In this Amazon Pestle Analysis we will discuss the opportunities and threats of external environment of this e-retail business.
Amazon is an e-commerce industry leader founded by Jeff Bezos in 1994. Started as bookstore and diversified its business model to everything you can imagine. E-commerce platform has simplified the shopping experience of consumers. If a consumer is not willing to go outside for shopping he can still get what he wants. He tries to find a product and analyze the reviews and rating and takes the final decision.
Amazon has become the top ecommerce retailer but it is not sticking to it any more. Amazon is now investing in stores to increase its customer base and market share. Let us discuss the pestle analysis of Amazon to identify the external factors in its macro environment. If you are interested please check Swot Analysis of Amazon.
Table of Contents
How Political Factors Affect Amazon
Amazon is an e-tailing platform which is serving millions of customer worldwide. The company has to face political influences and government activities that can affect Amazon success.
Political stability can affect Amazon e-commerce business. For example the political stability of developed countries like Australia gave Amazon.com an opportunity to expand its business in the region. Even a stable political governments can create threats for a company. The European Union is investigating Amazon.com regarding the use of retailers’ data who sell on Amazon Marketplace. If the regulators found Amazon guilty it can face severe consequences. Such political issues are affect Amazon brand image and profitability at the same time.
Another political factor that is worth mention is the government laws for e-commerce businesses. For example, few months back the Indian government stopped Amazon and Flipkart for selling products of those companies they have equity stakes. Government supports companies like Amazon due to their huge investments but it still have to comply with government laws and regulations which is sometimes very difficult. However this political factor becomes a threat when its supports other companies in the industry. For example, in China government support Chinese e-commerce companies to flourish their businesses.
Other external environment factors that can affect Amazon Inc. is cybercrime. If any government what to improve the e-tailing business environment it must fight against cybercrime. This can create an opportunity for the businesses.
How Economic Factors Affect Amazon
Amazon will grow fast if the economic conditions are positive in the areas where it is operating. Retailing is a medium how producers offer their products and services to consumers. Consumer buy from retailers in any economic condition and sometimes the retail business survive even in the worst economic conditions.
Consumers’ disposable income is increasing which is a great opportunity for Amazon.com. Higher disposable income means consumer will shop products of their choice. This will provide companies like Amazon, Walmart, Ebay an opportunity to expand its business to increase their market share and brand presence. According to the National Retail Federation, the U.S retail sales is expected to reach $3.8 Trillion in 2019.
No doubt Amazon is advanced Technology Company and facing criticism for offering fewer job opportunities and prefer to use technology where it is possible. The company denied the news and replied the Amazon is looking forward to hire highly skilled staff in the UK. But in May 2019 the company announced a program for those employees who want to quite. It will offer $10,000 plus three months gross salary for those who want to quit jobs and start their own delivery services for Amazon Packages.
Economic recession is another key macro environment indicator that can affect Amazon. For example Chinese economy is slowing these days and this Chinese recession is considered a threat to Amazon business expansion. Chinese market is one of the key markets where Amazon want to penetrate.
Flourishing retail industry creates opportunities but not only for Amazon. It means more competition for Amazon. Like retailer industry retailers are also flourishing their business and create more competition in the market. For example Walmart is increasing its online presence to not only compete with Amazon but also to improve their thin profit margins.
How Social Factors Affect Amazon
Social factors, trends and behaviors can affect the performance of Amazon negatively and positively. Amazon made people lazy, allow them to stay at home and Amazon delivery system will take care of everything like streaming movies, food itmes and groceries. Staying at home and eating junk food affected the health of American adults and children. The government is under immense pressure to take necessity measure to improve the lifestyle of every citizen.
Young generation is enthusiast and crazy for online shopping. The easy internet access and mobile devices increased this ratio. The senior citizens who don’t walk or don’t like to go outside can also use Amazon online shopping facility. Online shopping is becoming a hobby these day. Amazon can capitalize this opportunity to reach more and more people around the globe.
According to SurveyMonkey/Recode Poll, 20 percent Americans believe that Amazon have a positive impact on society as compared to any other Tech company like Google, Apple, Facebook or Microsoft.
How Technological factors Affect Amazon.com
Technology is the backbone of Amazon. Technology made amazon one of the most profitable company in the globe. Amazon is focusing on technology in terms of cloud computing (amazon web service) anvery system to satisfy its customers.
Amazon is looking to use technology to the fullest for the delivery systems. Amazon Prime Air is a new future delivery system to deliver packages to consumers using Unnamed Aerial Vehicles also known as drones. Amazon is working with different regulatory authorities to comply their requirements and design a sound air traffic management system.
Cybercrime is a threat to Amazon. The whole business model is on stacks. Amazon consumers and third party sellers have concerns about their sensitive data like credit card and debit card and any personal / confidential information stored on Amazon website. In this amazon pestle analysis cybercrime is a real threat to Amazon. According to CJ Rosenbaum, A Lawyer who is working for Amazon sellers, said that his several clients informed him that they were hacked and lost their monthly sales.
Technology obsoletes with the passage of time and amazon is facing the same issues which pressurize it to regularly work on technological assets. All the investments in information technology creates a competitive advantage for amazon.
How Environmental Factors Affect Amazon
Amazon Inc. has resisted pressure from investors and other stockholders to disclose information relevant to environmental impact. Recently Amazon.com committed that it will disclose all such information later this year. Another challenge for Amazon is reducing organizational emissions. It is quite complicated to estimate the emission form e-commerce business. Ordering online requires less energy than driving to physical stores and buy or pick up groceries.
Amazon is also looking for half of its shipment emission free by 2030. Amazon has more than 100 million prime members who are eligible for two days delivery. As a result “When customers want to receive a product in one or two days, the carbon emissions increase substantially,” he said. “If you are willing to wait a week, it’s like killing just 20 trees instead of 100 trees.”
How Legal Factors Affect Amazon Inc.
Amazon business operations must comply with different laws and regulation. There are many legal factors that can affect Amazon for example anti-trust laws, discrimination laws, consumer protection laws for ecommerce businesses, data protection laws.
Counterfeit product regulations are necessary and demand of the consumers. This can be considered as an opportunity for amazon to increase its efforts to minimize the counterfeit sales on e-commerce platform. Amazon has already an Anti-counterfeit policy in placed. Every product offered by sellers on amazon platform must be authentic. The sale of such type of products is strictly prohibited.
There are different Consumer Privacy Acts that could create a threat in the macro environment of Amazon. California Consumer Privacy Act 2018 is one of them and will take effect from 2020. Giant Tech Companies like Amazon, Apple and Facebook will be required to inform users what type of data they collect and how they share or use this data.
Another legal factor is EU GDPR (General Data Protection Regulations) affects Amazon and all those companies who collect customer data like name, emails and bank information. All the consumer data must be protected. The European Union launched an investigation and fined Google and Facebook. This is considered a huge threat to Amazon.
