Amazon Business Model Analysis

This assignment delves into an analysis of Amazon's business model. It explores the company's organizational structure, management philosophy, customer focus, innovation strategies, and overall approach to value creation. The student reflects on their learning experience from studying Amazon, emphasizing the leadership qualities of Jeff Bezos and the importance of continuous innovation.

Running head: BUSINESS CAPSTONE PROJECT
Business Capstone Project
Name of the Student
Name of the University
Author’s note

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Executive Summary
Amazon is an organization that has been one of the most successful in the past two decades.
With the advent of infrastructure supporting the usage of internet extensively by common people
e-business model organizations cropped up in the late 90s. Amazon was one of them, through
those years Amazon has evolved and expanded in the scale of the business in an exponential
way. There are almost 140 countries where Amazon has established its operations already. In this
report we identify the internal and external advantages and challenges of the organization. It also
includes the analysis of the external business environment using the PESTAL analysis.
Furthermore, in this report the business model of the organization has been stated in a descriptive
format along with a recommendation for future improvement and a reflective section.

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Table of Contents
Background of the company............................................................................................................3
SWOT Analysis...............................................................................................................................5
Strength........................................................................................................................................5
Weakness.....................................................................................................................................6
Opportunities...................................................................................................................................6
Threat...........................................................................................................................................7
Internal and external business Analysis of Amazon........................................................................7
Political factors............................................................................................................................8
Economical factors......................................................................................................................8
Social factors...............................................................................................................................8
Technological factors...................................................................................................................9
Environmental factors..................................................................................................................9
Legal factors................................................................................................................................9
E-business strategy issues..............................................................................................................10
Business model of Amazon.com...................................................................................................11
Evolution of the business model................................................................................................12
Recommendation...........................................................................................................................15
Future study plan.......................................................................................................................16
Reference list.................................................................................................................................17

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Background of the company
Amazon has been established by owner Jeff Bezos in the year 1994. It started off as a
humble set up in the garage of his house. In many interviews Bezos has mentioned that his love
for reading and his passion for information technology have driven him to come up with a
website which could be used as a platform to sell and buy books. This is where the multimillion
dollar endeavor had all begun. In June 2017, Jeff Bezos was announced as world’s richest man.
Amazon has made its position strong in the e-commerce industry. It has set some major
benchmarks for the competitors in the industry in terms of business model, management
leadership. The company is the second largest information technology company in the world
after Google. It is also regarded as one of the pioneer in the online retail. The company has built
a reputation in the industry both from the customer end as well as the stakeholder end for being
efficient and effective in the operations and policies. Amazon offers a plethora of products in the
platform from more than 40 categories of products. The leadership skills and qualities in Jeff
Bezos have lead the organization through a course of ups and downs and has eventually reach a
position where Amazon holds the largest market share in e-commerce and e-retail. His ability to
develop strategies and policies in order to establish a successful enterprise is commendable and
is appreciated worldwide. The far sightedness and the consumer centric approaches towards the
business model help the company gain goodwill and appreciation further adding to the market
value of the organization. Despite of the challenges and the issues faced by the e-commerce

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industry over and over again Amazon has developed a plan of action as well as a plan to combat
the external forces that impact the operations of the business (amazon.com, 2017).

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SWOT Analysis
This method of analysis provides an insight about the company’s internal as well as external
advantages and challenges that a company faces while commencing the business operation. The
challenges and the advantages of the organization is depends on the nature of business and the
scale of the business. Here is a SWOT analysis of Amazon:
Strength
 Amazon is regarded as one of the world’s largest online retailer which started off by
selling book and now has a plethora of product choices. This is an advantage for the
company and serves as one of the main strengths as well, being a leader in the market
enables the company to have management strategies like: cost leadership, differentiation,
and focus.
 The customers of the company come in two folds one is the customer end and the other is
the vendor side, the Amazon is only platform where the buyer and the seller can meet
online in order to do transaction.
 The brand recall value of the company is high and the people now use Amazon as a
generic word to mean e-commerce hence the popularity of the organization is one of the
significant strength.
 Amazon has one of the best logistics and distribution systems which develops goodwill
for the company in the eyes of the customer. Amazon has now come up with a new
facility called prime which enables a consumer to get the product delivered in 24 hrs or
less (Khan et al., 2015).

