All businesses operate under the influence of two business environments. These are the internal and the external business environments. The internal business environment is composed of things that a firm has control of and this entails; strengths, opportunities, weaknesses and threats. The external business environment consists of factors that are not in control of the firm. This factors demands businesses to make strategic decision in order to survive. These includes, political, economic, sociocultural, technological, environmental and legal environment. In this paper I will explore Amazon internal and external environment, forces of competition, resources, capabilities and core competencies.
General Environment
General environment forces are outside the business but they influence competitiveness of a firm. According to Hitt these are; technological forces, economic, sustainable physical, sociocultural, demographic, global and legal/political forces as shown in the figure below (Hitt, 2020). Amazon is an online retail business and the technological and demographic forces are the major forces that have a great influence on its operations and competitiveness.
External business environment (Hitt, 2020).
Demographic segment
The demographic segment according to Hitt entails population size, geographical distributions, income distribution, ethnic mix and age structure. This segment affect Amazon as the firm operates in several nations. Amazon must understand the population size and changes in that population overtime in order to know the nations to capitalize on (Hitt, 2020). The age of the population is also significant as it determines the needs of a given population. For example, an aging population will not have the same tastes and preferences as young generation.
Amazon need to understand ethnic mix in a given geographical location. This is to enable the firm to customize its goods to suit the needs of any given ethnic community. For example, in states like California and Texas the Hispanics are dominant and therefore Amazon must understand the needs of that minority group (Hitt, 2020). If a firm does not understand ethnic diversity it serves the population as equal in all aspects and this makes some members of the population not to buy from that firm as it does not take care of their interests. What would happen if Amazon markets products that contain pork or beef in its Indian market? The funds spent on marketing will be a waste as the population in that market does not consume beef and pork due to religious beliefs.
Technological segment
The current age is being referred to as the digital age. Technology is bringing changes and disruptions in life and businesses that are not thought of before. A business that does not embrace technology advances is destined to be thrown out of the market. A firm that adopts new technology first is able to gain large market share and as a result earn higher returns (Hitt, 2020). Amazon being a business that depends on technology must remain ahead to be competitive. Technology has both pros and cons. As Amazon is able to seize and utilize technology opportunities it also faces threats that come with technology. Amazon uses search technologies to recommend products to a given client according to client web searches and purchasing pattern.
Data breach is an area that hit online business and Amazon is not an exception. In 2018, Amazon faced a data breach before a Black Friday (Brignall, 2018). Such an occurrence can tarnish the reputation of the firm and clients can shy away buying online due to privacy concerns. Amazon ensures its systems including payments are secure. The firm employs up to date technologies and issues alerts to clients in case of any suspicious activity on their systems.
Five Forces of Competition
The forces within a given industry affects a firm competitiveness directly. There are five forces of competition in any given industry shown in the figure below. These are; the bargaining power of suppliers and buyers, threats of new entrants, availability of substitutes and competitor’s rivalry. The forces of competition that have a great influence on Amazon are the bargaining power of buyers and the competitor’s rivalry.
Forces of competition (Hitt, 2020).
Competitive Rivalry in the Industry
Though, Amazon ventures in several businesses lines, its retail business is what many people know of. The online retail business has a lot of players. In this industry, Amazon faces competition from brands like eBay, Walmart, Target, Alibaba, among others. Firms in this industry bases their competition on several dimensions like price, innovation, service after sale and of late speed of delivery. Stiff competition also emanates from firms that offer specialized products. For example, Treehouse kid & Craft of Georgia has exerted a lot of force on products of children (Keenan, 2021).
Bargaining Power of Buyers
Customers in this age have all the information they need for a given product. The bargaining power of clientele is accelerated by the internet accessibility. Customers can search price of a product on the internet and compare what sellers are offering. Amazon sells products that are not differentiated and substitutes are readily available. This makes Amazon customers to have high bargaining power as they can switch to a competitor at ease. To retain customers Amazon capitalizes on offering quality products at a price which is competitive and ensuring there is smooth flow of shopping experience (CFI, 2021).
Future Improvements
Amazon can decide to engage itself on other areas like cloud computing where forces of competition favors the firm. Cloud computing is the future of businesses. Since, Amazon has been getting good return from it, it should capitalize on this line of product (Markman, 2021). Also, Amazon can introduce loyalty reward points and special offers to buyers. These points and offers can keep the buyers glued with the hope of converting them to an item of their choice.
Greatest External Threat
The greatest threat Amazon faces is emergence of regional online retail firms. For example, Mercado Libre of Latin America, Rakuten of Japan, Wayfair of North America and Europe, among others (Merton, 2021). These firms are able to gain acceptance in the region they operate in. This is because they are close to the population they serve and their delivery turnaround time is shorter than that of Amazon. Competition from these firms is a threat that Amazon must deal with.
Greatest Opportunity
The number one opportunity Amazon has is global acceptance. The firm can use its brand name to venture in other areas easily. For example, the firm may acquire firms in nations where it has huge client base and make them physical outlets or delivery points. The clients who are afraid of buying online due to cyber fraud may opt to buy in those brick and mortar outlets (Handley, 2020).
Strengths and Weaknesses
Amazon has resources to keep its operation going. For example, during the pandemic when organizations were stuck on what to do, Amazon built its own delivery system. The firm is using its resources to build its own delivery system that is better than UPS and FedEx (Greene, 2020). Amazon major weakness is how it handles its employees. the firm is accused regularly for discrimination and firing staffs without following the correct procedure. This creates a bad picture about the firm. This is detrimental as the best minds can shun looking for opportunities in this firm (Jeans, 2021).
Strategy or Tactic
Amazon should partner with local courier services to strengthen its bought products delivery. The local couriers service provider should have employees dedicated to delivering only Amazon products. This will ensure timely delivery of orders. On employee’s grievances, the firm should conduct employee diversity audit. This will help the firm to know why employees are discriminated.
Resources, Capabilities, and Core Competencies
Amazon number one resource is internet. The firm sells its products online. The firm customer service is a key capability. The firm strives to be customer centric and as a result it has development a culture that values its client. The firm core capability include technology. The firm has Amazon Web Services that it rents to other businesses for a fee (Hitt, 2020).
