Amazon.com Inc.

Operations Management:
10 Decisions, Productivity
UPDATED ONUPDATED ON FEBRUARY 21, 2017 BY EDWARD FERGUSON

Amazon Tower II
(Rufus Block 19) in February 2016. Amazon.com Inc.’s operations management tackles
the 10 strategic decision areas through automation and HR development for optimal e-
commerce productivity. (Photo: Public Domain)
Amazon.com Inc.’s e-commerce success depends on the high efficiency achieved in its
operations management (OM), which directly determines productivity. The company
must address the concerns of the 10 strategic decision areas of operations
management to optimize productivity. As the leading player in the e-commerce industry,
Amazon is an example of the significance of technologically supported productivity for
optimal efficiency of services. These 10 strategic decisions of operations management
become increasingly complex, as the organization continues to expand and diversify its
business. Continuous improvement can help enhance the capabilities of Amazon in
maintaining adequate support for operations despite global expansion and the
broadening of the product mix [Read: Amazon’s Product Mix, Marketing Mix]. Through
effective operations management, Amazon keeps its lead in online retail and the e-
commerce market.
Amazon ensures that its operations management (OM) efforts satisfy the 10 strategic
decision areas of its e-commerce business. With expanding operations in addition to
online retail business, Amazon.com Inc. must continue adjusting its operations
management approach for the corresponding changes in these strategic decision areas.

Amazon’s Operations Management, 10 Decision Areas

1. Design of Goods and Services. The design of organizational output is covered in
this strategic decision area of operations management. Amazon addresses this concern
primarily through technology. For example, the company uses advanced information
and communication technologies to ensure that its online retail services are efficient and
convenient for target customers. Such technologies are also used to support maximum
efficiency of Amazon’s e-commerce operations.

2. Quality Management. The objective in this strategic decision area is to maximize

quality of operational output to satisfy the expectations of customers. Amazon.com
Inc.’s operations management approach involves continuous improvement efforts in its
e-commerce business. The company uses its organizational culture to support
innovative idea creation among employees [Read: Amazon’s Organizational Culture].
For example, Amazon encourages employees to be bold and pioneering in creating new
ideas to solve problems and improve the business.

3. Process and Capacity Design. An objective of operations management is to

optimize production processes and capacity. In this strategic decision area, Amazon
applies extensive automation to streamline its business processes. For example,
considering online retail service as its main organizational output, the company
automates the ordering process to increase the capacity to accept as many
simultaneous orders as possible. This approach to operations management highlights
the importance of automation and related technologies in enhancing Amazon’s process
and capacity in e-commerce.

4. Location Strategy. The accessibility of resources and markets is considered in this

strategic decision area of operations management. In the case of Amazon.com Inc., the
emphasis is on the strategic location of warehouses or fulfillment centers. For example,
Amazon must maintain warehouses that are optimally near the largest possible number
of customers of the online retail business.

5. Layout Design and Strategy. In this strategic decision area, operations managers
have the objective of optimizing the movement of human resources, materials, and
information. Amazon addresses this objective through efficient layout designs that align
with computer-assisted processes. For example, in the company’s warehouses and
fulfillment centers, items are organized according to a computerization policy. The
corresponding layout involves maximization of shelf space and minimization of aisles to
achieve optimal capacity without reducing process efficiency in Amazon’s online retail
business.

6. Job Design and Human Resources. Human resource development is the focus in
this strategic decision area. Amazon’s operations management uses a combination of
in-house employment processes and third-party employment agencies. For example,
workers from these agencies fill temporary positions and are evaluated to determine
suitability for permanent positions, especially in warehouses and fulfillment centers.
Amazon’s recruitment and hiring processes are aligned to organizational growth and
human resource needs in corporate offices.

7. Supply Chain Management. The operations management concern in this strategic

decision area is to streamline the supply chain to support organizational objectives.
Amazon does so through automation and enabling suppliers and buyers to access
some of its IT assets. For example, sellers adjust supply levels based on demand data
available from the company’s online retail website. Also, buyers can track order and
communicate with suppliers through data available from Amazon’s website.

8. Inventory Management. In inventory management, operations management’s focus

is on maintaining optimal inventory ordering and holding. Amazon addresses this
strategic decision area through a finished goods inventory using just-in-time inventory
management in some areas. For example, in just-in-time inventory management, some
goods that arrive at the company’s fulfillment centers are immediately shipped to fulfill
customers’ orders. Amazon holds other goods as part of its finished goods inventory. In
addition, to ensure optimal inventory ordering and holding, warehouse employees are
trained to maximize the speed of order fulfillment through mobile computers linked to a
central computer and database. In this way, Amazon.com Inc.’s operations
management optimizes its online retail inventory size to minimize costs while satisfying
market demand.

9. Scheduling. Operations managers consider intermediate and short-term schedules

to ensure that resources satisfy market needs. In this strategic decision area, Amazon
relies on the involvement of suppliers for its online retail business. For example,
suppliers access the company’s website to determine demand levels and implement
their shipping and delivery schedules accordingly. Also, Amazon’s operations
management automates shipping schedules involving its fulfillment centers, which
provide shipping services to sellers for a fee.

10. Maintenance. This strategic decision area emphasizes the reliability and stability of
business processes. Amazon.com Inc.’s operations management involves specialized
teams for maintaining technological assets. In addition, workers are regularly trained to
maintain human resource capacity to satisfy the company’s needs for its e-commerce
business. Moreover, Amazon is always on the lookout for advanced technologies to
improve its operational efficiency.
 Amazon.com Inc.’s Productivity Measures
Amazon’s business productivity mainly refers to the productivity of its personnel and
automated systems in fulfilling customers’ orders. In online retail operations, the
company’s employees must move fast in packing and shipping items to fulfill customers’
orders. The following are some of the measures or criteria used to determine
productivity at Amazon:

1. Inventory items processed per hour (inventory productivity)

2. Orders fulfilled per hour (Amazon Fulfillment Center productivity)
3. Inquiries answered per day (customer service productivity)

Amazon.com Inc. Stakeholders, Corporate

Social Responsibility (An Analysis)
UPDATED ONUPDATED ON FEBRUARY 20, 2017 BY EDWARD FERGUSON

Amazon.com Inc.’s
2013 AWS Summit in New York City. Amazon maintains a corporate social
responsibility (CSR) strategy that prioritizes the e-commerce interests of customers as
stakeholders. (Photo: Public Domain)
Amazon.com, Inc.’s ability to satisfy stakeholders supports organizational growth in the
e-commerce industry. In Archie Carroll’s model of corporate social responsibility (CSR),
stakeholders are individuals or groups linked to the organization based on their stake in
what the business does. The company affects its stakeholders, and vice versa. In the
case of Amazon, stakeholders have widely varying interests, considering the global
reach of the organization. This condition requires a broad scope for the company’s
corporate social responsibility strategy, policies and programs. Satisfying stakeholders’
interests helps maintain Amazon’s market position as the leading online retail company
in the world.
 Amazon must respond to stakeholders’ interests through a comprehensive corporate
social responsibility (CSR) strategy. While its CSR programs and policies evolve,
Amazon.com Inc. needs to improve its efforts to satisfy the changing interests and
expectations of stakeholders in the global e-commerce industry.

