PESTLE and SWOT analysis of Amazon Inc UK 2016-2017
Jonathan. K. Kush (2017) "PESTLE and SWOT analysis of Amazon Inc UK 2016-2017" 123 Writing [Online] at https://www.123writing.com/free-sample/pestle-and-swot-analysis-of-amazon-inc-uk-2016-2017
The objective of any business organisation is not only to make as much profit as it can, but also for as long as it can. As such, no business organisation is intended to be ad hoc; all are intended to operate as a going concern. To this end, strategies, tactics, and practices are adopted by business organisations to ensure their survival, continuity and longevity, which can only be achieved if a business organisation is profitable.
Be that as it may, the survival, continuity, and longevity of an organisation are not fiat accompli, but consequences of forces and dynamics both within and without the organisation. The forces and dynamics can make or break the organisation, and must be constantly and vigilantly monitored, and the organisation’s strategies, tactics and practices, modified accordingly to ensure its survival, continuity and longevity.
Overtime, approaches and tools have been devised to assist organisational strategists and managers in monitoring forces and dynamics that may potentially be existential threats to their organisations, and to design strategies to surmount them. SWOT, which is an acronym for Strengths, Weaknesses, Opportunities, Threats; and PESTLE, an acronym for Political, Economic, Social, Technological, Legal, and Environmental [forces]—are two of the frameworks that allow strategists and planners to monitor the forces and dynamics that may make or break the survival, continuity and longevity of an organisation.
Using PESTLE, SWOT, Samsung’s BCG matrix and Porters Five Forces framework, the report will examine how Amazon Inc. UK can take advantage of its core strengths in digital innovation, and seize on opportunities in the current global market created by a competitive retailing environment as well as faltering rivals to benefit.
2.0 Amazon Inc. UK SWOT analysis 2017 (Strengths and weaknesses)
Amazon is the world’s biggest online retail store in terms of profitability, having dispossessed the number one spot from Walmart in 2015 (Li, 2015). Amazon’s subsidiary in the UK was ranked the top retailer by paid search ad clicks, in the country in 2016 (emarketer, 2017). The success of Amazon is not a product of an accident, which means that the business organisation has taken deliberate efforts to leverage the internal strengths and environmental opportunities, and mitigate the effects of internal weaknesses and environmental threats.
Whereas there may be some variations in the strengths of Amazon across all branches, such are minimal, even negligible because the business philosophy, which guides strategies, tactics, and operations is the same. In effect, it is sound, first of all to state that one of the strengths that propelled Amazon to be top of the retail stores pack in the UK in 2016, is vision and leadership of the organisation’s founder and Chief Executive Officer, Jeff Bezos. The CEO’s leadership skills and experience are not in doubt, and if leadership means anything for an organisation’s success or failure, Amazon’s success can be attributed, in part, to the leadership of its CEO, who was in 2014 ranked number among best performing CEOs in the world by the Harvard Business Review (Ignatius, 2014). Amazon’s CEO is admired for his ability to solve business problems creatively, an aptitude that makes him an asset and a strength to the organisation (Dudovskiy, 2016).
Secondly, the business organisation boasts a competitive edge over its competition because of its efficient cost structure, which allows the organisation to offer competitive prices, attract and maintain a big clientele base, and to generate massive revenue. Further, its cost structure allows it, in some instances, to realise profits without incurring costs; that is, companies sell their products through its website, from which Amazon also earns. Because Amazon sells products online which enables it to significantly trim the cost of operating numerous stores, the organisation has been justly described as “a brutal competitor for brick and mortar merchants due to their large and growing cost advantages and a maniacal commitment to having the lowest prices anywhere (Jordan, 2013) .
Last but not least, Amazon enjoys huge brand recognition, and has a wide product range, which gives its clients the freedom of choice and a satisfying customer experience.
Among the weaknesses, Amazon UK like Amazon Inc., focuses on the customer, which leads the organisation to charge low prices, the ill effect of which is that it runs on a thinning profit margin. Whereas, substantial profit may be generated with a large sales volume, a thin profit margin is not good for the business organisation, since it makes it vulnerable to external shocks and crises, and other changes in the marketplace (Dudovskiy, 2016). For instance, with low profit margins, which affect liquidity and cash reserves, Amazon may find itself unable to sustain the business if changes in the external environment (political, economic, social, technological, legal, or environmental) incentivises low demand for its goods and services (Dudovskiy, 2016).
Amazon UK experienced and continues to experience bad press regarding the accusation that the organisation avoids paying taxes, which raises ethical questions and dents its reputation and goodwill. In 2016, the Mirror reported that together with Facebook, Google, eBay, and apple, Amazon engaged in tax avoidance that amounted to a staggering one billion UK Pounds (Sommerlad 2016)
3.0 Amazon Inc. UK PESTLE analysis 2016-2017 (Opportunities and threats)
PESTLE is used in strategy to analyse the macro environment and identify how future trends in the political, economic, social, technological, environmental and legal environments might impact individual organisations within an industry. Firms then study the key drivers of change behind the PESTEL factors. This is only a starting point as often, other frameworks such as Porters Five Forces and SWOT will also be used in conjunction to help Samsung utilise internal core competencies so as to take advantage of opportunities while neutralising threats.
