SWOT Analysis Of Amazon For 2022

Amazon is the leading e-commerce company currently in the world. Along with e-commerce operations, it is providing services in other domains such as digital streaming, artificial intelligence, and cloud computing. Looking at the numbers of its market cap, and influence on the current digital age, it has been regarded as one of the most influential brands across the globe. In this article, you will see the history of Amazon in brief. Post which, I will explain what exactly is a SWOT analysis. Later, we can move to answer the main question and perform a SWOT analysis of Amazon.

History Of Amazon

Jeff Bezos founded Amazon in the year 1994 out of his garage in Bellevue, Washington. You know Amazon as a marketplace to purchase almost anything. However, when Jeff started this company, it was limited to an online bookstore. It included a way to purchase books online. No other product was included in the inventory.

Jeff read a report on the web e-commerce growth that predicted growth of about 2300% in the coming year. He wanted to utilize this opportunity. He narrowed a list of five products that would become the first list of products in his online store. The products were: compact discs, computer hardware, computer software, videos, and books. Later till the end of 2004, many more products were regularly added to the inventory.

Moving from 2005 onwards, Amazon started to venture into other domains too. It started its Amazon Web Services which was essentially a cloud computing service. Later in 2011, it went on to start its own digital streaming platforms. You can see Amazon Prime Video and Amazon Music as their primary products in the market. Regardless of the competition, Amazon has stood its ground in every domain and assured a great service to its customers.

Apart from all this, Amazon has integrated various technologies like artificial intelligence, machine learning, blockchain, and many more in every service it provides. It has allowed them to enrich the customer experience in the current digital age.

Brief History Timeline Of The Amazon

What Is A SWOT Analysis

Before performing a SWOT analysis of Amazon, we should know the basics of this tool. Many of you may have heard this term and used it before. However, for the sake of all readers, here is a quick overview of what exactly is a SWOT analysis.

SWOT is an acronym. It stands for Strengths, Weaknesses, Opportunities, and Threats. It is a strategic planning tool that allows them to frame and identify the above four metrics for their business. Identifying such metrics can assist you in planning your business roadmap and taking advantage of your competition. This framework is also called situational assessment or situational analysis.

SWOT analysis of your business can help you answer certain questions and tackle the roadblocks for a better business model. It is primarily used in the preliminary stages of any business project to get a well-defined analysis and avoid any obstacles in the later stages. Although SWOT analysis is a great tool for analyzing the competition, it has some limitations. The limitations and the alternatives to this tool are out of the scope of this article. However, I will try to cover the alternative frameworks as well in the coming articles.

A simple overview of SWOT analysis frameworks would go like this

S: Strengths

This includes a product or service that you are leading in. This can be your unique selling proposition. This can also be a common product or service wherein you are leading the market, despite the competition. As the name implies, this is your strength. You are currently the best in this.

W: Weaknesses

This is your business aspect that you are weak in. You are lagging behind your competition. You are not the market leader in this service. This may be your weak link and customers would prefer some other company for this service.

O: Opportunities

A particular aspect of your domain that you can exploit to your advantage. It can be a new unique selling proposition that you launching. Or maybe a new feature in your already existing product or service. It is simply an opportunity to expand your business and get an edge over your competition.

T: Threats

This is a factor in the business environment that can cause loss to your business. The loss can be in any manner. It can be a new competitor providing a better service. Or it can be a change in certain policies of the domain that may put you at risk. The threats need to be analyzed thoroughly to avoid business loss.

So, this is a general brief of what is a SWOT analysis.

SWOT Analysis Of Amazon

Let us begin with the SWOT analysis of Amazon.

STRENGTHS

1. Established Brand Name

Amazon is an established brand name. It took advantage of the initial Internet age wherein it started its business. It gave Amazon an advantage to establish an early name in the e-commerce domain. When you want to search for anything on the internet, you simply say “google it”. Similarly, when people want to buy something online, Amazon is the first name that comes to their mind.

2. Variety Of Products

Amazon started as an online bookstore. However, Jeff Bezos knew that Amazon needs a variety of products to sustain its business. This is what helped the business to grow. From clothes to giant technical equipment – you can find it all on Amazon.

3. Market Leader By Huge Margin

Amazon is currently the leading player in the e-commerce and cloud computing industry. It is the second company after Apple to get a trillion-dollar evaluation. It has a market cap of $1.220 trillion. The second largest e-commerce company is Alibaba with a market cap of $167.19 billion. This margin is huge!

4. Many Subsidiaries In Other Domains

Amazon did not limit itself to being just an e-commerce company. It provides services in cloud computing, artificial intelligence, machine learning, and digital audio and video streaming. Moreover, it has around 40 subsidiaries from which it generates a huge margin of profit every year.