Amazon’s Stakeholder Groups & CSR Initiatives

Amazon.com Inc. maintains corporate social responsibility initiatives to target the
interests of its main stakeholder groups. In general, the e-commerce organization
experiences pressure from a variety of stakeholders and their interests. Nonetheless,
Amazon’s corporate social responsibility programs are designed to address and satisfy
the interests of the following stakeholder groups, arranged according to significance:

1. Customers (most important)

2. Employees
3. Communities

Customers. Amazon’s corporate social responsibility strategy gives the highest priority
to customers as the most important stakeholder group. The company considers
customers as the primary determinant of its e-commerce business success, especially
because these stakeholders significantly affect revenues. Such prioritization agrees
with Amazon’s mission statement and vision statement, which highlight the centrality of
customers in the business and its development. The interests of these stakeholders are
fair pricing, convenience of service, and online security in transacting with the company.
Amazon satisfies all of these interests through emphasis on service and technology. For
example, the company uses advanced information and communication technologies for
secure transactions and for efficient purchase and delivery processes. Amazon
employees are also trained to maximize the benefits of these technologies and to
ensure customer convenience. In addition, fair pricing is maintained through competition
among sellers on the company’s online retail website and through the market-based
pricing strategy [Read: Amazon’s Pricing Strategies, Marketing Mix]. Thus, Amazon’s
corporate social responsibility approach effectively addresses the interests of customers
as the primary stakeholder group.

Employees. Amazon.com Inc. values employees as significant determinants of

organizational performance and corporate social responsibility policies and programs.
This stakeholder group is interested in competitive compensation and career
development. Employees are important because they support competitive advantage
based on Amazon’s organizational culture. The company’s human resources facilitate
the development of new ideas to increase business efficiency. Amazon satisfies the
interests of these stakeholders through leadership development and an appropriate
compensation policy based on the organization’s high growth potential. For example,
the company provides high compensation, especially for IT personnel directly involved
in developing and maintaining the technology assets of the e-commerce business.
Amazon’s continuing growth and global expansion also creates career advancement
opportunities for employees, especially in leadership and management positions. Thus,
competitive compensation and organizational cultural support are the main thrusts in
Amazon’s corporate social responsibility strategy to address the interests of this
stakeholder group.

Communities. Amazon maintains a corporate social responsibility program for

communities. These stakeholders are significant because they influence consumer
perception on the company’s goods and services. The interests of communities include
development support, such as through education, healthcare and environmental
conservation. The company addresses these interests mainly through its primary
community support arm, Amazon Smile. For example, through Amazon Smile, a
percentage of sales revenues are donated to customers’ chosen charitable
organizations. This approach enables the broad reach of Amazon’s corporate social
responsibility strategy in satisfying the interests of communities as a significant
stakeholder group in the online retail business.

Amazon.com Inc.’s CSR Performance in Addressing

Stakeholders’ Interests
Amazon.com Inc. integrates stakeholders’ interests in its corporate social responsibility
(CSR) strategy. The company considers these interests as significant influences on the
e-commerce business. Such strategy supports Amazon’s mission and vision, which
affect organizational development. It is appropriate for the company to prioritize
customers as the primary stakeholder group, considering the online retail nature of the
business. The inclusion of employees and communities is one of the strengths of the
strategy. The company’s corporate social responsibility approach is also flexible
because customers are free to choose their charitable organizations through Amazon
Smile. However, the interests of governments and investors as stakeholders are not
clearly included in the strategy. For example, Amazon’s corporate social responsibility
efforts must consider investors’ interests on the financial performance of the e-
commerce business. The company must also address governmental interests regarding
consumer protection and international retail. These considerations show that Amazon’s
corporate social responsibility strategy is satisfactory, but has room for improvement.

Amazon.com Inc.’s Marketing Mix (4Ps)

Analysis
UPDATED ONUPDATED ON FEBRUARY 20, 2017 BY EDWARD FERGUSON
 An Amazon Kindle
e-book reader. Amazon.com Inc.’s marketing mix (4Ps) creates brand resilience and
product attractiveness in the e-commerce industry. (Photo: Public Domain)
Amazon.com Inc. uses its marketing mix as a powerful approach to attract consumers
to its e-commerce website. A company’s marketing mix or 4Ps (Product, Place,
Promotion and Price) is the combination of strategies and tactics used to implement a
marketing plan. In this regard, Amazon reaches out to its target online market through
its marketing mix, which focuses on the place and price components as major selling
points. As the biggest e-commerce organization in the world, Amazon continually faces
increasing competition, which can reduce the company’s market share and global
growth potential. To address this issue, the company must ensure that its marketing mix
is up-to-date relative to market trends. Through a suitable marketing mix, the company
enables organizational resilience while supporting innovation for long-term
competitiveness of its online retail business.

Amazon’s marketing mix (4Ps) is designed to take advantage of the online nature of the
company’s e-commerce operations. The components of this marketing mix enable
competitiveness and international growth while Amazon.com Inc. innovates its services.

Amazon.com Inc.’s Products (Product Mix)

 In this component of the marketing mix, Amazon’s products or product mix is
considered. As the top player in the online retail industry, the company offers a wide
selection of products. Such a product mix supports Amazon.com Inc.’s mission
statement and vision statement. Through continued expansion and diversification, the
company’s products now include not just online retail, but also a variety of other
products that address market needs:

1. Retail service
2. Retail goods
3. Amazon Prime
4. Consumer electronics
5. Digital content distribution service
6. Amazon Video
7. Amazon Web Services (AWS)
8. Amazon Publishing
9. AmazonFresh
10. Amazon Prime Pantry
11. Amazon Dash
12. Video Direct

Amazon is primarily an online retail business. As such, its main product is retail service.
The company provides such service through its e-commerce website. Some of the retail
goods available on the website are also the company’s, such as those sold under the
AmazonBasics brand. In addition, the firm offers Amazon Prime, which is a membership
product that includes shipping service for purchases on Amazon’s online retail website.
The company has also expanded its product mix to include consumer electronics like
the Amazon Kindle e-book reader and the Kindle Fire tablet. Such expansion led to an
improvement of the effectiveness of the company’s marketing mix in getting a bigger
share of the e-commerce market. Further broadening of the firm’s product mix involved
the distribution of digital content, including music and e-books. Amazon Video is an on-
demand video streaming service offered to customers in some locations in the United
States, Europe and Japan. On the other hand, Amazon Web Services (AWS) is a set of
online services, including cloud storage. Amazon Publishing offers book-publishing
service using a number of imprints. Moreover, AmazonFresh and Amazon Prime Pantry
are the company’s services for orders and delivery of grocery items. Furthermore, the
company has integrated additional technology in the purchasing process. For example,
Amazon Dash involves a device that enables customers to purchase household items
by simply clicking a button that connects to the Internet. Video Direct enables sale or
ad-supported free viewing of user-generated videos. These product lines indicate the
company’s efforts in continually broadening its product mix. Amazon.com Inc.’s
marketing mix increases in effectiveness as more products are added to these e-
commerce offerings.

Place/Distribution in Amazon’s Marketing Mix

 The venues used to reach target customers are identified in this component of the
marketing mix. Amazon.com Inc. is a mainly online business organization. Nonetheless,
the company uses the following places to reach its e-commerce customers:

1. Official e-commerce websites

2. Amazon Books
3. Others

Amazon uses its official e-commerce websites as its primary places for transacting with
customers. These websites include Amazon.com, Audible.com (a subsidiary), and a
number of other sites with specific target markets. In addition, the company operates a
physical bookstore named Amazon Books in Seattle. This location enables the
company to reach out to customers who want to physically evaluate products before
purchase. Moreover, the firm uses other venues to temporarily transact with customers.
For example, the annual Amazon Web Services (AWS) Summit held in various
locations enable the company to reach potential customers and persuade them to pay
for its e-commerce services. In this regard, Amazon’s marketing mix significantly relies
on the strong online presence of the organization in reaching its target customers.

