Environment of Amazon Assignment PDF

The purpose of this report is to analyse both the internal and external environment of Amazon
Australia,and from these analyses, the report will then discuss the strategic direction of the
company.Amazon Australia is an Australian based online retailer that sells products from A to Z.
The report will first provide an internal analysis of Amazon Australia which will critically
evaluate the organisation’s competencies, resources and strategic capabilities. This will be
followed by an analysis of the external environment which will critically discuss the macro and
industry environment of the company, which will be incorporated with two macro-environmental
trends that may impact the company and an analysis of Porters five forces that apply to Amazon
Australia. Lastly the report will recommend the strategic direction of the company, followed by a
conclusion.
Internal Environment
Strategic capabilities as defined by Johnson et al. (2014, p.50) are “the capabilities of an
organisation that contribute to its long-term survival or competitive advantage”. The two
components that make up strategic capabilities are resources and competences. Resources are the
assets that organisations have or can call upon and competences are the ways assets are used or
deployed effectively (Johnson et al. 2014, p. 50). It is vital that businesses such as Amazon
Australia not only have appropriate resources that contribute to strategic capability but to also
use these resources in an effective manner. To ensure long-term success however, strategic
capabilities need to be dynamic capabilities, that is, an organisation’s needs to be able to change
and adapt their strategic capabilities to meet the needs of changing environments (Johnson et al.
2014, p. 51). There are four criteria by which capabilities can be assessed in terms of providing a
basis for competitive advantage: value, rarity, inimitability and organisation support – or VRIO.
Resources
A company must have specific resources they can call upon to gain a competitive advantage.
Amazon Australia ensure they have the latest and most advanced technology in the industry.

This allows them to innovate a lot of their own products and services, which helps reduce costs
and increase revenue, giving them an advantage over their competitors. This is because it can be
difficult and rare for other competitors to create their own products and services the way
Amazon Australia does.The company already has a distribution centre in Dandenong South, in
Melbourne and are also set to launch a new 43,000-square metre fulfilment centre in the
Goodman Centenary Distribution Centre in mid-2018 (Hatch 2018). The new centre combined
with the existing centre will lead to an increase in their product range and will allow them to
support more third-party sellers who use their fulfilment service. Their extensive product range
also gives them an advantage over competitors in retail such as JB Hi-Fi who only sell a limited
range of products, and this could prove difficult for JB Hi-Fi to imitate Amazon Australia’s
product range as it creates extensive holding costs. In order for retailers such as JB Hi-Fi to gain
market share and profit, they would have to adopt a penetration pricing strategy, which could
significantly impact profit margins in the short term. Their online presence-only system also
gives them advantage over retailers, as it reduces their utility expenses and therefore can afford
to lower their prices on their products, assisting in achieving economies of scale and adding
value for customers, therefore giving them a competitive advantage. Their highly skilled staff
allow them to move efficiently and effectively as it is their model to process and deliver orders
quickly, which reduces lead times, leading to higher customer satisfaction and retention rates.
Their leading technology, such as product scanners and packaging technology, also creates a
competitive advantage as it also assists in reducing lead times.
Competences
Amazon Australia’s business systems is one of the leading systems in the world which has
enabled them to attract 11.4 million visits in Australia in March 2018 (Mitchelson 2018). They
understand what activities they need undertake that are especially important in creating value and
which are not. These essential activities are what’s used to create the value chain (Johnson et al.
2014, p. 60). Their buying process is well-known for its speed, accuracy and reliability which is
a reason for their consistent customer retention. The buying process, which involves mostly
operations and logistics, requires customers to access their website, of which then changes each
time based on a customer’s previous searches and products purchased. This creates a unique

experience with a personalised layout for nearly every individual (Investopedia 2018). Once a
product is purchased, Amazon’s system begins to work. Orders from third-parties are received
by Amazon, and these third-parties take a percentage of those sales(Investopedia 2018).
However, most orders are processed through the warehouse. These warehouses, such as the
centre in Melbourne, are stocked based on algorithms that predict the types and number of
products being in ordered in the region (Investopedia 2018). And its these algorithms and
fulfillment centres that create an advantage over other online retailers, such as Myer and Kmart,
as it allows the company to deliver orders quickly and offer cheaper prices to customers on a
consistent basis (Investopedia 2018).It is these support activities through their technology that
improve the effectiveness of their primary activities (Johnson et al. 2014, p. 61). Their internal
complexity is what delivers customer value, and would prove difficult for other retailers to
imitate.After the product has been processed and packaged, it is then placed in a delivery truck,
depending on the shipping option. This process takes just minutes from the final order
confirmation before its placed in delivery assets (Investopedia 2018). This entire process creates
value for customers, their processing and delivery speed is rare of which little to no competitors
can match, their algorithms and fulfillment centres are difficult and costly for competitors to
imitate, and the company is organised effectively so that they can carry these processes quickly
and efficiently (Investopedia 2018). The combination of all these competences allows them to
achieve economies of scale, and maintain as well as gain market share over competitors, leading
to increased profits.
Section 3
Section 3.1: Analysis of the Macro-environment
The analysis of the macro-environmental trends that affect Amazon is performed by
choosing any two factors of the PESTEL framework. This includes the political and economic
factors:
Political Factors

Australia is known as a safe economy for investment since the regulatory and political
environment of the countryis progressive and stable, which provides more certainty and
confidence for investors (Chaffey and Ellis-Chadwick 2016). Australia’s strong history as a safe
investment destination has proven quite effective in the face of policy direction and the economic
challenges. Changes in government policy in response to thechanges in the economy represents
the effectiveness and transparency of the government. The transparency, openness, efficiency, a
strong legal system, makes the country an important asset for the Multinational Corporations
(MNCs) in the Asia Pacific region. The political scenarios in Australia thus, pose little to no
threat to e-retailers like Amazon Australia. Hence, the political stability of the country also leads
to the economic stability, and in turn, could positivelyimpact growth for Amazon Australia.
Economic Factors:
Australia’s services sector represents about 70% of total GDP in Australia (DFAT 2018).
The economic growth is primarily dependent on the agricultural and the mining sectors. The
country ranks tenth in the ease of doing business index for both normal retailers and the e-
retailers like Amazon (Sarbah and Otu-Nyarko2014). Australia has many key factors that attract
business that include:
 Presence of an index that eases the doing of business
 Stable and constant economic growth
 Low unemployment rate
 Constant and stable inflation
 Stable and strong financial system
There is a strong correlation between economic factors, ad revenue and profits produced by
businesses such as Amazon Australia as it is significantly dependent on the state of a national
economy (Anthony 2018). During recessions, economic activity decreases in conjunction with
revenue and profits of e- businesses and vice versa. Likewise, higher rates of economic activity
should lead to faster growth and higher amount of revenue for Amazon. Although consumers
may be less likely to spend during a downturn, they will likely turn to Amazon Australia due to
lower prices if consumers do decide to spend money.