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 The leadership of the owner Jeff Bezos is also strength of the company; Amazon has
flourished and has reached millstones which were not even possible a decade ago
(Hollensen, 2015).
Weakness
 There is an uncertainty and unreliability associated with the e-commerce industry.
There is a stigma with the e-commerce as it is not a traditional approach of retail
many potential consumers still cannot rely on online retail.
 The profit margins of the company have been shrinking over the years. Amazon
operates in near zero margin business models that have severely dented its
profitability and even though the company has high volumes and huge revenues, this
has not translated into meaningful profits for the company.
 The company is an informational technology organization and hence technology is
required in order to avail the services the company has to offer. Hence internet
connectivity and infrastructure is essential, which can sometimes be a disadvantage
(Khan et al., 2015).
Opportunities
 The biggest opportunity that Amazon posses is that it has the ability to rule out the third
parties and come up with more and more own products. The company can produce more
products and services under the Amazon brand and as the brand is an established entity
already it has the opportunity to use the brand name.
 The company also has an opportunity to improve the physical presence of the brand

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 Amazon has established itself as a multinational company but there are countries where
there is still a lack of service hence the company can set up operations in those countries
and increase the international market share.
 Amazon has the opportunity to collaborate and partner with other business organizations
to carry out operations of the business
Threat
 With the advent of technology and increase usage of internet in the past two decades the
increased instances of cyber crime has also taken place. With a platform like Amazon
there can be cases of fraud and cyber theft as well. This is the major threat that any e-
commerce or e-retailer can face.
 There is a lot of external competition in the industry though the company has been
reviewed as the market leader but once a company reaches that position it is important for
the organization to maintain this position.
 There is also instances of price competition is significant in the threat assessed for
Amazon as the sales of the company are susceptible by the competitive pricing of the
competition in the industry. There are big players in the retailers market who are joining
the e-commerce industry and this may be regarded as one of the significant threat of the
company (Pandit & Poojari, 2014).
Internal and external business Analysis of Amazon
A business organization operates on the basis of two business environments firstly the
internal environment which is directly under the control o the enterprise and the external
environment which is not under the control of the organization. As the internal business

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environment can be controlled with policies and decisions of the management, in order to
combat the external business environment the company should have an understanding of the
attributes as well as. PESTAL Analysis is one of the instruments which are utilized to understand
the external business environment.
Political factors
Amazon is am multinational company and the politics of each region it has its establishment the
company has to understand the political scenario of the area in order to operate efficiently and to
reach the target market. The aspects include stability in the political circumstance of the country
and the ideology that the political groups follow in the country.
Economical factors
The GDP, disposable income of the people, inflation rates etc affects the operation of a business.
Hence Amazon as it has different portals and different offers for the country it is operating for
example there is Amazon.in (Amazon India) here the products are based out of India and are
priced keeping in mind the Indian market.
Social factors
The lifestyle and the cultural background of the country of operation helps the company builds
the business model around it to make t more relevant and more approachable to the target
market. The user interface of the website and the application changes Based on the social factors
as well. For example Amazon will give a festival sale during the Halloween in America where as
it will give a diwali sale in India (Khan et al., 2015).
The traditions of buying form retail stores are a part of many cultures which directly affects the
sales of Amazon.

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Technological factors
The owner of Amazon is a person who encourages research and innovations in the business and
hence technology plays an important role in the development of Amazon. Hence the company
has been the pioneer of including some of the changes in the e-commerce industry in terms of the
technology that the company uses and provides for the betterment and the easy usage of the
platform by the customers. The organization is involved in a number of projects in the innovation
and making the usage of the platform more and more simple and smooth for the consumers.
Amazon is a customer centric organization which has a reputation of offering the customers the
best service hence the monetary safety of the consumers were a priority and hence the company
came up with secured ways and means of operation form the customers behalf as well (Martins
et al., 2015).
Environmental factors
Amazon ensures that it sues recycled packaging materials and the service that it offers involves
minimum paper work and hence the company has established at self as environment conscious.
The company has also many policies depending upon the place of operations regarding the
environment. Consumers are also becoming more and more conscious about the global issues.
Legal factors
The guideline and the law and order of the country of operation are very important for a
company’s business. The taxation policies of every country are different and the company has to
keep that in mind. Several countries in which Amazon operates have strict regulation for
business in this case it proves to be difficult for company like Amazon to continue its operations
freely (Rothaermel, 2015).

