Capstone revisions I
Running head: AMAZON 1
AMAZON 9
Amazon
Yusuf Saed
02/13/2020
Executive Summary
Amazon.com, Inc. is one of the big four tech companies focusing on e-commerce, artificial intelligence (AI), digital streaming, and cloud computing. The corporation is the world's largest online retail store with a broad range of commodities. Manufacturers offer descriptions of the products available in the online store, and resellers also include an honest and concise summary of their products in the different categories. The company also offers other services like cloud computing, digital advertising, groceries, prescription drugs, movies, and television through its Amazon Pride Video platform.
The customer base of the company includes digital-savvy consumers who are not struggling with domestic bills. The company is also targeting teenagers with spending money where they can shop using their password. The target was 13 to 17-year-olds, who are the most massive media audience at 26%, with the figures growing annually. The main competitors in the e-commerce industry include Alibaba, Walmart, eBay, and Costco, while in the subscription services, the main competitors are Netflix, Google, and Apple. Oracle and IBM are the main competitors in the web services sector. The company sees opportunities in penetrating developing markets, reducing counterfeits through technology, and increasing the number of its physical stores to compete effectively with other retailers. There are a few necessary improvements that are needed to reinforce the company's market position.
Table of Contents
Ecological and Environmental Impact 8
Introduction
Amazon.com, Inc. is an American corporation based in Seattle that focuses on e-commerce through its online retail store. The company is ranked as the biggest online retail store in the world, with several physical stores geographically located. The company also provides services like a digital advertisement, cloud computing, groceries, prescription drugs, movies, and television through its Amazon Pride Video platform. The company has different competitors from different categories of the services they offer. They have competitors from their online stores, physical stores, subscription services, third-party seller services, and web services. All these competitors bring different challenges to their categories.
A PESTEL analysis would be able to give the impact of economic, social, political, technological, and environmental factors. This will be used as a tool to monitor the external marketing environment and its effect on Amazon. This is effective in accessing the right targeted market for the growth of the company as adverts can be directed to the right group of customers. The company is targeting youths aged between 13-17 with spending money, and this analysis will be useful in segmenting the target market.
Competition Analysis
Amazon started its business as online booksellers before expanding its business into electronics, foodstuffs, movies, groceries, among others. The company's expansion has made it dominate the U.S market with 50% dominance of the e-business. Its competitors differ with the various segments the company has diversified into. The competitors in e-commerce include eBay, Walmart, Home Depot, Etsy, Kroger, and Alibaba. Amazon's dominance in this segment is due to its strong financial position that enabled the company to expand its business. Walmart and eBay are the biggest competitors in the e-commerce segment. In China, the company is facing immense competition with a market share of only 1% as companies like Alibaba and Pinduoduo dominating the e-commerce segment.
Competitors in the brick and mortar segment include Walmart and Costco, with Walmart being the leading retail company in brick and mortar. Walmart has expanded its retail stores worldwide and is increasing its market share in e-commerce through mergers and acquisitions. Amazon has also diversified in the streaming media segment, where it faces competition from companies like Netflix. Amazon Prime, which is Amazon's media company, competes with Netflix in streaming media, where Netflix, with over 150 million subscribers globally, can provide movies, series, and documentaries to its subscribers. Amazon Prime offers streaming videos, movies, and reading books. The difference between the two is that Netflix charges differently for video quality and the number of devices, whereas Amazon Prime does not.
Economic Factors of the Industry
Amazon.com, Inc. is one of the biggest tech companies in the world, and it is placed among the four big tech companies, which are Google, Facebook, and Apple. It is the world's largest online retail store and the biggest internet company in the world by revenue. The company is also the second-largest private employer in the U.S. There are over ten firms in the e-commerce industry, both based within the U.S and globally. The various segments that the company has diversified into, like cloud computing, digital advertising, and web services, have different competitors like Microsoft for web services and cloud computing and Walmart in the brick and mortar segment.
