Amazon SWOT Analysis

SWOT is an acronym for strengths, weaknesses, opportunities and threats related to organizations. You can learn the theory of SWOT analysis here. The following table illustrates Amazon SWOT analysis

Strengths

1.      Strong presence in developing countries

2.      Experience of extensive utilization of the first mover advantage

3.      Efficient and charismatic leadership by founder Jeff Bezos

4.      Efficient cost structure

Weaknesses

1.      Seasonality of the business

2.      Low profit margins

3.      Lack of focus on product or service categories

4.      Damage to the brand image due to tax avoidance scandal in the UK

Opportunities

1.      Diversification of e-commerce business segment

2.      Increasing focus on own brand products and services

3.      Increasing physical presence of the brand

4.      Engagement in strategic collaborations with companies in e-commerce and affiliated industries

Threats

1.      Patent infringement and other lawsuits against the company

2.      Weakening of industry entry barriers

3.      Threats to online security

4.      The loss of market share post Jeff Bezos period

 

Amazon SWOT analysis

Strengths

1. Amazon has a solid presence in many emerging economies. The company has entered China more than a decade ago in 2014 and the markets of Brazil and India were entered in 2012 and 2013 respectively.[1]in currently offers more choice than any other e-commerce site in India – with more than 20 million products offered from more than 21,000 sellers.[2] Strong presence in emerging economies is an advantage that can make an immense contribution to long-term growth prospects of the company.

2. Amazon has benefited from the first mover advantage in several segments. For example, Amazon Kindle has been dubbed revolutionary by many reviewers[3], and Amazon Web Services (AWS) offer more than 516 features and services and the majority of these are of an innovative nature. Amazon’s experience and competency in terms of developing and marketing innovative products and services is a considerable strength that can be further capitalized with positive implications on the long-term growth prospects of the business.

3. Jeff Bezos, Amazon founder and CEO has proved to be a driving force behind the rapid and sustainable growth of the business via application of his visionary and charismatic leadership style. Bezos has also ranked #1 in 2014 list of The Best Performing CEOs in the World according to Harvard Business Review[4] and he is admired internationally partially due to his creative approach towards solving a wide range of business issues. It is important to note that Jeff Bezos’s ideas for the business are far from being exhausted, therefore, he can be assessed as a valuable asset to the business.

4. The company efficiently utilizes its lean cost structure as one of its main sources of competitive advantage. This advantage is gained by Amazon by an extensive exploitation of the economies of scale. Accordingly, Amazon 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”[5].

 

Weaknesses

1. Amazon has an incredibly thin profit margin in order to sustain its cost leadership strategy, as well as, its promise of free delivery (see Figure 3 below). Lack of focus on profitability in general and a low profit margin in particular makes the business vulnerable to external shocks and crises and other changes in the marketplace. In other words, due to low profit margins with negative implications on the level of liquidity and cash reserves, Amazon may find it difficult to go through the phases of low demand for its products and services caused by changes in the external environment.

Amazon SWOT analysis

Changes in Amazon profit margin[6]

2. It is interesting to note that while Amazon is famous worldwide as an online retailer, there is a lack of focus on a range of products and services offered by the business. Amazon offers own brand products as well such as Kindle and Fire devices, but this range is highly limited. Lack of focus on a range of products and services offered by Amazon and low range of company’s own brand products is a considerable weakness from the viewpoint of strengthening brand identity and this issue needs to be addressed by senior level management in a timely manner.

Detailed discussion of Amazon SWOT analysis and application of PESTEL, Porter’s Five Forces and Value Chain Analyses on Amazon can be accessed via purchasing Amazon.com Inc. Company Report. The report also comprises an analysis of Amazon’s marketing strategy and company’s approach towards Corporate Social Responsibility (CSR).

Amazon.com Inc. Company Report

[1] Singh, S. (2013) “Can Amazon, world’s largest online retailer, crack an emerging market?” The Economic Times, Available at: http://articles.economictimes.indiatimes.com/2013-09-26/news/42426794_1_amazon-india-south-india-retailer

[2] Annual Report (2014) Amazon

[3] Elgan, M. (2010) “Opinion: Why Amazon’s Kindle is Revolutionary” MacWorld, Available at: http://www.macworld.com/article/1061186/kindle.html

[4] Ignatis, A. (2014) The Best Performing CEOs in the World, Harvard Business Review, Available at: https://hbr.org/2014/11/the-best-performing-ceos-in-the-world

[5] Jordan, J. (2013) “How to compete with Amazon” Fortune, Available at: http://fortune.com/2013/10/24/how-to-compete-with-amazon/

[6] YCharts (2016) Available at: https://ycharts.com/companies/AMZN/profit_margin