PESTLE Analysis of Amazon | Course Keys

This PESTLE/PESTEL analysis is related to the performance of the business and the remote environment acting on the business. This analysis is a tool used by the management in their strategic policies and decisions, which reveals the external factors influencing the macro-environment. The analysis includes Amazon’s primary e-commerce business along with other segments, including consumer electronics, cloud computing, and retail. As the company is playing a leading role in information technology and other online services across the globe, Amazon enjoys a diverse and large market reach, a high brand reputation, and high capitalization. Nonetheless, despite such a position, Amazon faces challenges in the dynamic market. Therefore, the company needs to make sure competence and resilience to address these challenges.

Based on tools such as PESTLE/PESTEL analysis and more, the company’s strategic managers can examine the threats and opportunities prevalent in the external factors of Amazon’s business.

The analysis has highlighted the relative importance of the company’s penetration into other markets to ensure global penetration. Nevertheless, the aggressive competition posed by other giants like Walmart and Costco to compete with Amazon’s wholesale and retail business. The cloud-based services market is facing intensive competition from world-level firms like Apple, Google, IBM, and Microsoft. Amazon has also listed Intel as a potential competitor with the induction of Amazon-made microchips in the cloud infrastructure. Still, the company has the opportunity to keep expanding and growing its business into various sections.

Political Factors Impacting the Amazon

The business world is influenced by political policies and regulations. This section of the PESTLE/PESTEL analysis has revealed the impacts of political policies and regulations on businesses and their environment. The e-commerce industry is facing the following external factors in its external business environment:

• The stable politics of developed nations, mainly in European countries and the USA (opportunity)
• Governmental and political sustenance for e-commerce (threat & opportunity)
• Rising efforts of governments to secure cyber-security (opportunity)

The company can maximize its growth and revenue from stable countries and economies around the world. This PESTLE/PESTEL analysis has revealed that the company can diversify or expand in stable economies. To demonstrate, it can enlarge its operation of brick-and-mortar in the US. Similarly, new policies of governments that support the overall e-commerce business are another opportunity. Thereby, these governmental provisions and ease of business allow the company to expand in these markets. On the other hand, these factors are also responsible for distracting growth through increased competition from new Chinese retail firms operating online, directly threatening the company’s global position in the long run. However, governments are improving the online business landscape by improving cyber laws and controlling cybercrimes. This section of the analysis has revealed the opportunities lying in the way for Amazon to make itself more resilient in the business environment.

Economic Factors Prevalent in Amazon’s Business

The company’s business and the economy are dependent on the economies and their stability wherever it operates. The impacts of economic conditions and dynamics are discussed in this section of the PESTLE/PESTEL analysis. The subsequent economic factors are sin qua non in the case of Amazon’s business:

• The stable politics of developed nations, mainly in European countries and the USA (opportunity)
• Rising disposable incomes mainly in developing countries (opportunity)
• Possible recession in the Chinese Economy (threat)

The company’s business is directly related to the economic conditions of the region and market. If the economic indicators are showing optimistic growth, they can reduce many risks and hurdles in the way of Amazon. Thereby, the company can expand its retail business. Furthermore, the growing disposable incomes of the people living in developing economies can surge the economic growth of the company. On the other hand, the possible economic recession of the Chinese market can threaten the company’s business as China falls into a great source of revenue for the company. These external factors also reveal that the growth opportunities of developing states must be exploited to achieve goals of growth and expansion.

Social/Sociocultural Factors affecting the company

Social conditions have an influence on the performance as well as output of the company. This section of the PESTLE/PESTEL analysis reveals the impact of socio-cultural trends or changes in the macro-environment of the company. The following given factors are responsible for shaping the business in terms of socio-cultural factors:

• Rising wealth disparity in society (threat)
• Rising consumerism among developing states (opportunity)
• Increasing e-commerce habits (opportunity)

The new indicators of increasing wealth disparity are a significant threat to the company. The wealth gap between the poor and the rich is rising day by day. PESTLE/PESTEL has considered this gap as a significant threat. The remote environment of the company is affected by this factor. The stagnation in disposable incomes can significantly threaten the company’s economy as well. Therefore, higher levels of disposal incomes are desirable for optimized growth. The increased level of consumerism is an opportunity for the company. For instance, higher consumerism can significantly increase the company’s competitive advantage as well as benefit the growth strategy of e-commerce and the IT service business. Moreover, the company can earn revenue due to the increasing habit of buying online. Thereby, the company has the opportunity to expand and market growth by expansion in the developing countries.

