SWOT Analysis of Amazon: A Complete Guide

Published June 21, 2021 | Author: PenMyPaper

Amazon is an American e-commerce company, which operates internationally in various host markets. It offers online retail, consumer electronics, digital and computing services, digital media services and other localized services. The company currently holds the leadership position in the US as well as in the global e-commerce sector. As of 2019, the company generated a revenue of USD 280.52 billion. From academic perspective, Amazon is one of the most thoroughly studied organizations and is often chosen as a case company for a college essay. Having a thorough understanding of the business operations of Amazon can be really helpful for any business management student. Therefore, our essay writer has conducted a detailed SWOT analysis of Amazon in this column. It covers the internal (strengths and weaknesses) and external (opportunities and threats) factors influencing the business operations of the company. When you are going to write my essay in your college, this article will be of great help.

Amazon SWOT Analysis

The SWOT analysis framework is a strategic tool which is often used to analyze the external and internal environmental factors of an organization. The strengths and weaknesses are associated with the internal operational conditions of the company, whereas the opportunities and threats are associated with the external market and industry environment in which the firm operates. Let us now look at each one of them.

Strengths	Weaknesses
Strong financial position in terms of market capitalization and revenue Highly diversified business portfolio results in higher revenue generation and reduced financial risks Strong infrastructure and high workforce strength	Low profitability in almost every target market, including the home market Highly imitable business model, especially for the online retail venture Tax evasive maneuvers resulted in government scrutiny and poor corporate image
Opportunity	Threats
Potential growth opportunity in the e-commerce sector due to high market demand Growth opportunity in the streaming industry Expansion opportunity in the autonomous vehicle and driverless transportation sector	Steep competition in the e-commerce retail and media streaming service sectors Threat of political conflict, especially in the host markets Threatened by sudden changes in the market economy Unethical practices by supplier firms leading to poor corporate image.

Strengths

The key strength of the company relies on its financial status. A quantitative research states that Amazon holds the second rank after Walmart in terms of revenue generation. It recorded a revenue of more than USD 280 billion in the year 2019. Moreover, it also holds the third position in terms of market value, at USD 970.68 billion, following Microsoft and Apple. The strong financial position of Amazon has allowed the company to sustain the steep competitive environment and has also enabled it to invest into further business expansion ventures.

Amazon operates with a diversified business portfolio. It earns its revenue from multiple ventures such as e-commerce retail, cloud service, media streaming and consumer electronics and many more. The diversification enabled the company to reduce its dependence on just the online retail sector, thereby reducing its financial risks. Moreover, it has also allowed the company to become one of the top revenue earning firms in the world.

Amazon operates in multiple international locations, with 798,000 employees. The global operations of the company have also allowed it to create a strong brand image which is crucial for facing the steep competition in the market. Over the years, Amazon also adopted inorganic expansion strategies, where it has made strategic acquisition of more than 100 companies and holds minority stakes in many others.

Weaknesses

The most concerning weakness of Amazon is its extremely low net income. As of 2019, the net income of the company has been recorded to be USD 14.54 billion, with 4.10% net margin. The low net income can make the company highly dependent on its investors, as it is not able to make money from its business. The same has been found in other international markets as well.

Unlike one of the strengths in the SWOT analysis of Coca Cola, Amazon do not have any patented formula, which is why it has a highly imitable business model. This business model has become quite common, owing the rising popularity of the e-commerce platforms. Thus, the company has very little differentiation in terms of its value offering.

Amazon has also faced severe controversies in the recent years, related to tax avoidance. The company has adopted deceptive maneuvers to avoid taxes in US, US and Japan. The aggressive and deliberate practices of tax avoidance by the company has led to some serious issues with the respective governments and has also resulted in negative corporate image among its stakeholders.

Opportunity

The key opportunity of Amazon is the increasing popularity of online shopping. Over the past years, the worldwide e-commerce sales have increased significantly and is forecasted to increase further in the near future. This presents significant opportunity for Amazon to expand its business further.

The company also has potential growth opportunity in the media streaming industry. The streaming business of Amazon, under the brand Prime Video can expand in the near future, owing to the forecasted market growth and demand. The user penetration of video streaming service is likely to reach 17.2% by the year 2025, from 11.9% in 2020.

Amazon also has significant growth opportunity in the autonomous vehicle sector in the future. Its recent strategic acquisition of Zoox Inc. has proven that Amazon wants to enter into the autonomous vehicle sector and driverless transportation sector. This industry is currently at an infancy stage, with few companies testing their prototype in limited markets. However, with the increasing demand for ride sharing service, the autonomous vehicles can prove to be a boon for the company.

Threats

Amazon faces significant threat of competition in the industry. With the growth of the e-commerce sector, a lot of new entrants are drawn to operate in the industry, thereby increasing the competitiveness for the existing firms like Amazon. Amazon competitors such as Netflix and Disney offer nearly identical value propositions in the media streaming sector.

Amazon operates in multiple international locations, which exposes it to local political and economic issues. Any politically motivated conflict can cause significant disruption for the company’s supply chain, leading to loss of revenue for the Amazon. In this case, it can be also stated that sudden changes in the business policies and regulations in the host market can also disrupt the company’s business operations.

Amazon is also threatened by the global economic conditions. Any form of recession in the home or host markets can have a significant impact on the revenue of the company. Any economic down turn can reduce the affordability of the customers, which in turn can reduce the sales volume. Moreover, the Amazon faces threatened by labor scandals, where some of its supplier companies have been found to practice unethical treatment to the workers. This as a result has resulted in poor corporate image for the company

SWOT analysis of Amazon can be a fine topic to write on for your doctoral thesis. Otherwise, you can refer to this article as an example when you are applying the model to your own company of choice. You can refer to this article as an example when you are applying the model to your own company of choice.

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