Internal and External Environments for Amazon Term Paper

Pages: 8 (2553 words)  |  Bibliography Sources: 5


[. . .] These would be aimed at countering threats of new entrants and reducing the intensity of rivals. Using any of these moves would allow the company to expand its operations and market presence. The possibility of entering into new industries or creating competition barrier is increased with such ventures.

Threats and opportunities

New entrants, competitors, lawsuits, tax legislation, and online security are some of the threats faced by Amazon. Opportunities for Amazon are retail sales increase, physical presence, online payment systems, growing tablet and eBook sales. Amazon is facing pressure by state governors and traditional store to collect internet sales tax on its products and services. If the company complied with these requirement, the price of its products and services would increase adversely. This would affect its revenues because few customers would use the online store for purchases. Competitors are working hard to increase their presence and match Amazon prices. For example, Google has managed to build an extension to its search called shopping, which is aimed at pushing more customers to its stores. Sellers and merchants are using Google's product to place adverts, which increases competition in the industry. Groupon and Fingerhut are new entrants to the industry who are solidifying their efforts in the e-commerce industry. However, because of Amazon's reputation, branding, low pricing, and customer base the new entrants are finding it hard to compete with the giant. Foreign exchange fluctuation has been a constant threat to the company. Almost 45% of Amazon's revenue is from its international websites. The pricing used for its products has to cater for any fluctuations to ensure that the company maintains its revenues and does not incur losses. There is also threat of hacking, which would result in a PR nightmare. There are legal suits that can be launched by customers, competitors and employees. The nature of the lawsuit is dependent on the instigator. Customers will mostly sue the company if they receive faulty products or failure to deliver products.

In the cloud infrastructure industry, Amazon's EC2 and AWS are the leaders. Leveraging on these products, the company could increase its market share by offering a highly secretive and sensitive data solution. Amazon fresh has brought consumables to its consumers at affordable rates. The company can deliver groceries and staples to selected locations. Consumer item selection is increased by using Amazon prime, which brings to the customers video and items from third parties. Using these additional products, the company has managed to increase its revenues and diversify its product portfolio. Advertisement placement is done by tracking customer data. This ensures that the company is able to deliver appropriate and effective adverts to its customers. Sellers will use this feature to target their ads to specific groups or individuals. The company could gain other opportunities by engaging with customers in BRIC countries. Online advertising is a viable market for the company considering that it managed to raise over $500 million in advertising.

Strengths and weaknesses

The strengths for Amazon are brand, company size, low cost, strategic acquisitions, and earth's biggest selection. Its weaknesses are patent infringement, low business margins, frequent outages, and international operations. In terms of size, Amazon is much bigger than its closest rival eBay. Amazon is ranked as top 25 in the top 100 global brand. It is also amongst the largest corporations in America. Amazon has a wide variety of services and products on offer on its website for domestic and international customers. Having a high turnover rate and effective fulfillment centers has enabled the company to generate revenue from sales, lower prices, and low operating costs. The customer base for Amazon is larger. This is greatly contributed by its broader selection, outstanding selection of products, and low prices. Amazon has managed to occupy the top position in customer satisfaction for over eight years consecutively. Patent infringement is the major weakness faced by Amazon. The infringements involve technology innovations. Any infringement reduces the stakeholders' confidence in the company. Competitors offering related products to the company has also affected its revenues. Customer numbers are also affected by such moves. The outages faced by amazon have reduced customer confidence in the company. The loss of data, disruptions, and site outages affects not only Amazon websites, but also the companies that rely on its cloud services.

Amazon's resources, capabilities, and core competencies

Amazon has been able to maintain its leadership spot by developing and maintaining its resources, capabilities, and core competencies. Resources refer to anything the company relies on to create value. Exceptionally combining its resources to create core competencies demonstrates its capabilities. The company has managed to combine these resources to increase its revenues and build a stronger brand. Tangible resources are financial, physical, and labor. Intangible resources are reputation, innovations, technology, expertise, branding, and skills. Combining its resources and capabilities has allowed the company to gain competitive advantages over its rivals. Company culture, competitive pricing, logistics, technological infrastructure, and perceived customer benefits are some of capabilities employed by Amazon.

Transformation of the value chain is necessary for a company to gain a sustainable competitive advantage. Amazon would have to manage its physical supply and virtual computer web. Its online retailing revolutionized and transformed the book industry. The company's value chain currently consists of publishers, authors, retailers, and wholesalers. Amazon's bottom line is impacted by the supply-chain costs. It is costly to imitate Amazon's competencies, which is beneficial to the company. Rivals have tried to replicate the model employed by Amazon, but they have not managed (Rothaermel, 2013). The company's distribution channel is effective because the company has heavily invested in the distribution centers. This makes it easy for Amazon to deliver products to its customers. The Amazon brand is strong, and this has increased its customer loyalty and customer base.


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