Technological Factors Affecting Amazon

Technological advancement has impacted the business of this company, as is the case with many business industries. The impacts of technology and the factor contributing to this impact are discussed in detail in this section. The prevalent and significant technological factors are discussed here:

• Growing technological obsolescence (opportunity & threat)
• Rising efficient ITs resources (opportunity)
• Higher rates of cyberbullying (threat)

The company faces direct pressure because of the technological obsolescence within it. This pressure led the company to focus on innovation more rigorously. In comparison, the company can extract benefits when it invests heavily to overcome this threat. This can increase the competitiveness of the company in the market. Moreover, Amazon can grow and expand by carrying a rapid increase in its performance in an efficient IT sector. For example, the company can become cost-effective in its retail and operations by synthesizing new computing technology. Still, the company is facing a constant cybercrime threat and insecurity, thereby undermining the company’s integrity and customer experience. Therefore, Amazon must put a good amount into technological innovation and advancement to ensure competitiveness and long-term survival.

Legal Factors prevalent in the business

Amazon must operate under legal regulations to ensure the smooth operationalization of the company. The impacts of these regulations are covered in this section of the analysis. The succeeding factors are responsible for impacting on the business environment of the company:

• Growing regulation of product (opportunity)
• Dynamic export and import regulations (opportunity)
• Rising environmental protection laws (opportunity)

Production regulation trends can be seen as the increasing concerns of the public and governments for consumer safety and security. This factor has allowed the company to expand its profit by decreasing counterfeit of its products. Moreover, the company can grow due to the flexible orientation in exports and imports. For instance, Amazon has the expansion opportunity to increase its sales and revenue due to the rising suppliers in the overseas market. Furthermore, the company has the opportunity to improve its brand reputation and image by ensuring proper adherence to and adequate measures for its social responsibility. By adhering to ecological regulations, the company can ensure long-term development and growth. Therefore, legal factors influence the business, and the company can ensure success in an e-commerce venture by adhering to these legal regulations.

Environmental/Ecological Factors

Although the company is operating its business online, it is subject to the natural environment in terms of its operations. This section will reveal the firm’s relationship with the natural environment, in its operations. This section of the PESTLE/PESTEL analysis reveals the macro or remote environment impact on ecology and vice versa. The below-given factors are responsible for impacting the company:

• Growing interest in eco-programs (opportunity)
• Growing emphasis on sustainability of the business (opportunity)
• New trending Low-carb lifestyles (opportunity)

Amazon can improve its environmental impact response by deploying effective strategies and methods. The growing interest in environmental preservation has implications for businesses. The company must respond adequately to these new trends. The company must effectively address the solid waste management and energy consumption programs. Thereby, by adhering to improving the social responsibility of the company, Amazon can significantly improve its environmental impact. This section of the analysis highlights the opportunities for the company to improve its social responsibility. To demonstrate, the company can significantly improve its social responsibility and thereby it can ensure long-term sustainability and brand image. Moreover, the rising trend of low-carbon print in the environment is another factor that gives opportunities for the company to uplift its brand name in the competitive market. Amazon can implement energy-saving policies to further assure this purpose. To sum up, this section of the analysis has revealed the opportunity for the company to strengthen social responsibility and Amazon’s competence in addressing ecological/environmental concerns.

Recommendations

The company has secured the top slot in the online e-commerce market. The resilient marketing policy of Amazon has enabled the company to survive the intense competition.  PESTLE/PESTEL analysis has highlighted the core problems affecting the business environment of the company. The company must take the opportunities for rapid growth and expansion by entering the developing market with high scales of revenue potential. Amazon must address IT security concerns, for most of the company’s business is running online. The company must not afford to lose its market value and integrity to cyberbullying. Moreover, this PESTLE/PESTEL analysis recommends that the company must improve its brand image by assuring social responsibility and the issues that are prevalent in the business environment and are linked to ecology.