Amazon individual can explore or discover anything they

 

 

 

 

 

Amazon
SWOT analysis

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Amazon

Introduction

Amazon
was founded by Jeff Bezos as an electronic
commerce in July 1994, and it is
currently considered to be the biggest online platform retailer evaluated
through the market capitalization and
revenue. The firm is based in Seattle
Washington.  Amazon’s success has
continued to be undisputed and indispensable to the global economy. It is currently considered among the most valuable
firms in the world being ranked 4th.
Regarding sales for internet retailers,
it is second after Alibaba. It has replaced Walmart regarding market capitalization
in the USA becoming the most valuable retailer and is also among the most significant employer. The firm is among
the leading online sellers, and it is
offering the best diverse and range of product line plus services based on
Varia and Mathew’s (2015) study. The intended aim of this paper is to carry out
a SWOT analysis and evaluation. It will also provide an insight into the current trends and their impacts on the
firm as well as the financial objectives. 

The
most acknowledged wide range products
offered by Amazon include furniture, home-based
products, electronics, jewellery, software
and hardware for the computers, DVDs, video games, music etc. In simple terms,
there is everything for everyone since it views each
in the world a potential client as long as they have access to internet resources
and infrastructure. The fundamental value and vision the company focuses on is
to be a customer-oriented firm and develop a place where any individual can
explore or discover anything they intend or purpose to purchase over an online
platform.

The
industries Amazon serves are categorized
into 3: Consumer electronics, retail and internet. The internet category
entails Amazon video, Amazon web services and Amazon marketplace. On consumer electronics, the following are involved: Amazon Echo, Fire TV, Fire HD and
Amazon Kindle. Amazon Prime and Amazon
marketplace are categorized under retail
section. The main competitors and rivals include online and retail companies.
Others include eBay Inc., Netflix, Alibaba, IBM Corporation, Wal-Mart,
Microsoft Corporation, Facebook, Apple Inc. (Chang & Allen 2016; Soper,
2016). It has a strong customer base as its geographical area of service is
worldwide with an estimated establishment in 150 countries and over 47 states
in America.

SWOT (Strength, Weakness, Opportunity
and Threat) Analysis.

Strengths:

Minimum
cost strategy and structure

In
2016, Amazon earned an estimated 130 US billion dollars which epitomized an increase over the previous year
that attained 100 billion US dollars only on online sales. It gained more sales than any retailer in the world.
With such a record, the company secured a position as the most significant retailer in the world. By
2018, it will become the second largest retailer in the world with the
prevailing growth rate after Wal-Mart.

The
fundamental secret for the online company
lies as articulated by Hassan et al., (2015) within the minimum cost structure
and strategy. When the minimum cost strategy and structure is integrated with the best variety of different product
line, it will end up mitigating the price level and will ultimately lead to the excellent customer experience. Loyal consumers
are as a result of satisfaction, and they
usually appeal a lot of third party sellers once they return to the website due
to the customer ability to generate a constant
growth rate of the traffic. They enable
and catalyze Amazon’s growth. The firm
usually undertakes a cost leadership strategy.

The minimum expense structure and strategy is achieved by
Amazon since it has mitigated expenses related to physical stalls such as
electricity, rent etc. Amazon had a considerable aptitude and built capacity for
increasing sales of units without any rising marginal costs connected to it. The company relentlessly capitalizes on available centers
and other nirvana centers to ensure mitigation of shipment costs and nirvana times.
The expense reductions and times lead to mitigated prices on the products
leading to higher demand by consumers.

Diversification

Amazon has proved that they can sell
everything and anything. The company which initially began as an online bookstore has gradually increased their
capacity by incorporating an extensive
heterogeneous product line that ranges
from pets to foods and possibly anything anyone may require and desire. Amazon
has integrated support services where
business owners and consumers can get A/V services, furniture assembly and IT
support.

Consumer-oriented.

Amazon’s resilient customer
relationship management has created consumer-oriented procedures to articulate data on
consumer purchasing patterns. The trends will assist them to understand individualized
needs and tailor products based on preferences. Amazon has a strong reputation
and prides itself on having 50% of the
customers being repeated purchasers which
have resulted in a low cost of advertising, marketing and
acquisition of new purchasers.

