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Article Summary
The case study of Amazon.com, Inc. shows the point of view and strategic thinking of the management of the Amazon.com, Inc. Company. The case study describes the peculiarities of work and product line differentiation. The history of Amazon begins with the first time launch of official web-site in July 1995 and continues with the company’s rapid progress: in 3 months, the company began to earn $20, 000 in sales per week (Rothaermel 475). The company was developing extremely fast and in 1997 the revenue of the company was $ 15.6 million (Rothaermel 475). Kindle Direct Publishing has made a considerable impact on Amazon winning the book market. In addition, the company launched its small device, namely a smartphone, in order to compete with Kindle. Another important characteristic described in the case study is the fact that the company is the largest comparative web-site having many opportunities for advertisement developments. Amazon launched its own advertisement platform in order to target online customers of the company. In terms of high technical developments, the company developed Amazon Web Service, which accumulates the order and payment service, data storage, software, and networking. The case study identifies the main competitors that cover different fields of the Amazon Company’s activities; they are Apple, Inc., Google Inc., Alibaba, and Facebook (Rothaermel 482). Thus, the case study of Amazon.com, Inc. provides profound information about the company that gives the opportunity to develop a strategic analysis of the company, in particular the PESTEL analysis and Porter’s Five Forces Analysis.
The PESTEL Analysis Amazon.com, Inc.
Political and Legal. The political situation considerably affects any business, and Amazon is not an exception. Political instability and often legislation changes create complications for Amazon. Moreover, since Amazon is running its business in more than in 140 countries, it is becoming more difficult to get accustomed to the legal environment in different countries. In addition, the company follows the strategy of foreign markets expansion where the target market political situation needs to be taken into account. Moreover, the taxation system of the country needs to be followed strictly. Thus, the political and legal environment has to be studied and analyzed for each marker where the company is running or planning to enter.
Economic. Due to the fact that Amazon is represented in many countries and markets, the global economic situation and the economic conditions of the separate countries affect the working environment of Amazon considerably. As for the global trends, the economic decline prevents the business from development while the growth of the global economy stimulates sales and company development. The buying of country citizens determines the rate of sales. In addition, an exchange rate and inflation influence the profitability of the company.
Social. Despite the increasing popularity of Internet purchase, many people still have the habit of buying commodity goods in random stores. The habit is determined by the fear of online payment transfer, uncertainty, and product unawareness. The Amazon is constantly working on the breaking of the stereotypes developing different customer loyalty programs. Besides the personal habits and considerations of customers not to buy online, some counties have a culture of shopping in usual stores. This cultural characteristic is rather difficult to change.
Technological. With a rapid technological development, it is important for Amazon to be flexible, follow the trends, and update its product range fast. One of the trends is the often usage of the mobile phone; therefore, there is a need for the Amazon.com company to be adapted to the mobile version. In addition, there is a need for the mobile application provision on both services, Google Play and Apple Store. The company has to make the purchase process as easy for the customer as possible. In addition, many customers are concerned about personal information. Consequently, Amazon has to prove that using their service is safe, and the customers’ information will not be used inappropriately.
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Environmental. Due to the trend of global environment protection and a strong concern of customers about nature, Amazon.com, Inc. also has to pay attention to the environmental peculiarities. The company is trying to prove to its customers that there is a minimum negative effect of the company on nature. In addition, Amazon is financing different environmental programs, sponsorships, and nature protection.
The Five Forces Analysis
Threat of New Entrants. The threat of new entrants into the market of online sales is very serious. Any person or company can start selling online. However, in order to reach the level of the company development and market share of Amazon, one has to overcome some barriers. First of all, considerable financial resources are needed for the software and web data base creation. The economy of scale needs to be used by the new entrants. Moreover, in order to find a niche for Internet sales, an innovative product must be offered to the customers.
Threat of Substitutes. Threat of substitutes is also considerable. The products that are offered by Amazon can be bought from the usual stores and official web-sites of the producer. However, Amazon.com has a high popularity level among its customers and a large number of loyal customers. That is why in terms of buying the same products, Amazon can be substituted, but there is a low threat level of the company being substituted by another retailer.
Bargaining Power of Buyers. The bargaining power of buyers is great. It is caused by the fact that there are many different options of finding and buying the commodity goods. On the contrary, it is important that Amazon has a high level of customers’ loyalty that is a considerable competitive advantage over the rivals. Thus, in spite of the high level of bargaining power, the customers choose Amazon among the other ways of purchase.
Bargaining Power of Suppliers. Due to the high level of popularity of Amazon, the bargaining power of suppliers is diminishing. In addition, the company has managed to set direct distribution relationships with the major suppliers and get competitive prices as a result. Besides, the company has developed its own distribution system with own facilities and distribution centers. All of these factors give the Amazon Company the power among the suppliers.
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Industry Rivalry. Considering the fact that Amazon is a representative of various industries and markets, the industry rivalry can be also divided into different groups. They are the companies engaged in retailing, publishing, distribution, e-commerce, media, and other areas. According to the management of the company, the main competitors of Amazon are Apple, Inc., Google Inc., Alibaba, and Facebook. However, some competitors became the partners of Amazon or they have been merged by the company (Rothaermel 482).
Conclusion
Taking the aforementioned aspects into account, Amazon.com, Inc. is an obvious example of a successful online retailing company that is trading a great variety of products. Moreover, the company has managed to develop productive relationships with different partners and take the leading position on the market. With the help of Porter’s Five Forces and the PESTEL analysis, Amazon.com, Inc. has been analyzed in terms of its strategies. The findings shows that the company is rather strong and competitive. Nevertheless, Amazon needs always to stay flexible in order to get accustomed to all trends and changes of working conditions.
