BBA 6th Semester Case Study: E-commerce Analysis of Amazon

This case study from Martin Luther Christian University analyzes Amazon's e-commerce operations. It begins with an abstract highlighting the shift from traditional to e-commerce, emphasizing Amazon's revolutionary impact. The study covers the background of e-commerce, its evolution, and a detailed case study of Amazon, including its progression, competitors, and PESTEL framework analysis. The PESTEL analysis examines the political, environmental, social, technological, economic, and legal factors affecting Amazon's business. The study concludes with observations on e-commerce challenges and future trends. The assignment also includes references to articles and websites, providing a comprehensive overview of Amazon's e-commerce strategies and its position in the industry. This case study is a valuable resource for students studying entrepreneurship and e-commerce.

Martin Luther Christian University
Nongrah, Shillong, Meghalaya
Case study of E-commerce
On
Submitted By,
K.Dawcha
BBA 6th semester

Table of Contents
Abstract.................................................................................................1
1. Background of Ecommerce..............................................................2
2. Review of Literature ....................................................................... 3
2.1 ECommerce Evolution .....................................................................
............................... 3
2.2 Case Study –
Amazon ..................................................................................................
.... 5
2.2.1 Amazon Progression .....................................................................
............................ 52.2.2 Amazon's Competitor ....................................
........................................................... 72.2.3 PESTEL Framework Ana
lysis .................................................................................. 82.2.3.1 Poli
tical.........................................................................................................
......... 82.2.3.2 Environment ..................................................................
...................................... 102.2.3.3 Social ..............................................
..................................................................... 112.2.3.4 Technology ......
.................................................................................................... 112.2.
3.5 Economic .........................................................................................
.................... 132.2.3.6 Legal .................................................................
................................................... 143. Conclusions and Future Trend ...
............................................................................................ 153.1 Concl
usion on PESTEL affecting Amazon .....................................................
............... 153.2 Challenges of E-commerce ..........................................
.................................................. 163.3 Future Trend .............................
...................................................................................... 164. References
................................................................................................................
............. 194.1 Articles References ........................................................

................................................ 194.2 Website References ....................
.................................................................................... 20
Table of Figures
Figure 1: Online Sales by Product
Category................................................................................... 5
Figure 2: Amazon Revenues Growth 2004-
2015 ........................................................................... 6
Figure 3: PESTEL Framework
Analysis ........................................................................................ 8
Figure 4: Forecast of Worldwide Retail E-Commerce
Sales ........................................................ 17

Abstract
Electronic commerce or E-commerce allows consumers to electronically
exchange goods and services with no barriers of time or distance. More
customers moved from traditional purchase to e-commerce because it is often
faster and cheaper. Besides, e-commerce offers more convenience and flexible
for customization option of products and services.
Amazon began as a small startup with a big vision and has revolutionized its
present in e-commerce business over the past 20 years more than any other
company. Amazon was chosen as a case study since it has changed the way
people shop online with its e-commerce evolution overthe decades.
In Amazon case study, like any other businesses regardless of traditional or
online, are often affected by external factors. These factors are changing the
way businesses operate and how the industry evolves. Political, Environment,
Social, Technology, Economic and Legal (PESTEL)framework is a tool that is
used to identify these external factors that affects the condition of a business
organization or industry’s macro-environment.
Amazon sells a great deal of consumer goods, the other main feature that puts
the company onanother level is the multi-leveled e-commerce strategy it
employs. It provides services to
four primary customer sets: consumers, sellers, enterprises, and content creators
. The company also provides other marketing and promotional services, such as
online advertising and co-brandedcredit card agreements.Selling goods isn't the
only way the company makes money, its web site's affiliate program isone of
the most famous on the Web. The level of integration that occurs on Amazon is
a programming feat that few (if any)
online sales sites can match, Amazon makes every possibleattempt to customize
the buyer experience. The massive technology core that keeps Amazon running
is a major challenge, next to facing up growing competitors like Walmart,
Alibaba,Google in the online business.