Amazon’s Promotion (Promotional Mix)

This component of the marketing mix involves the strategies and tactics that a company
uses to communicate with its target market. Amazon.com Inc. aims to persuade its
customers to visit its websites and pay for its online services. The following strategies
and tactics are used in such promotional mix, arranged according to importance in the
company’s e-commerce business:

1. Advertising (most important)

2. Sales promotions
3. Public relations
4. Direct marketing

Advertising functions as the primary means for Amazon to communicate with its target
market. For example, the company has an affiliate program for website owners or online
publishers to earn revenues by displaying advertisements and corresponding links to
products sold on the Amazon.com website. This strategy widens the company’s market
reach. Also, Amazon.com Inc. applies sales promotion as a secondary strategy to
attract customers and persuade them to purchase goods and services on the website.
For example, the company occasionally uses discounts and special offers to generate
more sales. On the other hand, the firm strengthens its brand image through public
relations programs, such as Amazon Smile, which donates a percentage of sales to
charitable organizations. These programs enhance consumer perception about the
corporation [Read: Amazon’s Stakeholders & Corporate Social Responsibility Strategy].
Moreover, in using direct marketing, the company directly communicates with
businesses to offer its online services, such as publishing and digital content
 distribution. In this component of Amazon.com Inc.’s marketing mix, advertising is the
main determinant of the organization’s marketing communication effectiveness.

Amazon’s Prices and Pricing Strategies

This component of the marketing mix focuses on the price levels and pricing strategies
a firm uses in selling its products. Amazon.com Inc. uses low prices as a way of
attracting customers to its e-commerce website and product offerings. Nonetheless,
given the variety of the company’s products, the following pricing strategies are used:

1. Market-oriented pricing strategy

2. Price discrimination strategy
3. Value-based pricing strategy

Amazon uses market-oriented pricing as its primary pricing strategy. For example, the
company evaluates competitors’ prices as basis for pricing AmazonBasics products.
The advantage of this pricing strategy is that it makes selling prices more competitive,
affordable and attractive to target consumers. On the other hand, the price
discrimination strategy involves setting different prices for the same product. Amazon
applies this pricing strategy through its different websites. For instance, the company’s
prices for the same products are different between the United States and the United
Kingdom, which has its own Amazon website (amazon.co.uk). This strategy is
advantageous because it enables the company to adjust its prices based on national
market conditions, perceived value of products, and consumer preferences and
expectations. In relation, Amazon.com Inc. uses the value-based pricing strategy, which
involves price levels based on product value, considering consumers’ perception of
value. Thus, the company’s marketing mix reflects flexibility in adjusting to current
market prices.

Amazon.com Inc. PESTEL/PESTLE

Analysis, Recommendations
UPDATED ONUPDATED ON MAY 20, 2019 BY ROBERTA GREENSPAN
 An Amazon Kindle. A PESTEL/PESTLE
analysis of Amazon.com Inc. shows external factors that create opportunities for
globally expanding the company’s online retail/e-commerce and IT services businesses.
(Photo: Public Domain)
Amazon.com Inc.’s performance relates to the issues shown in this PESTEL/PESTLE
analysis of the business and its remote or macro-environment. The PESTEL/PESTLE
analysis model is a strategic management tool for identifying the external factors
(political, economic, social/sociocultural, technological, ecological/environmental, and
legal) that shape the conditions of the remote or macro-environment, which in this case
is that of the e-commerce enterprise. Other markets or segments included in this
external analysis of Amazon are cloud computing services, consumer electronics, and
retail. As one of the largest players in the global market for information technologies and
related online services, the company enjoys the benefits of extensive market reach,
high capitalization, and high popularity. However, the online market is dynamic and
continually presents new challenges for Amazon. Maintaining resilience and
competence in addressing such challenges is essential to fulfilling Amazon.com Inc.’s
corporate mission and vision statements. Through tools like the PESTEL/PESTLE
analysis model, the company’s decision makers can identify the most significant
opportunities and threats based on external factors in the remote or macro-environment
of the business.

This PESTEL/PESTLE analysis of Amazon.com Inc. reveals the significance of

operations expansion into more markets to support the global growth of the e-
commerce business. However, the company needs to address competition involving
large and aggressive companies like Walmart, as well as technology firms
like Google, Apple, Microsoft, and IBM, which compete against Amazon’s cloud
services and related technological products. Also, the company now has its own
microchips used in its cloud infrastructure, thereby making Intel a potential competitor.
Still, as shown in this PESTEL/PESTLE analysis, the competitive landscape presents
opportunities to continue growing Amazon’s operations, including those of subsidiaries
like Whole Foods Market, in various market segments.
 Political Factors Affecting Amazon’s Technology and
Services Business
Amazon.com Inc. operates alongside political influence. This aspect of the
PESTEL/PESTLE analysis model focuses on governmental activity and its effects on
businesses and their remote or macro-environment. In Amazon’s case, the following
political external factors are important in the development of the e-commerce industry:

1. Political stability of developed countries, especially the U.S.A. and European countries
(opportunity)
2. Governmental support for e-commerce (opportunity & threat)
3. Increasing governmental efforts on cyber-security (opportunity)

Amazon benefits from political stability. In the PESTEL/PESTLE analysis framework,

this condition creates an opportunity for the company to expand or diversify its business
in developed countries. For example, Amazon could expand its brick-and-mortar
operations in the United States to complement its e-commerce business. On the other
hand, the external factor of overall governmental support for e-commerce is also an
opportunity. Such governmental support facilitates Amazon’s continuing expansion in
relevant markets. However, the same external factor threatens the company because of
rising competition, such as that involving Chinese online retail firms that are expanding
their operations. Nonetheless, governments present improved business conditions
through efforts in fighting cybercrime. This aspect of the PESTEL/PESTLE analysis of
Amazon shows major opportunities that the company can exploit to increase its
resilience in the remote or macro-environment of the information technology services
and e-commerce industry.

Economic Factors Important to Amazon.com Inc.

Amazon’s performance depends on the situation of the economies where it operates its
online and non-online businesses. The effects of economic trends and changes on the
remote or macro-environment are considered in this aspect of the PESTEL/PESTLE
analysis model. In the case of Amazon.com Inc., the following economic external factors
are significant:

1. Economic stability of developed markets, especially the U.S. and European countries
(opportunity)
2. Increasing disposable incomes in developing countries (opportunity)
3. Potential economic recession of China (threat)

The economic stability of developed countries increases the likelihood of success for
Amazon.com Inc. Based on the PESTEL/PESTLE analysis model, this situation
minimizes economic issues in the remote or macro-environment, thereby minimizing
risks to the company’s online retail business expansion. Amazon also has growth
 opportunities in developing countries. For example, the increasing disposable incomes
in developing markets can boost the company’s financial performance. However, the
potential economic recession of China threatens Amazon’s business. China is one of
the biggest markets that the company hopes to increasingly penetrate. Based on the
external factors in this aspect of the PESTEL/PESTLE analysis of Amazon.com Inc.,
opportunities for growth in developing countries must be included in the company’s
strategy formulation.

Social/Sociocultural Factors Influencing Amazon

Social conditions are a determinant of Amazon.com Inc. This aspect of the
PESTEL/PESTLE analysis model identifies the impact of sociocultural changes or
trends on the company’s performance as a leading online retailer and provider of
information technology goods and services. Considering such trends in the remote or
macro-environment, Amazon faces the following sociocultural external factors:

1. Increasing wealth disparity (threat)

2. Increasing consumerism in developing countries (opportunity)
3. Increasing online buying habits (opportunity)

The increasing wealth disparity refers to the increasing gap between the rich and the
poor in many countries. This PESTEL/PESTLE analysis considers such a sociocultural
trend a threat against Amazon.com Inc. in terms of the potential stagnation of
disposable income levels and the corresponding stagnation of the remote or macro-
environment of the industry. Higher disposable income levels are more favorable in
increasing the e-commerce company’s potential revenues. In addition, an increasing
degree of consumerism creates opportunities for growing the e-commerce and IT
services business. For example, higher consumerism in developing markets increases
the potential success of Amazon.com Inc.’s generic strategy for competitive advantage
and intensive strategies for growth, as the company looks to expand its global online
retail operations in these locations. In relation, the company stands to benefit from
increasing online buying habits, as more people around the world prefer to buy products
through the Internet. The external factors in this aspect of the PESTEL/PESTLE
analysis of Amazon indicate the benefits of focusing on market penetration and
expansion in developing countries.

