Amazon is an electronic and commercial firm based in the U.S. It mainly focuses on cloud computing, artificial intelligence, and information technology. The company was founded in 1994 by Jeff Bezos with its headquarters in Seattle, Washington (Canales and Sonnemaker). On revenue generation, Amazon is considered the largest retailer in the world. The vendor has experienced exponential growth in the past few years and is now the online retail market leader. Currently, the firm is expanding to international markets, with a specific interest in the Asia region. The wide variety of products and innovations has made Bezos one of the wealthiest and most influential people with a net worth of $200 billion (Canales and Sonnemaker). Conducting a strategic audit will help develop approaches that will influence its e-retail competitiveness.
The difficulties e-retailers are facing are different from traditional businesses; similarly, some threat factors influence the e-retail segment’s operations. Amazon leads in this sector, and several political factors affect its operations. Recently, the company has been trying to establish branches in the Asia markets (Pennington). However, the Asia division has brought new challenges for the firm. For any foreign investor attempting to move into the Indian market, regulatory issues and the red tape would be obstacles (Kenny 5). Besides, political matters and taxes are also costly concerns to multinationals in the Asian region. For disputable reasons, the EU has been targeting U.S.-based technological companies. It started by attacking Google on anti-trust-related decisions. Later, the EU publishers have raised issues with Amazon’s e-book (Pennington). These political problems are not limited since there are other challenges with administrative origin. Thus, civil disturbances may occur and interrupt the supply chain resulting in low sales.
Compliance with the legal requirement is essential for business operations, whether locally or internationally. Besides, significant trademarks such as Amazon must abide by the rule. The company has an established team that manages authorized matters and problems. There are many areas where legal compliance is essential apart from labor matters. For Amazon, tussles with the regulation can be costly and may lead to considerable penalties or image loss (Kenny 7). Laws differ from one nation to another, and Amazon has to face substantial legal challenges ranging from labor to sustainability. Therefore, the decree can significantly pressure any organization operating globally; however, Amazon has remained committed to adhering to set regulations.
Economic variables have an important influence on markets and their conditions. When they are right, the market will produce increased trades and higher returns. Customer confidence is boosted when the labor market and the world economy are better. Such economic tendencies are beneficial to online retailers by increasing their productivity. Besides, in 2015 alone, the E-retail grew enormously by 23% and continues to experience more expansion in the years to come (Kenny 5). However, a favorable economic environment is also going to add new competitors into the market. Hence, all these dynamics indicate that Amazon will experience increased profits and more growth in the future.
Social and cultural dynamics have contributed to the growth of e-retail. In recent years, online shopping has received a significant boost from digital currency and increased mobile phone technology use. Many people own and do countless activities through smartphones worldwide, including online shopping and social media. Amazon and other retailers, for example, e-bay have received substantial boosts in their sales through 4G and digital technologies (Kenny 5). Additionally, changing consumer demographics is positively affecting online business. Millennials mostly shop online to get the best products at a low cost, and delivery is at their door. Only e-retailers can provide such conveniences; therefore, Amazon continues to gain from changing shopping and consumer values (Kenny 5). However, the brand needs to focus on cultural factors, better advertising strategies, and strike connections with consumers in regions where it has not penetrated worldwide.
In the 21st century, technological factors have gained high importance for both traditional and online businesses. Each firm depends on technologies to provide better services. In fact, in the current era, IT is the key to the success of any organization. The Internet aside, cognitive and artificial intelligence has become a part of customer service (Kenny 5). It is challenging to engage millennials without good customer service. Concerning Amazon, technology has helped build customer loyalty because marketing, sales, and customer relations management are now achieved through technology. Further, the retailer has invested in social media to facilitate better engagement with customers.
Currently, businesses are concerned about their sustainability, especially in this era of globalization and environmental activism. Amazon pays attention to areas such as waste reduction, packaging, and energy consumption. Besides, the firm is focusing on sustainability and cooperate social responsibility (CSR) (Kenny 5). It has spent resources on renewable energy, waste reduction, and proper packaging. Currently, the form is involving the community in sustainable undertakings such as renewable energy. It has used massive resources to gain a total shift from depending on nonrenewable energy for an extended period.
