansion and penetration in developing countries. Higher levels of disposable incomes and the increasing protection of consumers (consumerism) in developing countries are favorable to Amazon due to their potential in increasing the company’s ecommerce revenues.

The company will also enjoy the growing information technology services and ecommerce businesses due to the increasing consumerism. For instance, Amazon’s generic strategy for intensive and competitive advantage for growth is highly boosted by the increased consumerism in developing markets, as it seeks to grow its online retail services globally. Increasing wealth disparities are due to the increasing gap between the two major social classes (rich and poor). This sociocultural trend is a threat to Amazon’s operations due to stagnation of disposable incomes, remote and macro-environment of the economy (Greenspan, 2019).

Technological Factors

Technology is centrally placed in Amazon’s nature of business hence greatly impacts the company’s performance. Analyzed herein are the technological variations and trends, and their impact on the remote and macro-environment of the ecommerce company. The following technological factors impact Amazon:

Rapid obsolescence of technologies. This may be viewed as either a threat or an opportunity as far as Amazon is concerned

Increase in information technology resources efficiencies. This is a good opportunity to improve the company’s performance.

Rapid increase in cybercrimes. This poses a threat of insecurity to Amazon’s online business.

Differentiation and innovation. This is a good strength on the company’s side.

Product failures and flops. This is a weakness that denies the company brand popularity.

Rapid obsolescence in technologies puts a lot of pressure on Amazon to continuously evolve with the quick changing technology. This requires investment of time and resources to achieve. However, business optimization is met through improving the associated technologies. For instance, Amazon has over the years gained a continuous competitive advantage due to its massive investment in the information technology sector. It has also managed to protect its business from new competitors in the ecommerce industry. Increase in information technology resource efficiencies means reduced losses associated with the system hence increased productivity. An example is the company’s application of new computing technologies to minimize operational costs and maximize productivity in online retail (Greenspan, 2019).

Cybercrime is however, a constant threat facing the company, thus destabilizing consumer experience qualities (Christod & Cullinane, 2019) alongside the company’s business integrity. For this reason, Amazon needs to concentrate more on investing in appropriate technological protective measures for the company’s long-term survival despite the issues related to remote and/or macro-environment. This is specifically achieved through continuous and consistent technological improvement. Amazon is known for adding a touch creativity and innovation to its operations including drone delivery services and the Withings Aura Smart Sleep System. These differentiate the company from others. The company encountered big failure during launch of its Fire Phone in the US alongside poor growth in its Kindle Fire device.

Environmental/Ecological Factors

Amazon is mainly an online business although its operations are impacted by the natural environment. This analysis presents the relationship between ecological changes and Amazon’s remote and/or macro-environment. In its strategic plan, Amazon considers the following ecological factors:

Increasing interests in environmental conservation programs.

Increasing emphasis and need for business stability.

Rising popularity of low-carbon directed lifestyles.

Declining consumer safety.

The first three above are considered good opportunities for Amazon Inc. while the fourth one is a weakness. The company gets the opportunity to improve its impact on the physical environment following the increasing interests in environmental programs. These interests are driven by consequences associated with ecological challenges such as pollution due to energy consumption and waste management. The Amazon’s corporate social responsibility strategy may capture the external ecological factors to improve the company’s impact on the environment. The increasing need for business sustainability is another major opportunity for Amazon Inc. for instance higher sustainability criteria greatly strengthens the organization’s brand image as it further improves environmental impact (Greenspan, 2019). This is based on Amazon Inc.’s SWOT analysis.

Another considerable opportunity for the company is the rising popularity of low-carbon centered lifestyles, through which the company boosts its corporate image as an ecommerce leader. Implementation of policies in extensive energy saving could go a long way in enhancing the company’s efforts in reducing carbon emissions during its operations. Amazon therefore, has a significant corporate social responsibility to play by ensuring a comprehensive strategy for addressing ecological concerns in its operations. Rapid increase in number of customers and offerings pose a challenge for the company regarding product vetting and safety analyses. This has led to decline in product safety standards. The United States Environmental Protection Agency (EPA) recently ordered removal of a range of pesticides and other products that were considered unsafe from Amazon’s platform (Business Strategy Hub, 2020).

Legal Factors

The ecommerce operations by Amazon Inc. must be in line with the existing statutes. Herewith is the analysis of impact of regulations on the company’s remote and macro-environment. The following external legal factors impact Amazon Inc.:

Increasing regulation of products.

Changes in import and export regulations.

Increasing business regulations for environmental protection.

These are considered great opportunities for Amazon Inc. The demand by the society to protect consumer safety and security has necessitated the rise in regulation of products. The analysis focuses on how the legal framework creates opportunities for Amazon Inc. in its efforts to fight against retailing of counterfeit products on its website (Amazon.com, 2021). Changes in import and export regulations also provide the company the opportunity to grow. For instance, the increasing accessibility of overseas suppliers by sellers enables the company to expand its global operations. Policies on corporate social responsibility clearly address environmental protection regulations, which enable Amazon Inc. strengthen its brand image appropriately. To this effect, the company enjoys a competitive business advantage in the remote and/or macro-environment (Greenspan, 2019). The company therefore, can possibly enjoy long-term success in the ecommerce industry by ensuring full compliance with the set regulations.

References

Amazon.com. (2021). Amazon News. Retrieved July 23, 2021, from Amazon: https://www.aboutamazon.com/news?q=&f0=0000015f-35ef-d5ad-ad7f-3dff92cb0000

Business Strategy Hub. (2020, Sept 06). Amazon SWOT 2021. Retrieved July 23, 2021, from Business Strategy Hub: https://bstrategyhub.com/swot-analysis-of-amazon-amazon-swot/

Christod, A., & Cullinane, K. (2019). Identifying the Main Opportunities and Challenges from the Implementation of a Port Energy Management System: A SWOT/PESTLE Analysis. Sustainability MDPI, 1-15.

Greenspan, R. (2019, May 20). Amazon.com Inc. PESTEL/PESTLE Analysis, Recommendations. Retrieved July 23, 2021, from Panmore Institute: https://panmore.com/amazon-com-inc-pestel-pestle-analysis-recommendations

Shabanova, B. (2015). PEST - Analysis and SWOT - Analysis as the Most Important Tools to Strengthen the Competitive Advantages of Commercial Enterprises. Mediterranean Journal of Social Sciences, 705-709.

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