3.1 Political factors
3.1.1 The Brexit effect on Amazon
Perhaps the biggest political threat Amazon UK faces and continues to face is the consequential impact of Brexit, a move predicted to cause both political and economic upheaval and uncertainty for the UK economy if it were to happen, at least in the short term (Douglas and Gross 2016). The implications to leave the EU are many, not least the fact that it is already creating Brexit inflation as prices continue to escalate, in part due to a weakening pound against the dollar and Euro, a situation that will only get worse if Britain does leave the EU before 2020 (Davies 2017; Mintel 2016).
3.2 Economic factors
Despite Brexit, Amazon has stated its expanding its UK workforce by 5,000 taking its total UK workforce to more than 24,000 (Cox 2017). Nevertheless, many experts believe post-Brexit will affect Amazon. Firstly, there's a high chance that future hiring could become more difficult. This is because Amazon tends to rely on low wages, often immigrant workers to staff its fulfilment centres — those jobs start at £7.35 an hour — workers who may suddenly find it harder to work in the UK (Taylor 2016).
Secondly, the biggest threat from a Brexit will be in terms of taxation and effect on sellers. Depending on what type of economic treaties the UK government negotiates with the EU, its highly likely Brexit will lead to additional taxes for EU Amazon customers whose orders must be sold by Fulfilment By Amazon (FBA) centres in the UK. The best outcome would obviously be business as usual but with much remaining to negotiate over and the possibility of Britain being an example of, fears of a negative impact are not baseless (Johnson 2016).
3.3 Social factors
The social aspect of the PESTLE framework deals with the sociocultural changes and how they may either positively or negatively affect an organisation. According to Mintel (2016), there is a behavioural shift in the way customers are using smartphones. The rise of phablets (smartphones bigger than 5 inches) has meant that phablet owners were more inclined to use their phones to perform more complex or time-consuming tasks, such as online shopping, which presents opportunities for online retailers such as Amazon.
3.4 Technological factors
Technology is no doubt a big driver of business success. It presents many advantages that swirl around efficiency and effectiveness. Nonetheless, technology can also be a threat to businesses. Data breaches and hacking that compromise the sensitive information of an organization and its clients, and that lead to fraud, are common. According to the British Retail Consortium, fraud and cybercrime against retailers rose 55 per cent (Megaw, et al., 2016). “The majority of retailers were victims of some form of cyber-attack in 2014/15” (Megaw, et al., 2016). This staggering cyber insecurity is a threat to Amazon like all online retailers.
The complexities of digital business and the algorithmic economy, combined with an emerging "hacker industry," significantly increase the threat surface for Amazon. The company must thus focus on detecting and responding to ever evolving digital threats, as well as more traditional blocking and other measures to prevent attacks(Forbes 2016).
3.5 Environmental factors
Environmental issues have become global due to the ill effects of climate change that have been scientifically determined to be consequences of human activity. There is a global drive to preserve the environment, or at least not to destroy it further. As such, Amazon has been a target for instance, while it agreed to pay corporation tax on UK sales, Ethical Consumer magazine decided to boycott it, denouncing “cheaper shopping at the expense of our public services” after the tax avoidance row(Mazzini 2016).
3.6 Legal factors
A legal environment either impedes or it facilitates business survival. While Amazon isn’t facing any legal challenges at the moment, like Google and Starbucks, it has had a somewhat fraught relationship with HMRC. In 2014, for example, the company paid just £11.9m in UK taxes, and though it agreed to pay corporation tax on UK sales in May 2015, it was after public pressure and lots of media shaming (Mazzini 2016)
4.0 Amazon Inc. Five Forces Analysis
Available upon request
5.0 Amazon Inc. BCG MATRIX
Available upon request
Cox, Josie (2017) “Brexit fails to deter Amazon as it announces plans to expand UK workforce by 5,000” The Independent, available [Electronic] at: http://www.independent.co.uk/news/business/news/brexit-amazon-uk-workforce-expansion-a7585276.html [Accessed 02 May 2017]
Forbes (2016) “Top 10 Technology Trends for 2016” available [Electronic] at: https://www.forbes.com/sites/gartnergroup/2016/01/15/top-10-technology-trends-for-2016/2/#2b6fe9c12b07 [Accessed 02 May 2017]
Johnson, Tara (2016) “The impact of Brexit on Amazon sellers” available [Electronic] at: http://www.cpcstrategy.com/blog/2016/06/brexit-amazon-sellers/ [Accessed 02 April 2017]
Mazzini, Anna (2016) “How do I … avoid using Amazon?” The Guardian, available [Electronic] at: https://www.theguardian.com/uk-news/2016/mar/04/how-do-i-avoid-using-amazon#img-1[Accessed 02 April 2017]
Mintel (2016) “Digital Trends Autumn – UK, September 2016” Mintel Market Intelligence; London
Taylor Harris (2016) “Brexit will complicate Amazon's UK expansion plans” CNBC, available [Electronic] at: http://www.cnbc.com/2016/06/24/brexit-will-complicate-amazons-uk-expansion-plans.html [Accessed 02 May 2017]
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