Situation Analysis (Amazon) Assessment 2022

Running head: AMAZON
Assessment 1: Situation Analysis (Amazon)
Name of the student:
Name of the university:
Author note:

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Executive summary
Situation analysis communicates the shortcomings in business that may act as barriers to future
business expansion of a company. This study also conducts a situation analysis for Amazon.
Briefly stating Amazon is expanding from just a web-based business model to the brick-and-
mortar model. In this way, Amazon is about to operate as an omnichannel retailer. The analysis
could found that Amazon is prone to certain risk factors such as low count for strategic suppliers,
increasing trading tax internationally, the ecological impact of business and so forth. The study
concludes that Amazon has rising opportunities as an omnichannel retailer in Australia. It just
needs to be pretty careful with establishing and retaining a strategic relationship with suppliers
apart from other risk factors.

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Table of Contents
Introduction......................................................................................................................................3
Background to Amazon...................................................................................................................3
Macro-environmental Analysis (PESTEL) and findings.................................................................4
PESTEL.......................................................................................................................................4
Findings.......................................................................................................................................6
Analysis of Micro-environmental Analysis and findings................................................................6
Micro-environmental Analysis....................................................................................................6
Findings.......................................................................................................................................9
SWOT analysis and findings...........................................................................................................9
SWOT analysis............................................................................................................................9
Findings.....................................................................................................................................11
Growth opportunities.....................................................................................................................11
Conclusion/recommendation.........................................................................................................12
Conclusion.................................................................................................................................12
Recommendation.......................................................................................................................12
References......................................................................................................................................14

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Introduction
Amazon.com is one of the world’s renowned e-commerce companies. Though it faces
tough competition from eBay in the home country, the United States and Alibaba in China, is
still the leading e-commerce companies by revenue (Zhu & Liu, 2018). It prides to deliver
business solutions to different businesses and consumers. In this study, a situational analysis of
Amazon will be conducted. The findings of the analysis will indicate whether Amazon has
adequate resources and capabilities to expand to the brick-and-mortar model from the existing
web-based model. Indeed, the decision to expand to brick-and-mortar store formats may be the
consequence of increasing competition Amazon faces both at home and in international
locations.
Background to Amazon
Amazon started its operations officially in 1995. Amazon is Headquartered in Seattle,
Washington. The company has operations in the form of active websites in the United States,
Europe, Canada and Asia (Amazon.com, 2019). Amazon’s historical development from just an
e-commerce retailer to the world’s one of the most innovative companies is largely a reflection
of its strategy to merge or acquire strategic partners to serve different business needs. It started as
an online seller of millions of different books. The year 1999 marked a change and it no longer
remained just a bookseller. With acquisitions of drugstore.com, exchange.com, pets.com and
homegrocer.com it could diversify its product portfolio. It also allied with Toysrus.com to
develop a co-branded store. Amazon developed collaborations with major retailers like ‘The
Gap’ and ‘Nordstrom’ in 2002 to integrate clothes in the product portfolio (Amazon.com, 2019).

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As of December 31, 2017, Amazon employs approximately 566,000 employees comprising of
both part-time and full-time employees (Amazon.com, 2019).
Macro-environmental Analysis (PESTEL) and findings
PESTEL
Political
The United States is not quite known for trade openness. The recent meetings of the US
President, Donald Trump with Xi Jinping (General Secretary of the Chinese Communist Party)
and Vladimir Poutine (President of the Russian Federation) indicates the evolving trade
challenges for Amazon. The concerns of NATO can produce imbalances through economic
pressures. All this may impact on the rights and duties of Amazon (Dauvergne, 2018). The
political risk factors as indicated is controllable provided if the government has favorable trading
policies.
Economical
The consumption pattern of global consumers indicates a growing inclination towards
cost-effective products. Consumers want their concerns about quality and price to be satisfied
with the products they purchase. It is this sense of consumption pattern that has motivated firms
to go to any extent to attain sustainable competitive advantage. This trend has resulted in
streamlining the supply chain operations by eliminating the intermediaries and reducing the
operational cost (Duberry, 2019).
Social

