Internal and External Environment of Amazon - Research Paper Example

What are the marketing strategies of Amazon? Challenges and Contingency Plan Amazon can be considered as one of the leading web retailers and e-commerce organisations headquartered in Washington. This part of the research paper will analyse internal and external environment of Amazon. Moreover, the study will find out internal and external risks for the organisation based on the above mentioned analysis. Finally, the study will offer contingency plans, recommendations and action plans in order to mitigate those internal and external risk factors. Internal Environment Analysis (SWOT Analysis) SWOT analysis can be considered as one of the leading and important strategic marketing tool that will help to analyse Amazon’s internal strengths, weaknesses and external opportunities, threats. Strengths High brand recognition and high brand image are the major strengths of the organisation. Effective implementation of cost leadership strategy helped to increase its business revenue. Strong product and service diversification helped to become one of the leading brands. Constant business evaluation and effective customer service management process helped Amazon to gain huge customer loyalty. Weaknesses Inadequate distribution and supply chain is the major weakness of Amazon. Too much price reduction can affect brand image and brand recognition. Free order delivery and zero shipping charges on certain products is increasing business operation cost of Amazon. High supply chain lead time and inadequate inventory control may affect the effectiveness of business operation process. Opportunities Strong international business expansion can help to increase its global market share. New product and service differentiation may increase customer preferences. Increase in number of pre-ordering products may enhance customer loyalty aspect. Integration of several differentiated and popular web-sources may increase its brand awareness among global target customers. Threats Intense market competition and high market saturation are major threats. Recent economic crunch and financial crisis affected economic status of common people. Growing political tensions in global market and strict legal policies can create difficulty in business operation of Amazon. External Environment Analysis (PESTLE Analysis) PESTLE analysis can be considered as one of the significant strategic analytical tool that will help to determine the impact of external environmental factors on the business performance of e-commerce organisations including Amazon. Political Political environment is slightly unfavourable for Amazon as several political parties in several countries opposing FDI due to several political interests. These oppositions may affect the global business expansion strategy of Amazon. Economic Economic environment is unfavourable for Amazon. Recent financial crisis and global economic recession affected the economic condition of common people. Low disposable income and limited purchasing power are the major consequences of this economic crunch. People trying to save more rather than consumption. This may affect the business performance of Amazon. Social Social environment is favourable for Amazon. People are trying to consume products through internet and web-sources due to increase in the number of internet and social media users. This favourable socio-cultural aspect can help the organisation to maintain its business growth. Technological Technological environment is favourable for Amazon. The business operation of Amazon requires effective support of advanced technological applications and web sources. Recent technological revolution is helping Amazon to enhance effective business operation activities. Legal Legal environment is slightly unfavourable for Amazon. It is a multinational organisation. Therefore, the organisation has to follow different legal policies in different countries. Sometime, it affects the communication process among the employees and employers within the organisation in different market places. Environmental Government of each and every country is developing environmental sustainability policy in order to reduce the level of carbon foot print and carbon emission. The management and officials of Amazon are trying to follow the policy by integrating sustainable business approaches in business operation process. Government is supporting the initiatives that have been taken by the organisation in its distribution activities in order to maintain environmental sustainability. However, looking into the above aspects it can be stated environmental aspects are favourable for Amazon. Internal Risks It is clear from above SWOT analysis that Amazon has some internal issues that may affect the business performance of the organisation in near future. This part of the study will mention about those three internal risks that may affect the business performance of Amazon in near future. Aggressive Cost leadership strategy It has been already mentioned that the management of Amazon has adopted and implemented cost-leadership strategy in business operation process in order to reduce the prices of products and services by reducing business operation cost (Shin, 2014). Slowly and gradually, the management of the organisation went on further price reduction of products and services in order to maintain its market competitive advantage over its competitors. Zero