Strategic Analysis of Amazon: PESTLE, VRIO, and Porter's Five Forces

This report provides a comprehensive analysis of Amazon's business strategy. It begins with an introduction to business strategy and then focuses on Amazon. The main body of the report comprises four tasks. Task 1 applies frameworks to analyze the macro environment's impact on Amazon, utilizing PESTLE analysis to examine political, economic, social, technological, legal, and environmental factors. Task 2 assesses Amazon's internal environment and capabilities using the VRIO model, identifying core and non-core competencies. Task 3 applies Porter's Five Forces model to evaluate the competitive forces within Amazon's market sector. Finally, Task 4 interprets and devises strategic planning for Amazon using various theories, concepts, and models. The report concludes with a summary of findings and includes a list of references.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
TASK1.............................................................................................................................................3
P1: Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies...............................................................3
TASK2.............................................................................................................................................6
P2: Analyse the internal environment and capabilities of a given organisation using
appropriate frameworks...............................................................................................................6
TASK3.............................................................................................................................................8
P3: Applying Porter’s Five Forces model evaluate the competitive forces of a given market
sector for an organisation.............................................................................................................8
TASK4...........................................................................................................................................10
P4: Applying a range of theories, concepts and models, interpret and devise strategic planning
for a given organisation.............................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
Books and Journals:...................................................................................................................13

INTRODUCTION
Business strategy determines the set of plans and decisions consists within the
organisation in order to meet the specific objectives by the entrepreneurs. Although it can be
refer to a master plan which is implemented to secure a position in the competitive market by the
management team of the company to carry their functions of business, to satisfy their customers
and to achieve the desirable results (Yuan, Y. and Et.al., 2020). It can be useful to identify,
analyse and exploit the opportunities that benefits the company and to recognizing the threats
such as competition, counter balance the weaknesses and strengths and to optimizing maximum
results from the available resources. This report is going to focus on Amazon Company which is
an American multinational technological company headquartered in Seattle, Washington, which
is one of the leading companies in the US; along with Facebook, Google, Apple and Microsoft.
The company mainly highlights on e-commerce, digital streaming, AI (artificial intelligence).
The company was founded 26years back on July 5, 1994 by Jeff Bezos. The business strategy of
Amazon consists of focusing on financing in technologies, improving webs, improving and
enhancing their logistic operations and many more things (Ukko, J. and Et.al., 2019). It has been
using strategies over the years that are beneficial to the company.
MAIN BODY
TASK1
P1: Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies.
Internet is definitely plays a vital role in the Amazon company but innovations in
technologies, adapting new marketing strategies and most importantly business model changes
the history of Amazon. The company highlights four principles; focusing on customer
satisfaction rather than competitions, long term thinking, commitment to operational excellence
and passion on their commitment. Whether it is online or offline stores; the focus is on price,
selection and convenience.

Key strategies for Amazon's success:
 Knowing about their customer's needs and wants, and understand what pressurize them
to shop somewhere else and then take it into action.
 Amazon focusing on maximizing the data of their customer and gather behavioural
insights. So that it can create more personalised experience of customer.
 Amazon creates a customer centric culture, as they believes that the strong customer
connection will lead to strong feedback which helps the retailers to serve better to their
customers (Park, Y. and Mithas, S., 2020). Amazon's obsession is to serve better to their
customers.
 Amazon is not afraid to adopt new ideas and always ready to experiences new tests and
innovations.
 Intermingle the demographic, transactional and behavioural data to develop the
customer's profiles with the right technology and system.
PESTLE ANALYSIS OF AMAZON:
PESTLE analysis of Amazon considers the several factors such as political, economical,
social, legal and environmental factors that shape the conditions of its macro environment.
Amazon.com performance relates to their issues identified in its PESTLE analysis and its macro
environment. As one of the largest company in the world for using information technologies and
online related services, the company loves the benefits of high production, extensive reach in the
market, high popularity. The online marketing always creates new challenges for the company as
it is dynamic and continuous. By PESTLE analysis, this will help the decision-makers to find
opportunities, threats based on the external environment to control the macro environment of the
firm.
 Political Factors affecting Amazon technologies and services: This factor of PESTLE
analysis model drives on the bases of government activities and how it effects on the
business and their macro environment (Farrukh, M. and Et.al., 2020). In case of Amazon
company, the mentioned political factors are significant for the growth in the e-commerce
industry; support of government in e-commerce business, stability of politics in the
developed countries, focusing on how government increases their efforts on security of
cyber in both phases opportunities and threats. The support of government definitely