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Access to internet services has become easier with favorable subscription offers. It
increases the need to bring more mobile-based apps to be used for online shopping (Raitis,
Harikkala-Laihinen, Hassett & Nummela, 2018). Conversely, the shopping experience at
physical stores is not that digitally sound. Long queues around the cash counters are still very
much resolved (Siah & Fam, 2018). Studies suggest that increasing shopping on e-commerce
sites does not mean consumers love the channel. Indeed, consumers prefer shopping from the
most convenient channel. The most convenient shopping channel for consumers is one that can
serve their needs on an immediate basis and in a friendly way. Hence, omnichannel retailing
could be the best strategy for satisfying the trending consumption pattern.
Technology
The use of technology should influence more innovation in the e-commerce sector. Few
technologies including the Internet of Things (IoT), Blockchain and Artificial Intelligence (AI)
could be the brighter prospects for data security and cost-effective operations (Xu, Wu, Minshall
& Zhou, 2018).
Environmental
There is growing pressure on global firms to reduce the ecological impact of the business.
The US laws concerning the ecological impact of the business may create barriers to innovation
and encourage increased spending on Corporate Social Responsibility (CSR) activities (Aldrich
& Wiedenmayer, 2019). Hence, the competency of a firm may be affected and the profit margin
can decrease.
Legal

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Since the 19th century when the concept to use the corporate tax was placed by the state
of New Jersey (USA), the major and significant international groups are into devising new laws
to ensure better tax optimization. The payable tax rates for companies could go up considering
the growing universal arrangements for the same (Lahovnik & Bečić Steiner, 2019). This will
affect the net income for companies.
Findings
The analysis conducted as above can be summed up in a few sentences. The expenses for
e-commerce companies will increase following a hike in payable tax rates, increasing the need to
spend in CSR activity and the use of innovative technologies. Streamlining the supply chain
operations was largely seen as the way-out. However, this may no longer remain helpful to
remain cost-effective while ensuring healthy net income figures. Hence, omnichannel retailing
should provide relief provided if it is managed effectively.
Analysis of Micro-environmental Analysis and findings
Micro-environmental Analysis
Customers
Amazon serves its customers in numerous ways. It has long been into e-commerce
operations. It is now operative into a brick-and-mortar model with its "Amazon Go Convenience”
store that opened in Seattle, Washington (Inc.com, 2019). There are evidences, which show
Amazon will groom its omnichannel existence in the future. Studies suggest that omnichannel

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retailing instead of the only online and only in-store format will grow (Forbes.com, 2019).
Amazon is willing to open close to twelve grocery stores in the United States (Wsj.com, 2019).
Amazon is already into opening spaces in smaller stores, malls and others (Businessinsider.in,
2019).
Suppliers
Amazon has very few suppliers as its long-term partners. It has to depend on a limited
number of suppliers to ensure the stock availability. In case they stop selling to Amazon on
acceptable terms and delay delivery as a result of poor economic conditions and others, it may be
into trouble for procuring alternatives from other suppliers. Additionally, if the suppliers violate
any law the impact will be on the reputation of the company (Annualreports.com, 2017).
Competitors
Amazon receives competition from a broad array of competitors belonging to different
industries. This includes but not limited to online, offline, multichannel retailers, vendors,
publishers, distributors, manufacturers, producers, web search engines, social networks, e-
commerce companies, companies providing fulfillment and logistics services
(Annualreports.com, 2017). All these indicate the need to develop, maintain and sustain
competency in everything Amazon does.
Employees and Shareholders

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Figure 1: Employees and the Share Price of Amazon in Four Years
(Source: Linkedin.com, 2019)
The above figure shows how Amazon progressed over four different years (2014-2017)
for its performance concerning the employees and share price. As shown in the figure, the
number of employees increased by more than 270% in four years. It suggests Amazon has
excellent access to people. Additionally, the rates have fallen for employee turnover. Every year
it decreases by 20% averagely. These figures collectively show Amazon’s capability to attract
people and retain most of them as well.

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Amazon during the mentioned four years performed excellently well by almost tripling
the share prices during the same period. Shareholders will be in benefits considering their shares'
performance.
Media
Amazon purchased Goodreads to increase its capability in terms of media in 2013.
Goodreads is an online-based community for accessing the social media books. Approximately
30,000 book clubs are benefitted from the service. Amazon entered the self-publishing industry
to become proficient in printing books (Annualreports.com, 2017).
Findings
The analysis suggests that the pressure is constantly growing on Amazon to meet the
trending consumption pattern of consumers. The trend is more suitable for omnichannel retailers.
It faces quite so many risks from having very few suppliers in the long-term. Amazon faces
competition from the various end. Hence, the key to facing such competition will be to innovate
and keep the pricing competitive in the long-term. Indeed, Amazon is one of the most innovative
companies in the world. It should use innovation to expand its arm in the omnichannel retailing.
For this to happen Amazon will require more strategic partners under its belt.
SWOT analysis and findings
SWOT analysis
Strengths

