Business Environment Analysis: Amazon's PESTLE and SWOT Report

This report provides a comprehensive analysis of Amazon's business environment, examining the external factors influencing its success. It begins with an executive summary outlining the key areas of focus, including political, economic, social, technological, legal, and environmental factors. A PESTLE analysis is conducted to assess the impact of these external forces, followed by a SWOT analysis to evaluate Amazon's internal strengths and weaknesses. The report delves into economic factors such as supply and demand, market dynamics, and competitors like Walmart, Alibaba, and eBay. It also addresses legal considerations and concludes with recommendations for Amazon, such as adopting a bullwhip approach, building a unified IT system, and publishing an interactive map of tools. The report aims to provide insights into the challenges and opportunities Amazon faces in the dynamic e-commerce landscape.

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Business Environment

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Executive Summary
This report outline about the external factors in the business environment of Amazon.
Amazon is one of the largest American electronic commerce founded in 1994. There are
various external forces that impact directly on Amazon profitability and success. These
external forces are divided into political factors, economic factors, social factors,
technological factors, legal factors and environmental factors. Some of these are beyond the
control of management and thus the company needs to develop adequate strategies to gain
competitive advantage in the industry. The company internal strengths and weakness also
being identified with the help of SWOT tool.
In section two of the report, economic factors such as supply and demand, market and
competitors are also being identified. Some of the competitors of Amazon includes Walmart,
Alibaba and eBay. In last, necessary recommendations are being made such as adopting the
approach of bullwhip, building unified IT system and publishing an interactive map of tools
in extent with fulfilling legal obligations.

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Table of Contents
Introduction................................................................................................................................3
PESTLE analysis of Amazon.....................................................................................................3
SWOT Analysis of Amazon.......................................................................................................6
Economic Factors.......................................................................................................................7
Legal Factors..............................................................................................................................8
Recommendations....................................................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................12

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Introduction
Business environment in today’s world is becoming dynamic and complex as it is
surrounded by various external forces having significant impact on the decision making of an
organisation (Smith, Binns & Tushman, 2010). In addition, the external environment of the
organization is constantly changing in relation with consumer preference, change in
technology (technological advancement) and market competitors. In addition, business
environment is largely uncertain and it’s different from market to market. With regards to
this, there are both opportunities and threats present in the business environment and it is up
to the organization, how they exploit necessary opportunities as well as exclude threat.
To understand the business environment explicitly, Amazon is selected as an
organisation, which is one of the biggest e-commerce company in the domain with having
operations in more than 16 plus countries. Amazon yearly revenue for 2018 was $232.887B,
a 30.93% increase from 2017 (macrotrends.net, 2019). As per the report of 2018, Amazon
has employed 6,47,500 employees in its organisation. As Amazon operates in more than one
country, the company have to face several challenges in the business environment and in the
same way, they also gain various opportunities such as their intensive diversification into
private label products, cloud computing and so on.
The business environment can more effectively understand with the help of PESTLE
and SWOT tool.
PESTLE analysis of Amazon
PESTLE analysis is a comprehensive tool to help in analyzing various external forces
in the business environment. It stands for Political, Economic, Social, Technological, Legal
and Ethical.
Amazon business environment can be said to more complex and dynamic as the company
operates on a global scale and in various countries. For every country or market, the external
force will be different due to legal obligations, customer culture and preferences and so on
(Matten & Moon, 2008). The PESTLE analysis of Amazon is elaborated below -