Technological Factors in Amazon’s Business

Technological advancement directly affects Amazon, considering the centrality of
technology in its business. The consequences of technologies and related trends on the
remote or macro-environment are covered in this aspect of the PESTEL/PESTLE
analysis of the e-commerce company. The technological external factors important in
Amazon.com Inc.’s business are as follows:
1. Rapid technological obsolescence (threat & opportunity)
2. Increasing efficiencies of IT resources (opportunity)
3. Increasing rates of cybercrime (threat)

Amazon.com Inc. faces the threat of rapid technological obsolescence, which imposes
pressure on the company to continuously develop its technological assets. However, in
the context of this PESTEL/PESTLE analysis, such a condition is also an opportunity in
optimizing the business. For example, the corporation’s continued heavy investment in
information technology can boost its competitive advantage and protect the business
from new entrants in the e-commerce industry. Amazon also has opportunities to further
improve its performance based on the rapid increase of IT resource efficiencies. For
instance, new computing technologies can maximize online retail productivity and
minimize operational costs. However, the company also faces the constant threat of
cybercrime. This external factor threatens the quality of customer experience as well as
the integrity of Amazon’s business. Thus, significant investment in appropriate
technological measures is critical to the company’s long-term survival despite
technology-related issues in the industry’s remote or macro-environment. Based on this
aspect of the PESTEL/PESTLE analysis, Amazon needs to emphasize continuous
improvement of its technologies.

Ecological/Environmental Factors
Even though Amazon.com Inc. is mainly an online business, its operations are subject
to the influence of the natural environment. This aspect of the PESTEL/PESTLE
analysis model presents how the company’s remote or macro-environment relates with
ecological changes. Amazon considers the following ecological external factors in its
strategic formulation:

1. Rising interest in environmental programs (opportunity)

2. Rising emphasis on business sustainability (opportunity)
3. Increasing popularity of low-carbon lifestyles (opportunity)

Amazon has opportunities to improve its environmental impact in response to the rising
interest in environmental programs. Such interest is a direct consequence of ecological
challenges, such as waste management and energy consumption. Based on this
external factor, an improvement in Amazon.com Inc.’s corporate social responsibility
strategy could enhance the company’s environmental impact. In relation, this
PESTEL/PESTLE analysis notes major opportunities in the area of business
sustainability. For example, higher sustainability standards can further improve
environmental impact and strengthen the brand image of the e-commerce organization,
based on the business strengths identified in the SWOT Analysis of Amazon.com Inc.
Furthermore, the increasing popularity of low-carbon lifestyles provides opportunities for
the company to boost its corporate image as a leader in the e-commerce industry. The
company could implement extensive energy-saving policies in its operations for this
purpose. This aspect of the PESTEL/PESTLE analysis of Amazon shows the
 significance of a comprehensive corporate social responsibility strategy to increase the
company’s competence in addressing the ecological concerns its remote or macro-
environment.

Legal Factors
Amazon.com Inc.’s e-commerce operations must adhere to legal requirements. The
effects of regulations on the remote or macro-environment are determined in this aspect
of the PESTEL/PESTLE analysis model. In Amazon’s case, the following legal external
factors are significant:

1. Rising product regulation (opportunity)

2. Changing import and export regulations (opportunity)
3. Rising environmental protection regulations on businesses (opportunity)

Rising product regulation is seen as a result of societal demands on consumer safety

and customer security. In the PESTEL/PESTLE analysis framework, this external factor
creates opportunities for Amazon.com Inc. to intensify its efforts in reducing counterfeit
sale on its online retail website. Also, the company has opportunities to grow, based on
the external factor of changing import and export regulations. For example, Amazon can
expand its global operations to exploit the increasing ability of sellers to access
overseas suppliers. Moreover, the e-commerce company has opportunities to
strengthen its brand image through appropriate corporate social responsibility policies
that address rising environmental protection regulations. Such effort can increase
business competitiveness in the remote or macro-environment. Based on this aspect of
the PESTEL/PESTLE analysis model, Amazon can ensure long-term e-commerce
success through regulatory compliance.

PESTEL/PESTLE Analysis of Amazon.com Inc. –

Recommendations
Amazon.com Inc. remains the top player in the online retail market. The company has
shown resilience despite increasing competition with companies like Walmart. This
PESTEL/PESTLE analysis of Amazon identifies key issues that are critical to the
company’s long-term success. A recommendation is to expand the company’s
operations into developing markets, which present rapid economic development and
high e-commerce growth potential. Also, the company must address IT security issues
by continuing and enhancing its current strategies for IT security and integrity. These
issues affect consumer confidence and the stability of the company’s remote or macro-
environment. In addition, based on the external factors in this PESTEL/PESTLE
analysis, it is recommended that Amazon boost its brand strength through a corporate
social responsibility strategy that addresses current issues that link the business to the
natural environment.
Amazon.com Inc. Five Forces Analysis &
Recommendations (Porter’s Model)
UPDATED ONUPDATED ON FEBRUARY 24, 2019 BY ROBERTA GREENSPAN

An Amazon delivery box. A Five Forces

Analysis (Porter’s model) of Amazon.com Inc. shows external factors that highlight
competition, consumers and substitutes as strong forces in the online retail industry
environment. (Photo: Public Domain)
Amazon.com Inc. continues to lead the online retail market as a result of integrating
business challenges, such as the ones identified in this Five Forces Analysis, into the
firm’s strategy development. Michael Porter developed the Five Forces Analysis model
as a tool for the external analysis of business organizations. In this case of Amazon, the
external factors define the conditions of the e-commerce industry environment, with
focus on the online retail market. However, other markets are also considered, as the
company has operations in consumer electronics, digital content distribution, and online
services, such as cloud computing. Amazon.com Inc. remains the biggest player in the
e-commerce market. To keep this industry position in the long term, the company must
regularly evaluate the external factors in the online and non-online industry
environments, such as through tools like the Five Forces Analysis framework. The
forces of competitors like Apple, Google, Microsoft, Walmart, and Home Depot can be
effectively tackled through strategic formulation that accounts for the influences of the
five forces on Amazon’s e-commerce competitiveness.

Amazon.com Inc. enjoys the top position in the online retail market. Nonetheless,
external factors identified in this Five Forces Analysis indicate possible reduction of
market share and business performance because of strong competition involving large
multinational retail and technology firms. Amazon’s generic competitive strategy and
intensive growth strategies must evolve as the online market develops and expands to
include the participation of more companies and customers around the world.

Overview: Amazon’s Five Forces Analysis

Amazon.com Inc. competes against a variety of firms, including smaller online retail
stores and large firms like Walmart. The global scope of the e-commerce business also
 exposes Amazon to a diverse set of external forces. Thus, the company must ensure
that it remains resilient amid changes in the conditions of the online retail industry
environment. The following are the intensities of the external factors affecting Amazon,
based on Porter’s Five Forces Analysis model:

1. Competitive rivalry or competition (strong force)

2. Bargaining power of buyers or customers (strong force)
3. Bargaining power of suppliers (moderate force)
4. Threat of substitutes or substitution (strong force)
5. Threat of new entrants or new entry (weak force)

Recommendations. Amazon must address the major forces of competition, consumers

and substitutes, based on the Porter’s Five Forces Analysis of the business. It is
recommended that the company must address the strong force of competitive rivalry by
emphasizing competitive advantage and strengths of the e-commerce organization. For
example, the company must continue boosting its brand image, which is among the
strongest in the industry. Amazon.com Inc. can address the external factors linked to
the strong force of the bargaining power of buyers by focusing on service quality. For
instance, counterfeit reduction can improve customer experience in using the
company’s e-commerce website. Another recommendation is for Amazon to counteract
the threat of substitution by making its service more attractive. For example, the
company must continue enhancing the usability of its website to optimize user
experience. These recommendations aim at increasing Amazon’s competitiveness and
potential for long-term success in the online retail industry environment.