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E-business strategy issues
Internet over the past two decades have opened a plethora of options for new business
ideas to crop up in the minds of far sighted and visionary leaders like Jeff Bezos. The reduced
rate of data charges and increased availability of internet has made even retailers and traditional
business organizations to take the “e” path of business. Nevertheless there are several challenges
in this business model as well. E-business involves risks of the contemporary type as the
business model is also new. Some of the challenges faced by the organizations that follow this
model are: First of all the people who are engaged in the e-commerce transaction one of the
major issues that is faced is of reliability. In the virtual world trust is a major issue among the
customers. The photographs are the only way a customer can recognize a product which itself
makes it a little less trustworthy, the words that are in the contents are the only written proof of
the claims that the platform has to make for the product. It is often seen that what is shown in the
picture is not what the reality is. There is another risk of theft in the process of online payment,
this also fall under the category of cyber crime. Hence to ensure perfect and full proof security
for the customers the company has to build secure payment options and cash on delivery option
(Ritala et al., 2014).
Logistics and delivery are very important in the e-business sector and because Amazon is
a multinational company the management has to be in a macro level in order to delegate and run
the operation of the business process. The company has to partner with several third parties in
order to deliver the products in time. Because the third parties quality of work are not under the
direct control of Amazon it has a large network in term so logistics.

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Not meeting the customer satisfaction is another issue that can be a significant issue in
the e-business model. As all the transactions and exchange is happening online the expectations
of the customers may be different from what the actual product or service can offer, exchange of
product again include a lot of issues and problems. When the business is happening face to face
the retailer understands and perceives what the expectation of the customer is in terms of the
product as the customer explains it to the retailers but here there is the content in the written from
and the pictures based on which the customer has to made a decision (Khan et al., 2015).
Business model of Amazon.com
The business model is a method by which a company operates on the daily basis in order to
increase and maximize the profit. There are two aspects to the business model first is the pricing
and the second is the cost. It is the visual or an analytical interpretation which deals with the
daily operation and working process of the business. There are several steps that are undertaken
by an organization to create a business model. Amazon has been described itself as a customer
centric organization that thinks first about the utility and the preferences of the consumers before
the sales and the profit maximization of the company. Jeff Bezos has told in numerous interviews
with popular medium that this approach that has always been his way to success. In just two
decades the company has reached heights and milestones which are many organizations can only
think of achieving (Bini, Dainelli & Giunta, 2016). The benchmark business model that Amazon
follows is described as:
Product: There are a number of services that Amazon has to offer to the customers with the
online retail platform, it also offers web services and kindle products as well. The company has
recently come up with books and music and video streaming options (DaSilva, & Trkman, 2014)

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Customer segmentation: The Company targets the market of people who go to the retail stores to
buy products. These people should have access to internet and a device which can connect the
customer with the platform of service that Amazon has to offer. The latest offering and the
widely promoted Amazon Prime Video offers a platform for showcasing videos and movies
streaming options. Hence depending on the type of product or service the customer segmentation
also changes for Amazon (Carayannis et al., 2015). For example, in the case of Amazon Gaming
suite, the target consumers of this service are people who are young and are interested in the
professional level virtual gamming.
Evolution of the business model
The mission and the vision of the company remain same even though there is a range of
services that the company offers. The company from inception wanted to offer quality services to
the customers. It is also analyzed by many that Amazon has also observed zero profit margins in
order to improve the customer services. The hidden message in the logo of Amazon is evident of
the aims and objective of the organization the Amazon logo is marked with a sign indicating
from A to Z which suggest the plethora of product options in the platform it also signifies a smile
which suggests a satisfied customer after receiving the Amazon package. The new services and
products that Amazon is set to offer to the customers also follow the same rule. The company
with its growth has become more and more consumer friendly the applications of Amazon are
user friendly and absorbs minimum data the user interface is also self explanatory (Casadesus‐
Masanell, 2013).
The company follows the triple bottom line model the three Ps in the concept is evident
in the business model that Amazon has been following as a new business and as the brain child
of a visionary leader, the company has a broad vision and a new set of priorities than just

