Amazon is a multinational company and is based out in Seattle. Amazon has about 750,000 employees and its business focuses on the following areas:
- Online Commerce
- Cloud Computing
- Artificial Intelligence
- Digital Streaming
Amazon is considered one of the top four technology companies amongst Apple, Google, and Microsoft. Amazon is considered the most significant economic and top cultural forces across the world. The company’s popularity is extensive across the globe.
It is estimated to have about 310 million active users and about one million subscribers across the globe. Amazon is the world’s top online retailer and it has many achievements, effective launches, and eye-popping profits.
The SWOT analysis of Amazon distinguishes all the main strengths, weakness, opportunities, and threats that gives a pointer to the company to scale up to more. Readout this article, to get an understanding of where Amazon stands.
Before we begin in-depth on the SWOT analysis of Amazon, let us understand a bit of the background of the company Amazon.
The following points provide you a bit of background:
- The company is known with the name Amazon Inc.
- Amazon was established during the year 1994 and its headquarter is set up in Washington, United States.
- The company logo is shown in Image 1.
- The various industries served by the company are the following:
- Consumer Electronics
- Amazon serves its business to about 14 countries worldwide.
Amazon’s virtual world has become the most common has become a customer-centric company. The company is guided by the following main principles:
- Customer passion instead of customer focus
- Desire for invention
- Obligation to operational excellence
- Long term thinking
For each of Amazon’s segments, they serve the primary customer sets that contain customers, developers, sellers, enterprises, and content creators. Amazon has a retail website to serve its customers and many physical stores that emphasis on selection and price of the product.
Amazon’s website is designed with great care to permit millions of unique products sold by other third parties and Amazon, having many product categories. Amazon’s products can be accessed by customers through their website, Alexa, mobile apps, and by visiting their stores personally.
Amazon has also produced and marketed various electronic devices like the following:
- Kindle e-readers
- Fire TVs
- Fire Tablets
- Echo Devices
Amazon also develops media content. Amazon endeavors to provide to its customers with every product with the lowest price by giving daily product pricing and shipping offers. To have control over its operating competences, it continues to maintain a low price for Amazon’s customers. Amazon also takes care of the following:
- User-friendly functionality in their website design
- Quick and consistent fulfillment
- On-time customer service
Apart from the efficiency of their excellent operations, it also provides Amazon Prime that gives an annual membership program to its customers. These annual membership holders have unlimited free shipping on millions of products, be able to access unlimited instant streaming of many movies, television episodes, and many other benefits.
Amazon believes that the main competitive factor for any retail business has the selection, convenience, and price that includes quick and reliable execution. Few other competitive factors include speed, quality, and reliability of the Amazon services and tools. It also focuses on the customer’s willingness and ability to modify the business practice.
The SWOT analysis of Amazon highlights the strengths that Amazon makes use to bypass its weakness. It also throws light on the threat that the business can encounter to get the maximum benefit from the various opportunities in the international market. The various industry situation comprises global e-commerce operations. To make sure that Amazon meets the long-term competitive advantage it must address the various concerns highlighted in the SWOT analysis of Amazon.
This SWOT analysis of Amazon highlights the point to have a strong brand image in par with the other strengths that would fit the online market well. The company must build its strength by taking the technology development that goes at a fast pace. By using these strengths, Amazon should be able to fight against strong competition across the world.
Let us discuss on the SWOT analysis of Amazon.
Strengths in the SWOT Analysis of Amazon
- Strong Brand Image – Amazon has been a popular e-commerce company. It is an online commerce giant and its online operations have seen huge success over the years. As a result, it has gained a lot of online presence and it has built its reputation as a brand. The brand is so popular among people and Amazon has placed itself in a high position in front of its customers. Owing to its popularity and its timely service, Amazon has created a strong brand market across the world. Also, the brand is known for its discounts, product placement and selection, shipping rates, and timely delivery. The company follows a less-price structure as there are many third parties who sell products through their website and Amazon also sees a profit in it.
- Customer Oriented – Per day, Amazon accommodates many customers to meet their daily requirements at less price. This has made the customer to be depended on Amazon to a larger extent. The company has an excellent CRM that has created a systematic customer-centric processes that cautiously captures data about the customer’s buying behavior. Also, almost 55% of Amazon’s customers are repeat buyers and get connected with the brand again and again. This would result in a low acquisition cost of new buyers.
- Innovation – Amazon has an excellent innovative idea and it frequently releases creative ideas to its product line. It creates a differentiation with various services being provided like the Withings Aura Smart Sleep System, which is a sleep tracking system. This creates a variation if this brand from other brands.