Competitive Rivalry or Competition with Amazon.com

Inc. (Strong Force)
Amazon competes against strong competitors. This aspect of Porter’s Five Forces
Analysis model tackles the effects of firms on each other. In the case of Amazon.com
Inc., the following external factors are responsible for the strong intensity of competition
or competitive rivalry in the online retail industry environment:

 High aggressiveness of firms (strong force)

 High availability of substitutes (strong force)
 Low switching costs (strong force)

Retail firms are generally aggressive, and they exert a strong competitive force against
each other. For example, Amazon.com Inc. directly competes against giants like
Walmart, which has a significant and expanding e-commerce website. Amazon also
experiences the strong force of substitutes because of their high availability. For
instance, Walmart’s physical or brick-and-mortar stores are substitutes to Amazon’s
online retail service. Other brick-and-mortar bookstores and smaller retailers also
compete against Amazon. Furthermore, low switching costs impose a strong force on
the company. Low switching costs correspond to low barriers for consumers to transfer
 from one retailer to another, or from one company to a substitute provider. Based on the
external factors in this aspect of the Five Forces Analysis of Amazon, competition must
be a strategic priority to ensure the company’s long-term competence.

Bargaining Power of Amazon’s Customers/Buyers

(Strong Force)
Amazon.com Inc.’s vision statement and mission statement highlight the company’s
customer-centric approach to e-commerce business. This aspect of Porter’s Five
Forces Analysis model determines the influence of consumers on firms and the industry
environment. The following external factors support the strong intensity of the
bargaining power of customers in affecting Amazon:

 High quality of information (strong force)

 Low switching costs (strong force)
 High availability of substitutes (strong force)

Consumers have access to high quality information regarding the services of online
retailers and the products they sell. This external factor affects Amazon.com Inc. in
terms of the ability of customers to find alternatives to the company’s online retail
service. In relation, the low switching costs make it easy for consumers to transfer from
Amazon to other firms, such as Walmart. Also, the high availability of substitutes further
empowers consumers to shift from one retailer to another. For example, instead of
purchasing on Amazon’s e-commerce website, a customer can easily go to one of
Walmart’s stores, which are strategically located throughout the United States. The
external factors in this aspect of the Five Forces Analysis show that Amazon must
consider the strong bargaining power of buyers as a major factor in addressing
business challenges in the online retail industry environment.

Bargaining Power of Amazon’s Suppliers (Moderate

Force)
Suppliers control the availability of supplies or materials Amazon.com Inc. needs for its
e-commerce operations, such as hardware components for information systems. The
influence of suppliers on the online retail industry environment is outlined in this aspect
of Porter’s Five Forces Analysis model. Amazon experiences the moderate intensity of
the bargaining power of suppliers based on the following external factors:

 Small population of suppliers (strong force)

 Moderate forward integration (moderate force)
 Moderate size of suppliers (moderate force)
 The small population empowers suppliers to impose a strong force on Amazon.com
Inc.’s e-commerce business. For example, changes in prices of equipment from a small
number of large suppliers could directly impact the company’s online retail operational
costs. However, the moderate forward integration limits suppliers’ actual effect on
Amazon. Moderate forward integration equates to a moderate degree of control that
suppliers have in the sale of their products to firms like Amazon. Moreover, the
moderate size of most equipment manufacturers limits their influence on the company.
Based on this aspect of the Five Forces Analysis of Amazon, the external factors
emphasize the moderate significance of suppliers as a strategic determinant in the
online retail industry environment.

Threat of Substitutes or Substitution (Strong Force)

Amazon.com Inc. competes with substitutes in the online retail market. This aspect of
Porter’s Five Forces Analysis model identifies how substitutes affect the industry
environment. In the case of Amazon, the following external factors support the strong
intensity of the threat of substitution:

 Low switching costs (strong force)

 High availability of substitutes (strong force)
 Low cost of substitutes (strong force)

Amazon continually addresses the strong force of substitutes, which threaten the e-
commerce company’s performance. The low switching costs show that customers can
easily transfer from the company to other retailers. For example, consumers can easily
decide to buy from Walmart stores or other retail establishments instead of buying from
Amazon.com Inc. The high availability of substitutes and the low costs of their product
offerings further increase the influence of substitutes against the company. Thus, the
external factors in this aspect of the Five Forces Analysis of Amazon.com Inc. show that
substitution is among the priorities in the company’s strategies for long-term success in
the online retail industry environment.

Threat of New Entrants or New Entry (Weak Force)

New firms potentially reduce Amazon’s market share in online retail. The effects of new
entrants are considered in this aspect of Porter’s Five Forces Analysis model.
Amazon.com Inc. experiences the weak intensity of the threat of new entry based on
the following external factors:

 Low switching costs (strong force)

 High cost of brand development (weak force)
 High economies of scale (weak force)
Amazon’s consumers can easily transfer to new firms, thereby empowering new firms to
impose a strong force against the company. This condition is due to low switching costs,
or the low negative effects of transferring from one provider to another. However, the
high cost of brand development in online retail weakens the influence of new entrants
on the performance of Amazon. For example, it would take years and billions of dollars
to create a strong brand that directly competes with the Amazon brand. In addition, the
company benefits from high economies of scale that make its e-commerce business
strong. As such, new entrants need to achieve similarly high economies of scale to
compete against the company. Based on the external factors in this aspect of the Five
Forces Analysis, new entrants are a minor strategic issue in Amazon’s performance in
the online retail industry environment.

Amazon.com Inc. SWOT Analysis &

Recommendations
UPDATED ONUPDATED ON JUNE 22, 2019 BY ROBERTA GREENSPAN

An Amazon Kindle. A SWOT analysis of

Amazon.com Inc. shows that the business has the potential to continue its e-commerce
leadership in the long-term. (Photo: Public Domain)
Amazon.com Inc.’s position as a leading firm in the online retail industry indicates
success in addressing the issues shown in this SWOT analysis of the business. The
SWOT Analysis model involves an internal analysis that identifies the strengths and
weaknesses (internal strategic factors), and an external analysis that identifies the
threats and opportunities (external strategic factors) relevant to the e-commerce
business. This SWOT analysis of Amazon shows the strengths that the company uses
to overcome its weaknesses and counter the threats to its business, to maximize the
benefits from exploiting opportunities in the global market. The industry situation
involves diverse factors, considering the global scope of the e-commerce company’s
operations. To ensure long-term competitive advantage, Amazon continues to address
the concerns shown in this SWOT Analysis. The company’s strategic management
efforts respond to the development of the markets for retail, consumer products,
consumer electronics, and Internet-based services. Amazon.com Inc.’s generic strategy
for competitive advantage and intensive strategies for growth are partly based on the
internal and external factors shown in this SWOT analysis.
 This SWOT analysis of Amazon points to the need to ensure a strong brand image,
along with other strengths appropriate to the online market. The company needs to
continue building its strengths, considering the rapid development of technologies.
These strengths should combat the effects of the strong competition shown in
the Porter’s Five Forces analysis of Amazon.com Inc. The e-commerce company must
maintain strategic coherence to address the challenges assessed in this SWOT
analysis.

Amazon’s Strengths (Internal Strategic Factors)

Amazon.com Inc.’s e-commerce success relies on the effective use of business
strengths. In the SWOT Analysis framework, this aspect enumerates the internal
strategic factors that the company uses to maintain and improve its operations in the
online retail, technology products, and online services markets. The following strengths
support the success and continuous growth of Amazon:

1. Strong brand
2. Moderate and expanding business diversification
3. High capability for rapid technological innovation, especially in online services

Amazon.com Inc. has the strongest brand in the online retail market. This strength is
partly responsible for the rapid growth of the business, especially in its early years,
considering brand recognition and confidence among consumers. Moderate business
diversification is also among the strengths in this SWOT analysis of Amazon. For
instance, the company now operates as a provider of consumer electronics, online retail
services, brick-and-mortar (non-online) retail services, private-label goods, and
information technology services, including cloud-computing services, among others.
These diversified operations are complementary and make Amazon.com Inc. a
formidable competitor. Moreover, the high capability for rapid technological innovation
strengthens the business in terms of the ability to respond to trends, at least
technologically. Such internal factors in this aspect of the SWOT analysis enable
business development toward the fulfillment of Amazon’s corporate mission and vision
statements.

