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Last updated: Sept 06, 2020

  Company: Amazon 

 CEO: Andrew R. Jassy

 Year founded: 1994

  Headquarter: Seattle,USA

 Number  of Employees (2020): 1,298,000

 Type: Public

 Ticker Symbol:  AMZN

 Market Cap (Feb 2021): $1.65 Trillion

 Annual Revenue (2020): $386 Billion 

 Pro t | Net income (2020): $21 Billion

 Products & Services:    Amazon.com | Zappos.com | IMDb | Junglee | Ring |

Whole Foods Market | Amazon Web Services (AWS) | Blink | Alexa.com | 

 Competitors: Alibaba | Net ix | ebay | JD | Costco | Flipkart | Apple’s itunes |

Walmart | Otto | Tesco | Google Play Store | Target | Home Depot | Walgreens |

Staples |

Did you know?

When Amazon was started, a bell used to ring at the o ce after every
 purchase? Soon enough, this bell had to be shut down because of the

high volumes of sales.  

An overview of Amazon

Amazon’s popularity is widespread around the globe. It has over 310 million active

users and 100 million subscribers worldwide. Being the world’s leading online

retailer, Amazon bags many achievements, eye-popping pro ts, and successful

launches.

Let’s discuss this online retail giant in a little depth and understand the company’s

business scenario with the help of Amazon SWOT analysis.

Je Bezos laid the foundation of Amazon in 1994. Originally, the company started as

an online bookstore but soon converted to a top online retailer selling almost

everything from A to Z just like its logo says.

 Key facts about Amazon

SWOT Analysis of Amazon

The SWOT analysis of Amazon is given below:

Amazon’s Strengths – Internal Strategic Factors

1. Strong brand name – As a global e-commerce giant, Amazon has a strong

position and successful brand image in the market. 

2. Brand valuation – According to Interbrand’s Global Brand Ranking 2020, Amazon

is ranked at #2 position (Apple at #1 and Google at #3), with a brand value of $200

Billion.

3. Customer oriented – Amazon caters to a large number of customers for everyday

needs at inexpensive prices. This has made it a customer-oriented brand.

4. Di erentiation and Innovation – Amazon frequently brings creative ideas and

innovative additions to its product line and service o erings like ambitious drone

delivery service and Withings Aura Smart Sleep System.  This creates a

di erentiation from other companies.

5. Cost Leadership – Amazon doesn’t incur costs in maintaining physical retail

stores by selling everything online. With economies of scale, Amazon e ciently

controls its costs and lowers its inventory replenishment time. The company has

formed numerous strategic alliances with many companies like Evi Technologies,

Thalmic Labs, Shoe tr, The Orange Chef etc. It has a strong value chain system

which also helps in maintaining a low-cost structure.

6. Largest Merchandise Selection – Amazon owns extensive product mix which

attracts online customers to make their majority of purchases from it rather than

other online retailers. As of 2018, Amazon has sold 562.3 million products in its

Amazon.com Marketplace. 

7. Large number of third-party sellers – Due to the high tra c volume on

Amazon’s sites, a large number of third-party sellers have joined the platform of
Amazon to sell their own merchandises. The data from Ful llment by Amazon (FBA)

reveals that there are more than 2 billion items available from third-party sellers.

8. Go Global and Act Local strategy – This strategy has bene tted Amazon the

most. Amazon develops partnerships with local supply chain companies that help it

in competing against domestic e-commerce rivals. It understands the local needs

and launches its services as per the country’s culture.

In India, for example, it has launched a market campaign “Aur Dikhao” to encourage

users to search more of its products.

9. Large number of acquisitions – The successful acquisitions of Whole Foods,

Zappos.com, woot.com, Junglee.com, IMBD.com, and many others have produced

signi cant revenues and pro ts for Amazon.

10. Involved into 3 key business – Amazon Marketplace, Amazon Web Services

(AWS), and Amazon Prime are 3 key businesses of Amazon which work and support

each other. As a whole, they generate massive pro ts and advantages for the

company.