1. Background of E-Commerce
In e-commerce (electronic commerce) the trading business is done through
the internet and it involves commercial transactions that include transfer of
information. E-commerce simplymeans buying and selling products and
services through the internet and is commonly associatedwith online
shopping. It covers a range of different type of businesses, from consumer
basedretail sites to business exchange trading goods and services between
corporations.There are four principal categories of e-commerce, namely B2B
(Business to Business), B2C(Business to Consumer), C2B (Consumer to
Business) and C2C (Consumer to Consumer).
• B2B: Involves companies doing business with each other. One example
ismanufacturers selling to distributors and wholesalers selling to retailers.
• B2C: Comprises of businesses selling to the overall public through
shopping cartsoftware, without needing any human interface. An example of
this would beAmazon.
• C2B: Consumers post a project with a set budget online, and companies
bid on
the project. The consumer reviews the bids and selects the company. Elance is a
nexample of this.
• C2C: Takes place within online classified ads, forums or marketplaces
whereindividuals can buy and sell their goods. Examples of this include
Craigslist, eBayand Etsy.
Following the tech-savvy consumer demands, e-commerce has evolved over the
years as one ofthe main facets of the internet to emerge. Companies like
Amazon began over a simple platformof B2C by merely selling goods and
books and transformed to the biggest online retailer in theUnited States. Its
operation is now serving multinational consumer markets including
Europe,India and China. Nowadays the e-commerce giant provides a range of
services ranging fromretail to cloud computing to book publishing. In year
2015, Amazon hit $107 billion revenue ascompare to $6.9 billion in year 2004.

2. Review of Literature
2.1 E-Commerce Evolution
Early development of e-commerce can be traced back to the 1960s, when companies started
using Electronic Data Interchange (EDI) to share business documents with other companies.
E-commerce was defined by IBM in 1972 when the first electronic transaction happened. As
the number of individual users sharing electronic documents with each other grew in the
1980s, in the 1990s, the rise of eBay and Amazon transformed the e-commerce industry. The
development of e-commerce has also led to rapid increase of internet sales as consumers
begin to appreciate benefits of:
• Discounted price offered by sellers as they operate with less margin
• Convenience to have a product delivered rather than the cost of time and transportand
parking of going to a store
• Sourcing low-priced product from overseas vendors
• More variety of catalogue offered by online stores
• Review engines that compare and recommend product
• Uncommon goods sold for cheaper offer at auction sites
The wide use of the internet globally has substantially contributed to the increase of online
transactions. As mobile devices became more popular, mobile commerce has become its own
market. With the rise of sites like Facebook and Pinterest, social media has become an
important driver of e-commerce. Source from Internet Live Stats (2015) showed that 201
countries around the world have internet access. The accessibility to internet help to grow E-
commerce over thevirtual platform, below are the major milestones for the E-commerce
evolution:
1979- Michael Aldrich is credited with inventing online shopping by connecting amodified
domestic TV to a real-time transaction processing computer via a domestic telephone line.
1982- Minitel was introduced in France and was used for online ordering.
1991 – The World Wide Web is created

1994- Netscape releases the Navigator browser. Pizza Hut offers online ordering onits web
page, and the first online bank opens.
1995 – eBay is founded & Amazon makes its first sale
1996 – Over 40 million people have Internet access, and online sales surpass $1 billion for
the year
1998- PayPal comes into existence.
2000 – Revenue from U.S. online shopping totals over $25 billion
2002- eBay acquires PayPal for $1.5 billion and changes the scope of online
shoppingforever.
2003- After eight years, Amazon posts its first yearly profit and Apple launchesiTunes, the
first major digital music store.
2005 – The term “Cyber Monday” is coined and becomes one of the biggest online
shopping days of the year
2006 – Facebook begins selling advertisements
2008 – Online purchases are made on mobile phones for the first time
2009 - Alibaba held the first Double Eleven (Single’s Day) Shopping Festival online
2012- US E-commerce and online retail sales are projected to reach $226 billion
(anincrease of 12% over 2011).
2016 - Alibaba Singles' Day festival posted a record $17.73 billion sales in 1 day
Today, 78% of US adults have made a purchase online, and 69% of adults with Internet
accessshop online at least once a month and the most commonly purchased items online are
electronics(22%) and clothing (17%).

Figure 1: Online Sales by Product Category
2.2 Case Study – Amazon
2.2.1 Amazon Progression
Amazon startup began with its founder’s own savings, loan from bank and family. It began as
adestination to buy books, and eventually other media. It then offered marketplace services
foronline retailers and/or individuals, while simultaneously selling other physical goods for
homes,offices, cars, and beyond. The company is a giant in the online retails with tremendous
productrange and they make every possible attempt to customize the buyer experience.After
1996, Amazon received extra investment of $1 million from venture capital. Amazon didnot
rely solely on its internal strength to conquer the market. Eventually, Amazon went public
on NASDAQ in May 1997, Amazon acknowledged that only the stock market would be able
to provide the kind of financing it was looking for. Today the shares are valued at approximat
ely

