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SWOT ANALYSIS

OF
ABOUT
AMAZON
ABOUT
Amazon, the leading e-commerce brand of the world, led
by Jeff Bezos was first incorporated in Washington in
1994 and again in Delaware in 1996. For the first time, its
website was launched in 1995. The brand has continued to
see very fast growth and has come a long way since its
inception. Apart from being a global e-commerce brand,
Jeff Bezos Amazon is also a leading cloud player and is growing its
strengths in the cloud industry.
(S)trength
E-Commerce
Leader
Significant Cloud Player
Customer Base
And Loyalty
Amazon has maintained a very large customer
base of loyal customers. Prime is driving the
addition and retention of customers. Prime video
is major source of new memberships for Amazon.
Other reasons behind the high level of customer
loyalty include customer experience, quality of
customer service and products as well as
investment in technology.
Global Presence
Amazon is a global brand with sellers and
buyers from around the globe. There are
sellers from every state in United States
and 130 different countries listed on
Amazon selling their products to a global
audience.
Large range
of product
Amazon sells a very large range of products through
its website. The website sells hundreds of millions of
unique products. In several categories including
fashion and music Amazon has become the most
favourite destination for the shoppers. The product
range has continued to grow based on the
increasing number of third party sellers from all over
the world.
Strong Financials
Another major strength of the brand is its financial
performance. In the recent years, its sales have
grown very fast. Even if the operating margins are
weak, the brand acquires very large sales resulting
in high income. Sales grew by more than 40 Billion
dollars in 2017 as compared to 2016. Its 2017 net
sales touched 177.9 Billion as compared to 136
Billion last year. Net income in the same period grew
from 2371 million to 3033 million.
Focus on innovation
Amazon has maintained a strong focus on innovation so as to
provide its consumers with the best experience. Apart from
providing them with a great shopping experience online the
brand also invests in AI and other areas in modern technologies
so as to retain its competitive advantage. Technology is a major
source of competitive advantage for an e-commerce brand in
the modern era. However, apart from managing a great
website, it is also important to provide the customers with a
unique experience. However, not just e-commerce but Amazon
also invests in innovation in the cloud business. Its total R&D
expenditure for the year 2017 amounted to 22.6 Billion USD
which was more than 6.5 Billions higher than the same in the
previous year. In this way, it has continued to raise its
investment in R&D every year.
(W)eakness
Weak Operating
Margins
Operating margins of Amazon have remained weak
traditionally. Apart from a small rise in the last two
quarters they had remained below 3% since the middle of
2016. In last quarter of 2017, operating margins rose to
3.5% and then in the first quarter of 2018 to 3.8%.
Compare it with Facebook’s 45% and that is quite major
difference.
Product Failures
In past, some of the products
made by Amazon did not
achieve the kind of success they
were expected to.
(O)pportunities
Diversification provides
unique opportunities of
growth for Amazon. Apart
from e-commerce, it is
operating in cloud industry.
The brand can diversify into
new and related
technological areas that can
afford it faster growth.
Forward
Integration
Forward integration can also be a
method to achieve higher growth rate.
Apart from developing its own
logistics and distribution network, the
brand can open physical stores as it
opened fulfilment centers to grow
faster and to get closer to the
customers.
Acquiring New
Businesses
Acquisition of new businesses also offers
some faster opportunities of growth.
Recently Amazon acquired Whole Foods
market and another company named Ring
that operates in the are of Home Security.
Amazon can similarly expand into new
areas of business that can help it grow its
business and the brand faster.
Releasing New
Product
Releasing new products like its Alexa can
help the brand achieve faster growth.
However, due to intense competition from
the likes of Google, the brand would like to
remain careful about what products it is
trying to build. Product failures often result
in losses.
(T)hreats
Heavy Competition
Competition both in Cloud services and e-retail is a major
threat for the brand and it has kept intensifying. Apart from
eBay and Flipkart, Alibaba is also adding to the intensity of
competition. Moreover, there is competition from the
physical retail brands that is also causing higher pressure
on Amazon. Walmart’s entry into e-retail has intensified
the threat. In cloud industry, there is solid competition from
Microsoft, Oracle, Salesforce and other leading cloud
services brands.
Regulatory Threats
Legal and regulatory pressures are also
creating major trouble for the big
technology brands including Amazon.
Especially it is the EU where the
environment has kept changing fast and
where top technology brands have faced
the biggest challenges including large fines.
In 2017, Amazon was hit by a fine of 250
million Euros in back taxes.
Stronger Dollar
A stronger dollar worldwide has also kept
affecting the profits of major international
and technological brands including
Amazon. Changes in foreign currency
exchange rates can also have a potential
negative impact on the profits of big
businesses like Amazon.
Dependence on American
Markets
For a large part of its business, Amazon still
depends on the American markets. Its North
America net sales in E-commerce were close to
double the net sales of the brand internationally. In
2017, its net sales in North America reached 106
Billion dollars whereas that from the international
sales was 54.3 Billion dollars. Amazon must focus
on expanding its international business to reduce its
dependence on the American markets.