11. Market Leader – With over $1 Trillion market capitalization and above $386

billion annual revenues, Amazon is truly a market leader in online retail industry.

12. Superior logistics and distribution systems – Amazon uses highly e cient

logistics and distribution systems. It even has xed rates for di erent delivery time

periods. Thus, it executes reliable, secure, and fast delivery of goods and products to

the customers.

13. Minimum pay raise to $15 per hour – Amazon is among the rst companies in

retail to raise its minimum hourly pay to $15. In comparison, Target pays $12 per
hour, Walmart pays $11 per hour, and Costco pays $14 per hour. 

Image source: Statista

Amazon’s Weaknesses – Internal Strategic Factors

1. Easily imitable business model – Online retail businesses have become quite

common in this digital world. So imitating Amazon’s business model for rival rms is

not so di cult. A few businesses are even giving Amazon a tough time. These

include Barnes & Noble, eBay, Net ix, Hulu, and Oyster etc.

2. Losing Margins in Few Areas – In few areas such as India, Amazon has faced

losses. It’s free shipping to customers can be one of the reasons that expose the

risks of losing margins in some markets.

3. Product Flops and Failures – Its Fire Phone’s launch in the US was a big failure

while its Kindle re device didn’t even grow well.

4. Tax Avoidance Controversy – Tax avoidance in Japan, UK and US has sparked

negative publicity for Amazon. President Trump criticized Amazon over taxes on

social media.

5. Limited brick-and-mortar presence – Amazon owns very limited physical

stores. This sometimes hinders to attract customers buy things which are not

sellable on online stores.

6. Vox published negative reports related to employees’ treatment and workplace

conditions against Amazon in July 2018. Poor air conditioning, timed bathroom

breaks, and constant video surveillance are few of the negative remarks made by the

employees. Such things a ect the market reputation of Amazon.

7. Declining consumer safety – As its o erings increase, it is becoming a challenge

for Amazon to vet each product and guarantee the highest level of safety. The U.S.

Environmental Protection Agency (EPA) recently had to order Amazon to remove a

wide range of pesticides and unsafe products on its platform.  

8. Unfair use of third party data – Engaging in unfair trade practices undermines

trust and increases legal risks. Amazon is facing antitrust charges in the European

Union for collecting and using data from third-party to compete against them. If

found in violation, Amazon can be ned up to 10% ($28 Billion) of its 2019 annual

revenue ($280 Billion). 

10. Overdependence on distributors – Relying on distributors exposes Amazon to

a wide range of issues. One of its main distributors (German Logistic Group –

 Deutsche Post DHL) can leverage its position to renegotiate terms.

11. Employees Strike – Strikes can grind Amazon’s operations to a halt. In Germany,

Amazon employees went on strike due to unsafe working conditions and paralyzed

operations in six distribution centers.  

Amazon’s Opportunities – External Strategic Factors

1. Amazon can gain the opportunity to penetrate or expand its operations in

developing markets.

2. By expanding physical stores, Amazon can improve competitiveness against big

box retailers and engage customers with the brand.

3. Amazon has the opportunity to improve technological measures and

organizational policies to reduce counterfeit sales. One case of counterfeit sales

came into light when Amazon sold a fake My Critter Catcher. The product was sold

for $1 less than the original product.   

4. Can do backward Integration by expanding its production of in-house brands

such as Amazon basics to di erentiate its o erings and improve pro t margins. 

5. More acquisitions of e-commerce companies can increase the company’s

market share and reduce the competition level.

6. Self Driving Technology – Amazon recently acquired California-based self-

driving startup Zoox Inc for whooping $1 Billion. It can now leverage autonomous

technology to exploit the increase in demand for ride-hailing services or use it to

improve its delivery network.