$268. In 2001 the stock price plunged to just $5.97 with the dotcom crash. Amazon managed
tosurvive this industry challenge period, though had to close two warehouses and lay off 15%
oftheir staff in the process. The company finally turned a profit in late 2001 despite the
dotcomcrisis. Even when profitable, Amazon have never declared or paid cash dividends on
commonstock, opting instead to retain all future earnings to finance future growth.
Amazon’s revenue growing trend from
year over year as shown in Figure 1 makes it a case studyworth analysing.
(source: Statista, 2016)
Figure 2: Amazon Revenues Growth 2004-2015
Amazon is simply the ultimate hub for selling merchandise on the Web, it lets almost anyone
sellalmost anything using its platform. Since 2000, customer can also find goods listed by
third- party sellers to individuals or small companies and retailers like Target and Toys 'R Us,
used goods, refurbished goods and auctions.
The embedded marketing techniques that Amazon employs to personalize shopper
experienceare probably the best example of the company's overall approach to sales by
knowing itsconsumers very well. Customer experience good deals when they visit
Amazon.com, fromspecial offers and featured products to some customized
recommendations to attract personal shoppers.
Amazon is also able to lead the industry as it has been sensitive to the macro
environmentchanges throughout the world, by trending of consumer buying behavior and
keeping track withfast development of technology in every business aspects.

2.2.2 Amazon's Competitor
Amazon operates in three general segments: media, electronics and other merchandise. As
of November 2014, the company became the largest internet company in the US and amultina
tional consumer electronics company.In the media segment, Amazon competes with auction
site eBay, media game-changer Netflix,Time Warner Cable, Apple, with iTunes; Google with
its Play Store and media producer LibertyInteractive.Amazon has several competitors in the
electronics and general merchandise segment, many ofwhich are brick and mortar rivals
including Best Buy, Family Dollar, RadioShack, Staples,Target, Walmart, Sears, Big Lots,
Delia and Systemacs. Where else in the online electronics andgeneral merchandise segment
the competitors includes Alibaba Group, LightInTheBox HoldingCo., Overstock.com, PCM,
Vipshop Holdings, JD.com, Wayfair Inc. and Zulily.In the other operating segment, Amazon
competes with several of the world's largest companiesincluding CDW, PC Connection,
Insight Enterprises, Google, Oracle; salesforce.com, Accentureand Citrix Systems, among
others.
Amazon’s CEO realized that not only could Amazon sell products for less than its
competitors
but could also make them much cheaper than its competitors. By streamlining manufacturing
,distribution and retail of products, Amazon has a significant competitive advantage due to
thescale it operates in.
2.2.3 PESTEL Framework Analysis
We used the PESTEL framework, as displayed in Figure 2 to analyze the changes in
macroenvironment that affects Amazon. The PEST framework was first introduced by
HarvardProfessor Francis Aguilar in 1967 as the tool to scan the business environment which
is useful tospot business opportunities, detect direction of change within business
environment and avoidunconscious assumptions when entering a new country, region, or
market. In 1980’s, 2 more factors were added to ensure the framework more comprehensive.

Figure 3: PESTEL Framework Analysis
2.2.3.1 Political
Political behavior refers to “intentional acts from a wide range that may include influence
tactics,self-presentation, impression management, voice and helping behavior to manage
(create,
maintain, modify or abandon) the shared meanings of organizational situations so as to
produce desired outcomes that would otherwise be unfeasible” (Kapoutsis, 2016). Therefore,
politics is tied to what is actively going on within the company, and in the society outside the
company.Where in previous years, the concern was for laws and regulations for security,
false advertising,fraud and anti-dumping, while this now the focus has been all about
potential political electionrisk.
There is no difference between e-commerce and traditional commerce in this respect within
theforeseeable future, as this year represents a sea change whereby external political
factorsdominate almost all events worldwide, with the biggest factor being the US
Presidential electionsculminating in November 2016. The uncertainty to business practices
stems from the rhetoric,fear mongering, sensationalistic statements, and victimizations of
various parties, with eitherClinton or Trump both viewed as risky for business. E-commerce
impact is not tied to scientificliterature, but to promises of political entities worldwide to
erect barriers to trade in order to protect local economies.

The e-commerce risk particularly on Amazon is clear, its founder Jeff Bezos purchased
theWashington Post newspaper more than 2 years ago, and has actively undermine the
candidacy ofDonald Trump. The retaliation from Trump as the US President, can be
detrimental to Amazon,as this is the primary source of ownership income for Jeff Bezos.
Therefore,political perspective is crucial as policies displayed by the US Presidency can post
a spill over threat tothe e-commerce industry.
Overall governmental support for e-commerce is an opportunity especially for foreign
countriesexpansion, Amazon could continue expanding in India and China markets with
governmentalsupport. However, the rising threat to Amazon also comes from the same factor,
Chinagovernment allowed foreign e-commerce to operate in China, at the same time, they are
alsostrongly encouraging e-commerce startup with China companies. Competitors like
Alibaba andJD.com compete with Amazon fiercely in China online retail market.