Amazon’s Weaknesses (Internal Strategic Factors)

Amazon’s weaknesses present challenges that limit its business growth and expansion.
This aspect of the SWOT Analysis model outlines the internal strategic factors that
impose difficulties in growing or improving the business. In this case of Amazon, the
following weaknesses are most significant:

1. Imitable business model

2. Limited penetration in developing markets
3. Limited brick-and-mortar presence
 Amazon.com Inc. has a business model that is easy to imitate. For example, other
companies can establish e-commerce websites that sell just about anything. In the
SWOT analysis framework, this internal factor is a weakness that creates opportunities
for other firms to impose greater competition against the e-commerce giant. Amazon’s
limited penetration in developing markets is also a weakness that prevents the business
from benefitting from the high economic growth rates of these markets. On the other
hand, the company’s limited brick-and-mortar presence is a barrier to rapidly expanding
in the non-online market. Nonetheless, considering its acquisition of Whole Foods
Market, Amazon is on track to grow its non-online operations. Overall, the internal
factors in this aspect of the SWOT analysis impose challenges on the company,
especially in terms of growth in current and new e-commerce markets. Addressing
these challenges may involve changes in Amazon’s organizational structure and design,
as well as corresponding adjustments in strategic planning and management.

Opportunities for Amazon.com Inc. (External Strategic

Factors)
There are various opportunities to improve Amazon’s business performance and service
quality. In the SWOT Analysis model, this aspect identifies the external factors that the
company can use to enhance its business, such as through growth in the international
e-commerce market. In this case, Amazon has the following opportunities:

1. Expansion in developing markets

2. Expansion of brick-and-mortar business operations
3. New partnerships with other firms, especially in developing markets

Amazon has the opportunity to penetrate developing markets. This move should
establish the company’s presence before other large e-commerce firms take root,
thereby giving the advantage of a stronger competitive edge. In relation to the
weaknesses considered in this SWOT analysis of Amazon.com Inc., there is an
opportunity to expand the company’s brick-and-mortar operations. This external factor
refers to the potential revenue increase that comes with establishing a stronger
presence through more brick-and-mortar stores, in addition to existing Amazon Go
stores. Furthermore, the opportunity to develop new partnerships with other firms is an
external strategic factor that the company can exploit to expand its reach in the global e-
commerce industry. Also, partnerships with businesses that have a strong corporate
citizenship image can improve the effects of Amazon’s corporate social responsibility
strategy and stakeholder management efforts. The company can use these external
factors to improve market reach and revenues. Thus, this aspect of the SWOT analysis
illustrates that Amazon can continue growing despite increasing market saturation.

Threats Facing Amazon (External Strategic Factors)

 Amazon experiences various threats corresponding to its operations in different
industries and markets. External factors that reduce or limit business development and
performance, such as in e-commerce operations, are considered in this aspect of the
SWOT Analysis model. Amazon.com Inc. must address the following threats in its
industry environment:

1. Aggressive competition with online and non-online firms

2. Cybercrime
3. Imitation of business model and products

Competition remains one of the strongest threats against Amazon.com Inc., with regard
to competition against firms like Walmart, Home Depot, Costco
Wholesale, eBay, Apple, Google, Microsoft, and Netflix, among others. This competitive
pressure represents the strategic management challenges in the markets for consumer
electronics, retail, e-commerce, online digital content distribution, cloud-based services,
and other information technology services. Cybercrime is also pertinent to this SWOT
analysis of Amazon.com Inc. Cybercriminals threaten the security and integrity of the
business, as well as customer confidence in the company. The PESTEL/PESTLE
analysis of Amazon.com Inc. identifies this threat as one of the technological trends
affecting the industry. Another threat is imitation, which is an external factor that could
reduce the e-commerce company’s market share and brand value. Amazon’s marketing
mix or 4P helps address the adverse effects of this threat. Overall, the external strategic
factors presented in this aspect of the SWOT analysis point to the need to develop
stronger measures to strategically overcome the threats in the e-commerce, retail,
consumer electronics, consumer goods, and information technology services industry
environments.

Recommendations – SWOT Analysis of Amazon.com

Inc.
This SWOT analysis shows that Amazon’s operations can continue expanding, based
on the opportunities in the business environment, as well as the company’s strengths.
For example, the corporation can grow through expansion into new e-commerce
markets, especially in high-growth developing economies. However, the weaknesses
and threats identified in this SWOT analysis require Amazon to consider revising some
of its strategies. Still, the business remains strong and one of the biggest technology
firms in the global market. To address the external and internal factors in this SWOT
analysis, it is recommended that Amazon.com Inc. continue diversifying its business to
further strengthen itself against industry-specific risks. Another recommendation is to
develop new partnerships to extend market reach and reinforce Amazon’s multinational
operations against competition and related strategic challenges.
Amazon.com Inc.’s Organizational Culture
Characteristics (An Analysis)
UPDATED ONUPDATED ON FEBRUARY 12, 2017 BY PAULINE MEYER

Ashton Carter, left,

meets with service members in an exchange program with Amazon in Seattle on March
3, 2016. Amazon.com Inc.’s organizational culture promotes risk-taking and
unconventional human resources in the e-commerce business. (Photo: Public Domain)
Amazon.com Inc. has an organizational culture that enables business capacity to
respond to the demands of the e-commerce market. A company’s organizational or
corporate culture sets the traditions and values that influence employees’ behaviors. For
example, Amazon’s corporate culture pushes employees to go beyond traditional limits
and conventions to develop bright ideas and solutions. As the world’s top-performing
online retailer, the company continues to seek fresh talent. However, to maintain a
capable workforce, Amazon must reinforce its organizational culture to shape the
development of human resources for long-term competitive advantage.

Amazon’s organizational culture is seen as a critical factor in the success of the online
retail business. The corresponding cultural characteristics define the capabilities of
Amazon.com Inc.’s human resources and, in turn, the e-commerce organization.

Features of Amazon.com’s Organizational Culture

Amazon is known for a corporate culture that pushes employees to explore ideas and
take risks. This cultural condition is responsible for the company’s capacity to seek new
opportunities to utilize data-intensive processes to provide efficient online retail service.
Amazon.com Inc. states, “We’re a company of pioneers. It’s our job to make bold
bets, and we get our energy from inventing on behalf of customers. Success is
 measured against the possible, not the probable. For today’s pioneers, that’s
exactly why there’s no place on Earth they’d rather build than Amazon.” This
statement shows that Amazon’s organizational culture has the following characteristics:

1. Boldness
2. Customer-centricity
3. Peculiarity

Boldness. Amazon promotes boldness among its workers. This characteristic of the
corporate culture is seen in how the company pioneered to sell a wide array of items
online, initially starting with books, through data-intensive information technology. In
relation, Amazon.com Inc.’s employees are encouraged to take risks, such as in
considering new ideas to do business. In emphasizing boldness, the company also
facilitates openness toward new ideas based on an organizational diversity policy. This
feature of the organizational culture enables Amazon to identify the best possible ideas
to solve problems or improve the e-commerce business.

Customer-Centricity. Amazon.com Inc.’s vision statement highlights the centrality of

customers in its business. This factor is also included in the company’s organizational
culture. For example, Amazon reinforces workers’ focus on customers’ needs and
demands. The company continually strives to determine trends and changes in
consumer preferences, and applies these preferences in its online retail and related
services. Through this characteristic of the corporate culture, Amazon maintains its
effectiveness in satisfying customers as the e-commerce business expands.

