Amazon

Internal and External Analysis of Amazon

Rida Zehra

Strategic Management

Internal Analysis

Three trends in Amazon external environment

The following are the three major trends in Amazon’s external environment:

Wal-Mart Entering E-Commerce

Amazon appears to have defeated Walmart, which is the biggest retailer in the world. After Walmart ignoring the space of E-commerce for a long time, the prevalence of Amazon in E-commerce has lastly got the attention of Wal-Mart. Walmart Company is under CEO Doug McMillion, the company is rapidly growing after declining. McMillion has prioritized e-commerce with a quick extension of its grocery pick-up program. At the beginning of the year, the CEO also purchased a jet.com worth $3.3 billion (Hassan, Sistani, & Raju, 2014). The company has been pushed by him to make investments in wages and stores which have motivated equivalent sales advanced and made the series very eye-catching for shoppers. Wal-Mart Company has a store within every 5 miles in America, having many stores in America gives it a benefit of any brand of omnichannel competition, and it has the economies and supply chain of scale to contend with any person on the value. Online grocery expansion picked up after the acquisition of jet.com, the company still focuses its increase in e-commerce.

A potential Recession

With Amazon’s fickle profit and triple-digital P/E ratio, there was a high-priced treatment on the growth stocks. In its previous years, the proposition value of Amazon was built on low prices but with the fast increase of the prime loyalty program, this has happened to the main point of selling for most of the customers. In the coming years, there is a civilized chance that can occur, as the financial system enters the 8th expansion chance. Consumers in America may drop their membership in prime but instead do shopping in low-priced companies like dollar stores, Costco or Wal-Mart. This can put pressure on its stock and Zap runaway success of the company.

The law of large Number

In business, it is the truism to say that one company cannot dominate the market forever. Amazon has been doing good to ensure that the economic law of gravity is not on its sides. Over the coming decade, Wal-mat has plans to open many e-commerce grocery stores for its success. If Amazon wants to grow, it must invest on prime and make better services that will attract customers.

The magnitude and urgency of the trends

Based on urgency and magnitude, the trend that is rated the highest is Walmart entering e-commerce. The second is the potential recession while the third is the law of large numbers. Through entering the e-commerce market, Walmart will provide Amazon with stiff competition. Walmart will be able to take away some of the customers of Amazon because it extensive distribution channel of 150 distributions and 5,000 stores in different countries (Amazon.com, 2014).

Threats and opportunities Amazon should consider

Opportunities

Amazon has the chance to market share and increase sales after expanding aggressively into the South East of Asia since the region has a big market with several 600 million people who are potential, this means that Amazon could attraction around $70 billion (Hassan, Sistani, & Raju, 2014). Having new deals on trade in the United States and the United Kingdom, this gave Amazon an opportunity to expand its business to British countries presenting the same service.

Threats

Despite the fact that Amazon business expanded into the South East of Asia, Amazon still faces competition in an area that is close to the inventive hub of China. Alibaba which is one of the Amazon competitors have the foremost delivery service in the area and the locals have more knowledge about it. Globally, Amazon has continued to expand, but it does so in regions which have widespread infrastructure that will facilitate logistics activities of Amazon. This leads to the competitive advantage that the company believes to have during their services being delivered in two hours never be attained.

External Analysis

Company’s core competencies and key resources and capabilities

A core competence is the outcome of some unique set of production techniques or skills that provide customers with value. The core competencies of Amazon give it easy access to different markets. Also, Amazon's core competencies enable it to provide a significant contribution to perceived prospect benefits relating to end products (Nhung, 2013). The products and services of Amazon are unique; therefore, it is hard for competitors in the market to imitate. Among the things that are giving the company core competencies are large warehouses, technical equipment and servers, large stock, Customer Relationship Management (CRM), Amazon brand, finance website skills, marketing, technological innovation, and supply chain management.

