Amazon SWOT Analysis
SWOT is an acronym for strengths, weaknesses, opportunities and threats related to organizations. Amazon, as the e-commerce and cloud computing company worldwide needs to build upon its strengths at the same time reducing negative impact of its weaknesses on the bottom line. Moreover, it is important for the company to take advantage of opportunities and adopt a proactive approach in dealing with threats in the marketplace. The following table illustrates Amazon SWOT analysis:
| Strengths
1. Market leadership in the global scale 2. Strong ecosystem of products and services 3. Cost leadership due to efficient cost structure 4. Customer-centricity 5. Brand value |
| Weaknesses
1. Business model that can be imitated 2. Seasonality of the business 3. Weak competitive position of Amazon’s Fire Phone 4. Damage to the brand image due to tax avoidance controversies in USA, UK and Japan 5. Working conditions for warehouse workers |
| 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. Developing more local sites in international markets 5. Intensifying backward integration
|
| Threats
1. Patent infringement and other lawsuits against the company 2. Weakening of industry entry barriers 3. Threats to online security 4. Andy Jassy failing to fill Jeff Bezos shoes effectively 5. Backlash towards the brand |
Strengths in Amazon SWOT Analysis
1. Amazon is an undisputed market leader in online retail and cloud computing segments. The e-commerce giant generated USD 386 billion revenues and earned a net income of USD 21,3 billion in 2020 alone[1]. Dubbed as The Everything Store, Amazon sells hundreds of millions of products of its own and third-party sellers. Current market leadership position grants the tech giant upper hand in the competition in a number of ways such as economies of scale and brand recognition. Furthermore, the more products and services Amazon sells, the more customer-specific information the company has to feed its Artificial Intelligence (AI) systems to help generate more sales.
2. Amazon possesses a strong and growing ecosystem of products and services. Specifically, the ecosystem of the tech giant comprises retail, payments, B2B, entertainment, hardware, logistics, cloud computing and other segments. Amazon products and services within the ecosystem are highly compatible with each other and as such, the usage of one product or service within the ecosystem encourages the usage of other related products and services.
For example, Amazon smart security camera that is compatible with the Echo smart speakers allows users to stream live video from the camera on the Echo Show or through the Alexa smartphone app. Moreover, Amazon smart glass is based on Alexa voice assistant and can be used only if the device is linked to a user’s smartphone.[2] Strong and growing ecosystem is a considerable strength for online retail behemoth to achieve long-term growth.
3. The e-commerce giant efficiently utilizes its lean cost structure as one of its main sources of competitive advantage. “Amazon can operate on razor-thin margins and still make money on the transaction. Physical retailers can’t do that and if they drop prices online they risk cannibalizing their own sales and driving margin down while having all the same overhead costs.”[3] This advantage is gained by the company thanks to 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”[4].
4. Efficient customer relationship management practices also belong to the list of strengths possessed by Amazon. The tech giant has “a reputation for providing customers with everything that they need, all in one place. What has since become known as ‘the Amazon Effect’, the company have successfully managed relations with millions of customers without ever meeting them face-to-face.”[5] Amazon’s customer relationship management practices effectively integrate customer data collection and the usage of the data for service personalization. Moreover, Amazon’s returns process is dealt with entirely online via a customer’s account.
5. Amazon is one of the most valuable brands in the world. Kantar BrandZ assessed Amazon as the most valuable brand worldwide for 2020 with the brand value of USD 415,90 billion, an increase of 32% compared to the previous year[6]. According to Brand Finance Amazon is the 2nd most valuable brand in the world in 2022 after Apple with brand value of USD 350, 27 billion.[7] High brand value is indicator of strengths of the business, as well as, high level of customer loyalty.
Weaknesses in Amazon SWOT Analysis
1. The e-commerce and cloud computing company generates its revenues from online sales of own products and third-party seller services, Amazon Web Services, subscription services and advertising revenues. These businesses can be imitated by existing or potential competitors to threat the market share of the tech giant. In other words, it can be argued that the largest internet retailer in the world by revenue mainly benefits from the economies of scale and it does not possess business processes or know-how that competitors cannot copy.
2. Amazon revenues and scope of operations are highly seasonal with direct implications on a wide range of business practices and processes, especially HR practices. Sales and revenues tend to peak in Q4 annually and the company experiences an urgent need for extra workforce during the same period of time. The company generates higher sales volume in Q4 each year. Dramatic fluctuations of the need for the workforce over the course of the year is a significant weakness as it increases the costs of employee training and development along with other disadvantages in various levels.
Amazon.com Inc. Report contains a full version of Amazon SWOT Analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Amazon. Moreover, the report contains analyses of Amazon leadership, organizational structure, business strategy and organizational culture. The report also comprises discussions of Amazon marketing strategy, ecosystem and addresses issues of corporate social responsibility.
[1] Annual Report (2020) Amazon.com Inc.
[2] Newman, P. (2017) “Amazon is looking to further expand Alexa ecosystem with two new products” Business Insider, Available at: http://www.businessinsider.com/amazon-alexa-ecosystem-new-products-2017-9
[3] Kline, D.B. (2015) “Amazon’s Sustainable Competitive Advantage” The Motley Fool, Available at: https://www.fool.com/investing/general/2015/05/18/amazons-sustainable-competitive-advantage.aspx
[4] Jordan, J. (2013) “How to compete with Amazon” Fortune, Available at: http://fortune.com/2013/10/24/how-to-compete-with-amazon/
[5] Amazon CRM Case Study (2017) Expert CRM Software, Available at: http://crmsystems.expertmarket.co.uk/Amazon-CRM-Case-Study
[6] Most Valuable Global Brands 2020, Kantar, Available at: https://www.kantar.com/campaigns/brandz/global
[7] GLOBAL 500 2022 RANKING (2022) Brand Finance, Available at: https://brandirectory.com/rankings/global/table