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sticking to the traditional form of focusing in sales and profit maximization. The People, Planet
and Price are the three main focus of the business model of Amazon. As the company has
established itself and has a good reputation of customer services as well the “People” part of the
model has been efficiently handled by the management of the organization. The company also
follows all the global ethics and regulations of employment and the resources of the organization
are mostly satisfied with the organization. The employee turnover of the company is also low
hence indicating that the level of job satisfaction among the resources is also high (Barnes &
Hunt, 2013).

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Recommendation
Amazon has goodwill within the industry among the customers and it is also the market
leader in terms of e-business, the challenge of the company is to retain the position at the top and
not to reach a point where the services are saturated. The company should come up with more
marketing and promotions as many people do not even know about the other services that the
company has to offer. For example: the company owns a number of publishing, books and
literature related services that most people are unaware of. The marketing strategies of the
company are mostly dependent on the traditional as well as digital marketing medium, which is
fitting given the nature of the business. But the company should more engage in Public relations
so that the consumers and the stakeholders get to know the company better. The value
proposition of the company is price and convenience and this remains unchanged.

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Future study plan
I am a management student and in the future I also want to work in the same domain,
during this project I have learnt a lot about Amazon as an organization and the management
methodology that they follow. I have found Jeff Bezos as an extraordinary leader and a visionary
entrepreneur who is inspiring. I want to serve in the management domain for a good amount of
time in my life and further move on to becoming an entrepreneur myself. The management
insight that I have received form this learning experience is valuable as it teaches me basic value
of a successful business like Amazon. I appreciate the passion with which Jeff Bezos runs the
organization and how he understands the customers as well. Another aspect that I have learnt is
that a business organization should always look forward to innovations and creativity, Amazon
has always been inclusive of new and innovative ideas which are also regarded as one of their
strengths. As an entrepreneur I also would like to be a leader who has skills like farsightedness,
acceptance of new improvements and idea.

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Reference list
amazon.com. 2017. About Us. [online] Available at:
https://www.amazon.com/p/feature/rzekmvyjojcp6uc [Accessed 19 Aug. 2017].
Barnes, S., & Hunt, B. (Eds.). (2013). E-commerce and v-business. Routledge.
Bini, L., Dainelli, F., & Giunta, F. (2016). Business model disclosure in the strategic report:
entangling intellectual capital in value creation process. Journal of Intellectual
Capital, 17(1), 83-102.
Carayannis, E. G., Sindakis, S., & Walter, C. (2015). Business model innovation as lever of
organizational sustainability. The Journal of Technology Transfer, 40(1), 85-104.
Casadesus‐Masanell, R., & Zhu, F. (2013). Business model innovation and competitive
imitation: The case of sponsor‐based business models. Strategic management
journal, 34(4), 464-482.
DaSilva, C. M., & Trkman, P. (2014). Business model: what it is and what it is not. Long range
planning, 47(6), 379-389.
Hollensen, S. (2015). Marketing management: A relationship approach. Pearson Education.
Khan, U. A., Alam, M. N., & Alam, S. (2015). A Critical Analysis of Internal and External
Environment of Apple Inc. International Journal of Economics, Commerce and
Management, 3(6), 955-961.

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Martins, L. L., Rindova, V. P., & Greenbaum, B. E. (2015). Unlocking the hidden value of
concepts: a cognitive approach to business model innovation. Strategic Entrepreneurship
Journal, 9(1), 99-117.
Pandit, D. D. V., & Poojari, A. (2014). A study on amazon prime air for feasibility and
profitability--a graphical data analysis. IOSR Journal of Business and
Management, 16(11), 06-11.
Ritala, P., Golnam, A., & Wegmann, A. (2014). Coopetition-based business models: The case of
Amazon. com. Industrial Marketing Management, 43(2), 236-249.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.