shipping charges in certain cases, huge discounts and too much price reduction can affect the business performance of organisation. It is true that e-commerce industry is becoming highly competitive. If the organisation only sticks with this price reduction strategy, then the organisation may lose its market share and customers to its competitors in near future. Therefore, it is highly important for the organisation to focus on other strategies to enhance market competitiveness. . High supply-chain lead time High supply chain lead time also can be considered as one of the internal risk factors that may affect the business performance of the organisation. It is true that, the number of order placing has increased in last few years due to the free delivery of goods option (Chopra, 2004). Therefore, it is highly important for the management of the organisation to reduce the supply chain lead time. Inadequate inventory control and lack of sufficient numbers of supply-chain executives affect the order delivery activities. Therefore, this aspect is affecting the brand image and customer satisfaction aspect. Inadequate distribution It is true that Amazon is one of the leading web retailers in this globe. The management of the organisation is facing issues in distribution and logistics activities due to centralised distribution management process. Therefore, communication between the employees and executives are becoming inadequate due to this centralised approach. This aspect may hamper the efficiency of distribution process in near future. External Risks Intense market competition, and recent financial crisis and economic crunch are the major external risks for Amazon that may affect the business performance of the organisation in near future. Market Competition Intense market competition and high market saturation are affecting the business performance of the organisation. The global e-commerce industry is becoming highly competitive due to existence of several competitive organisations. These organisations are constantly implementing unique strategies in business operation processes. Therefore, this is becoming a serious risk factor for Amazon. Global Economic Recession Recent global recession and financial crisis affected the disposable income and purchasing power of people. Therefore, people have limited their consumption activities. This aspect has affected the sales growth rate of the organisation. It may affect the financial health of the organisation in near future if the organisation failed to develop differentiated strategy. How Risks will be avoided First of all, it is highly important for the organisation to integrate decentralisation in the logistics and supply-chain activity. It will help the management of Amazon to reduce the supply chain lead time (Lee, 2004). Therefore, the organisation can deliver goods to the customers within mentioned deadline. Secondly, it is highly important for the organisation to integrate differentiation business level strategy in business process. It will help the management of the organisation to differentiate its service providing aspect. Moreover, the organisation can offer range of products to the target customers through this strategy (Adin, 2004). It will help the organisation to mitigate the risk of intense market competition and high market saturation. Last but not the least; it is highly important for the management of Amazon to install online customer feedback application on its web page. It will help the organisation to focus on the good as well as inadequate aspects of its business operation process. This strategy will help the organisation to focus on the good aspects for further improvement. On the other hand, it will also help the organisation to focus on inadequate aspects to develop effective future strategies. Actions during Risks It is important for the management of Amazon to focus on collaborative workplace performance and internet innovations. The organisation should focus on advanced technological resources in order to enhance competitive advantages. Effective organisational culture and friendly workplace environment are important for the organisations during these risks. Effective stakeholder engagement approach will help the management of the organisation to develop effective and significant strategies during this period of time. First of all, it is important for the organisation to continue with its cost-leadership approach in order to maintain its competitiveness (Stoian, 2000). Then the management of the organisation should focus on effective customer service management process during risks. Customers are real king for any business. Therefore, it is important to develop effective CRM approaches in order to enhance customer satisfaction during risks. Only these mentioned approaches will help the management of Amazon to maintain its leading position and competitiveness in the global e-commerce industry. References Adin, A. (2004). “Differentiation in competitive business environment”. Harvard business review, 8(1), 38. Chopra, A. (2004). “Supply Chain Break Down”. MIT Sloan management review, 12(1), 3. Lee, H. (2004). “The triple-A Supply Chain”. Harvard business review, 3(2), 7. Shin, N. (2014). Strategies for competitive advantage in electronic commerce. Retrieved from: < http://www.csulb.edu/journals/jecr/issues/20014/paper4.pdf>. Stoian, D. (2000). “Porter’s Generic Strategy”. International business review, 5(2), 7. Read More