benefits the company as it continues the expansion in relevant markets. But on the other
side, it threatens the company as it rising the competition; as the government involving
China to raise and expand their online retailing store and business operations.
 Economic factors are significant to Amazon.com Inc.: The performance of the
Amazon depends on the economic situations where it operates their online and offline
businesses. The following factors of economics in external environment is important;
increase in disposable income in developing countries can be opportunity, the recession
in potential market of China and the economics's stability in developed markets (US and
EU countries) can be opportunity. The financial performance of company boosts when
disposable income increase in developing markets. This situation helps in minimization
of issues and risks occurred in the macro environment.
 Sociocultural factors influencing Amazon: This factor recognizes the impacts of
sociocultural factors trends leading on the online retailer of information technology goods
and services. As the gap increasing between rich and poor on their disposable incomes,
that will be consider as a threat to the Amazon.com. The higher the level of disposable
income is more favourable as it increases the e-commerce revenue (Yuliansyah, Y., Gurd,
B. and Mohamed, N., 2017). It will create a great opportunities for growing e-commerce
business and IT systems.
 Technological Factors in Amazon: Considering the centrality of technology, the
advanced technology directly impact the Amazon. The company faces the challenges or
threats of rapid change in advancement of technology which creates pressure on the
development of technology assets. Greater investment in technologies can boost the
productivity of the company with minimizing the cost, as well as creates a significant
competitive advantage. But at the same time this might be a threat to the quality
experience of customers. Thus, it will be critical to the company's long term survival.
 Legal factors: The operations of the company must be stick to the legal requirements.
This external factor in PESTLE analysis creates a huge opportunities for the Amazon
company, by rising product regulation can be seen in the demands of consumer safety
and security, it can be opportunity for the company by changing import and export
regulations.

 Environmental Factors: The company can grow and improve their environmental
impacts by rising interest in environmental programmes, although the company has their
mostly online operations but it can be direct challenging in the waste management,
energy consumption or creates a direct consequences of environment.
TASK2
P2: Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks.
For understanding the internal analysis of Amazon, the VRIO model founded by Jay B.
Barney's system has been used in practising for the identification of competitiveness. This model
helps the Amazon; how business manages to sustain and grow their market position (Kong, D.
and Et.al., 2020). The competitive advantages of Amazon considering various resources and the
capabilities. It empowers the company's decision-makers to adapting optimal of strategic
objectives and plans in order to meet with the competitors like Alibaba. The core competencies
of the company Amazon are based on the resources and capabilities of the firm that satisfy all of
the VRIO criteria i.e. Valuable, Rarity, Inimitable and Organisation. Many of these fits in the one
or more criteria but overall it supports the business. The mentioned table of VRIO model figure
out the core and non-core competencies:

Amazon's
Resources and
Capabilities
Valuable Rarity Inimitable Organisation
Relationships
with suppliers
yes no no yes
Human resources yes no yes yes
Innovations yes no no yes
Customer's base yes no no no
Brand name yes yes yes yes
AI capabilities yes yes yes yes
Portfolio of
private labelled
products
yes no no no
Online services yes no no no
Networks for
delivery
yes yes no no
History of e-
commerce
yes yes no no
High market
capitalization
yes yes yes yes
Brick and
Mortar's presence
yes no no no
Amazon's Core Competencies: The sustainable competitive advantages of the Amazon are
derived from the core competencies of the company. Amazon brand equity is rare and valuable
and high in the global market. The company attracts their customers by its current and emerging

products but sometimes it is difficult to imitate where company already has their presence in the
market (Suoniemi, S. and Et.al., 2020). The company optimizing the maximum benefits of this
core competency by using the various products and organising the business.
Amazon's Non-core competencies: The above table mentioned the non-core competencies like
Brick and Mortar's presence which is valuable to the company and facilitates the competitive
advantage. The growing diversity of online services of the Amazon is valuable in respect of
adding the sources of revenue but not rare and inmitable, because many other companies offers
the similar services. These resources and capabilities gives the company a competitive advantage
but these are not sustainable and applicable in long journey of developing strategies (Chen, Y.,
Eshleman, J. D. and Soileau, J.S., 2017).
TASK3
P3: Applying Porter’s Five Forces model evaluate the competitive forces of a given market
sector for an organisation.
Amazon Company stands out in a variety of competition whether it is a small or large
companies like Alibaba. It enjoys their position in online retail market which leads the result of
integrating challenges in businesses as it identifies in the Porter’s Model analysis (Fraser, J.,
2019). The founder Michael Porter developed this analysis model as a tool to the external
analysis of business firms. As considering the Amazon Company external analysis defines the
environment of e-commerce market or industry that is online retail market.to maintain its
position in the long term journey, the company must evaluate the external factors in their online
as well as offline stores such as by using this model of Porter’s Five Forces. The following are
the excess of the external factors affecting Amazon, based on this analysis framework:
 Rivalries and strong competition.
 Bargaining power of suppliers.
 Bargaining power of customers or buyers.
 Threat of substitution.
 Threat of new entrants or new entry.

