SWOT Analysis

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SWOT Analysis

Amazon is one of the largest online global retailing websites. It was founded by Jeff Bezos in 1994 and made its first book sale in 1995. It became publicly traded in 199and listed in the NASDAQ Global Select Market. It grew from an online bookstore to become the largest global retailer. It expanded its products offering from books to other goods and made several acquisitions, partnerships and alliances. Its objective has been to achieve long-term sustainability and growth while making profits for the shareholders. Today, it has made its presence in many countries, which allows it to fulfill orders in more than 200 countries worldwide. Currently, it sells a wide variety of products to its customers, as well as online services through its subsidiaries.

Despite being the biggest online retailer, it is faced by same challenges and opportunities as any other online company. However, it has strengths that can enable it to continue leading the market. This can be highlighted by its SWOT analysis.

Strengths

• Cost Leadership Strategy
  • In this strategy, a company aims at producing its goods and services at a lower cost compared to the competitors. The main way of achieving this leadership is using economies of scale that come with size. In order for Amazon to succeed through cost leadership, it has gone ahead to offer a wide range of products. It benefits from displaying all them on its online market at a low price compared to having physical displays. The online display can be viewed from any region on earth (amazon.com 2014). Without physical display and store, the company is able to reduce costs associated with inventories and maintenance of retail shops, thereby availing products at a cheaper price.
• Economies of Scope
  • Economies of scope occur when a company is able to produce more than one good or service at a less cost than when producing individual ones while utilizing the same resources. Amazon is able to achieve economies of scale by offering many products through its IT skills online. This means it uses the same space to offer a wide variety of products at the same time, as opposed to each product in its own website (amazon.com 2014).
• Superior Website
  • Amazon was able to create its website in a way that offers consumers effective online shopping. The feature of Amazon’s website appeal comes from its accurate searches, selection, and prices, and speed, ease of use, timely consumer response and reliable services (amazon.com 2014). People have identified with it, which makes it easy for them to use.
• Diversified Products
  • Despite starting as an online bookstore, Amazon has grown into a company offering the widest range of products. In 2010, 43% of the company’s sales came from other products apart from books, such as DVDs, music, magazine subscription, video games and digital downloads (Hoffman 4).
• Efficient Distributions and Logistics
  • In order to serve all the customers worldwide, Amazon has developed an efficient logistics method. It has dispatch warehouses in most of the regions it sells goods. These warehouses are used for dispatching the goods to consumer addresses.
• Strategic Acquisition and Partnerships
  • Finally, the other strength is partnerships and strategic acquisitions. Through acquiring new firm, Amazon has been able to bring in new products to its offering. In addition, collaborating with manufacturers and other suppliers has enhanced its supply chain.

Weaknesses

• No Physical Presence
  • Lack of physical presence means that consumers who prefer goods on demand or immediate delivery are not served. Although Amazon has dispatch warehouses, it does not have physical display retail shops, which means a consumer has to wait for the product to be delivered after purchasing. In addition, it does not offer support for technical products such as the Kindle to those who are not familiar with it.
• Negative Publicity
  • Recently after taxation was introduced for online companies, Amazon has faced several lawsuits. It has been accused of tax avoidance, which is ruining its reputation.
• Zero Margin Sales
  • Amazon has sought to increase its market share in all ways possible. One of its strategies has been to sell at a zero margin, sales without making profits in order to gain market share. An example is the Kindle Fire, which it sold for $199, which was $300 less than the Apple iPad. Its aim was to gain market share (Hoffman 10).

Opportunities

• Establishing physical Presence
  • One of its biggest opportunities is establishing a physical presence to serve clients who want products on demand or instantly. In addition, this will allow consumers to have a physical feel of the products before buying, which adds to their confidence, as opposed to purchasing online. Considering the company is trusted and widely known, a physical presence will be welcome by consumers around the world. By availing the products in physical stores, it will attract more consumers.
• Adding More Online Stores to Other countries
  • Although it has achieved global recognition, it does not have online stores in most of the countries that buy its products. Increasing the online stores would allow more visibility to the specific region, hence reaching more consumers. This will sustain the growth especially if it opens them in the developing Asian markets such as India and China.
• Online Payment Methods
  • The other opportunity comes from increasing online payment methods. Considering that many of its consumers are mobile buyers, providing a payment method that does not require one to provide bank details would be crucial. For instance, a PayPal card can allow a consumer to buy goods from anywhere in the world.
• Releasing more Own Brands
  • Majority of the products offered by Amazon are produced by other companies. If Amazon could offer more products of its own brand considering it has a very large market, it would take advantage of it popularity across the world to introduce its own products.

Threats

• Taxation
  • For a long time, online businesses have not been required to pay taxes. However, 2012 saw a change where they are required to pay corporate taxes as other firms do. This leaves the company in a risky position considering it offers products at a cheaper price. This would potentially decrease its sales considering it would have to increase its retail prices. This also creates an administrative burden (Hoffman 10).
• Online Security
  • Online security has been a major problem for online companies trying to protect their data and crucial information. Amazon has faced breaches of security from third parties who tried to gain access to its website’s crucial data. Although mason has put in place systems to prevent this, it faces constant threats as in case of any failures. Amazon is targeted by online thieves because of customer bank information that could help in gaining access to a lot of money.
• Strategic Alliances of other Competitors
  • Competitors are also forming strategic alliances that could stiffen the competition. One example of a strategic alliance posing a huge threat is Apple and e-books. This alliance required Amazon to sell its books at a higher price or the company, e-books, would give the rights to Apple.
• Sale of Media Products in Digital Formats
  • Today, more and more media products are offered in digital form, meaning that consumers do not require buying them from retailers. Instead, the can log on to a company’s website and purchase the product. Through such sales, Amazon’s physical dispatch warehouses are no longer competitive since clients do not need the delivery of digital products. This leaves Amazon at a risky point of losing clients.

Work Cited:

Amazon.com. Introducing Amazon Fire TV. amazon.com, 2014. Web. April 7, 2014.

Hoffman Alan, N. Retailing Giant to High-Tech Player? Amazon.com, Inc. n.d. PDF files.