5. Global Yet Local

Amazon is present in more than 180 countries as of 2022. How come it is delivering and serving every country that is different from all other countries? Amazon’s strategy to partner with local vendors and encourage them to use its platform is the reason behind this success. You will find all the sellers to be from local areas that are delivering and using the platform. This ensures great product quality along with the fulfillment of local needs.

6. Premium Logistics

Buying and selling online relies only on one aspect: timely deliveries. Amazon uses a very complex method of storing and delivering products. It has allowed it to be at an advantage and deliver a satisfying customer experience. The return and exchange policies are also flexible, adding to its strengths.

7. Acquiring Many Other Businesses

Apart from venturing into different domains, Amazon has also acquired a large number of other businesses. It allows it to generate profits from other sources without directly managing the operations. Some acquisitions include IMDb, Junglee, Audible, and many more. It currently holds more than 100 acquisitions.

WEAKNESSES

1. No Unique Proposition

Amazon’s business model is quite imitable. There are now many online marketplaces serving customers. It gives tough competition for Amazon to retain its leading position. Not only the e-commerce store, Amazon now has competitors in other ventures too. You can see many competitors in digital audio and video streaming, cloud computing, and more.

2. Limited Physical Stores

Amazon is huge when it comes to its online marketplace. However, it has many limited physical stores currently. Many products or items are preferred by customers to be bought at the physical stores. In this aspect, Amazon is behind its competitors.

3. Reports On Poor Workplace Conditions

There have been some reports on poor workplace conditions for the employees at Amazon. The delivery and store employees have raised certain complaints in the past. This has put a negative mark on its reputation. Complaints included poor workplace, strict and fixed bathroom breaks, full camera surveillance, and much more.

4. Losing Profits Due To Free Shipping

Due to attracting more customers, Amazon issues free shipping of many products in many countries. This has affected the growth of the company. As per analysts, it is losing huge profit margins only because of this free shipping model. This model may be beneficial in moderation. However, considering the amount of sales Amazon receives, it reduces profit margins in large numbers.

5. Allegations Of Tax Evasion

There have been tax evasion allegations against Amazon in Japan, the UK, and the US. This is under investigation. However, it has put a negative impact on the company. Many competitors have used and made a significant increase in their user base due to such allegations.

OPPORTUNITIES

1. Expand Physical Stores

Amazon has the opportunity to increase its offline presence. Currently, it holds the highest share of the online market. However, it is still behind many physical store chains like Walmart. This would also allow capturing this market by Amazon.

2. More Acquisitions

As per certain reports, Amazon is looking to acquire many more businesses. It is a great opportunity to expand its revenue margins. Moreover, it would allow them to collaborate in domains where they are not delivering any service on their own.

3. Use Of Cryptocurrencies

There have been reports that Amazon supports the use of digital currencies.

As many countries are accepting digital currencies, it can give Amazon a boost and an upper edge over others.

4. Delivery By E-Rikshaw In India

Amazon pledges to make a positive impact on the environment through changes in their delivery logistics. They plan to deploy 10,000 electric rickshaws for delivery in India by 2025. This can surely leave a positive impact considering the high volumes of deliveries on a daily basis.

THREATS

1. Fake Reviews

Amazon has recently received a lot of criticism for fake reviews for many product categories. This leaves a negative impact on the company’s service to its customer. As a customer, you rely on reviews by other customers while buying online. However, if a review is fake, it can prove to be an issue for a new buyer of the same product. Amazon is already working and deleting fake reviews on a daily basis. However, it still needs improvement and is a great negative aspect for them. More negative reviews will leave the business with low-profit margins.

2. Economic Recession

As per analysts and financial experts, the year 2023 is in recession. Many countries can face economic slowdown and recession. This can impact the sales of Amazon to a large extent.

3. Cybercrime Threats

In the age of the Internet, there is a massive increase in cybercrime. All online businesses are on the verge of getting online security issues. A company like Amazon can be the biggest victim of cybercrimes.

4. Competition In Other Domains

As amazon is venturing into other domains, it is aggressively competed by other companies. It is no longer a company limited to e-commerce. You can see some competitors to Amazon in many other domains.

Prime Video Competitors: Netflix, Hulu, Apple TV, Disney Hotstar, and more.

Prime Music Competitors: Spotify, Apple Music, and more

5. Complex Government Regulations

Amazon does not ship to Cuba, Iran, North Korea, Sudan, and Syria currently. Moreover, there are many changes in government policies that hinder Amazon from performing its operations. It has become a constant issue and limits Amazon from generating profits.

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