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 Political Factors – To any e-commerce firm, stability in political forces can help their
business to diverse internationally. In case of Amazon, there are various political
aspects influence Amazon business significantly. For instance, EU target Amazon for
disposable income, complex data laws, political red tape and so on. In addition, one of
the recent examples is related to China where due to change in data regulation, the
company have to sell off its China cloud assets (Cuthbertson, Furseth & Ezell, 2015).
With regards to this, many American technological enterprises were targeted by EU
and therefore, Amazon needs to be responsive and include all the approaches before
stepping into new and developing markets.
 Economic Factors – Amazon will have lot of opportunities when the economic
stability is high and this increases the likelihood of success. In a developed nation,
high disposable income is covered by the population bringing many benefits for
online sellers. For instance, people tendency has been changed as they spend more on
luxurious items. With regards to this, E-commerce is noted a high growth in 2017
with a 21% rise in sales (Thaichon et al, 2018). However, there are various rivals of
Amazon such as Walmart and eBay, who may impact Amazon growth and
development. The competitor of Amazon also takes out necessary ways to compete
with Amazon as like Walmart is working on a large scale to improve its online
mechanism and structure. For gaining high market share in the e-commerce industry,
Amazon is required to consider all these aspects.
 Social Factors – The trend of online shopping ,gets boosted due to various cultural
and social factors and being a part of e-commerce domain, Amazon is also influenced.
Considering an example, the usage of internet is increasing at fast rate but in the same
market, selling and buying is not part of numerous cultures. In different countries or
markets, many people misjudge online shopping as unsafe and unreliable and thus not
adopt the system. Taking an example of developing nation India, most of the people
consider retails shops as the best place to buy specific products such as electronics,
clothing and grocery as they thought that it will help them to do comparison
physically. Therefore, the company is required to consider every aspect of culture
needs in order to develop a better customer connection.
 Technological factors – This decade brings out advancement in technology in every
sector and industry and to every type of market whether traditional or online. Being a
giant technological enterprise, Amazon undertakes much research and development to
understand patterns of technological scenarios. According to Amazon, big data

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analytics are transforming ways for both traditional organisations as well as e-
commerce. For example, Amazon uses big data analytics to analyse relevant trends of
different market in relation with customer preference and application (Kambatla et al,
2014). This help the company to explore uncover needs of the customer and do act on
it. Hence, with these technological trends, Amazon also gained competitive advantage
in the industry.
 Legal factors – Being a multinational firm, Amazon needs to comply with various
laws and regulations globally. As per the latest practice, government are coming up
with various legal barriers considering the technological firm. For example, EU
targets Amazon in relation with antitrust settlements while selling books and
arrangement of tax with Luxembourg. With regards to this, GDPR regulations also
impacted the company cloud services and this requires the company to do various
changes in cloud service infrastructure and this lead to more cost (Hon et al 2016).
Hence, laws can be one of the major considerations for companies when functioning
globally.
 Environmental factors – In this competitive market, every firm is required to follow
positive environmental practices in order to create positive brand image in the market.
Amazon is targeted before to contribute to reduction of carbon footprint and faced
various criticism for lack of transparency. In relation with climate change
management, Amazon does not disclose significant information and the company
perception towards carbon disclosure markedly stanches from its business model.

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SWOT Analysis of Amazon
Strength
The main strength of Amazon is its strong market presence and the World largest
retailer. Besides this, its reputation has helped in various ways to enter the new market.
By using superior logistics and distribution system, it is able to demand of customers in
effective way. It also helps Amazon to get various competitive advantages as compared to its
rivals (Lev, 2017). In terms of competitive environment, it is able maintain its unique
position in the market.
By building or ensuring its early success with book, it recently has added several
other product categories such as electronics, toys, games, white goods, home and kitchen and
many more. Due to several technological improvements, Amazon is now evolved as global
E-commerce platform in the global market (Strange & Zucchella, 2017).
Weaknesses
It is true that Amazon offers free shipping to many customers. Several times, this
strategy of Amazon put the company in danger by losing its margin. Several times, it might
not be able to augment on the cost due to this strategy.
In many emerging nation, Amazon is still making struggles to make business
profitability. Due to the increasing competition too, it has to face several challenges.
Therefore, it affects the overall profitability of the company that further results in the debt
(Barry & Jilla, 2016).
The biggest weakness of Amazon is that it mainly operates in the zero margin
business model. Due to this, even if company is earning high revenue and high volume, it is
not translated into meaningful profit.
The products that are made by Amazon have not got a huge success like other
companies such as Alexa or Kindle. It is because technological development is happening at
a higher pace that might affect the growth of the company.