Efficient delivery
network:

Amazon has generated a structured and
in-depth delivery systems and network through fulfilment
centers and strategic partners who have
ensured commodities are availed even in
distant or inaccessible regions. The firm also offers free delivery in
particular places.

Weaknesses

High
level of debt      

The
company has an increased long-term priority to asset ratios. Compared to some
of its rivals, the firm’s debt to asset ratio has increased substantially over
the recent years. The proportion is
attributed mostly to the fact that the business
is experiencing impediments in developing economies which influences the
profitability capacity and level which ultimately leads to a very high standard
of debts.

Product and commodity
failures

As much as the risk factor has paid
off for Amazon, it has proved in some cases not to be quite the same. The
online retailer ventured into the mobile phone market with a fire phone which
was a big failure resulting way below the target. Another product like kindle
fire did not perform to its expectations. Consequently, there have been many products launched which have led to an
indentation of the firm’s pocket.

Tax evasion subject.

Tax evasion in member states such as
the United Kingdom and the United States
has made Amazon suffer a big blow to its brand
reputation as a business. The avoidance
has brought about negative publicity due to the evasion
of tax subject from the consumers.

Decreasing margins:

The company’s margins are continually reducing
mainly attributed to price wars and wide
or broad distribution systems. Such a pragmatic approach to this occurred
between the year 2014 and 2015 whereby the firm recorded over $300 CRS loss in India alone. The mitigation of margins in most scenarios
and cases will lead to massive losses.
Among the logical explanation behind the losses
is free shipping which is costly to the
firm and is estimated to be up to 800 million US dollars. Amazon will need to strategize its free shipping costs at some
point.

Opportunities

Worldwide expansion:

There is an excellent
opportunity for Amazon due to low rivalry and competition in the developing
countries and Asian market since European markets, and other developed nations
have high saturation levels of online retailing.

Backward integration:

Amazon has the capacity to
build its products and in-house brands such as kindle in various commodity
categories. Amazon can also discern multiple
offerings which will catalyze the firm’s
aptitude to generate profits.

Establishing physical retails outlets cross-borders

Amazon intends to develop physical outlet stores beyond the
borders to increase the up close personal engagement between the brand and
consumers. The move will lead to the rise
of a loyal customer base to the name and encourage repeat purchases. It is also
an expansion strategy by the firm in acquiring high market shares and customer
base.

Acquisition and mergers

Amazon will reduce the level of competition between them and
other e-commerce firms absorbing or
acquiring the upcoming potential online retailers. Additionally, incorporating
strategic partners will increase the capacity of business to be useful in cross-border
operations.

Threats

There are “little or no” barriers to entry

Amazon is facing huge
rivalry since it has been influenced with
diminutive impediments by new entrants. The level of competition has been
witnessed in India as online retailers such as snap deal and flipchart have
captured a more significant market share.
Many other countries have their own established e-commerce retailers who are
competing for the same local market like
Amazon.

Brand risk

Even as the most extensive
online retailers continuously possess a wide variety of commodities, it is at risk of
ruining its brand reputation. The firm was
initially identified as an online bookstore,
and even with more certain merchandises, it may confuse purchasers of its main venture as a
business. Also, the fact there are some
products Amazon is well known for, and if
they launch other products, they are more
likely to succeed or fail miserably.

Current trends and
their impact.

Currently, many aspects and
trends are influencing the way online retailing business is operated. For instance, the rise of mobile
use is among the significant and critical elements.
There has been a rapid influx and growth of smartphones
which is an excellent opportunity for Amazon and other retailers. Experts have
predicted by the end of 2017; there will
be a 70% use of mobile phones, therefore, replacing desktops and laptops in
accessing information. It has resulted in
the creation of mobile applications to
connect with the customer with their online outlets. Personalized content is
another key trend set to take over the online retailers which entail developing personal materials formulated through preferences, past
purchases, geographical locations and market trends understanding consumers and
prioritizing their needs.

