Amazon Inc. is a multinational technology company with the main focus on e-commerce operations, cloud computing, artificial intelligence, and digital streaming. The firm is one of the Big Five companies within the US I.T industry alongside Microsoft, Apple, Google, and Facebook. As of 2021, Amazon is positioned as the leading brand within the online retail industry. As a result, Amazon’s business operations have been a point of interest for several upcoming and existing companies. The SWOT analysis of Amazon company gives a lot of insight into how the company manages to maintain such a high reputation within the commerce industry. With this information, companies can use Amazon’s business strategies to maximize their net profit.
SWOT analysis is a business analysis strategy that outlays internal and external factors that affect business operations within an entity. SWOT, which stands for the Strengths, Weaknesses, Opportunities, and Threats highlights the conditions within which an entity operates and determines the success or the failures of the business. Given this, the SWOT analysis of Amazon Company has often been used as a point of reference for Amazon and other similar businesses within the company. This article explores the Amazon Swot analysis to give more information on how Amazon succeeds in the commerce industry.
What is the SWOT analysis of Amazon?
As the world’s leading online retailer, Amazon Company has managed to gain authority in the e-commerce industry. A SWOT analysis of Amazon Company identifies the strengths and weaknesses (internal strategic factors) and external analysis that highlights the threats and opportunities that are important in the e-commerce business. Amazon SWOT analysis reveals the strategies used by the company to overcome weaknesses and curb potential threats to the business, thereby maximizing profits arising from present opportunities in the global industry. The SWOT analysis of Amazon Company is as follows:
What are the Strengths of Amazon?
Amazon Inc. brags a high success rate in the e-commerce industry due to the company’s effective use of its strengths. In the SWOT analysis of Amazon Company, the company used its strengths to maximize business operations within the market. Generally, Amazon’s strengths are the internal strategic factors that the company uses to maintain or improve business operations within the e-commerce industry. The strengths of Amazon Company include:
- Strong brand image
- Expansive business diversification
- Effective and efficient technological innovation, particularly on online platforms
- Amazon has proven to be customer-oriented
- A global network of distribution
Amazon Strengths Explained
Amazon Inc. is unarguably the strongest brand within the online retail industry. The company has created and maintained a strong brand image that has continuously increased brand recognition and confidence among consumers. The strong brand image created in the past years can be linked to the tremendous growth in business operations. Therefore, analysts can conclude that one of Amazon’s strengths is that it can gain revenue by virtue of a strong brand image.
Amazon has also managed to be the world’s most successful brand in e-commerce due to its business diversification. Originally, Amazon Inc was founded to be an online market for books butt has currently progressed and diversified as a retailer dealing with online retail services, private-label goods, consumer electronics, brick-and-mortar retail services, and information technology services among others. The diversity of business operations in the company has made Amazon one of the formidable competitors in the world. In addition to this, Amazon has intensified their technological innovations and have often strategized to keep up with latest technological trends.
The integration of diversified business operations, aggressive technological innovations, and other products and services have often proven that Amazon is consumer-oriented.
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What are the Weaknesses of Amazon?
In the SWOT analysis of Amazon Company, the weaknesses present the inadequacies or challenges that limit the general growth of the company. Amazon weaknesses outlay the internal strategic factors that bring forth difficulties in improving existing business operations. The weaknesses of Amazon are as follows:
- The business model is imitable
- Limited penetration in developing markets
- The limited presence of physical stores
- The decline in consumer safety
- Over-dependence on external distributors
Amazon Weaknesses Explained
Amazon Company has proven to have a business model that is easily imitable by other firms within the industry. For instance, one firm can decide to establish a website that sells a wide range of products and services. The weakness posed by the easily imitable business model creates a loophole or opportunities for other companies to strategize on more aggressive competition against Amazon.
Amazon’s limited penetration in some areas i.e., developing market has also been an inadequacy on the company as revealed by the SWOT analysis of Amazon. As a result, Amazon fails to benefit from the rapid economic growth witnessed in such markets. Moreover, the lack of a brick-and-mortar presence is considered a weakness of the giant company considering the continuous expansion in the non-online market.
What are the Opportunities of Amazon Company?