Peculiarity. Amazon.com Inc.’s organizational culture also involves peculiarity. In

particular, this cultural characteristic refers to the idea of challenging conventions. For
example, Amazon motivates its employees to view themselves and their work as
different from conventional ways of doing business. The company believes that
conventions impose limits on potential business growth. Thus, through this feature of
the corporate culture, Amazon motivates employees to think outside the box to bring the
e-commerce business to its maximum potential.

Amazon’s Organizational Culture Implications,

Advantages & Disadvantages
Amazon’s corporate culture reinforces the company’s pioneering efforts in this type of
online retail business, as espoused in the vision of CEO and founder Jeff Bezos. The
firm’s cultural characteristics have the advantage of supporting innovation. For example,
boldness and peculiarity directly promote new ideas to improve Amazon.com Inc.’s e-
commerce business. Another advantage of this organizational culture is its focus on the
customer, ensuring that the company always satisfies consumer expectations and
preferences. However, a disadvantage of Amazon’s organizational culture is that it
imposes a strain on human resources, especially in pushing employees to take a bold
and peculiar non-conventional approach in doing their jobs.

Amazon.com Inc.’s Organizational Structure

Characteristics (An Analysis)
UPDATED ONUPDATED ON FEBRUARY 16, 2019 BY PAULINE MEYER

Defense Secretary Ash Carter (left) with

Amazon CEO Jeff Bezos on March 3, 2016. Amazon.com Inc.’s organizational structure
enables managerial control of the e-commerce business. (Photo: Public Domain)
Amazon.com Inc.’s organizational structure enables extensive control on global e-
commerce operations. An organizational or corporate structure establishes the design
and system of interactions among members of the firm. For example, Amazon’s
corporate structure determines how managers direct and influence operational activities
in various business areas. As a leading online retail business, Amazon.com must
maintain an organizational structure that adequately supports its expanding market
reach. An evolving corporate structure also benefits Amazon as the company adds
more products and gradually diversifies its business. The design of this structure
complements the technological foundation of the business. Such complementation
makes Amazon’s corporate structure a determining factor in the company’s ability to
withstand the effects of competitors, such as Walmart, Apple, Google, Microsoft, and
many other businesses with online and non-online operations. Considering the
aggressiveness of competition, it is essential that structural characteristics strengthen
the company to ensure continuing e-commerce success.

Amazon’s organizational structure enables managerial control. Strategic management

initiatives are comprehensively implemented through such control. The characteristics
of this structure also provide support necessary for Amazon.com Inc.’s new product
launches in the e-commerce market, as the corporation diversifies its operations. Future
elements of the corporate structure are expected to capture business necessities based
on new organizational components that represent a more diversified corporation.

Features of Amazon.com’s Organizational Structure

Amazon.com Inc. has a functional organizational structure. This structure focuses on
business functions as bases for determining the interactions among components of the
 organization. The following characteristics are the most significant in Amazon’s
corporate structure:

1. Global function-based groups (most significant feature)

2. Global hierarchy
3. Geographic divisions

Global Function-Based Groups. Function-based groups are the strongest

characteristic of Amazon’s organizational structure. Each major business function has a
dedicated group or team, along with a senior manager. The strategic objective in having
this structural characteristic is to enable Amazon.com to facilitate successful e-
commerce operations management throughout the entire organization. Considering its
ongoing global expansion, the company grows through this feature of the corporate
structure in terms of ease of establishing operations in new markets, as shown
in Amazon.com Inc.’s Generic & Intensive Growth Strategies. The following are the
major function-based groups in Amazon’s organizational structure:

1. Office of the CEO

2. Business Development
3. Amazon Web Services (AWS)
4. Finance
5. International Consumer Business
6. Accounting
7. Consumer Business
8. Legal and Secretariat

Global Hierarchy. Hierarchy is a traditional organizational structural characteristic. In

the case of Amazon.com Inc., such characteristic is expressed in terms of a global
system of vertical lines of command and authority that influence the online retail firm.
For example, senior managers’ directives are applied throughout the organization,
affecting all relevant offices of the company worldwide. The strategic objective of this
feature of the corporate structure is to facilitate managerial control of Amazon’s entire
organization.

Geographic Divisions. Amazon’s organizational structure also involves geographic

divisions. In this structural characteristic, groups are based on geographic regions and
related business goals. For example, Amazon.com Inc. uses geographic divisions to
make it easier to manage the e-commerce business based on economic conditions of
certain regions. The strategic objective in having this characteristic of the organizational
structure is to enable the company to address issues or concerns relevant to each
geographic region, considering differences among regional markets. Amazon has a
simple approach for this structural feature, involving the following geographic divisions
in its operations:

1. North America
2. International

Amazon.com’s Organizational Structure Implications,

Advantages & Disadvantages
Amazon’s corporate structure is effective in supporting international growth in the e-
commerce market. The company’s continuing success in expanding its business is an
indicator of the suitability of this organizational structure. An advantage of function-
based groups and hierarchy is that they enable Amazon.com Inc. to rapidly and
effectively implement managerial directives. Also, geographic divisions are
advantageous in supporting focus on online retail market concerns and related
economic conditions in certain regions, such as North America.

A disadvantage of this organizational structure is that it has limited flexibility and

responsiveness. The dominance of the global function-based groups and global
hierarchy characteristics reduces the capacity of Amazon to rapidly respond to new
issues and problems encountered in the e-commerce business. Thus, a
recommendation is for the company to consider reducing the dominance of these
structural characteristics. Amazon could also establish higher flexibility and
responsiveness by increasing the empowerment or degree of autonomy of regional or
local offices.

Amazon.com Inc.’s Generic Strategy,

Intensive Growth Strategies
UPDATED ONUPDATED ON FEBRUARY 12, 2017 BY NATHANIEL SMITHSON

Amazon’s e-
commerce website showing deals to attract consumers. Amazon.com Inc.’s generic
strategy for competitive advantage (Porter’s model) and intensive growth strategies
support the company’s objectives in dominating the online retail market. (Photo: Public
Domain)
Amazon.com Inc.’s generic strategy for competitive advantage, based on Michael
Porter’s model, shows the approach that the organization uses to develop its business
amid tough competition in the online retail market. As the largest online retailer in the
world, Amazon proves to be highly competitive, even against giants like Walmart
[Read: Walmart’s Generic & Intensive Growth Strategies]. Amazon’s intensive growth
strategies are responsible for business growth and expansion. For instance, the
company’s provision of its e-commerce services outside the United States shows
business plans for international growth. Through effective implementation of its generic
competitive strategy and intensive strategies for growth, Amazon.com succeeds in the
global e-commerce market.

Amazon’s generic competitive strategy enables the e-commerce business to offer

goods and services at affordable rates. The intensive strategies of Amazon.com Inc.
support continuing international growth.

Amazon.com’s Generic Strategy (Porter’s Model)

Amazon uses cost leadership as its generic strategy for competitive advantage.
Minimization of operational costs is the objective in this generic competitive strategy.
For example, Amazon.com uses advanced computing and networking technologies for
maximum operational efficiency, which translates to minimized costs. Considering the
nature of e-commerce, the company benefits from process automation, which is
generally used in purchase processing, scheduling, and other operational processes.
These benefits enable Amazon.com Inc. to minimize the cost of its online retail and
other services.

A strategic objective linked to Amazon’s cost leadership generic strategy is to build e-

commerce competitive advantage through continuous improvement of information
technology infrastructure. In relation, the company also has the strategic objective of
heavily investing in research and development (R&D) to optimize the performance of its
IT resources. In addition, the cost leadership generic competitive strategy pushes
Amazon.com Inc. to minimize its price levels. This strategic objective impacts Amazon’s
marketing mix. The low prices are significant in attracting consumers. Thus, through the
generic strategy of cost leadership, competitive advantage is gained to support the
fulfillment of Amazon.com Inc.’s mission statement and vision statement, especially with
regard to online retail global growth and leadership.

