WA 3 – PESTEL and Five Forces analysis for AMAZON – Written Assignment Unit 3 PESTEL and Five Forces – Studocu
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Written Assignment Unit 3
PESTEL and Five Forces analysis for AMAZON
BUS 5117: STRATEGIC DECISION MAKING AND MANAGEMENT
DEC 2021
PESTEL and Five Forces analysis for AMAZON
PESTEL analysis is used as an analytical tool to determine how external factors influence its operations
and increase its competitiveness in the market. Five Forces analysis was a tool developed by Michael E.
Porter which is used by organizations to help identify the structure, strength, weakness of the industry, and
determine its competitive strategies.
Introduction
Jeff Bezos founded Amazon in 1995 as an online marketplace for books but it soon expanded the
sells to electronics, video games, furniture, software and much more. He came across this idea and was
willing to implement on it due to the realization of the drastic growth of the internet, which was 2300%.
Within the E-Commerce his main objective was to build a customer-centric company & an online purchase
area where anyone can easily purchase anything that is available on the platform (Majed et al., 2018).
Porter’s Five Factors
Porter’s Five Forces of Competitive Position Analysis is a tool used by businesses to measure and
evaluate their position and competitive capabilities. The five forces are: supplier power, buyer power,
competitive rivalry, threat of substitution and threat of new entry. Since Amazon started its business during
the early stages of the internet world it had a digital advantage. However, it was also competing with
traditional mortar and brick stores. Eventually Amazon became the largest selling platform because of its
convenience, availability, and lower cost. Amazon provides a lower price to its customers; this has helped
in increasing its market pool.
PESTEL Analysis
Amazon has built a legacy in the e-commerce world. Although this global technology company has a
secure position on the market, it faces increasing competition. By using a PESTEL analysis, Amazon is
able to better understand its remote macro-environment and continually assess the competition. As a result,
they are better able to identify their shortcomings and improve their customer service.
Edrawmax (n.) explains ecological factor as “The ecological factor examines if the company stands a
good chance of thriving considering its ecological sensitivity. Companies that focus on environment-
friendly products and services, utilize renewable energy, and think about a sustainable future have an
additional benefit.” In relation to this Amazon has made several efforts and contribution such as
environmental programs, promotion of business sustainability, and low-carbon lifestyle and waste
management strategies which will in turn develop the business opportunities.
Social Factor
For a company to develop its product or service in such a way the that the consumer will purchase is a great
factor that needs to be considered. Its when we understand the consumer behavior that we can provide a
product. In the case of Amazon, it has provided consumers the most convenient way to make their daily
shopping’s. It is because of this reason Amazon has developed an entire global business(edrawmax, n.).
However, the drawbacks are that along with technology job opportunities are being taken away from
employees.
Technological Factor
In order to plan for the future with intelligence, companies need to embrace automation, technological
innovation, change, and technical awareness. These technologies help them adopt new ones, plan their
manufacturing, logistics, and distribution. Amazon’s innovative and creative ways to reach out to its
customers are unparalleled (edrawmax, n.). They are ever exploring new and effective ways of shipping
and delivering packages. Furthermore, given the advancement of the technology amazon is hiring more
people to keep up with the demand.
Economic Factor
It gives an organization the purchasing power plan, price, product, and services. It is a factor that needs to
consider since it incorporates interest rates, raw material cost and others. For Amazon it has major challenge
is tax. In developing countries, economic stability has growth opportunities for Amazon(edrawmax, n.).
Legal Factors
It is concerned with rules and regulations. These laws include industry regulation, health & safety of the
employees, consumer law, and others. Similar to other industries amazon needs to obey the rules &
regulations, which majorly includes cybersecurity (edrawmax, n.). Other considerations and challenges
for Amazon is the import & export policies it faces in different countries.
The first action I will be taking as a CEO is managing and building relationship with developing countries.
For instance Amazon’s market does not apply in my country. It has a large population meaning a large
customer for the company. By aligning with the countries rules & regulation it can defiantly penetrate into
a new market.
Secondly, with the increasing technology come along decrease in employment. Amazon needs to find ways
to employee more people so the industry is neglected by the society. Just as there is a concern in the
environmental sustainability the same needs to be applied for number of employment.
Reference
Majed, S., Nuraddin, S., & Hama, S. (2018, January 1). Analyzing the Amazon success strategies.
ResearchGate.
researchgate/publication/328689933_Analyzing_the_Amazon_success_strategies
