Amazon.com Inc. PESTEL/PESTLE Analysis, Recommendations – Panmore Institute
An Amazon Kindle. A PESTEL/PESTLE analysis of Amazon.com Inc. shows external factors that create opportunities for globally expanding the company’s online retail/e-commerce and IT services businesses. (Photo: Public Domain)
Amazon.com Inc.’s performance relates to the issues shown in this PESTEL/PESTLE analysis of the business and its remote or macro-environment. The PESTEL/PESTLE analysis model is a strategic management tool for identifying the external factors (political, economic, social/sociocultural, technological, ecological/environmental, and legal) that shape the conditions of the remote or macro-environment, which in this case is that of the e-commerce enterprise. Other markets or segments included in this external analysis of Amazon are cloud computing services, consumer electronics, and retail. As one of the largest players in the global market for information technologies and related online services, the company enjoys the benefits of extensive market reach, high capitalization, and high popularity. However, the online market is dynamic and continually presents new challenges for Amazon. Maintaining resilience and competence in addressing such challenges is essential to fulfilling Amazon.com Inc.’s corporate mission and vision statements. Through tools like the PESTEL/PESTLE analysis model, the company’s decision makers can identify the most significant opportunities and threats based on external factors in the remote or macro-environment of the business.
This PESTEL/PESTLE analysis of Amazon.com Inc. reveals the significance of operations expansion into more markets to support the global growth of the e-commerce business. However, the company needs to address competition involving large and aggressive companies like Walmart, as well as technology firms like Google, Apple, Microsoft, and IBM, which compete against Amazon’s cloud services and related technological products. Also, the company now has its own microchips used in its cloud infrastructure, thereby making Intel a potential competitor. Still, as shown in this PESTEL/PESTLE analysis, the competitive landscape presents opportunities to continue growing Amazon’s operations, including those of subsidiaries like Whole Foods Market, in various market segments.
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Political Factors Affecting Amazon’s Technology and Services Business
Amazon.com
Inc. operates alongside political influence. This aspect of the PESTEL/PESTLE analysis model
focuses on governmental activity and its effects on businesses and their remote
or macro-environment. In Amazon’s
case, the following political external factors are important in the development
of the e-commerce industry:
- Political
stability of developed countries, especially the U.S.A. and European countries
(opportunity) - Governmental
support for e-commerce (opportunity & threat) - Increasing
governmental efforts on cyber-security (opportunity)
Amazon
benefits from political stability. In the PESTEL/PESTLE analysis framework, this condition creates an opportunity
for the company to expand or diversify its business in developed countries. For
example, Amazon could
expand its brick-and-mortar operations in the United States to complement its
e-commerce business. On the other hand, the external factor of overall
governmental support for e-commerce is also an opportunity. Such governmental
support facilitates Amazon’s
continuing expansion in relevant markets. However, the same external factor
threatens the company because of rising competition, such as that involving Chinese
online retail firms that are expanding their operations. Nonetheless, governments
present improved business conditions through efforts in fighting cybercrime. This
aspect of the PESTEL/PESTLE analysis of Amazon shows major
opportunities that the company can exploit to increase its resilience in the remote
or macro-environment of the information technology services and e-commerce
industry.
Economic Factors Important to Amazon.com Inc.
Amazon’s
performance depends on the situation of the economies where it operates its
online and non-online businesses. The effects of economic trends and changes on
the remote or macro-environment are considered in this aspect of the PESTEL/PESTLE analysis model. In
the case of Amazon.com
Inc., the following economic external factors are significant:
- Economic
stability of developed markets, especially the U.S. and European countries
(opportunity) - Increasing
disposable incomes in developing countries (opportunity) - Potential
economic recession of China (threat)
The
economic stability of developed countries increases the likelihood of success
for Amazon.com Inc. Based
on the PESTEL/PESTLE analysis model, this
situation minimizes economic issues in the remote or macro-environment, thereby
minimizing risks to the company’s online retail business expansion. Amazon also has growth
opportunities in developing countries. For example, the increasing disposable
incomes in developing markets can boost the company’s financial performance.
However, the potential economic recession of China threatens Amazon’s business. China is
one of the biggest markets that the company hopes to increasingly penetrate.
Based on the external factors in this aspect of the PESTEL/PESTLE analysis of Amazon.com Inc., opportunities for growth in
developing countries must be included in the company’s strategy formulation.
Social/Sociocultural Factors Influencing Amazon
Social
conditions are a determinant of Amazon.com Inc. This aspect of the PESTEL/PESTLE analysis model identifies the impact of sociocultural
changes or trends on the company’s performance as a leading online retailer and
provider of information technology goods and services. Considering such trends
in the remote or macro-environment, Amazon faces the following sociocultural external factors:
- Increasing
wealth disparity (threat) - Increasing
consumerism in developing countries (opportunity) - Increasing
online buying habits (opportunity)
The increasing wealth disparity refers to the increasing gap between the rich and the poor in many countries. This PESTEL/PESTLE analysis considers such a sociocultural trend a threat against Amazon.com Inc. in terms of the potential stagnation of disposable income levels and the corresponding stagnation of the remote or macro-environment of the industry. Higher disposable income levels are more favorable in increasing the e-commerce company’s potential revenues. In addition, an increasing degree of consumerism creates opportunities for growing the e-commerce and IT services business. For example, higher consumerism in developing markets increases the potential success of Amazon.com Inc.’s generic strategy for competitive advantage and intensive strategies for growth, as the company looks to expand its global online retail operations in these locations. In relation, the company stands to benefit from increasing online buying habits, as more people around the world prefer to buy products through the Internet. The external factors in this aspect of the PESTEL/PESTLE analysis of Amazon indicate the benefits of focusing on market penetration and expansion in developing countries.
