Amazon’s SWOT , PESTEL Analysis and Porter’s Five Force Appraisal Analysis

Amazon Company SWOT Analysis

In order for the company to be able to identify its areas of weaknesses, and come up with effective strategies to improve the company’s performances and profitability margins, it has to conduct a SWOT analysis.

Strengths

The company derives its strengths from the three strategic drives which are, good leaderships that aim in reducing company’s costs, differentiations and focus on customer obsessions rather than competitor focus. This strategy has helped in the increase in the profitability margins and hence the shareholders achieving value from the company. The other strength is that the company develops its competitive advantage from leveraging information technology and the use of e-Commerce as a platform for ensuring that the company remains competitive in all the market segments (Peterson & Smith, 2015, p.56). The company has marketed itself globally from the quality services and products it offers to its customers, this has led to it enjoying top of the mind recalling from consumers. This has also helped in entering into new markets, an issue that was very difficult for other e-Commerce companies. The company has also been able to actualize customer satisfaction through the use of better logistics and distribution structures which also improved its level of competitiveness.

Weakness

The company’s diversification strategy, which entailed expanding its focus from the retail of books online into other products like electronics, has been spreading slowly. This is seen as a good strategy on considering the risks of diversification, but the company has to ensure that it does not lose its strategic advantage as it moves from its principal competence. The high possibility of losing profit margins due to the offering of free shipping to customers is another weakness (Spender, 2013, p.56). Considering the fact that the company retails through online only, it might interfere with the company’s expansion to emerging markets. The greatest weakness is that the company operates in an almost zero margin business representations, which has severely hurt its profitability.

Opportunities

The company is benefiting in on its identifications as an online retail pioneer through the sell of its expertise to key store groups globally. This is promoted by the merging and acquisition of small companies that help in increasing its market shares. Amazon also has many opportunities for building collaborations with public sectors (Peterson &Smith, 2015, p.47). Through the purchase of other companies, for example, the purchase of China’s online retailer, the company is able to enter into new markets and reduce the level of competition from rival companies.

Threats

The company faces stiff competition since all successful internet companies attract competition. Another threat is that international competitors may intrude upon the company as it expands, hence limiting its growth and expansion (Peterson & Smith, 2015, p.78). Most of the products sold by the company are bought as gifts; hence the sales might be affected by the elements of seasonality.

Some of the questions that might be a source of more information from the stakeholders and that can contribute to the analysis are whether the company is planning to expand its product mix, and what are they going to consider when are trying to enter into new market segments that lacks trust on online marketing.

Amazon Porter’s Five Force Appraisal Analysis

Entry Threats

The major impediment faced by companies that purpose to venture into online marketing and selling regards how they access the requisite distribution or supply channels. In the social marketing industry, that traditional impediment has been conquered by extra entrants who manage top bypass the traditional retail distributions, selling to consumers straightforwardly via e-commerce, or internet. The principal distribution channel followed by Amazon and all its competitors is the internet.

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The Risk of Substitutes

Various companies have substitutes to Amazon products. The companies include Banes and Nobles as well as Wal-Mart. Notably, the performance to price ratio is a central element regarding substitution risk. Amazon allows consumers to shop online regardless of their physical location. It ensures that good quality products are delivered quickly and cheaply to consumers.

Buyer Power

Customers are critical to the survival of all businesses (Radder & Louw 1998). Amazon’s customers are powerful as they make purchases online. They are powerful owing to various factors. First, they are concentrated. Second, the corresponding switching costs are low. Third, there is the risk of buyer competition.

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Supplier Power

Suppliers ought to be capable of supplying the raw materials that given businesses require in the production of own products. The materials include fuel and technology. For instance, Dell supplies Amazon with software.

Competitor Rivalry

Amazon’s competition includes Wal-Mart and E-Bay. The rivalry defining these competitors is rather high. That ensures that they maintain the quality of own products, leading to consumer contentment. Amazon tries to fix product prices in regions that are deemed reasonable and growing sales to remain profitable.

Amazon’s PESTEL Analysis

Political

There are varied global policies that are impeding the growth of the company. The policies include those impeding the company from expanding to varied countries especially with respect to online purchases. There are various politically-instigated regulations that interfere with internet-based purchases as well.

Economic

Fluctuations in major currencies bring about issues when the selling of Amazon multimedia as the company transacts in US dollars. The recent economic downturn hurt the company’s sales significantly. Even then, the sales are now rising.

Social

There are various countries where the usage of the internet is limited owing to ethical, as well as religious, factors. That reduces the amounts of sales that Amazon could make in the regions. The sustained growth of the number of users of internet resources, Amazon can grow its market share considerably going forward. Amazon is increasing own awareness via social network marketing,

Technological

Amazon is compelled to seek methods that are innovated to survive competition especially because it is an internet-based, or online, retailer. The company is experiencing a marked breakthrough regarding internet access. Individuals are capable of accessing internet regardless of where they are via mobile devices that have 4G or 3G features. Consumers can compare the pricing regimes of different companies using online resources. Amazon can attract more and more consumers to its online stores by offering markedly competitive prices.

Environmental

Amazon is presently affording its clients cloud computing, as well as storage, which is capable of eliminating hardware requirements, as well as storage facilities, for the typical consumer. That portends that Amazon is on a regime that could potentially put an end to the involvement of computer components and hard drives in varied mass production contexts. Online shopping reduces the amount of pollutants being given off by automobiles. Even then, product shipping leads to the addition of unjustified packaging; to given products before being shipped. That means that there is a need for Amazon to seek greener solutions to the transportation of own sales.

Legal

Since Amazon is engaging in international business, it is important for it to have a thorough appreciation of the applicable international legal instruments. Some of its products fall under the purview of particular laws, depending on the forms in which they are transported. Given that the company sells multimedia online, it should obtain particular legally defined rights to the multimedia.

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