Amazon PESTLE Analysis: An Overview for E-commerce Giant
PESTLE analysis is one of the best known strategic business analysis tools. This article is a PESTLE case study, where we’ll go through the Amazon PESTLE analysis to see how this Political, Economic, Sociological, Technological, Legal and Environmental analysis of the e-commerce giant.
A PESTLE analysis is a framework that lets you understand the external environment surrounding your business. This wider realization of business strategies and their impacts can help your business to correct past mistakes and make the accurate decisions in the future. The effect of a (or multiple) PESTLE analysis (or analyses) can be a “wide opener event” for your company.
Due to the fact that you will be categorizing, researching and analyzing various types of external factors affecting your business, the analysis itself will require time, attention and effort. You are going to go through possible threats and opportunities facing your business.
These threats can help you realize to take immediate action and eliminate them. On the other hand, realizing untouched and unexploited opportunities can open new doors for you and your business. While you can minimize any threat’s impact, you can also maximize the impact of business opportunities whether they are financial, organizational or even social.
Useful PESTLE Tools
The exact categories of a PESTLE analysis are Political, Economic, Social (or Sociocultural), Technological, Legal and Environmental (or Ecological). If you are an owner of a business, a potential future CEO or a start up founder, you can conduct your own PESTLE analysis for your business as well!
The best and easiest way to do it is to list the factors in a spreadsheet in Microsoft Excel. Here, you can find an Excel template that provides you a simple yet professional looking design in order to conduct your own analysis. And it is completely free to use, download it now!
– This image is from Someka’s PESTLE Analysis Excel Template –
Perhaps, you are wondering how to start a PESTLE analysis. Here is a blog post all about it! The history of the concept, the different versions of the acronyms and their changing outcomes, how a PESTLE analysis can advance your business into the next stage, the pros and cons of the analysis, the comparison between a SWOT analysis and a PESTLE analysis and also a PESTLE analysis example of one of the biggest companies in the world are all in the blog post!
There is also an instruction section for you to start and conduct your analysis in seven easy steps. So, you can download the template and whilst reading the blog post, you can create your own PESTLE analysis step by step.
Similar “Threats” and “Opportunities”
If the PESTLE concept seems familiar with all the terms such as “threats” and “opportunities”, you are correct. A SWOT analysis lists the strengths, weaknesses, opportunities and threats of a company without categorizing them. It is a very general ‘all in’ analysis for someone to read and get a general idea of a company.
A PESTLE analysis can be more detailed and actually direct and specific on the factors that it depicts because they are categorized accordingly. Below, you can find the PESTLE analysis of the biggest ecommerce company in the world: Amazon.
Amazon PESTLE Analysis
Amazon.com, Inc. (or shortly Amazon) was founded by Jeff Bezos in Bellevue, Washington on July 5th, 1994. The company started as an online marketplace for only books. However, as it grew, it expanded into selling electronics, furniture, jewellery and just about everything.
Let’s discover Amazon Pestle Analysis now!
Political (External) Factors
Being the biggest ecommerce company in the whole wide world forces Amazon to keep good and healthy relations with different countries. This means Amazon has to comply and obey the ‘suggestions’ or much more strict regulations of various governments. But that does not mean Amazon does not have dependent stability in and with some of the biggest countries and biggest Amazon buyers.
For example:
Amazon is a big force in the United States and that is an incredible opportunity which not many companies have in their hands.
Even though Donald Trump has benefited Amazon Inc. by cutting its taxes and helping the company to pay an incredible $0 in federal taxes in 2019, their relationship has not been perfect.
Trump does not like (at least he did not like when he was the President) American companies operating and manufacturing their products overseas. He focused on trade protectionism and put new regulations in order to keep ‘American jobs’ in the United States. Amazon’s operations, foreign imports and the number of tariffs was threatened by the administration. Good news for Amazon, Trump’s term as the
President has ended. Bad news for Amazon, Joe Biden won the Presidency.
Biden’s Labor Agenda
A company such as Amazon which pushes against its warehouse workers’ wishes to form unions can clash with the new President who promises to be “the most pro-union President” ever. Biden proposed various reforms regarding workplace conditions advancements and broaden the worker protections. He has policies planned to give more power and authority to workers in his new labor agenda.
Amazon has also its concerns over Biden’s determination on antitrust issues, breaking up monopolies and properly taxing the big tech companies. It is said that the Biden administration will be tougher on these issues than the previous two administrations (in which Biden was the Vice President in Obama’s term).