Technological Factors in Amazon’s Business
Technological
advancement directly affects Amazon,
considering the centrality of technology in its business. The consequences of technologies
and related trends on the remote or macro-environment are covered in this
aspect of the PESTEL/PESTLE analysis of the
e-commerce company. The technological external factors important in Amazon.com Inc.’s business
are as follows:
- Rapid
technological obsolescence (threat & opportunity) - Increasing
efficiencies of IT resources (opportunity) - Increasing
rates of cybercrime (threat)
Amazon.com
Inc. faces the threat of rapid technological obsolescence, which imposes
pressure on the company to continuously develop its technological assets.
However, in the context of this PESTEL/PESTLE
analysis, such a condition is also an opportunity in optimizing the business.
For example, the corporation’s continued heavy investment in information
technology can boost its competitive advantage and protect the business from
new entrants in the e-commerce industry. Amazon also has opportunities to further improve its
performance based on the rapid increase of IT resource efficiencies. For
instance, new computing technologies can maximize online retail productivity
and minimize operational costs. However, the company also faces the constant
threat of cybercrime. This external factor threatens the quality of customer
experience as well as the integrity of Amazon’s business. Thus, significant investment in appropriate
technological measures is critical to the company’s long-term survival despite
technology-related issues in the industry’s remote or macro-environment. Based
on this aspect of the PESTEL/PESTLE analysis, Amazon needs to emphasize continuous
improvement of its technologies.
Ecological/Environmental Factors
Even
though Amazon.com Inc. is
mainly an online business, its operations are subject to the influence of the
natural environment. This aspect of the PESTEL/PESTLE analysis model presents how the company’s remote or
macro-environment relates with ecological changes. Amazon considers the following ecological
external factors in its strategic formulation:
- Rising
interest in environmental programs (opportunity) - Rising
emphasis on business sustainability (opportunity) - Increasing
popularity of low-carbon lifestyles (opportunity)
Amazon has opportunities to improve its environmental impact in response to the rising interest in environmental programs. Such interest is a direct consequence of ecological challenges, such as waste management and energy consumption. Based on this external factor, an improvement in Amazon.com Inc.’s corporate social responsibility strategy could enhance the company’s environmental impact. In relation, this PESTEL/PESTLE analysis notes major opportunities in the area of business sustainability. For example, higher sustainability standards can further improve environmental impact and strengthen the brand image of the e-commerce organization, based on the business strengths identified in the SWOT Analysis of Amazon.com Inc. Furthermore, the increasing popularity of low-carbon lifestyles provides opportunities for the company to boost its corporate image as a leader in the e-commerce industry. The company could implement extensive energy-saving policies in its operations for this purpose. This aspect of the PESTEL/PESTLE analysis of Amazon shows the significance of a comprehensive corporate social responsibility strategy to increase the company’s competence in addressing the ecological concerns its remote or macro-environment.
Legal Factors
Amazon.com
Inc.’s e-commerce operations must adhere to legal requirements. The effects of
regulations on the remote or macro-environment are determined in this aspect of
the PESTEL/PESTLE analysis model. In
Amazon’s case, the
following legal external factors are significant:
- Rising
product regulation (opportunity) - Changing
import and export regulations (opportunity) - Rising
environmental protection regulations on businesses (opportunity)
Rising
product regulation is seen as a result of societal demands on consumer safety
and customer security. In the PESTEL/PESTLE analysis
framework, this external factor creates opportunities for Amazon.com Inc. to intensify
its efforts in reducing counterfeit sale on its online retail website. Also,
the company has opportunities to grow, based on the external factor of changing
import and export regulations. For example, Amazon can expand its global operations to exploit
the increasing ability of sellers to access overseas suppliers. Moreover, the e-commerce
company has opportunities to strengthen its brand image through appropriate corporate
social responsibility policies that address rising environmental protection
regulations. Such effort can increase business competitiveness in the remote or
macro-environment. Based on this aspect of the PESTEL/PESTLE analysis model, Amazon can ensure long-term e-commerce success through regulatory
compliance.
PESTEL/PESTLE Analysis of Amazon.com Inc. – Recommendations
Amazon.com
Inc. remains the top player in the online retail market. The company has shown
resilience despite increasing competition with companies like Walmart. This PESTEL/PESTLE analysis of Amazon identifies key issues that
are critical to the company’s long-term success. A recommendation is to expand the
company’s operations into developing markets, which present rapid economic
development and high e-commerce growth potential. Also, the company must
address IT security issues by continuing and enhancing its current strategies
for IT security and integrity. These issues affect consumer confidence and the
stability of the company’s remote or macro-environment. In addition, based on
the external factors in this PESTEL/PESTLE analysis, it is
recommended that Amazon
boost its brand strength through a corporate social responsibility strategy
that addresses current issues that link the business to the natural
environment.
