Unit 8: Course Project- Final Paper

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Strategic Analysis

Rymario Armstrong

Park University

Stacy Yeager-Okosi

MBA695 Strategic Management

20220705

Introduction

Strategic analysis informs strategic decision-making (Chen, 2022). It shows probable possibilities and threats that ought to be considered in strategic decision-making, and it frequently delivers vital information about the evaluation and changes in the environment both inside and outside the organization. This paper will provide a strategic analysis of Amazon using SWOT analysis, 5 forces, and the PESTEL framework.

SWOT analysis

Strengths

Amazon, the most successful online retailer in the world, attributes its success mostly to a strategic initiative that focuses on cost leadership, distinctiveness, and focus. This initiative gives Amazon its competitive edge. In addition to having pricing that is affordable for all of its consumers and being honest with them, Amazon also offers a variety of payment and shipping alternatives that are tailored to meet the needs of each and every one of its clients on a global scale. This is yet another one of Amazon's many strengths.

Amazon is able to stay so far ahead of its rivals because the firm makes extensive use of advanced technologies and a platform that is both scalable and quick to ramp up. This keeps the company in a position of considerable advantage over its rivals. Amazon's notable brand awareness among customers all over the world is one of the company's most valuable advantages. Thanks to this familiarity, the company has been able to break into new areas that were previously inaccessible to the majority of e-commerce businesses. Amazon has an edge over its competitors because it is able to provide better customer fulfillment because of its stronger logistics and distribution systems (Chen, 2022). As a result of this, the organization has a greater degree of market dominance than its competitors.

Weaknesses

Amazon, like every other organization, has certain areas that need improvement, despite the undeniable success it has had. Some of them are the high taxes that they levy on each good, and it's possible that some of their items are priced a little higher than they would be in other stores. According to Vollero et al., (2021) their business model is just too open to interpretation, which makes it easy for other businesses to imitate it. Another one of the company's flaws is that it put the lives of many of its workers in jeopardy by subjecting them to harmful working environments which has sparked criticism. Amazon has an increasing amount of difficulty in vetting each product and ensuring the greatest possible degree of safety as the number of items it sells grows. Recently, EPA was forced to demand that the organization take down a broad variety of unsafe items and pesticides from its platform. 

Opportunities

With the launch of its new online payment system, Amazon has the potential to significantly expand its business. This is especially significant when one considers the fact that customers' worries about the safety and confidentiality of their personal information while shopping online are among the most pressing concerns facing customers today. In addition, this would allow the firm to reap the benefits of using its own payment gateway, which would result in an increase in the company's margins. Another possibility that Amazon may focus on is the rollout of more items under its own brand rather than acting as a forwarding site for products from other parties (Jindal et al., 2021). Amazon also has the chance to increase its worldwide footprint and create additional locations in emerging regions. Doing so would unquestionably provide it with an advantage in the extremely competitive online retailing business.

Threats

Due to the political climate and the state of the economy in some countries, Amazon encounters obstacles when trying to sell and ship its products in such locations. It is also up against tough competition from Walmart and eBay, both of which are working hard to establish themselves as one of the most successful online shopping sites. Another threat arises because Amazon does not verify the authenticity of the products sold by its vendors, some sellers have taken advantage of this loophole to peddle counterfeit goods and mislead buyers into thinking they are purchasing an authentic product from a luxury brand (Jindal et al., 2021). Some customers have lost faith in Amazon, which will have an impact on the company's future sales. Some hackers have been successful in penetrating Amazon's system, which has resulted in the exposure of sensitive data belonging to Amazon's customers, including their addresses and card details. Because of this, the customer's safety and faith in the firm have been put in jeopardy. In spite of all that has occurred in the past, Amazon has ensured that it continues to build its system to be as safe and secure as possible for its consumers.

Summary

This tool shows the strengths weaknesses, opportunities, and threats of Amazon. Data collected using this tool can be very helpful in informing strategic decisions o the organization. Using this tool the organization should continue to maximize its strengths, minimize its weaknesses and take advantage of existing opportunities to further cement its position in the market.

5 Forces

Threat of new entrant

The threat of new entrants is low in this environment. Launching an online retail store is simple. However, any business seeking to reach or compete with Amazon on the same level is a task near impossible because of the extremely high investment that such an undertaking would require (Vollero et al., 2021). The organization further enjoys customer loyalty which stems from the first-mover advantage of being among the first big players in the e-commerce space. The organization further greatly benefits from economies of scale. A new organization can easily enter the market but it would find it difficult to gain benefits of economies of scale in a similar manner that Amazon does.

