Amazon is one of the top companies in the world. The company has millions of active users globally and realizes billions of dollars in revenues every year. Amazon’s success can be attributed to a strong internal and external environment. The internal environment’s success results from a strong internal financial structure, and the external environment’s success results from social factors and technological.
The key internal strength of the company is its strong financial position. The company had a revenue of 280,522 billion for the year 2019, which represented a 20.5% increase from 232.887 billion in 2018 (“Amazon.com, Inc.”, 2020). A strong financial position has enabled the company to expand in online retail. It also allows the company to withstand any environmental challenges from the changing online business landscape.
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The external environment analysis shows that there are sociological and demographic changes where a large number of people prefer shopping online. Changing trends in online shopping have made many people have faith in online transactions. The recent COVID-19 pandemic is an external factor that has worked to the company’s advantage. The company has experienced significant growth in the use of Amazon Web Services as academic institutions and companies shift to using cloud computing (“Amazon.com, Inc.”, 2020). Such sociological changes have resulted in significant growth in the company’s revenues.
Amazon faces significant external threats from legal and political issues due to claims, litigation, and government investigations. Investigations of the company can focus on various issues such as taxes, consumer protection, competition and antitrust, commercial disputes, and goods and services delivered by third parties (“2019 Amazon annual report”, 2020). The proceedings are a threat to the company as it results in legal costs, negative publicity, and disruption of its operations.
Amazon has been impacted by various external forces and competition in the e-commerce and online auctions industry. One of Porter’s five forces selected was that of competition. The company faces high competition from other retailers such as Costco Corporation and Walmart Inc (“IBISWorld”, 2020). The immense competition has resulted in retailers making huge discounts, which resultantly reduces profits. Technological advancement was selected as one of the PESTLE forces. The growth and development in technology have resulted in the growth of online retail. Companies like Amazon increasingly make use of robots to cut costs and improve service delivery.
In conclusion, Amazon has a strong market share and market position and continues to grow as it capitalizes on its strengths and opportunities. The company should also focus on improving its weaknesses and improving services to counter various threats.
References
Amazon.com, Inc. (2020) 2019 Amazon annual report. Amazon. https://s2.q4cdn.com/299287126/files/doc_financials/2020/ar/2019-Annual-Report.pdf
IBISWorld. (2020). E-Commerce & Online Auctions Industry in the US - Market Research Report. IBISWorld.com. https://www.ibisworld.com/united-states/market-research-reports/e-commerce-online-auctions-industry/