Amazon.com’s Intensive Strategies (Intensive Growth

Strategies)
Market Development. Amazon uses market development as its current primary
intensive growth strategy. Entry and growth in new markets is the main objective in this
intensive strategy. Amazon.com Inc. adds new countries where it offers its services. For
example, the company initially provided its online retail services to consumers in the
United States. Amazon now operates e-commerce websites in more than 10 countries,
including Canada, the United Kingdom, China and India. Each new country is
considered a new market that creates growth opportunities for the firm. Amazon’s
generic strategy builds competitive advantage that allows the company to implement
this intensive strategy of market development. A strategic objective related to this
intensive growth strategy is for Amazon.com to establish new online retail websites that
correspond to new countries added to the company’s global market reach.

Market Penetration. Market penetration is a secondary intensive growth strategy in

Amazon’s online retail business. The objective of this intensive strategy is to generate
more revenues from the markets where the company currently operates. Amazon.com
grows with increasing consumerism. For example, as consumers develop increasing
interest in online retail, the company benefits from higher sales revenues, especially
when considering the popularity of the Amazon brand. Market penetration is responsible
for the initial rapid growth of Amazon.com Inc. in the United States. The company’s
generic strategy creates the competitive advantage necessary to penetrate markets
based on low costs and prices. A strategic objective based on this intensive growth
strategy is to implement an aggressive marketing campaign to attract more consumers
to Amazon’s e-commerce website.

Product Development. Amazon.com Inc. applies product development as a supporting

intensive strategy for business growth. Developing and offering new products to gain
higher revenues is the goal of this intensive growth strategy. Amazon grows partly by
developing new products over time. For example, the company now offers
AmazonBasics products and Amazon Web Services (AWS). The company’s cost
leadership generic strategy supports this intensive strategy by providing the company
with low-cost business processes to introduce new products. A strategic objective
related to this intensive growth strategy is to increase research and development (R&D)
investment for rapid product development and release to the online retail market.

Diversification. Diversification is the least significant among Amazon’s intensive growth

strategies. Growth based on new business is the objective in applying this intensive
strategy. For example, Amazon grew through its acquisition of Audible, which is a
producer of audiobooks and related products. In this regard, the company partly uses
acquisition to implement this intensive growth strategy. Amazon.com Inc.’s cost
leadership generic strategy enables the organization to grow in diversification by
applying the same approaches to minimize operating costs and selling prices. A
strategic objective associated with this intensive strategy is to grow the e-commerce
business through an aggressive acquisition strategy.
Amazon.com Inc.’s Mission Statement &
Vision Statement (An Analysis)
UPDATED ONUPDATED ON FEBRUARY 13, 2019 BY LAWRENCE GREGORY

An Amazon delivery box in 2009.

Amazon.com Inc.’s corporate vision statement and corporate mission statement show
strategic objectives for global expansion and leadership in the e-commerce market,
cloud computing, online services, and related industries. (Photo: Public Domain)
Amazon.com Inc.’s mission and vision statements contribute to the company’s status as
one of the largest online retailers in the world. This success is attributed to stringent
measures to ensure that the vision and mission statements are fulfilled. In theory, the
corporate vision statement provides organizational direction toward a desired future
condition of the business. On the other hand, the corporate mission statement presents
business goals and guides strategic management in the company. Based on this
business analysis case, Amazon’s mission statement focuses on effective and high-
quality service. For example, the company emphasizes target customers’ convenience
in accessing the best selection of products in the e-commerce market. The scope of the
selection of products available from the company is a business strength identified in
the SWOT analysis of Amazon.com Inc. In relation, the company’s vision statement
shows a target future of global dominance in the online retail industry. The fulfillment of
these official statements facilitates further enhancement of the e-commerce business for
long-term success in the global market.

Amazon.com’s corporate mission and vision statements are fundamental in developing

strategies to support the company’s competitive advantages against firms
like Google, eBay, Apple, Walmart, and Costco Wholesale. These competitors create
the strong force of competitive rivalry evaluated in the Porter’s Five Forces analysis of
Amazon.com Inc. The company’s corporate vision and mission statements also
influence the operations of its subsidiaries, such as Whole Foods Market. Considering
the variety of its products, which include online retail services, digital content
distribution, cloud computing services, and computer software and hardware,
Amazon.com Inc. aligns its vision statement with its mission statement to unify its
diverse operations in various industries.
 Amazon.com’s Corporate Mission Statement
Amazon’s mission statement is “We strive to offer our customers the lowest
possible prices, the best available selection, and the utmost convenience.” This
corporate mission promises attractive e-commerce services to satisfy target customers’
needs. The company focuses on the variables of price, selection, and convenience. In
this regard, the following characteristics are identifiable in Amazon’s corporate mission
statement:

1. Lowest prices
2. Best selection
3. Utmost convenience

The “lowest prices” component of the mission statement guides the pricing strategies
included in Amazon.com Inc.’s marketing mix or 4P. Low prices are a selling point that
makes the company’s e-commerce website and services attractive. A corresponding
strategic objective is to reduce operational costs to enable the business to minimize
prices. Amazon’s corporate mission statement also points to having the best selection.
For example, the wide array of products on the company’s website is a factor that
attracts customers. Moreover, Amazon.com Inc.’s corporate mission emphasizes
convenience, such as in accessing the company’s products via the Internet. This
characteristic is a response to consumers’ use of “convenience” as a criterion when
evaluating the quality and attractiveness of online retail services.

Amazon.com’s Corporate Vision Statement

Amazon’s corporate vision is “to be Earth’s most customer-centric company, where
customers can find and discover anything they might want to buy online.” This
vision statement underscores the business organization’s main aim of becoming the
best e-commerce company in the world. In this regard, the following characteristics are
identifiable in Amazon’s corporate vision statement:

1. Global reach
2. Customer-centric approach
3. Widest selection of products

The “global reach” component of Amazon.com Inc.’s vision statement is all about
international leadership in the e-commerce market. For example, in stating the “Earth”
as the market, the company shows that it aims to continue expanding globally. Thus, a
corresponding strategic objective is global expansion, especially through market
penetration and market development, which are included in Amazon.com Inc.’s generic
strategy and intensive growth strategies. The customer-centric approach in Amazon’s
corporate vision statement shows that the company considers customers as among the
most important stakeholders in the online retail business. This consideration agrees
with Amazon.com Inc.’s corporate social responsibility strategy for its stakeholders.
Moreover, the corporate vision indicates continuing efforts to broaden the product mix.
These efforts contribute to business growth and to making the company’s services more
attractive to target consumers.

Amazon.com’s Corporate Vision and Corporate

Mission – Recommendations
Amazon.com’s mission statement satisfies many of the conventional characteristics of
ideal mission statements. For example, the company includes target customers and
market, variety of products, and basic business aims (pricing and convenience) in the
corporate mission. However, the company does not include technology and the nature
of the business and its operations. In this regard, it is recommended that Amazon add
details in its corporate mission to give employees and investors a better idea of what the
company is all about. This recommendation should make the corporate mission
statement more comprehensive, especially in representing the company’s businesses,
such as e-commerce, cloud-based computing services, digital content delivery, software
and hardware, and brick-and-mortar retail (Amazon Books).

Amazon.com’s vision statement possesses strong characteristics, such as the

specification of the company’s target market and an aspect of its marketing mix.
However, this corporate vision satisfies only some of the conventional characteristics of
ideal vision statements. For example, Amazon’s corporate vision is concise, clear, and
abstract enough to ensure suitability in various areas of the business. Still, this
corporate vision is not stable enough to ensure its suitability in the future of the
business. For instance, Amazon’s business now includes cloud services and brick-and-
mortar bookstores. Yet, the company’s vision statement still focuses on e-commerce.
Thus, it is recommended that Amazon improve its corporate vision statement by adding
these details about such businesses to make the statement comprehensive in reflecting
the future state of the corporation.