- Strong Product List – Amazon was built on its initial achievement with books. Currently, Amazon has several product categories like apparel, electronics, home and décor, kitchen appliances, games, toys, groceries, and many more. Its extensive product list attracts customers to make their purchase from Amazon instead of other online retailers. Amazon has been estimated to have sold about 562.3 million products on its website.
- Cost Leadership – Amazon does not acquire cost to maintain a physical retail store as it has its selling take place online. Having the economies of scale, Amazon has strong control over its costs and lowers its inventory renewal time. Amazon has formed many strategic alliances by connecting with many companies like Thalmic Labs, Evi Technologies, The Orange Chef, and many more. This helps the company to provide high-quality customer service. It has a strong tie-up with logistics providers. The value chain of Amazon is strong that helps the brand to maintain a low-cost structure.
- Good Delivery Network – To maintain a smooth business operation, Amazon has created many strategies associations with other companies to provide high-quality customer service. One main important strategic tie up is with logistics providers who control the cost and contribute a strong value chain. Its distribution system is strong and has fixed dates for various delivery time slots. Hence, it caters to reliable, fast delivery of goods, and security for the product delivery to their clients.
- Strategy – Go Global and Act Local – Amazon’s strategy, ‘Go Global and Act Local’ has helped the brand to a larger extent. Amazon initiates partnerships with many local supply chain companies that help in challenging against various domestic e-commerce competitors. It analyses the local requirement and promotes its services as per the culture of the company. This strategy has helped Amazon to fight against various domestic E-commerce companies by initiating a proper supply chain management.
- Acquisitions – Amazon has expanded its business by acquiring many top companies like Junglee.com, Zappos.com, woot.com, etc. It has proved by the company to be successful and a great revenue-generating step for the company. Acquisitions have helped to gain more revenues and strengthen Amazon’s profit.
- Third-Party Sellers – As Amazon sees a huge traffic volume, there are many third-party sellers who have joined the Amazon platform to sell their products. Amazon sees billions of products that are sold from the third-party sellers. Using a third-party seller, Amazon can fulfill all types of products in one place. You name a product and you get it in Amazon. Due to this, millions of customers find it easy to shop using Amazon, thereby Amazon profit is increased.
- Main three Key Business Areas – These business areas are a great advantage to the company and generate huge profits. The main three business areas of Amazon are the following:
- Amazon Web Services (AWS)
- Amazon Marketplace
- Amazon Prime
- Highest Revenue – Amazon is seen as the market leader and generates the largest revenue in the industry. Its market capitalization is about $778.39 billion and has an annual revenue of about $200 billion.
Weaknesses in the SWOT Analysis of Amazon
- Business Model Imitated – Online retail is a business that has become common over the years in this digital era. So, it becomes easy for others to copy the business model thereby gaining Amazon competitors. Few of the online businesses like Netflix, Oyster, eBay, Barnes & Noble, etc. is giving a tough competition for Amazon. So, this is a major weakness for the brand as the competitors would increase in no time thereby making it tough for Amazon’s operations.
- Fewer Margins – Amazon sees a less margin in few areas. This might be because its free shipping could be the reason for the same. By having an exhaustive delivery network and its fluctuation in prices for various products, Amazon tends to lose its margins on a few areas. When a few areas are impacted, it would naturally impact the entire profit of the brand. During the year 2013-14, Amazon has lost about $359 crores in its business.
- Product Failures – Amazon has seen many failures in its product. Few of the products are not a big hit in the market and eventually, it has ended in a dip in the business. For example, the popular product Kindle Fire and Fire Phone in the United States has seen a big failure. Many such products have not been successful. This is a weakness to the brand as when the product’s failures and success keeps fluctuating, there can be a hit in the business scenario.
- Controversy about Tax Avoidance – Tax issues has created a negative impact on Amazon’s publicity. This has taken Amazon to a great weak point and President Trump has criticized the company over taxes on the social media network. Moreover, the negative publicity on Tax issue has been raised in countries like the UK and US which is the market where most of Amazon’s revenue is generated.
- Limited presence of Brick and Mortar – Amazon does not have a full-fledged physical store. This would bring a hindrance to the customers to get all the products offline. This is a major weak point for the brand, where in people who are not strong in dealing with an online market, would not get a chance to connect with Amazon.
- Negative Reports – Recently, Vox has published negative reports about Amazon treating its employees badly at the workplace. The workplace has fewer infrastructure requirements and negative remarks are created by the employees. These kinds of comments and remarks affect Amazon’s status.
- Increase in Debt – In a few of the developing nations, Amazon still struggles its way to find its business in a few nations. Hence, the overall productivity of Amazon is hit that reflects the overall profitability. This results in high debt. This is a great weak point for the brand that affects the Amazon business. When debt starts to increase in a company, then it is reflected in the overall business profit and its growth. Amazon should try to expand its service to other developing nations as well.