7. Launch of electric rickshaws in India– Amazon pledges to make a positive

impact on the environment. With this vision in mind, Amazon plans to deploy 10,000

electric rickshaws for delivery in India by 2025. 

Amazon’s Threats – External Strategic Factors

1. Few controversies have caused a dent in Amazon’s brand image. People critically

reacted and boycotted Amazon sites in 2010 when they found that it’s selling the book

“The Pedophile’s Guide to Love & Pleasure: a Child-lover’s Code of Conduct.”

2. Government regulations can also threaten the business proceedings of Amazon in

some critical countries. Amazon does not ship to Cuba, Iran, North Korea, Sudan, and

Syria.
3. Links to exploitative labor – Amazon is one of three retail giants facing scrutiny

from the US State Department for maintaining supply chains and labor sources

associated with human rights abuses. This exposes the ecommerce giant to

reputational, economic, and legal risks.

4. Increasing cybercrime can a ect the network security system of the company.

5. Aggressive competition with big retail rms like Walmart and eBay can give

Amazon a tough time in the future. In addition, now Amazon competes with the

following companies:

In Video Streaming Service: Apple TV+, Net ix, Disney+

In Logistics: FexEx

In Self Driving Technology: Tesla, Uber, Ford

6. Imitation is simple as many new entrants are coming up in the market usually with

the same business model of Amazon.

7. Fake Products – The increase in counterfeiting and fake products threatens Amazon’s

pro ts. The company recently led a lawsuit against New York-based online retailer for

allegedly counterfeiting Valentino shoes, a luxury Italian shoe brand o ered by Amazon. 

8. Economic Recession – Amazon is not immune to an economic recession. If

economic uncertainty worsens, it can impact Amazon’s sales. 

9. Fake reviews – Amazon has an overwhelming amount of fake reviews, and the problem

has worsened in recent times due to the pandemic. Product reviews are a critical indicator

of quality and authenticity, and customers rely heavily on reviews to make purchases.
According to the Financial Times investigation, Amazon has deleted over 20,000 fake 5-

star reviews from its top UK reviewers.

 Amazon SWOT analysis

Recommendations

SWOT analysis clari es the current standing of Amazon. Few necessary improvements are

needed to be done to administer the lacking and reinforce its market position.

In short, Amazon needs to strengthen its key areas, minimize its weaknesses, avail

opportunities, and counteract threats for future progress.

Few recommendations are given below:

1. Consolidate the market dominance by boosting its marketing e orts, promotional

activities, and competitive advantages.

2. Strategically deal with global controversies. Amazon needs to resolve tax issues and

manage its app’s features e ciently to diminish negative publicity in the market.

3. Increase its limited presence through opening physical stores outside the U.S. This

will augment brand popularity and market reach.

4. Enhance its strategic entry in developing countries where many growth opportunities

are available.

5. Increase competitive edges and enlarge the gap between Amazon and its biggest

competitors.
6. Address the issues of counterfeit sales and cybercrimes by upgrading technology

measures.

7. Enhance network security systems for the protection of consumers’ rights.

 Tell us what you think? Did you nd this article interesting?                            

                       

Share your thoughts and experiences in the comments section below.

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S.K. Gupta

A management consultant and entrepreneur. S.K. Gupta understands how to create

and implement business strategies. He is passionate about analyzing and writing

about businesses.

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3 COMMENTS

Maggy 
MAY 29, 2020 AT 10:57 AM

2. Government regulations can also threaten the business proceedings of Amazon in

some critical countries. Amazon does not ship to Cuba, Iran, North Korea, Sudan, and

Styria.

I think you meant Syria, not Styria. Styria is a part of Austria and we get Amazon

deliveries here in Styria 😉

 SG 
MAY 30, 2020 AT 8:52 AM

Thanks Maggy, it was a typo

xed it now 🙂

Meagan Castano 
NOVEMBER 21, 2020 AT 3:12 AM

Thanks for the information, i am bookmarking it for future updates.

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