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Opportunities
It can role out many products in its brand instead of being an advancing site for the
products of third party. It can also open many sites in the growing and emerging market. This
will generate more revenue in the firm directly or indirectly.
Due to its strong market presence, it can also deal in several other product lines. This
will help it by presenting several other business opportunities (David & David, 2017). In
addition to this, it can also open several new businesses in the merging market. This will lead
to growth in the Company.
Threats
The main threat that lies with Amazon is that due to increase in concern of the online
market, theft problem can arise due to problem of hacking that can leave the consumer data
exposed. Several hacking challenges are being faced by companies such as Amazon due to
exposure to IT industries. It is therefore required by the Amazon to ensure the privacy of
online market.
In recent time, competition is increasing at a greater pace that puts the threat to
Amazon. Therefore, it can remove threats by adoption of several strategies
Economic Factors
There is numerous economic factor that impacts Amazon business significantly. In
relation with supply and demand, Amazon has changed the face of retail through its bold
supply chain strategies and with integration with innovative technologies to gain necessary
insights into the customer demand (Priem, Li & Carr, 2012). In relation to managing supply
effectively, Amazon has a service called Fulfilled by Amazon (FBA), which includes a three-
step process to cater the customer demand. It includes storage, packaging and delivery. The
inventory is stored with Amazon and when the orders come in, the warehouse team of
Amazon deals with them in the similar way as their own products — packing them into the
proper box and handling them over to delivery drivers. At bigger scale, these rules break
down and the company also has invested in distribution network that can hold up with prime
and with all the necessary setup in place for their own inventory, it does not cost them much
to rent it out others with the help of FBA.

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In relation with other economic factor, it includes their current market. It can be said
that Amazon is likely to hold almost 50 per cent of the U.S. e-commerce marketplace.
Amazon Prime international consumers will grow at a 56% compound annual growth rate
(CAGR) between 2016 to 2018 (Thomas, 2018). Globally, Amazon shipped more than 5
billion items in 2017 with Prime. The market for Amazon is a selective interactive market as
the enterprise adopt a database to collect customer previous purchases and use various
different type of page selections and pop-ups to suggest similar products to what customer
history has shown them may be interested in selecting. The current market of Amazon not
only includes e-commerce customers but also associated with B2B as the company is proving
its web services (AWS) to various big organizations such as Netflix and constitute as a bigger
part of the overall company profit.
The competition in e-commerce is also rapidly increasing and some of the major
competitors of Amazon are Alibaba, Walmart, eBay, BestBuy and Staples. Some of these
competitors use different business model allow them to gain competence in both markets i.e.
B2B and B2C. In addition, Amazon has different segment in the market and to each segment,
the competitor is different. For instance, in the Media segment, the biggest competitor of
Amazon is Netflix. Even from some of the firm, Amazon is facing indirect competition such
as Facebook and Apple. The company is facing lot of competition as from social networking
sites to Google to others, there are endless competitors and even small business are creating
their own e-commerce stores and do market in on social media, posing threat to Amazon.
However, the company doing it well to cover it up vertically or horizontally, however, due to
change in digital sphere, the future cannot be predicted.
Legal Factors
Amazon is highly committed to conduct its business in an ethical and lawful manner
comprising association with the suppliers and they are also engaging with the same practice.
In order to make sure these standards are flowed throughout the practice, the company
undertake several measures.
The three legal responsibilities for Health and Safety compliance, it includes risk
assessment, reporting and Involuntary Labor, Human Trafficking, and Slavery. Risk
assessment is the keystone to effective health and safety management and it covers all