Opportunities in the SWOT Analysis of Amazon
- Penetration into Developing Nation – Amazon should enhance its business market to developing nations. Increasing its operations to other developing nations would provide more opportunities for the brand. This would lead to better operations for Amazon and increase its profit. Entering its business into further developing nations would see a better growth for Amazon.
- Increase in Physical Store – Amazon can expand its business operations by increasing its presence in the physical store. This would enable customers who do not have access online as well to shop. Having an offline store would help the brand to get more customers and they can serve both the online and offline markets. This would also enable customers to get involved in their brand that would essentially lead to repeated purchases and have loyal customers.
- Improve on Technology – Amazon should work on ways to improvise on the technology so that it would violate any fake purchases or log in. The brand should make every attempt to ensure that all the processes are well-defined using the latest technology thereby giving it a stay for any unnecessary transactions.
- Include Backward Integration – Amazon can do backward integration by expanding its in-house brand like Amazon basics. It can become more popular when it includes these kinds of in-house brands in various available categories of products. This would enable us to distinguish between what it offers thereby increasing profit margins amongst the various online commerce competitors.
- Increase in Acquisition – Amazon has expanded its business by acquiring many top companies like Junglee.com, Zappos.com, woot.com, etc. It has proved by the company to be successful and a great revenue-generating step for the company. Acquisitions have helped to gain more revenues and strengthen Amazon’s profit. But the company should not just stop with few acquisitions. It should involve itself in gaining more acquisitions. This would increase in its brand image and increase the market share of the company that would eventually lead to a reduction in the competition level.
- Amazon Flex – Amazon has launched Amazon Flex that has provided a unique opportunity for many part-time delivery partners in India. This is a unique opportunity that enables every individual to be their boss, be able to create their schedule and earn money per hour by delivering Amazon packages. This innovative initiative would create job opportunities for many individuals. It also helps the company to enhance its delivery capacity and speeds up the delivery process.
- Controversies – There have been few controversies in the brand and that had affected its brand image to a large extent. After this, many people had criticized the brand and boycotted it from visiting the Amazon website. Time and again some or the other controversy had affected the brand to a larger extent. When such controversies about the brand were in news, there was a slight dip in the market that essentially hit their profit margins.
- Government Regulations – One major threat for the brand is government regulations. This would be a big threat to Amazon’s business proceedings in a few countries. Due to the various regulations, Amazon does not have its business operations in countries like Iran, Cuba, Sudan, North Korea, and Styria. Also, Amazon does not have many clarifications on FDI related issues in multi-brand retail. This has in fact been a big hindrance to Amazon’s growth in the online market in many of the developing countries.
- Impact of Cybercrime – Various issues related to cybercrime is a major threat to the Amazon website. Cybercrime comes in various ways and tends to affect the network security of the Amazon system. Sometimes, people would hesitate to enter the website for fear of losing their money. This threat is unavoidable, and Amazon should figure out ways and incorporate into its business model and provide trust to its customers. It should give assurance to the customers that when they face any kind of cybercrime issues Amazon would compromise for it. If such an assurance is not projected to the customers, then they go for a bang.
- Competitors – Amazon faces great competition from many other online commerce giants like eBay and Walmart. Other online market giants also highlight the same features and hence Amazon should figure out ways how to attract customers to their brand without allowing them to the other brands. It should also add value for the customers to get connected with Amazon.
- Local Competition – Apart from the various online competition threat, Amazon also faces strong competition from the local markets, that is, the offline markets. There are many local players in the market who takes a huge market share and hence making it difficult for big online market players like Amazon to increase their profit.
- Copying the ideas – Online retail is a business is quite popular and is upcoming over the years in this digital era. Hence, its business model becomes easy for others to copy it and this is a big threat to the company. There are many online businesses who work in a similar domain as Amazon, like Netflix, Oyster, eBay, Barnes & Noble, etc. where Amazon sees a threat from. So, this is a major threat for the brand as the competitors would increase in no time thereby making it tough for Amazon’s operations.
Amazon is a leading online commerce player in the world and has enjoyed a great sale over the years. It has won many customer’s heart for shopping. It provides numerous products in one place.
The SWOT analysis of Amazon mentioned in this article has highlighted the main strengths of the brand that comes up from its brand value, product quality, and has its unique features incorporated in its business model.
The major weakness is its imitable business model, failures of a few products, and tax-related issue. Amazon sees a huge opportunity in the industry when it expands its business to the offline market as well and enhances its distribution network. Its major threat comes from online and offline competitors.