Bargaining power of buyers

The organization places a high degree of value on the satisfaction and experience of its customers. It ensures that the product it sells meets the required quality standards.  The cutthroat nature of competition in this space, ensures customers are availed with too much power. The cost of switching is really low and substitute products are easily availed which gives consumers high bargaining power. The organization has a competitive advantage as it is able to offer customers a variety of different products under one roof and at reasonable prices making the shopping experience satisfying for most customers (Vollero et al., 2021).

Threat of substitute

The organization faces competition from other companies such as Walmart, eBay, and Alibaba. A major challenge in the category faced by the organization is the low switching cost which implies weak brand loyalty as consumers can easily switch to other platforms without seeing any significant loss in value. The majority of the products offered by the organization are not unique to the organization and can be easily found on other platforms. (Chen, 2022).

Bargaining power of suppliers

The barging power of suppliers is low to moderate. Amazon has superiority over its suppliers as it is the most renowned participant in the sector. There is no doubt that Amazon has a large number of suppliers, but such stakeholders have to adhere to what amazon dictates. According to Chen, (2022), the organization places a heavy focus on the ethical working practices of its suppliers and tries to enforce this via its supplier code of conduct.

Competitive rivalry

As previously established this space is highly competitive. The events regarding coronavirus did not help much as they led many organizations to shift their operations online hence intensifying competition. Walmart, Alibaba, Flipkart, eBay, and many more online retailers are among the organization’s most notable rivals (Jindal et al., 2021).  Customers have the ability to switch from one vendor to another at a minimal cost, which puts further pressure on the organization. Substitutes are also easily available.

Summary

This tool has been used to showcase competitive forces existing in the retail industry. The data made available via this tool can be helpful to the organization as it enables identifying areas of the industry that remain attractive and adjusting strategies in order to maximize profitability. From this analysis, it is crucial for the organization to continue putting customers at the center of everything and improving their overall experience in order to remain a leader in the e-commerce space.

PESTEL

Political factor

The stability of the Amazon Company has been undermined by political pressures. Countries have their own set of laws and political ideologies; for instance, economically affluent nations like the United States and Australia have contributed to Amazon's expansion. Other nations, such as China, which has long been willing to assist local Chinese enterprises, have proved a barrier to Amazon's development in the region (Jindal et al., 2021).   

Economic factors

Economic factors have an impact on the profitability of the organization. Some of these factors include the unemployment rate, foreign exchange rate, inflation, and cost of raw materials. The organization has reaped enormous benefits from economic stimulus measures that have resulted in an increase in the amount of discretionary spending held by consumers in the aftermath of the global coronavirus outbreak.

Social factors

Social factors account for the general views and attitudes of a populace which in most cases are connected to demographical and cultural trends (Vollero et al., 2021). These considerations will eventually define and subsequently, drive the behavior of consumers. Amazon has once again capitalized on a trend toward delivery methods that are easy, quick, and do not need physical interaction. Millennial customers are also driving the enormous increase in online buying since they are tech-savvy and comfortable using the internet.

Technological factors

The organization is highly innovative and leverages this to improve customer experience. Through continuous innovation, the organization is able to keep introducing new value for customers. The company has leveraged technology to secure payment, improve communication and enhance the privacy of its customers.

Environmental factors

There are increased concerns over the sustainability of companies. Amazon takes this seriously and is committed to promoting a sustainable environment. However, there is still more that the organization can do to reduce its green gas emissions across its distribution network.

Legal

The organization has operations in multiple countries. Different countries have different legal frameworks that guide business operations. It is crucial for the organization to adhere to government regulations such as tax obligations in order to avoid interference and ensure the smooth running of operations (Chen, 2022).

Summary

This tool shows that the company has been able to take advantage of the shift to online retail. However, as the company continues to extend its global reach the organization is exposed to new vulnerabilities. However, through continuous innovation and adherence to existing regulations, the company should be able to withstand the challenges arising from its external environment.

References

Amazon. (2021). US About Amazon. US about Amazon. https://www.aboutamazon.com/

Chen, B. (2022). Investment Value Analysis of Amazon. Applied Economics and Policy Studies, 301–308. https://doi.org/10.1007/978-981-19-0564-3_32

Dyer, J. (2015). Strategic management. John Wiley & Sons, Inc. https://www.wiley.com/en-us/Strategic+Management%3A+Concepts+and+Cases-p-9780470937389

Jindal, R. P., Gauri, D. K., Li, W., & Ma, Y. (2021). Omnichannel battle between Amazon and Walmart: Is the focus on delivery the best strategy? Journal of Business Research, 122, 270–280. https://doi.org/10.1016/j.jbusres.2020.08.053

Vollero, A., Sardanelli, D., & Siano, A. (2021). Exploring the role of the Amazon effect on customer expectations: An analysis of user‐generated content in consumer electronics retailing. Journal of Consumer Behaviour. https://doi.org/10.1002/cb.1969