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necessary risks and hazards in extent with relevant regulations. A five-step approach to risk
management is identified by Health and Safety Executives (HSE) that includes identification
of risks by exploring how individuals can be harmed, decide who and how might be harmed,
assess those risks and agree on precautions, document and implement the findings and at last,
review and apprise the risk assessment (Hollins, 2010). Risk assessment is an integral part of
an organisation and so it cannot be said that how the company is tackling this aspect of its
obligation. However, on its website, it is stated that Suppliers must establish a process to
recognize the environmental, health, safety, and ethical risks associated with their operational
and labor practices. To Support this, the company also provide necessary training for workers
and managers to implement the necessary standards to comply with appropriate legal
requirements. However, sometimes a company may ignore this due to extra cost on training
and fulfilling obligations.
The next legal responsibility is reporting where a retail business must immediately
notify the relevant local authority for any work-related death, disease or injuries with
following a report within 10 days. Specific injuries to self-employed individuals and
members of the public must also be documented and reported. It is also significant for the
local authority to give details of how to give in to notification and report on its own online
site. Considering Amazon, the company facilitate this with supplier by identifying and
planning for emergency situation and procedures including emergency reporting
(amazon.com, 2018). However, Amazon sometimes not gave full control on all suppliers and
workers and thus this could create barrier for the company to fulfil the necessary legal
obligations.
Considering Involuntary Labor, Human Trafficking, and Slavery, Amazon ensures
that their suppliers must not use forced labour and traffic workers by any mean i.e. force,
fraud and coercion. The company also ensures that its workers work with full voluntary in
relation with work status and all expenses and fees must be shared to the employees in their
native language prior to the employment (amazon.com, 2018). However, at local level,
sometimes workers were not given clear and understandable contracts in relation with terms
and conditions of their engagement in a language understood by them. This is made on a
local level and thus it makes difficult for Amazon to track down with the more stringent of
the appropriate laws of the nation.

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Recommendations
As Amazon continues to grow, the level of competition also going to increase. It is
very important for the company to ensure that it continuously provide quality service to its
customer in compliance with environment and legal framework. This will help the company
in its sustainability growth over a long period of time.
In relation with economic factor, the company can go with the approach of
“bullwhip”. This means that the company can assimilate its SCM improved and change from
a collaboration model with its suppliers to a coordination mode. It would involve information
sharing among all its collaborators and suppliers adopted the cutting-edge technology. This
will also stabilize demand and supply of various products sold by FBA. This also involves
making of a unified IT system that can comprise all the stakeholders and suppliers in its SCM
and not Amazon only. However, to attain this the company will be required to change its
business model and company does not function in isolation however, instead carries together
all the components and the elements of the supply chain below one umbrella. Other than this,
the company can also unify its supply chain less than one gigantic IT system so that there is
better visibility on each element of supply chain and transparency in the process. In other
words, Amazon can assimilate its complete supply chain with end-to-end node of the single
IT system so that to identify blocks in a better way. This will also provide the company a
competitive advantage against its major competitors.
Considering legal factors, it is important for any company to fulfil legal
responsibilities for Health and Safety compliance. In relation with risk assessment, the
company is to bring out various policies and programs where the workers, employees and
suppliers can directly connect with senior management to share their views as most of the
time; these are ignored at local level. In addition, there must be quarterly appraisal relating to
operational and labor practices in extent with applicable legal requirements. This will help all
individual while providing a platform to share their views. Considering Involuntary Labor,
Human Trafficking, and Slavery, Amazon is required to embrace anti-traffic technology to
address and manage the respective risk. The initiative will be publishing an interactive map
of these tools, with the goal of increasing collaboration and encouraging the use of innovative
technology to support a multi-pronged approach to eradicating trafficking.

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Conclusion
Amazon is an innovative e-marketplace and the company is fulfilling its mission
statement day by day being customer-centric organisation. However, there are various
external forces in the business environment having direct impact on the success of the
organisation. The list of Amazon biggest competitor includes Walmart, Alibaba and eBay.
To ensure its sustainability and growth, the company is required to balance its
economic sphere and fulfil all legal obligations of the different country. Generally, Amazon
has advanced into one of the most significant and successful corporations in the world today.