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 – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, increasing household debt because of falling income levels, increasing energy prices, central banks are concerned over increasing inflation, technology disruption, supply chains are disrupted by pandemic ,
increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
Strong track record of project management in the Retail (Catalog & Mail Order) industry
– Amazon.com is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Innovation driven organization
– Amazon.com is one of the most innovative firm in Retail (Catalog & Mail Order) sector.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Amazon.com in Retail (Catalog & Mail Order) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Amazon.com has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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.
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.
Weaknesses of Amazon.com | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amazon.com are -
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.
Workers concerns about automation
– As automation is fast increasing in the Retail (Catalog & Mail Order) industry, Amazon.com needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Low market penetration in new markets
– Outside its home market of Germany, Amazon.com needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Amazon.com has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Retail (Catalog & Mail Order) industry using digital technology.
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.
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.
Compensation and incentives
– The revenue per employee of Amazon.com is just above the Retail (Catalog & Mail Order) industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on Amazon.com ‘s star products
– The top 2 products and services of Amazon.com still accounts for major business revenue. This dependence on star products in Retail (Catalog & Mail Order) industry has resulted into insufficient focus on developing new products, even though Amazon.com has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Amazon.com is one of the leading players in the Retail (Catalog & Mail Order) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Catalog & Mail Order) industry in last five years.
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.
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.
Amazon.com Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Amazon.com are -
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Amazon.com to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
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.
Developing new processes and practices
– Amazon.com can develop new processes and procedures in Retail (Catalog & Mail Order) industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
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.
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.
Manufacturing automation
– Amazon.com can use the latest technology developments to improve its manufacturing and designing process in Retail (Catalog & Mail Order) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Amazon.com can improve the customer journey of consumers in the Retail (Catalog & Mail Order) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Amazon.com can use these opportunities to build new business models that can help the communities that Amazon.com operates in. Secondly it can use opportunities from government spending in Retail (Catalog & Mail Order) sector.
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.
Threats Amazon.com External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Amazon.com are -
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.
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.
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.
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.
Stagnating economy with rate increase
– Amazon.com can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Retail (Catalog & Mail Order) industry.
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.
Increasing wage structure of Amazon.com
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Amazon.com.
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.
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.
Regulatory challenges
– Amazon.com needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Retail (Catalog & Mail Order) industry regulations.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Amazon.com will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.