Comprehensive Situational Analysis Report: Amazon, MKT600 Marketing

This report presents a thorough situational analysis of Amazon, a leading e-commerce retailer, examining its business environment and strategic positioning. It begins with an executive summary highlighting the competitive landscape of the e-commerce industry and the importance of evaluating both external and internal factors. The report then delves into a PESTLE analysis, assessing the political, economic, social, technological, legal, and environmental factors influencing Amazon's operations. Following this, an internal environment analysis is conducted, evaluating Amazon's strengths, weaknesses, and competitive advantages. A SWOT analysis is then presented, synthesizing the internal and external factors to identify Amazon's strengths, weaknesses, opportunities, and threats. The report concludes with a summary of the key findings and their implications for Amazon's strategic decision-making, aiming to provide insights into how the company can maintain and enhance its competitive advantage in the e-commerce market. The analysis is based on the MKT600 Marketing course requirements.

Running Head: MANAGEMENT 0
SITUATIONAL ANALYSIS

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Executive Summary
This report outlines the situational analysis of Amazon, a leading e-commerce retailer.
The business environment of e-commerce is highly competitive and to build up any strategy
related to product or market development, the enterprise is required to evaluate external
factors with the help of PEST analysis tool. In addition, Amazon also needs to measure
internal competitiveness and threats to match and align respective business strategies with the
external environment.
Therefore, its report will help the management in their strategic decision-making and
lead them to gain competitive advantage in the specific industry.

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Table of Contents
Introduction................................................................................................................................3
Analysis of External Environment.............................................................................................4
Analysis of Internal Environment..............................................................................................6
SWOT Analysis.........................................................................................................................9
Conclusion................................................................................................................................11
References................................................................................................................................12

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Introduction
Unlike the old times, marketing no more deals with the communication of the product
to the consumer; however, it fuels both the internal and external activities of the business
today. The current business environment is highly dynamic and surrounding by various
external forces and therefore, it is important for the management to frame effective marketing
environmental analysis help organisation to compete with uncertainty in the future (Easterby‐
Smith, Lyles & Peteraf, 2009).
For better understanding of these marketing frameworks, one of the largest e-
commerce company Amazon is selected.
Amazon Background
Amazon is one of the leading e-commerce corporation established in 1994 offering
wide varieties of products including electronic items, books, video games, furniture and many
more. The company are having their operations in 13 countries comprising of some top
nations including US, UK, Spain, Canada, Germany, Austria and France.
Amazon is also known for using combination of strategies in relation the product
portfolio such as bundle pricing, dynamic pricing and price skimming strategy. For the fiscal
year 2018, Amazon reported earnings of US$10.07 billion, an increase of 30.9% over the
previous fiscal year (Valdez, 2019). The company also ranked at 18 in the Fortune Global
500. The number of employees working in the organisation are nearly 566,000.

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Analysis of External Environment
 Political Factors – In case of Amazon, political stability helps the firm to diversify its
business on an international level. On the opposite side, there are some political
factors having significant impact on Amazon business operations such as strong data
regulations, EU target for disputable income and political red tape. Taking example of
Amazon in China, the company was forced to sell off its cloud assets as tough new
rule bite and for up to $301.2 million (Cadell, 2017). In the same way, Amazon was
also being unfairly targeted by the European Commission for tax avoidance and thus
PESTLE ANALYSIS
Political Factors
Economic Factors
Environmental Factors
Legal Factors
Technological Factors
Social Factors

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ordered to repay €250m. Therefore, such political factors may negatively impact
Amazon growth in a particular region.
 Economic Factors – Higher the economic stability, there will be number of
opportunities to Amazon. Stability in economy of a country will directly increase
disposable income with the people and thus allow them to spend more on luxurious
items. In addition, Global e-commerce sales grow 18% in 2018 and much more
growth is anticipated in this sector (Young, 2019). This requires Amazon to develop
proactive marketing strategy considering all these economic factors.
 Social Factors – The e-commerce industry is highly influenced by various cultural
and social factors. For instance, there is an increase in internet usage all over the
world but still in many countries, buying and selling are not part of their cultures. For
example, in India, people resist buying some specific products online such as grocery
items and clothing (Vaithianathan, 2010). They prefer to purchase these products on
physical stores by comparing and contrasting each item. Therefore, to make a deeper
connection with the customer, Amazon needs to consider the above social factors and
develop strategies accordingly.
 Technological Factors – There are various new technological breakthroughs in this
21st century with rapid progress in information technology and rise of digital media
(Livingstone & Brake, 2010). This technological disruption is revalorizing business to
consumer transaction in the e-commerce with extensive personalization,
conversational marketing, automation and presence of Omni-channels. In addition,
Amazon is also taking out various technology initiatives to reach customer in an
effective way. For instance, the company come up with drone deliveries in the year
2017 (Chang & Lee, 2018) and they even tested this transportation at various places.
However, at the time of official launch, the company is required to take the help of
various marketing strategies.
 Legal factors – Amazon is operating on an international level and has to deal with
various legal compliance in different counties. For example, renewed General Data
Protection Regulation (GDPR) leads to increase in cost for the company, as they have
to tweak its cloud service infrastructure. Hence, these factors are beyond the control
of an organization and they need to be active and ready to deal with such issue.
 Environmental factors – Environmental factors are related to the sustainability
practices of an organisation. Due to intense competition in the e-commerce industry,
Amazon needs to comply with many general sustainability practices such as energy