The key resources and capabilities of Amazon have enabled it to out-compete most of its rivals in the retail market. Some of the major resources and capabilities of Amazon are; vast information technology equipment, stock, warehouses, good relationship with suppliers, good relationship with customers, online retail experience, and increased innovation. These resource and capabilities have made it possible for the company to pioneer and create quality products and services that meet the needs of customers in the E-business market. The company could survive in its market and continue to be successful in the long-term.

Amazon’s efficiency, quality, customer responsiveness, and innovation to compete

Being the leader in the e-commerce sector, the business relies so much on high efficiency from its operations management. High efficiency directly determines the high productivity of the organization. The efficiency is increased by technologically supported productivity. Quality products and services are maintained in the organization through having categories of products and services that require approval. People who want their products to be sold by the company have to get permission from Amazon. Therefore, only sellers who are having professional selling plan subscription can sell their products in the Amazon categories. “Amazon limits access to sell in these categories to help ensure that sellers meet standards for product and listing quality as well as other category-specific requirements” (Amazon.com, 2014, par. 6). These requirements and standards make it possible for customers of the company to have confidence while dealing with the business.

Amazon ensures that customers are placed at the center of everything it does. It takes advantage of customer services as well as customer experience strategies. Customer responsiveness is used by Amazon through a core commitment to the customers, creating a corporate culture that listens to customers, giving users the power of DIY services, nurturing a community of fellow prospect support, making personal interactions an easy option, and making the driver for innovation to be customers’ needs.

When it comes to innovation, Amazon is among the most innovative companies. This has been possible through building on the ruins of the past structures. Also, the company is fast to embrace continuous evolution in delivering products and services.

Internal strengths and weaknesses

The strengths of the company have given it a competitive advantage over its competitors. Being the largest online retailer in the world, the company has captured abundant customers in different markets compared to its competitors. Having the largest percentage of market shares enables the company to make more revenue. The revenue of the company went up by 25 percent in 2017. Additionally, the services of Amazon have been extended to other new markets. For instance, there has been the expansion the expansion of on-demand Amazon TV subscription channels to different markets, such as the UK. The Amazon Web Services, cloud computing division of Amazon, continues to expand. It managed to make a net income of $914 million in 2017 compared to $718 million that it made in 2016.

The profits for the company fell in 2017 because of extensive overseas investments and heavy spending. Due to the fall in profits by 75 percent, the shares of Amazon sunk. In terms of technological offerings, the competitors of Amazon, among them Apple and Google are providing stiff competition. These competitors are a growing threat to Amazon.

SWOT

There are many initiatives that can be introduced by the company to take advantage of its strengths, weaknesses, opportunities, and threats. The first initiative is to make use of the physical stores to grow the reach of the company. Now, Amazon is selling a wide variety of products online (Hassan et al., 2014). Having physical stores will help it in furthering the growth of its sales. Having Amazon stores that are well supplied with high quality and a variety of commodities can be a good attraction to customers.

The second initiative is to diversify its operations into new areas. This can help the brand of the company see further growth. There is the Asian market that has not been exploited by the company (Muhammad, Muhammad, & Khalil, 2013). Entering this new market will enable the company to direct attention to new customers in such market. The Asian market is full of opportunities for Amazon.

References

Amazon.com. (2014). Inside Amazon. Retrieved from http://www.amazon.com/Inside-Careers-Homepage/b?node=239367011

Hassan, S. M., Sistani, A. J., & Raju, R. S. (2014). Top Online Shopping E-companies and their

Strength and Weakness (SWOT). Research Journal of Recent Sciences ISSN, 2277, 2502.

Muhammad, M., Muhammad, M. R., & Khalil, K. M. (2013). Towards shari’ah compliant

ecommerce transactions: A review of Amazon. com. Middle-East Journal of Scientific Research, 15(9), 1229-1236.

Nhung, X. (2013). Amazon's resources and competences. Retrieved from

http://www.academia.edu/10503143/Amazons_resources_and_competences

Ratnasingham, P. (2006). A SWOT analysis for B2C e-commerce: the case of Amazon.

com. International Journal of Cases on Electronic Commerce (IJCEC), 2(1), 1-22.