Amazon's revenue has been growing in the past decade, with the last three years, the company reporting an average of $230.43 billion. The company reported $177.87 billion in 2017, $232.89 in 2018, and $280.52 in 2019 as the revenue. Economic factors like interest rates, government funding, workforce preparation, risk of entry, and funding sources affect the company's revenue. The company being global is subjected to changes in the dollar currency with changes in foreign currency exchange rates having an impact on net sales. The company has employed 560,000 employees, and the cost of labor has an impact on the profit.
Societal Impacts of the Industry
In a survey among tech companies in the U.S, Amazon was ranked as having the most positive impact in society. This is because of the Amazon effect, which is the ongoing disruption of the retail business that sees even small businesses benefiting from the profits. Small businesses have been able to help from Amazon by increasing their customer base after listing their products. With over 20,000 low and medium-sized companies listing their products in Amazon, they can benefit in the sales and also create jobs. The Amazon effect has both a positive and negative impact on society due to its disruption of the way people shop. The ripple effect of this effect has created jobs, increased investments, killed inflation through its low overheads and undercutting of prices, and has been a significant facilitator of both small and medium-sized businesses.
Political Environment of the Industry
Various laws affect the e-commerce industry both globally and within the U.S. E-commerce laws like the recent regulations in India that led to Amazon and Flipkart pulling out of India. This had a significant effect on the company, which had invested more than $5 billion in the economy. And also, the workers lost their jobs because of the company leaving India. Tax laws are different in various countries like in the U.S goods are displayed exclusive of VAT while in Australia, it is the reverse where assets are displayed inclusive of VAT. Amazon succeeds because it can ship a customer's product within the specified period. Shipping restrictions on certain items will, however, affect the operations of the company. Labor laws affect both the company and employees in the industry. The company has over 570,000 employees worldwide, and different countries have different labor laws that will affect the company and its employees.
Technologies Used in the Industry
Since its inception in 1995, Amazon has been innovative in developing technologies to keep up with other tech giants. The company has the three largest Linux database with over 24TB. The company's data warehouse has over 25 HP servers with four CPUs per node that run Oracle 9i database software. The company uses different technologies that run their various departments. The sales and Support use App Annie, CRM Adoption, and Zoho CRM, while the marketing uses App Nexus, Fiksu, and Mail Chimp. The finance department uses SAP Concur and Square while HR uses ADP Payroll and Behance. Google Analytics is used for analytics. Technology changes that are happening in the e-commerce industry that also affect the operations on Amazon. The changes include the use of smartphones in online shopping, product visualization e-Wallet technology for payments of online services, mobile Apps, and Artificial Intelligence. The growth of mobile phone technology and, in particular, smartphones will likely affect the sales at Amazon as it will make it easier for more people to access their services. This will go hand in hand with mobile Apps and e-Wallet for quick and easy access and payments.
Ecological and Environmental Issues of the Industry
The company has a two-day free shipping policy that harms the environment. The number of online shoppers has been increasing over the years, and this means an increase in shipping, which requires more cars and trucks that are used to deliver the packages and more packaging waste. This has increased noise pollution, air pollution, and cardboard to our landfills. This efficiency in delivery is encouraging more shoppers online and increasing the number of shipments being made.
This is a sustainable industry, and the environmental impact can be mitigated as people as still using vehicles to go to stores when all they can do is wait for their package to arrive. Packages a-8 e consolidated into one delivery, and this reduces the number of vehicles on the road and reducing both noise and air pollution.
References
Krishnamurthy, Sandeep. (2005). Amazon.com - A Comprehensive Case History.
AIMEE PICCHI. (2017). Amazon eyes a new audience: teenagers with spending money. CBSNEWS. Retrieved from https://www.cbsnews.com/news/amazon-eyes-a-new-audience-teenagers-with-spending-money/
John Dudovskiy. (2018). Amazon PESTEL Analysis. Research Methodology. Retrieved from https://research-methodology.net/amazon-pestel-analysis/