Amazon Company is in the face of various opportunities that can improve the company’s general business operations and service quality. In the SWOT analysis of Amazon Company, the opportunities highlight external strategic factors that the company can utilize to enhance business performance and grow bigger within the international e-commerce market. Amazon opportunities include the following:
- Expansive distribution in the developing markets
- Venturing into physical business operations
- Creating new partnerships with new companies, particularly those in the developing countries
- Venturing into backward integration
- Self-driving technology
Amazon Opportunities Explained
Amazon Company has the potential to utilize opportunities that allow penetration into developing markets. A move to penetrate developing markets goes a long way into establishing Amazon’s presence before any other large e-commerce companies manage to takes firm root in the market. This way, the company can maintain and strengthen Amazon’s competitive advantage within the e-commerce industry.
With consideration to the weaknesses discovered in the SWOT analysis of Amazon Company, Amazon has an opportunity to venture into the brick-and-mortar business operations. An in-depth analysis of brick-and-mortar operations reveals that Amazon has the potential to realize more revenue if they add more physical operations to add to the existing Amazon Go Stores. Furthermore, Amazon has the opportunity to create newer partnerships with other companies to expand the market reach within the global e-commerce industry. More strategic partnerships with companies that have a strong corporate citizenship image can increase Amazon’s CSR and stakeholder management efforts.
Amazon Company can also venture into backward integration by strategizing on expansive production of in-house brands in order to improve general profit margins. Moreover, the giant e-commerce company can leverage autonomous technology to meet the increased demand for ride-hailing services.
The opportunities of Amazon company highlight the external factors that Amazon can use to improve market reach and company revenues in the long run. Hence, the opportunities illustrate that Amazon still has a chance to grow even though they already have authority in the existing market.
What are the Threats of Amazon Company?
Amazon Company experiences several threats in different markets and industries. The threats are external strategic factors that limit or reduce the development and performance of a company. In this case, the threats in the SWOT analysis of Amazon Company reveal all factors that reduce the performance of Amazon. In order to improve business operations beyond the threats, Amazon Company has to address the following threats:
- Aggressive Competition from other online and offline retailers
- Increasing cybercrime
- Imitation of Amazon’s business model and products
- Increase of counterfeit and fake products
- Governmental regulations
Amazon’s Threats Explained
In the SWOT analysis of Amazon Company, the biggest threat to Amazon’s business operations is revealed to be the aggressive competition from companies like Walmart, eBay, Costco, and Home Depot, among others. These companies pose competitive pressure that translates to strategic management challenges in the markets for retail, e-commerce, online digital content, and other information technology services.
Cybersecurity and cybercrime are also important factors in the SWOT analysis of Amazon Company. Cybercrime poses a threat to the security, integrity customer confidence in Amazon Inc. The increasing trends in cybercrime are fast becoming one of the technological trends causing adverse effects in the industry. In addition to this, imitation of Amazon’s business model and strategies can potentially reduce Amazon’s market share and brand value. However, Amazon’s 4P or marketing mix helps in curbing the adverse effects of imitation as a threat.
The increase of fake and counterfeit products threatens Amazon’s general profits. For instance, Amazon recently filed a lawsuit against a retailer for the sale of counterfeit Valentino shoes. The New-York based online retailer jeopardized the integrity of Amazon’s Company by selling the luxury Italian brand offered by Amazon. In addition to this, Amazon experiences threats arising from government regulations that limit the company’s operations in some countries. For instance, Amazon does not ship to North Korea, Cuba, Sudan, Syria, and Iran.
Since Amazon‘s revenue streams are diverse, major competitors are categories in the following categories:
- e-commerce (online stores)
- subscription services
- Web services
Amazon’s competitors in online stores include Alibaba, Walmart, Target, Costco, and Best Buy. For subscription services, Amazon faces rivalry from Apple, Netflix, and Google. In addition to this, Amazon faces competition from companies in the web service category like IBM, Microsoft, and Oracle.
What is the USP for Amazon?
USP is an acronym for Unique Selling Proposition and refers to the aspect of a business’s products or services that differentiate it from other companies. Amazon’s USP has identified a company that sells the widest range of books online. Having been formerly founded as an online seller, Amazon has diversified into an online retailer with the widest range of books.
The SWOT analysis of Amazon Company reveals that Amazon has the potential to expand its business operations through its strengths and opportunities. For instance, the company can expand by venturing into new e-commerce markets, especially in developing economies. In addition to this, the company can strategize on minimizing the effects of its weaknesses and threats in order to ensure continuity of the strong brand image.