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consumption, green packaging, reduction of waste, etc. Other ethical responsibility of
Amazon includes disclosure of carbon footprint in the report, as it will help in
reaching the emission goals set at the initial stage.
Analysis of Internal Environment
Amazon has its internal strengths help the company to stay ahead of the competition
with constantly utilizing current technology and watching the industries trends.
The mission statement of Amazon is – “We strive to offer our customers the lowest
possible prices, the best available selection, and the utmost convenience” (Treanor, 2010). It
clearly specifies that every action and strategy of the company be intended for customer
satisfaction.
On the other hand, their corporate vision statement is – “to be Earth’s most customer-
centric company, where customers can find and discover anything they might want to buy
online” (Treanor, 2010). It implies the company aim to become the best e-commerce
enterprise in the world.
The market position of Amazon is demonstrated below with the help of diagram –

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In relation to suppliers, 53 per cent of paid units were sold by third-party sellers in the
first quarter of 2019 (statista.com, 2019). The company is strongly committed to conducting
its business in a responsible and ethical way with engaging to the suppliers that are also
committed to the same principles. In addition, Amazon is encouraging vendors to sell directly
to consumers on its marketplace by charging respective commission on each transaction.
Pushing more suppliers on the marketplace is the company strategy to decrease overhead by
getting more of them to use an automated self-service system that requires no input from
managers of the company. With regards to this, Amazon also constantly review their selling
partner relationships so as to offer customers improved value and selection.
In relation with competitors, Amazon is giving tough competition to various e-
commerce businesses. Amazon is called as Google of e-commerce (Huang & Benyoucef,
2013). However, many sellers had launched their own e-commerce platform and in few years,
brick and mortar shop owners also start using various technologies and that may create small
change to Amazon. Amazon has expanded its roots to various category including e-
High Quality
Lower Price
Low Quality
High Price

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commerce, media and music. In e-commerce segment, the major competitor of Walmart
includes eBay, Walmart, Best Buy and Alibaba. In response to media, the competitor of
Amazon prime media is Netflix and Hulu. In music segment, Apple Music and Spotify are
the major competitors of Amazon music. Lastly, Azure is the biggest competitor of Amazon
AWS cloud computing. Hence, due to presence of varieties of options, the company needs to
be alert while reaching to the customers in an effective way.
Considering Amazon e-commerce business, the customer of the company includes
online shoppers to which the product is communicated. Today, Amazon is serving millions of
business customers around the globe. In relation with breadth of customers, their customers
also range from sole proprietors to large enterprises. The company is serving billions of
business globally comprising universities, hospitals, government agencies, restaurants, and
more. On behalf of the customers, the company continuously innovate such as bringing more
transparency in the procurement process and thus developing intuitive buying experiences.
With regards to this, Amazon is also using Big Data gathered from consumers through their
every click on the website based on collaborative filtering. From future perspectives, Amazon
is required to adapt itself with the unique needs of the customers.

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SWOT Analysis
Strength
Amazon strong market presence is one of the biggest strength of the company. This e-
commerce company are running their operations in most of the developed nations and
emerging economies like US, Canada, UK, India, etc. Due to its stronghold in major
economy, it helps the brand to enter into the new market in an effective way.
In addition, Amazon also runs a robust logistics and distribution system so that the
customer demand can be fulfilled quickly and it helps the firm to gain competitive edge in the
industry (Yu et al, 2016). Other than this, the company has maintained extended product
portfolio in align with its early success of the book segment. This helps the brand to achieve
economy of scale and also decrease in cost at various places.
Weaknesses
Amazon free shipping to various customers negatively impacts the profit margin of
the company. In addition, the company overall profitability is also hampered due to
increasing competition in the developing countries as domestic players are offering
standardized products to the customers at lower prices. The business model of Amazon also
functions on Zero margins and therefore, even if Amazon gaining greater revenue, it is not
being converted into significant profit. Other than this, the private label product portfolio of
Amazon such as Alexa and Kindle are also not getting huge success in the markets and thus,
indirectly the profit margins of the company are reducing (Waldfogel & Reimers, 2015).
Opportunities
The company have huge opportunities to expand the business in grocery market
segment as this market is yet untapped and being first mover in the industry will help the
brand to gain higher brand awareness. In the same way, Amazon can also foray into
pharmacy as it will help them to gain different sort of customers and also make them attract
towards e-shopping. Amazon can also invest in brick and mortar stores to ensure its physical
presence and thus make the product easily accessible to all the customers. In last, Amazon
can also roll out its own payment gateway to have full control over the operations.

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Threats
Data security and scalability is one of the biggest threat to Amazon and this may
impact customer to not buy products from Amazon. Amazon is also getting tough
competition from two big brands i.e. Alibaba and Walmart and therefore, it is important for
the company to be ready with the proactive strategies and create entry barrier in the online
retail space.
Putting SWOT into action
 The company has a strong brand presence in various countries and therefore, if
Amazon wishes to expand into grocery segment, it will easier to make the business
success due to presence of existing loyal customer base.
 In addition, the present distribution system will also help Amazon to move into
grocery and pharmacy segment and thus without any greater investment.
 AWS is one of the strengths of Amazon and the company can use this technology to
ensure data security by doing strategic alliances with CISCO or any other tech
company.
 One of the weaknesses of Amazon is link with the strength of domestic player in the
emerging economy. Before expanding, Amazon can merge or do joint venture with
already established domestic player to lower down the competition. It will help
Amazon with facing direct competition.

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Conclusion
Amazon already has successfully established in various developed and developing
countries. However, due to intense competition and dynamic environment variables, the
company is required to formulate relevant strategies matching with the external environment.
In addition, there are various weakness of Amazon, which can be converted into
strength if the management tap on the relevant opportunities in the business environment.
Hence, to conclude, Amazon has developed itself to be the leading retailer in the e-commerce
industry by benefitting the user in each and every way.