In fact, Amazon entered the Chinese retail market quickly. It was the most popular ecommerce company in the country. And then, services such as Alibaba’s Taobao and JD.com became popular and took the reins.
Additionally, Amazon has to compete with the giants as well as other local and smaller companies such as Pinduoduo and VIP.com. Amazon has a tough competition in China and it has struggled quite a bit.
So much that Amazon has actually shut down its marketplace in China. Its (Chinese) website can be accessed; however, all the products listed are imported from other countries overseas that still have a functioning marketplace for Amazon. That means China does not technically have Amazon, it only has deliveries from Amazon.
Economic Factors in Amazon Pestle Analysis
If your country’s economy flourishes, then everyone can make more money. An increase in salaries, wages, pensions and income can also increase the level of ‘disposable income’ for every household. Amazon can invest more in production, warehouses, storage and distribution systems in these developed markets such as the United States and majority of the European countries because they can and will steadily continue to buy.
You can buy the latest iPhone from Amazon’s website. Also, you can buy a weekly subscription of toilet papers delivered right to your house. And, you can even buy jewelry priced for hundreds of thousands of dollars as well. That is what makes Amazon, Amazon.
Continue to grow?
Amazon can still advance its techniques, operations and systems in developing markets. There is an enormous potential regarding financial gain for Amazon in some of the countries in Europe, Asia and Africa which do not have Amazon as their most popular ecommerce company. Amazon has conquered the United States as the ‘leader in online retail’ but there are a lot of countries in which Amazon is not placed as the most used ecommerce website among customers and citizens.
New tax laws can diminish Amazon’s profit significantly, if the new tax regulations are forced on Amazon. Warren’s taxation plan for Amazon was to introduce a 7% corporate tax which could create 698 million dollars. Even though Warren did not take the office, it is reported that Warren still gets in touch with Biden regarding a number of issues.
Social (or Sociocultural) Factors
The number of people who are buying products online are gradually increasing = An opportunity
The easier it gets for everyone to shop online, the more people are going to do it. It is an inevitable feature of the world wide web that so often gets people addicted to it. In addition to that, every new generation who gets their own smartphones or smart devices buy products online. And the most popular platform to buy your product from is Amazon.
Covid and Amazon
The pandemic caused an incredible number of stores, shops and companies to close down around the world. COVID-19 has done a lot of financial damage to local shops, average size companies and even some large corporations. But not Amazon! The pandemic actually helped Amazon immensely: Their quarterly profits doubled, its net sales has risen by 40% and Jeff Bezos became the first person to have a net worth to surpass $200 billion.
The vaccines have been created and the vaccination processes have started in various countries. However, it is not quite possible (for now) to figure out when everything will go to the ‘old normal’. That is why there are new lockdowns happening around the world (especially in Europe), quarantines do still continue and there are curfews in place in some of the countries.
And Amazon takes advantage of this situation (knowingly or unknowingly) due to the fact that it can deliver whatever you want right to your house and to your front door. This is an important factor in Amazon’s Pestle analysis.
The world stopped when the pandemic hit. Almost every institution had to close down temporarily or permanently and some of them were forced to lay off a quite amount of their employees. However, Amazon actually hired more employees. The company employed 427,300 more people between January 2020 and October 2020. Globally the number of its employees reached more than 1.2 million people.
Technological Factors
Amazon has an amazing and unique system of keeping track each of the production, distribution and delivery processes. Other than the technology it uses in its factories, Amazon is also developing and using new transportation technologies in regard to its delivery system. This means that you can see drones delivering your products right to your front door pretty soon.
So, Amazon is trying to figure out a faster way of delivery; an unmanned transportation system and a new age in technology. This can, without a doubt, change the delivery system of products. However, at the same time, it can also hurt one of the areas Amazon takes pride in.
As it was mentioned as one of the opportunities in the social factors, Amazon employs a lot of people. And it continues to hire more and more people. Changing the whole delivery system to drones can surely be the more profitable solution for Amazon. But on the other hand, it also eliminates employees.
Drone Delivery?
It is uncertain that Amazon can maintain the drone delivery system for a certain amount of time, so Amazon drivers are not going anywhere soon. But that ‘soon’ can be earlier than some of the people have thought. And even if Amazon gets rid of some of the delivery drivers, there can be protests and a lot of bad publicity in regard to the new air delivery system of Amazon.
A leak of Amazon user details can be a huge gift to cyber criminals to take control of the accounts of users. These hackers can go through all of the information a user stores in his or her account: Bank details, credit card numbers, phone numbers, detailed addresses, etc.
