Amazon.com Inc. SWOT Analysis & Recommendations

Amazon.com Inc. SWOT analysis, strengths, weaknesses, opportunities, threats, internal, external factors, e-commerce business management case study
An Amazon Kindle. A SWOT analysis of Amazon.com Inc. shows that the business has the potential to continue its e-commerce leadership in the long-term. (Photo: Public Domain)

Amazon.com Inc.’s position as a leading firm in the online retail industry indicates success in addressing the issues shown in this SWOT analysis of the business. The SWOT Analysis model involves an internal analysis that identifies the strengths and weaknesses (internal strategic factors), and an external analysis that identifies the threats and opportunities (external strategic factors) relevant to the e-commerce business. This SWOT analysis of Amazon shows the strengths that the company uses to overcome its weaknesses and counter the threats to its business, to maximize the benefits from exploiting opportunities in the global market. The industry situation involves diverse factors, considering the global scope of the e-commerce company’s operations. To ensure long-term competitive advantage, Amazon continues to address the concerns shown in this SWOT Analysis. The company’s strategic management efforts respond to the development of the markets for retail, consumer products, consumer electronics, and Internet-based services. Amazon.com Inc.’s generic strategy for competitive advantage and intensive strategies for growth are partly based on the internal and external factors shown in this SWOT analysis.

This SWOT analysis of Amazon points to the need to ensure a strong brand image, along with other strengths appropriate to the online market. The company needs to continue building its strengths, considering the rapid development of technologies. These strengths should combat the effects of the strong competition shown in the Porter’s Five Forces analysis of Amazon.com Inc. The e-commerce company must maintain strategic coherence to address the challenges assessed in this SWOT analysis.

Amazon’s Strengths (Internal Strategic Factors)

Amazon.com Inc.’s e-commerce success relies on the effective use of business strengths. In the SWOT Analysis framework, this aspect enumerates the internal strategic factors that the company uses to maintain and improve its operations in the online retail, technology products, and online services markets. The following strengths support the success and continuous growth of Amazon:

  1. Strong brand
  2. Moderate and expanding business diversification
  3. High capability for rapid technological innovation, especially in online services

Amazon.com Inc. has the strongest brand in the online retail market. This strength is partly responsible for the rapid growth of the business, especially in its early years, considering brand recognition and confidence among consumers. Moderate business diversification is also among the strengths in this SWOT analysis of Amazon. For instance, the company now operates as a provider of consumer electronics, online retail services, brick-and-mortar (non-online) retail services, private-label goods, and information technology services, including cloud-computing services, among others. These diversified operations are complementary and make Amazon.com Inc. a formidable competitor. Moreover, the high capability for rapid technological innovation strengthens the business in terms of the ability to respond to trends, at least technologically. Such internal factors in this aspect of the SWOT analysis enable business development toward the fulfillment of Amazon’s corporate mission and vision statements.

Amazon’s Weaknesses (Internal Strategic Factors)

Amazon’s weaknesses present challenges that limit its business growth and expansion. This aspect of the SWOT Analysis model outlines the internal strategic factors that impose difficulties in growing or improving the business. In this case of Amazon, the following weaknesses are most significant:

  1. Imitable business model
  2. Limited penetration in developing markets
  3. Limited brick-and-mortar presence

Amazon.com Inc. has a business model that is easy to imitate. For example, other companies can establish e-commerce websites that sell just about anything. In the SWOT analysis framework, this internal factor is a weakness that creates opportunities for other firms to impose greater competition against the e-commerce giant. Amazon’s limited penetration in developing markets is also a weakness that prevents the business from benefitting from the high economic growth rates of these markets. On the other hand, the company’s limited brick-and-mortar presence is a barrier to rapidly expanding in the non-online market. Nonetheless, considering its acquisition of Whole Foods Market, Amazon is on track to grow its non-online operations. Overall, the internal factors in this aspect of the SWOT analysis impose challenges on the company, especially in terms of growth in current and new e-commerce markets. Addressing these challenges may involve changes in Amazon’s organizational structure and design, as well as corresponding adjustments in strategic planning and management.

Opportunities for Amazon.com Inc. (External Strategic Factors)

There are various opportunities to improve Amazon’s business performance and service quality. In the SWOT Analysis model, this aspect identifies the external factors that the company can use to enhance its business, such as through growth in the international e-commerce market. In this case, Amazon has the following opportunities:

  1. Expansion in developing markets
  2. Expansion of brick-and-mortar business operations
  3. New partnerships with other firms, especially in developing markets

Amazon has the opportunity to penetrate developing markets. This move should establish the company’s presence before other large e-commerce firms take root, thereby giving the advantage of a stronger competitive edge. In relation to the weaknesses considered in this SWOT analysis of Amazon.com Inc., there is an opportunity to expand the company’s brick-and-mortar operations. This external factor refers to the potential revenue increase that comes with establishing a stronger presence through more brick-and-mortar stores, in addition to existing Amazon Go stores. Furthermore, the opportunity to develop new partnerships with other firms is an external strategic factor that the company can exploit to expand its reach in the global e-commerce industry. Also, partnerships with businesses that have a strong corporate citizenship image can improve the effects of Amazon’s corporate social responsibility strategy and stakeholder management efforts. The company can use these external factors to improve market reach and revenues. Thus, this aspect of the SWOT analysis illustrates that Amazon can continue growing despite increasing market saturation.

Threats Facing Amazon (External Strategic Factors)

Amazon experiences various threats corresponding to its operations in different industries and markets. External factors that reduce or limit business development and performance, such as in e-commerce operations, are considered in this aspect of the SWOT Analysis model. Amazon.com Inc. must address the following threats in its industry environment:

  1. Aggressive competition with online and non-online firms
  2. Cybercrime
  3. Imitation of business model and products

Competition remains one of the strongest threats against Amazon.com Inc., with regard to competition against firms like Walmart, Home Depot, Costco Wholesale, eBay, Apple, Google, Microsoft, and Netflix, among others. This competitive pressure represents the strategic management challenges in the markets for consumer electronics, retail, e-commerce, online digital content distribution, cloud-based services, and other information technology services. Cybercrime is also pertinent to this SWOT analysis of Amazon.com Inc. Cybercriminals threaten the security and integrity of the business, as well as customer confidence in the company. The PESTEL/PESTLE analysis of Amazon.com Inc. identifies this threat as one of the technological trends affecting the industry. Another threat is imitation, which is an external factor that could reduce the e-commerce company’s market share and brand value. Amazon’s marketing mix or 4P helps address the adverse effects of this threat. Overall, the external strategic factors presented in this aspect of the SWOT analysis point to the need to develop stronger measures to strategically overcome the threats in the e-commerce, retail, consumer electronics, consumer goods, and information technology services industry environments.

Recommendations – SWOT Analysis of Amazon.com Inc.

This SWOT analysis shows that Amazon’s operations can continue expanding, based on the opportunities in the business environment, as well as the company’s strengths. For example, the corporation can grow through expansion into new e-commerce markets, especially in high-growth developing economies. However, the weaknesses and threats identified in this SWOT analysis require Amazon to consider revising some of its strategies. Still, the business remains strong and one of the biggest technology firms in the global market. To address the external and internal factors in this SWOT analysis, it is recommended that Amazon.com Inc. continue diversifying its business to further strengthen itself against industry-specific risks. Another recommendation is to develop new partnerships to extend market reach and reinforce Amazon’s multinational operations against competition and related strategic challenges.

References