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Amazon is now the largest online retailer. It has a very diversified product portfolio. It
offers many services to the target market. The supply chain and logistics are pretty efficient and
robust (Zhu & Liu, 2018).
Weaknesses
Amazon’s web hosting faces technical outages frequently. E-commerce business is
technically a low-margin business (Zhu & Liu, 2018).
Opportunities
Amazon's growing interest in the brick-and-mortar model can bring new opportunities to
it. Amazon can revolutionize the industry with its efficient distribution channel and the ability to
offer innovating shopping styles. The “Amazon Go Convenience” indicates the difference that
Amazon can create with its physical stores. As of June 2019, Australia registered a GDP growth
by 0.5% (Abs.gov.au, 2019). Hence, the consumption pattern of consumers will improve. This
should bring positive effects on Amazon’s performance in Australia.
Threats
Amazon will remain under threats from Foreign Exchange fluctuations as this may affect
its net income. Amazon faces strong competition from various trading formats such as e-
commerce and e-reader markets. The growing unemployment rate in Australia can be a problem.
As of August 2019, the unemployment rate stood at 5.3% (Abs.gov.au, 2019). In the short-term,
the growing unemployment rate will help Amazon to access part-timers. Conversely, sourcing
skilled professionals can become a challenge in the long-term. There are forecasts for new
entrants in Australian supermarkets and grocery stores. Though the industry has grown at 1.5%

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annually over the last five years, the new entrants can affect the benefits to be accrued by
Amazon (Ibisworld.com.au, 2019).
Findings
The analysis indicates that though consumers will grow to their capacity to buy new
products they will have wider options for shopping platforms to shop from. Hence, the constant
use of innovative ideas and the ability to remain cost-competitive will hold the keys to success
for Amazon.
Growth opportunities
All the analysis conducted as above indicates that Amazon has good opportunities to
proliferate the brick-and-mortar industry in Australia. Major players in the supermarket sector
have been less strategic towards adopting innovative ideas and offering a refreshing experience
to consumers. It is just recently that both Woolworths and Coles started taking things seriously.
These players are now investing more in data analytics and also in upgrading their loyalty
programs. All these are the after-impacts of Amazons’ entry to Australia and Costco’s expansion
of its store chain (Ibisworld.com, 2019). Despite all these Amazon has some good opportunities
in Australia. The changing consumption patterns of Australians have boosted online shopping
over the past five years. The growth stood at 14.3% annually since 2014 (Ibisworld.com.au,
2019). However, it is majorly ruled by Coles and Woolworths. Amazon still has opportunities
considering its dominance across a variety of trading patterns such as e-commerce and e-book

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markets in many major global markets. Amazon can use its innovating capabilities and resilience
to barriers in creating a strong foothold in the brick-and-mortar market.
Conclusion/recommendation
Conclusion
Therefore, Amazon despite being a global leader in e-commerce business is prone to
certain risks. The risks can vary from market to market. However, few risks such as increasing
trade tax, and political, legal and environmental impacts on the company’s CSR activity remains
the same. The study could found growing opportunities for Amazon in the Australian retailing
sector considering that the major industry players have been less experimental towards the
infrastructure development works and use of innovation. However, Amazon may consider a few
strategies to manage controllable factors efficiently.
Recommendation
Amazon should focus on expanding its business outreach from just an internet-based
company to an omnichannel retailer. In doing so it must respond to trending consumption
patterns and offer something that consumers want to see from omnichannel retailers. Along with
its physical stores in Australia, it should consider both infrastructural development activities and
offer private label products. Private-label products as found in this study will create opportunities
for brick and mortar retailers. In this way, it will also impact Amazon’s omnichannel retailing in
Australia.

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1. Increased demand for Private-label Products should be seen as an opportunity
(Ibisworld.com.au, 2019). Apart from offering a digital shopping experience, Amazon
should explore its strategic capabilities to offer private-label products.
2. Strategic relationship with suppliers will hold the key in sourcing the private-label
products.
3. Amazon has not been good at establishing long-term relationships with suppliers. This
problem has persisted throughout its global wide operations. Hence, Amazon should
focus on identifying, establishing, managing and sustaining its suppliers to enjoy healthy
business with them.
4. Supplier Code of Conduct can help guide suppliers to ethical practices. Amazon, as
found in this study, is prone to its suppliers' unethical practices. Due to the low count for
suppliers in the long-term Amazon can do nothing than to suffer their behaviors. Such a
code of conduct will help Amazon control its suppliers significantly and protect its
market reputation from reputational losses.

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October 2019, from https://www.abs.gov.au/
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