The other problem is phishing scams. An email sent to an unknowing user (seemingly by Amazon) informs them about the ‘opportunity to change their passwords’. The email details that their information has been leaked and their passwords have been compromised, so they need to change it.
And, in the Amazon PESTLE analysis perspective, they need to change it now. Then, an ‘Amazon customer service employee’ calls them in order to help them through the password change process. The user downloads and shares their screen with the customer service employee. So, what is the problem in this situation?
Unfortunately, the email did not come from an official Amazon email address. Also, the ‘Amazon employee’ does not work for Amazon. This is called a phishing scam. When the user gets into his or her Amazon account, the ‘customer service employee’ can look and note every detail. And (as it is not enough) they additionally charge them for the customer service they have provided.
Legal Factors
European Union formed the General Data Protection Regulation (GDPR) and in May 2018 it put an important regulation for companies operating in the countries in the European Union. It gave customers the right to demand a copy of all of their personal data from the websites they have created an account in.
This regulation also states that the data should be easy to understand for the user. The big tech companies such as Apple, Spotify, Google, YouTube and Amazon all changed their rules and complied with the new regulation. They made the user’s personal information available but there were some criticisms from the privacy campaign group “noyb”. They said that some of the data provided by the companies were “intelligible” and some of the data were not understood by the users.
Privacy issues?
Privacy issues have been on the news and caused an incredible amount of bad publicity to the ‘big tech’ companies. Perhaps the one company which took the most damage on the new privacy regulations and lawsuits was Facebook. But Amazon did not escape criticisms, lawsuits and
European Commission brought charges to Amazon as the Commission claims the company violated European Union’s competition law. Even though Amazon denied the accusations, the Commission accused the company of using nonpublic data to give unfair advantage to big third party sellers rather than smaller ones.
These allegations, charges and lawsuits are not only happening in Europe. The United States Congress and the Federal Trade Commission also opened up investigations on Amazon’s treatment on third party sellers. After a 16 month investigation and deliberation period, the antitrust subcommittee concluded that Amazon is a monopoly force over the third party sellers present on its website.
And even though the European Union did not file legal charges for the company; the claims, the allegations and the charges brought still made the news and were covered by the reputable news outlets. That can harm a company’s image and brand, especially one of the big tech companies that had its issues with privacy and security in the past.
Environmental (Ecological) Factors
The Good Actions Against Climate Change
Amazon actually invests a lot of money into environmental and ecological programs and platforms that strive to reduce waste, diminish energy consumption and take on ecological challenges. Jeff Bezos himself donated 10 billion dollars to scientists, activists and nongovernmental organizations (NGOs) which focus their efforts to fight climate change.
These kinds of actions the company (and its founder) takes increases its popularity and the value of their brand as it supports a ‘low carbon lifestyle’. These energy saving policies also puts an emphasis on the business stability and the general sustainability of the company.
The ‘Not So Good’ Actions
These are all great efforts to fight the dangerous consequences; however, Amazon itself (its warehouses around the world, offices, vehicles, storages) emits so much carbon dioxide that it makes its efforts for climate change seem irrelevant. According to the report Amazon detailed, in 2018 the company emitted 44.4 million metric tons of carbon dioxide. That is almost equal to annual emissions of Norway.
Even though Jeff Bezos donates an incredibly large amount of money to a good cause, if the company hinders its efforts to do good to the environment, then all the donations and efforts mean nothing. The company tries to escape its responsibilities by throwing money to it. And, unfortunately, ecological issues such as climate change cannot be easily fixed only with money.
On top of that, one of Amazon’s most useful and utilized feature is Amazon Prime. The Prime subscription promises its customers a two day delivery. Therefore, its more than 100 million prime members receive their products that they ordered in a day or two. This increases the carbon emissions significantly.
FINAL WORDS FOR AMAZON PESTLE ANALYSIS
As you can see a PESTLE analysis can tell a lot of details and touch a lot of important areas of a company. Whether it is a huge company such as Amazon or your newly founded start up, a comprehensive, well researched and an accurate PESTLE analysis can be the thing your company needs. It can bring out past mishaps, controversies and mistakes to take notes on as well as future opportunities to be exploited and possible threats to carefully consider.
If you’re going to make a PESTLE analysis for your company, our PESTLE spreadsheets will help you.
You can instantly download:
These templates have lots of benefits:
- Ready-to-use
- Editable and printable
- No installation needed
- Includes reference and guiding
- Sleek design
- Ready for presentations
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