The Threat of New Entrant
The company has low switching costs between services and high brand recognition. Though, it has security issues with its untested systems, which can scare away consumers. However, it is not easy for a new firm to compete with Amazon’s massive distribution network (Kenny 5). Thus, a new entrant is a small issue when dealing with performance in the e-retail environment.
Bargaining Power of Suppliers
Amazon has many suppliers who can control and affect the availability of material requirements for e-business, such as information systems and hardware components. Therefore, the firm experiences moderate supplier bargaining power levels based on external factors such as modest supplier size, moderate forward integration, and a small population of suppliers (Kenny 5). For instance, if a small number of larger suppliers combine, they can directly influence the overall company’s online presence.
Threat of Substitute
First, the threat of substitutes is high due to the presence of many other online retailers. Second, there is high availability of improved alternatives with better features and low prices. For instance, Tesco provides additional characteristics in its physical stores that support urgent purchases (Kenny 6). Third, the existence of low-cost alternative shops is another threat, such as where customers can meet their sellers at the gumtree and complete transactions conveniently despite the risks involved.
Bargaining Power of Buyers
The high availability of quality and educative information over the Internet provides Amazon with intense challenges; it gives customers strong bargaining powers and exposure to potential substitutes. Other firms provide better alternatives to Amazon facilities, such as in Argos, where delivery and picking services are done simultaneously after making reservations online (Kenny 6). Besides, customers can easily compare prices for the two retailers using the Internet.
Rivalry among Competitors
Rivalry in online retail enterprises is very high due to the increasing number of players. Besides, traditional businesses also offer online sales, providing further competition to Amazon and other similar firms. In addition to rivalry from competitors such as Flipkart, Alibaba, eBay, Amazon also has to compete with small firms and online shops that want a stake in the market share (Kenny 5). The market comprises many players who specifically target products that amazons sell, such as clothing, motor vehicle spare parts, and electronics, resulting in intensive rivalry for Amazon.
Labor unions have had little or no effect on Amazon’s operations due to its discouraging employees from joining unions or engaging in organized labor activities. For instance, its workers are offered large salaries and allowances; therefore, they do not need collective bargain agreements from unions (Palmer). Of late, the company has not yet experienced strikes among its workforce because it has various ways of gathering intelligence and toil every day to improve the working environment.
Government is a moderate force for Amazon; it has given the company tax breaks worth almost one billion dollars and provides food for many of its employees. The e-commerce giant receives incentives to create additional job opportunities (Dayen). Additionally, states and cities continue to offer tax subsidies, referred to as economic development, to encourage the firm to open more stores across America.
Conclusively, Amazon remains strategically placed as the largest and the best internet retailer globally. The strategic audit shows advantages over its rivals, from a sustainable business environment, government support, and good employees relations. The company will continue to expand and reach new markets to grow sales, which translates to increased revenue. On the other hand, customers’ power, threats from substitute products, and rivalry pose a risk to the company. Therefore, any further recommendations should focus on ensuring value preposition to consumers so that they make Amazon their choice over competitors’ products.
Canales, Katie, and Sonnemaker Tyler. “Jeff Bezos is Now Worth More Than $200 Billion, Making Him the Richest Person in The World by Nearly $90 Billion.” Business Insider Africa, 2020, Web.
Dayen, David. “Amazon is Thriving Thanks to Taxpayer Dollars.” The News Republic, 2018, Web.
Kenny, Sarah E. “Strategic Audit of Amazon.” University of Nebraska, 2019, Web.
Palmer, Annie. “How Amazon Keeps a Close Eye on Employee Activism to Head Off Unions.” CNBC, 2020, Web.
Pennington, John. “Amazon’s Plans for Southeast Asia Have Not Materialized.” ASean Today, 2020, Web.