Social marketing and selling has also grown to be an
indispensable trend as analyzed by
professionals and is predicted to increase.
It entails online traders capturing consumers with their products or services
through social media platforms such as Twitter,
Instagram, WhatsApp, Facebook, google plus, Pinterest among others. It is because they generate a lot of consumer
traffic and most people with access to internet engage in such platforms. The
use of chatbots has become a standard phenomenon among online retailers. They are
artificial agents who usually keep records of past search and purchases of
customers (AL Sayyed, 2016). They are also the initial contact point whenever a consumer
visits a website. They have proved to be useful in
assisting sites or platforms formulate
strategies by comprehending consumer data to acquire in-depth insights. A
pragmatic approach to this is when many consumers inquire about a particular product; the chatbot informs the website directly about the inquiries
made. Content development is another subject most online retailers should look into. Since all products do not have
tangibility (see or touch), it has been a challenge for most online retailers.
Due to the inadequate content
description, most consumers may abandon a commodity (AL Sayyed, 2016). However online
retailers who have an accurate and full report
of merchandise have higher chances of
product purchase.

Financial
objectives

Amazon
over the past has been achieving its target sales and anticipated
revenues.  Occasions such as holidays, Black Friday and Cyber Monday have made the
online retailer realize its goals and
objectives. In 2016, Amazon had achieved exponential sales compared to 2015.
Amazon had targeted a 20% increase in sales over the previous year that is 2015. However, it exceeded its expectation and
achieved a 27% increase. 2015 recorded a sales record of 100 billion US dollars,
but in 2016 it attained an estimated 136
billion US dollars. It intends to achieve
a growth of at least 35% increase in 2017/2018
financial year (Chang & Allen, 2016). The profits earned in 2016 was one of
the best gains increase recorded. It made
the company become among the most profitable organizations
expanding its
public valuation as a company. In 2015,
it marked a 500 million US dollars’ worth
as profit, but in 2016 it recorded a 400%
increase in profit with a 2 billion US dollars’ worth of profit. Amazon hopes
to maintain and increase its profit levels continuously. Its intended target is
a 600% increase in profit.

Strategic intent

Amazon’s efficacious expedition is affiliated with the firm’s
strategies, models and structures adopted to achieve its purpose. Focus
strategy, customer differentiation and cost leadership are the three
fundamental strategies according to Wittig & Wittig (2015) that are
currently operational. The policies are
what the company intends to continue to employ to attain competitive advantage
and high market share plus enable the firm to realize
its purpose and objective.

The 1st stratagem is focus strategy which aims to
achieve market niche. This approach in a
synergy of customer differentiation and cost leadership. Amazon in all its
venture ensures that it delivers
excellent customer service since it places top priority on the customer. The second strategy employed is
customer differentiation. Product differentiation is attained through excellence, quality and design. The third procedure is
utilized cost leadership. Cost leadership is providing products same variety of products at a lower cost (Frynas and
Mellahi, 2015).

Conclusion

Amazon
has experienced one of the most phenomenal growth in revenues, sales and profit substantiating this claim. Having a robust consumer-oriented culture, long-term
vision and commitment towards future needs and being passionate about invention has led it to become one of the
best company as an online platform retailer in the 21st century. It
has been able to establish a worldwide
market share and customer base which has catalyzed
its exponential growth. Other elements
that have propelled its growth constitute a low-cost strategy and structure,
diversification, management, invention and an excellent network distribution
network. However, with great success comes great challenges. Amazon experiences
impediments such as product failures, high level of debts and tax evasion etc. The
company continues to look forward to the future since there are many opportunities
that it would like to capitalize on.

 

References

Al Sayyed, S. (2016). Strategic Marketing. A Live Case Study on Amazon Marketing.

Chang, W. L., & Allen, T. J. (2016, December). Amazon and
Alibaba: Competition in a Dynamic Environment. In Workshop on
E-Business (pp. 29-53). Springer, Cham.

Frynas, J. G., & Mellahi, K. (2015). Global
strategic management. Oxford University Press, USA.

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.

Soper, T. (2016). Amazon Echo sales reach 5M in two years,
the research firm says, as Google
competitor enters the market. GeekWire,
November, 21.

Varia, J., & Mathew, S. (2014). Overview of Amazon web services. Amazon Web
Services.

Wittig, A., & Wittig, M. (2015). Amazon Web
Services in Action. Manning Publications Co.

 

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