PESTLE Analysis of Amazon. Amazon is an American retail e-commerce, cloud computing, and tech company. Jeff Bezos is the founding father of Amazon and he laid the foundation of the company in 1994.
The headquarters of the company is situated in Seattle, Washington. When we talk about the total online sale, retail market share, and market capitalization, then Amazon is the world’s largest e-commerce retail company.
Amazon outsmarted its biggest rival Walmart by gaining more market share in 2015. The business model of Amazon comprises of three parts;
- Amazon Retail Operations
- Amazon Marketplace
- Amazon Cloud Computing
Amazon retail operation deals with buying the stock of various products/services, managing the inventory, and then shipping it to the customers. Secondly, Amazon marketplace deals with offering its platform to third-party local sellers, where they use the company’s name and platform and sell their products/services.
The company charges a certain amount of money from them in return. Thirdly, Amazon offers cloud computing and web services to tech companies and individuals worldwide.
The vision and mission statement of Amazon is “To be earth’s most customer-centric company and an online platform where people can buy anything and everything they need and endeavor to offer its customers the lowest possible prices.’’
Amazon is employing approximately 1,000,000 (one million) people across the world by the end of July 2020 during the COVID-19 pandemic. The total revenue of the company in 2019 was 280.522 billion US dollars, the operating income of the company was 14.541 billion US dollars, and out of which the net income was 11.588 billion US dollars. The net worth of Amazon’s asset in 2019 was 225.248 billion dollars.
Today, we’ll discuss the pestle analysis of Amazon that how macro-environmental factors are impacting the performance of the company. Here are the main macro-environmental factor of a pestle analysis are as follows;
Political Factors Impacting Amazon
Some of the main political factors that are affecting the performance and revenue of the company are as follows;
Trade Tariff & Protectionism
Ever since President Donald Trump has won the election in 2016 and his administration came into power. They’ve been following conventional nationalistic policies by making it difficult for foreign companies to run and operate their business in the US.
Amazon is a global enterprise and imports most of its products from other countries. The government is making it difficult with its trade and tariff policies on imports.
In the Brexit deal, Britain leaving the EU, the British and the US government are negotiating over the trade deal between two countries. Since Amazon is an American company, it’s a great opportunity for the brand to expand its market share in the UK.
Asian Market & Countries
Even after winning the European and the US market, Amazon couldn’t seem to hold the market share in the Asian market. It is because of many reasons; Chinese companies like Alibaba and AliExpress are among them.
They’re serving the customers at much cheaper prices. Currency differences and government taxes are also the reasons that make it very expensive for Amazon to run its various operations.
Dependent on Government Support
As we know that Amazon is a global company and it has to deal with the laws and support of different governments. Although the internet has helped the company a lot for the expansion of the brand name, the company has to follow the rules and regulations of different governments. It increases the cost of running business operations.
Economical Factors Affecting Amazon
Some of the main economical that is affecting Amazon are as follows;
Criticism on Downsizing
According to an estimate, Amazon is employing approximately 1 million people worldwide by the end of July 2020. However, the tech department of the company is working on drone technology to deliver products to the customer timely. If the company launches this drone shipment technology, then it would lead to downsizing at a mass scale.
That’s why Human Resource journalists and critics are hailing on the company. If it happens, then it would be a great economic recession by making hundreds and thousands of people unemployed.
Uncertain Stock Market
The stock market is going through a crisis due to the COVID-19 pandemic across the world. Secondly, the company is expanding its market in the grocery retail sector to compete with its competitors like Walmart. Globally, companies like Walmart are also facing uncertainty because of the drop in the share price.
Capitalist Structure, no longer fit
Amazon is following the European capitalist structure of the business. It served the company well over the years and it’s also one of the reasons for the success, growth, and productivity of the company. But recent researches have indicated that the traditional capitalist business model is no longer a fit for the businesses because of the tech revolution.
Ecommerce retail is becoming very competitive because of the easy entry into this business. Although Amazon holds a great market share and is a market leader, the company shouldn’t ignore the growth of competitors like Walmart. Competitors are improving the search bar on their websites, making the platforms a more user-friendly and catchy interface.
Retail Stock Dropped
Currently, Amazon is working on the development of the retail grocery field to compete with Walmart offline business. You’re wondering right that it’s not the right business move. Therefore, it has dropped the company’s stock price and affected the share price as well.
Check out this article as well: Pestle analysis of Amazon (E-commerce Company)
Some of the main social factors that are affecting Amazon are as follows;
Obesity and Weight Issues
Obesity and overweight have become a major issue across the world. According to an estimate, approximately 711 million people fall under the category of obesity and overweight. Government and public welfare organizations are encouraging people to live a healthy lifestyle by doing exercises.
Amazon is providing the service of delivering the products at your doorsteps. It is the opposite of a healthy lifestyle because it doesn’t involve any exertion.
We’re living in the era of marketing and customer service; all the companies are trying to serve their customers better than competitors. Amazon is best at providing customer service and the brand is trying to deliver the product on the same day.
It’s because of these facilities, online shopping has become easier than ever. You can do it anytime at your ease, convenience, and accessibility. Amazon provides the service of quick and free delivery to its premium subscribers.
Some of the main tech factors that are impacting Amazon are as follows;
Latest Technology becomes Necessity
When we talk online retail e-commerce business, then it has become a technologically competitive because of the interconnectedness of many parties. Amazon uses the latest technology to have a competitive edge whether it’s logistics or inventory management.
Amazon started the latest service by the name of “Hub”; it means that the customer would receive their delivery even when they’re outside of their house.
Research & Development
If your company has a strong research and development department, then it would give you a competitive edge with innovative and creative products and services. Amazon has recently said that the company would hire more people in its R & D department by doubling the size of the current staff. It means that the company is serious about tech research and development.
New Methods of Shipment
Amazon is currently working on the development of drone technology to deliver the products to the customers. It may seem easy, but it is very complicated because of many factors. Like making the drones to deliver the products, managing them, and finally getting permission from the government and following other regulations.
Digital ways to Build Relationship
When you sign up to Amazon, the company sends emails and reminder messages about the products that you have checked but didn’t buy. The brand also sends you emails of similar products that other people have bought. The company uses digital methods to develop a relationship with customers.
24hours Live Chat Customer Service
Amazon offers the 24 hours live chat service to its customers. For instance, you haven’t received your package; want to refund, packaging issues, replacement, or any other problems with the shipment. You can have the live chat at any time.
Some of the main legal issues that are impacting Amazon are as follows;
Multinational companies like Amazon are under great pressure from the government that they have to reveal the customer database to the government. It’s because some of the customers are under the terrorist watch list of the government.
FBI has recently accused Amazon of selling products to the customers who are under the terrorist watch list. It says that the company is violating the international safety laws.
False and Misleading Claims
Federal trade commission of the US has also accused the company of selling approximately 1000 products by false and misleading claims.
Some of the environmental factors that Amazon is facing are as follows;
Carbon Emission & Pressure on Amazon
The government is putting pressure on the manufacturing companies and industries to reduce carbon emission. Now the question is how Amazon is complying with such regulations. It’s because large portions of supplies come from the same industries. The brand is also planning to deliver the products on the same day. How it would reduce the carbon emission rate.
Amazon has never published an environmental sustainability report until the end of 2016. It has raised serious questions about the company’s priorities about the environment.
After a careful study about the pestle analysis of the company, we have concluded that the macro-environmental challenges the company has to face are great and overwhelming. If the company doesn’t comply with the abovementioned factors, then it would be a great loss for the company.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.