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Amazon: SWOT analysis

Amazon: SWOT analysis

Amazon is one of the best online retailers and it will continue its success and growth into the second half of 2016. One out of every three product searches online is done through Amazon.com and nearly half of online sales are filtered through Amazon.com.

Amazon is the fourth most valuable public company in the world, the largest internet company by revenue in the world and the ninth largest employer in the United States.

Amazon.com, Inc., incorporated on May 28, 1996, offers a range of products and services through its Websites. The Company operates through three segments: North America, International and Amazon Web Services (AWS). The Company’s products include merchandise and content that it purchases for resale from vendors and those offered by third-party sellers. It also manufactures and sells electronic devices. It provides services to four primary customer sets: consumers, sellers, enterprises, and content creators. The company also provides other marketing and promotional services, such as online advertising and co-branded credit card agreements. It serves consumers through its retail websites with a focus on selection, price, and convenience. It designs its websites to enable its products to be sold by the company and by third parties across dozens of product categories. The company also serves developers and enterprises of

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all sizes through Amazon Web Services, which provides access to technology infrastructure that enables virtually any type of business.

And now let’s talk about the strengths and weaknesses, opportunities and threats of Amazon company.

Strengths

Amazon is one of the oldest and time-tested portal providing multi-branded quality products worldwide. Amazon has products in every possible segment, ranging from white goods, books, brown goods, electronics, toys, kitchenware and much more. The last two decades has seen a phenomenal growth for the global e-commerce giant, Amazon.

Amazon is a retail giant. It’s a monopoly in its own right. It offers fast shipping, made faster when you subscribe for their Prime membership — plus video, music, photos, reading, and many discounts. These offerings make Prime membership (lower cost to students) appealing to consumers in many ways.

Additionally, Amazon has strong brand power; people know it by name and use it for discounts, low shipping rates, and product selection. Amazon also has a low-cost structure, as third parties sell through the site and Amazon sees profits.

Also read about importance of commerce in moderm world

Amazon is extremely customer friendly when it comes to acquiring new customers and continuing with on-going customers. As per data, 55% of its customers are repeat buyers, thus this data talks a lot about the trust that the buyers have on Amazon. The added advantage being, Amazon has to spend less money in acquiring new customers. Amazon’s robust CRM helps capture all the details, especially for new buyers.

Weaknesses

Amazon has an incredibly thin profit margin in order to sustain its cost leadership strategy, as well as, its promise of free delivery. 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.com Inc. has a business model that others can easily imitate. For example, other firms could easily establish an online retail website that sells just about anything. Also, Amazon generates most of its revenues from developed countries, such as the United States. When other firms become fully established in developing markets, it would be difficult for Amazon to penetrate and compete in such markets.

Amazon has been running in losses especially in the developing nations, as it is yet to make a mark in the developing nation, thus a major loss in aggregate.

Opportunities

Expansion mainly in Asian & developing economies will help Amazon because those are the markets with low competition in E-commerce industries & are not saturated like developed economies.  By having a physical Amazon stores in a few locations, the company can increase its brand association and familiarity with the consumers for increasing reliability and repeat purchase.

Another opportunity, which Amazon can capitalize on, relates to it rolling out more products under its own brand instead of being a forwarding site for third party products. In other words, it can increase the number of products under its own brand instead of merely selling and stocking products made by its partners. Own branded products would offer attractive and exciting discounts and offers, thus attracting more consumers and increase stickability.

Threats

The competition will increase due to the low barriers to entry in the market since offline companies are coming online. All successful Internet businesses attract competition. Since Amazon sells the same or similar products as high street retailers and other online businesses, it may become more and more difficult to differentiate the brand from its competitors. International competitors may also intrude upon Amazon as it expands. Those domestic (US-based) rivals unable to compete with Amazon in the US may entrench overseas and compete with them on foreign fronts. Joint ventures, strategic alliances and mergers could see Amazon losing its top position in some markets. The local brands like Alibaba and Flipkart despite being smaller pose a formidable threat.

Several countries are yet to have a structured FDA policy designed specifically for multi-branded ecommerce organization. Amazon is facing a huge issue with the current Government processes and policies.

Because of its aggressive pricing strategies, the company has had to face lawsuits from publishers and rivals in the retailing industry. The obsessive focus on cost leadership that Amazon follows has become a source of trouble for the company because of the competitors being upset with Amazon taking away the business from them.

Conclusion

Amazon.com, with its sales model based on low prices, wide-ranging merchandise, convenience, customer satisfaction, quality recommendations, and delivery efficiency hits a number of high demand features in the modern retail climate. Doing so consistently for years has built a loyal customer base and unparalleled brand equity for the company. Distinct strength in its home market belies its potential in developing regions such as India, where it is poised to become a major player. Focusing on the Asian markets could help it generate better sales there. Another smart way of increasing sales is the use of smart stores. It seems Amazon is already planning to do something big through its grocery stores. However, it can try diversification to increase its profits and generate new sources of revenue. Amazon is an established brand name but it can better use its potential to achieve higher profits.

References

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