Amazon.com (AMZN) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Catalog & Mail Order)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Amazon.com (Germany)
Based on various researches at Oak Spring University , Amazon.com is operating in a macro-environment that has been destablized by – increasing energy prices, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, wage bills are increasing, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google,
central banks are concerned over increasing inflation, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Amazon.com can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Amazon.com, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Amazon.com operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Amazon.com can be done for the following purposes –
1. Strategic planning of Amazon.com
2. Improving business portfolio management of Amazon.com
3. Assessing feasibility of the new initiative in Germany
4. Making a Retail (Catalog & Mail Order) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Amazon.com
Strengths of Amazon.com | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Amazon.com are -
Diverse revenue streams
– Amazon.com is present in almost all the verticals within the Retail (Catalog & Mail Order) industry. This has provided Amazon.com a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Cross disciplinary teams
– Horizontal connected teams at the Amazon.com are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Retail (Catalog & Mail Order) industry
- digital transformation varies from industry to industry. For Amazon.com digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Amazon.com has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Amazon.com is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Amazon.com is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Amazon.com emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Amazon.com has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Amazon.com has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Operational resilience
– The operational resilience strategy of Amazon.com comprises – understanding the underlying the factors in the Retail (Catalog & Mail Order) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Retail (Catalog & Mail Order) industry
– Amazon.com has clearly differentiated products in the market place. This has enabled Amazon.com to fetch slight price premium compare to the competitors in the Retail (Catalog & Mail Order) industry. The sustainable margins have also helped Amazon.com to invest into research and development (R&D) and innovation.
Training and development
– Amazon.com has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Amazon.com in the Services sector have low bargaining power. Amazon.com has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Amazon.com to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Amazon.com has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Amazon.com staying ahead in the Retail (Catalog & Mail Order) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Amazon.com
– The covid-19 pandemic has put organizational resilience at the centre of everthing Amazon.com does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Amazon.com is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Retail (Catalog & Mail Order) industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of Amazon.com | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amazon.com are -
Products dominated business model
– Even though Amazon.com has some of the most successful models in the Retail (Catalog & Mail Order) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Amazon.com should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Amazon.com has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Catalog & Mail Order) industry over the last five years. Amazon.com even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Increasing silos among functional specialists
– The organizational structure of Amazon.com is dominated by functional specialists. It is not different from other players in the Retail (Catalog & Mail Order) industry, but Amazon.com needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Amazon.com to focus more on services in the Retail (Catalog & Mail Order) industry rather than just following the product oriented approach.
Skills based hiring in Retail (Catalog & Mail Order) industry
– The stress on hiring functional specialists at Amazon.com has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High bargaining power of channel partners in Retail (Catalog & Mail Order) industry
– because of the regulatory requirements in Germany, Amazon.com is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Retail (Catalog & Mail Order) industry.
Employees’ less understanding of Amazon.com strategy
– From the outside it seems that the employees of Amazon.com don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Ability to respond to the competition
– As the decision making is very deliberative at Amazon.com, in the dynamic environment of Retail (Catalog & Mail Order) industry it has struggled to respond to the nimble upstart competition. Amazon.com has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Amazon.com supply chain. Even after few cautionary changes, Amazon.com is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Amazon.com vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Amazon.com products
– To increase the profitability and margins on the products, Amazon.com needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Amazon.com is slow explore the new channels of communication. These new channels of communication can help Amazon.com to provide better information regarding Retail (Catalog & Mail Order) products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, Amazon.com has high operating costs in the Retail (Catalog & Mail Order) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Amazon.com lucrative customers.
Amazon.com Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Amazon.com are -
Better consumer reach
– The expansion of the 5G network will help Amazon.com to increase its market reach. Amazon.com will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Use of Bitcoin and other crypto currencies for transactions in Retail (Catalog & Mail Order) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Amazon.com in the Retail (Catalog & Mail Order) industry. Now Amazon.com can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Amazon.com to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Amazon.com to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Amazon.com can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Catalog & Mail Order) industry, but it has also influenced the consumer preferences. Amazon.com can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Amazon.com can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Amazon.com to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Amazon.com has opened avenues for new revenue streams for the organization in Retail (Catalog & Mail Order) industry. This can help Amazon.com to build a more holistic ecosystem for Amazon.com products in the Retail (Catalog & Mail Order) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Catalog & Mail Order) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Amazon.com can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Amazon.com can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Amazon.com in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Catalog & Mail Order) industry, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Amazon.com can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Catalog & Mail Order) industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Amazon.com can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Amazon.com is facing challenges because of the dominance of functional experts in the organization. Amazon.com can utilize new technology in the field of Retail (Catalog & Mail Order) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Amazon.com can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Amazon.com External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Amazon.com are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Catalog & Mail Order) industry are lowering. It can presents Amazon.com with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Catalog & Mail Order) sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Amazon.com may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Catalog & Mail Order) sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Amazon.com business can come under increasing regulations regarding data privacy, data security, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Amazon.com in the Retail (Catalog & Mail Order) sector and impact the bottomline of the organization.
Consumer confidence and its impact on Amazon.com demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Catalog & Mail Order) industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Amazon.com is facing in Retail (Catalog & Mail Order) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Amazon.com can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Amazon.com prominent markets.
Environmental challenges
– Amazon.com needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Amazon.com can take advantage of this fund but it will also bring new competitors in the Retail (Catalog & Mail Order) industry.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Amazon.com.
Easy access to finance
– Easy access to finance in Retail (Catalog & Mail Order) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Amazon.com can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Amazon.com has witnessed rapid integration of technology during Covid-19 in the Retail (Catalog & Mail Order) industry. As one of the leading players in the industry, Amazon.com needs to keep up with the evolution of technology in the Retail (Catalog & Mail Order) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Amazon.com needs to understand the core reasons impacting the Retail (Catalog & Mail Order) industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Amazon.com Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Amazon.com needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Amazon.com is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Amazon.com is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Amazon.com to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Amazon.com needs to make to build a sustainable competitive advantage.