Competition with Amazon.com Inc.: Amazon stands out and maintain their position among
rivalries. This model addressed the impact of organisations on each other. Retail companies are
usually aggressive, but exert a strong competition among each other. The following external
factors are accountable for strong competition in their retail market;
 High availability of substitutes.
 Low switching costs.
 High aggressiveness of companies.
The respective company has their direct competition with Alibaba which is a Chinese
multinational technology company known as Alibaba.com, which has a vital and expanding e-
commerce website. But Amazon also gives a tough competition to Alibaba as it has strong force
of substitutes because of their high availability (Xie, Y. and Cooke, F. L., 2019). The five forces
analysis of Amazon indicates that competition must be a strong priority to ensure the company’s
long term journey.
Bargaining power of Suppliers: Suppliers have the power to control the availability of supplies
or material needs for online retail operations such as hardware components for IT systems. In
this analysis framework, outlines the influencing bargaining power of suppliers based on these
external factors:
 Small size of suppliers.
 Moderate size of suppliers.
 Moderate forward integration.
The external factors highlights the moderate importance of suppliers as a determinant in the
e-commerce industry. The small size of population empowers the suppliers to impose strong
force such as price changed in the equipments from a small number of large suppliers might
affect the operational costs of the company. On the other side, moderate forward integration
limits the actual impact of suppliers on the company. And, based on the last factor moderate size
of suppliers for equipment limits the influencing power on the Amazon company.
Bargaining power of customers: The Amazon Company highlights the approach of customer-
centric to their online retail business. This analysis framework addressed the influencing power

of consumer on business and industry environment. The external factors affects the business in
terms of customers finding other alternatives to the online retail services. In respect of low
switching costs makes customers easy to switch from one to another companies. As well as the
high availability of substitutes empowers the consumer to get better options in other retailing
firms instead of purchasing from one company. This factor emphasize the great challenges in the
online retailing.
Threat of Substitution: The Five Forces analysis focuses on the substitution for the company.
Amazon determines the strong force of substitution which might be a threat to their online
retailing business and affects the performance of the company (Olson, E. M. and Et.al., 2021).
There are many other options available to the consumers to switch from one company to another;
options available like Alibaba, Walmart and many more which matches with their preferences
and budgets.
Threat of New Entrants: Amazon market share has been reduced in retailing industry as many
new companies comes into force and it might be a threat to the existing companies. As
consumers can easily shift from one to other, it might empowers the new firms to impose a
strong force not favouring the existing companies. The branding development takes years to
make impact on consumer’s mind as a result it weakens the force. This analysis framework says
new entrant is just a minor issue in Amazon’s performance.
TASK4
P4: Applying a range of theories, concepts and models, interpret and devise strategic planning
for a given organisation.
Strategic planning gives a platform to record vision, mission, values, long term objectives as
well as the plan of actions to reach or get them in a effective manner. A well written strategic
plan can play a significant role in the small or large online retailing firms and responds smartly
to opportunities and challenges that company might get and will also helpful in the growth of
business (Cubas‐Díaz, M. and Martinez Sedano, M. A., 2018). Its just a documentation of
planning and establishing direction in right way to get them. As considering the company

Amazon, the brand is focused only on the satisfaction of consumer. The firm wants be known as
most customer’s friendly throughout the world which serves best at lower costs. The company’s
strategy based on leveraging the technological capabilities for their success.
The fortune at the bottom of pyramid; business plus strategy:
For the companies with resources and dogged to compete at the bottom of economic
pyramid, the rewards include growth, profits or contributions towards human kind. The countries
which still do not have modern infrastructure and to meet the general requirements of humans
are ideal of testing grounds for developing the environmental technologies as well as the product
for the whole world (Alam, R. and Et.al., 2019). Generally, the bottom of pyramid customers
looking for the products which have low prices such as small size sachets of toothpastes, hair
oils, shampoo or face washes. It refers to two-thirds population of economy who stands at the
bottom of the pyramid. Amazon’s investments at the bottom of pyramid refers lifting billions of
people from the poverty and desperation, it could be continue if the bridge between poor and rich
grows too wide. Continuing business operations involving poor people will require some
technological innovations, terrorism, political chaos many more. Companies like Amazon will
serve to transform their understanding of scale from ‘bigger to better’ ideal to small scale
opeartions distributed to global capabilities.
Amazon’s strategic plan to their offline business operations:
According to the company, this has been done for the first time that uses technologies,
training and developing capabilities to power boost the local shops or physical stores across the
world. This plan has been made for the purpose of convenience of consumers they can buy
products from local cities and which is convenient from their home with a motive of improving
the digital presence of local shopkeepers. It can serves the customer with varieties of selection,
value added services, faster deliveries and helps local shops to transform in digital shops
(Pucheta‐Martínez, M. C. and Bel‐Oms, I., 2019). But due to COVID-19 pandemic and
lockdown measures, prompted customers shifted to online purchasing that will cost to local
shopkeepers.
Amazons strategic plan to their online stores:

Amazon has committed to deliver the best and fast experiences. As a multinational company
it serves varieties of products and services to the customer at global level, the customers need not
to worry about quality services of the company. Amazon online stores serves varieties of
services like Amazon pantry, groceries shopping, online payment, online payment transfers from
bank account and many more. But the company is lacking services with transportation,
hospitality, medical services and many more.
CONCLUSION
It has been concluded from the above report that business strategy determines by the end
result of individuals and manners to achieve a common goal by utilizing systems. Business
Strategy turned out to be effective in the e-commerce business as well. The concepts, theories
models of strategic planning and the fundamental ideas which are particular can be very helpful
in the long term journey of the respective company. Organisations have thrived and the business
of the Amazon company turned out to be more effective due to the support and procedures of
strategic management.

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