MGT PPT Data

Porter’s Five Force Model
Competition in the industry (Strong force)

Amazon operates in a very competitive market, and the Amazon competitors' analysis shows that the rivalry in the
online retail market is increasing very rapidly. The number of players in the market is increasing, and small-scale
brands and startups are making their place because of low switching costs. Amazon faces throat-cut competition from
Walmart, Flipkart, Alibaba, eBay, etc. However, Amazon enjoys economies of scale and large investment options.
3.2. The threat of new entrants (weak force)

Amazon is a giant in the market, and it has a very strong brand image. Also, it enjoys economies of scale and large
warehousing and delivery facilities. Since it is a large-scale company, it has a massive investment in eCommerce
solutions, customer services, logistics, and marketing. So, it is rather challenging for any company to beat this brand
image and make its prominent place in the market. However, small-scale companies can grab a limited segment of
customers because of low switching costs. So Amazon Porter's five forces analysis shows that the threat of new
entrants is a weak force with no substantial setback for Amazon.
3.3. The bargaining power of suppliers(moderate force)

Suppliers control the availability of products for the eCommerce operations of Amazon. Also, Amazon relies on the
equipment and hardware components for information systems in cloud services. In Amazon Porter's five forces
analysis, the bargaining power of suppliers is a moderate force. The contributing factors to this force are small
suppliers, moderate forward integration, and the size of supplier.However, Amazon dictates the supply chain because
of its large business and ease of switching suppliers.
3.4. The bargaining power of customers(Strong force)

The bargaining power of buyers in Amazon Porter's five forces model is medium to high. Amazon's success is based
on customer satisfaction and product quality. Though switching costs for the customers are very low, substitutes have
emerged in large numbers. Customers have access to general information about products and services that different
suppliers offer, making it easy for them to find alternatives.
3.5. Threat of substitute products or services(Weak Force)

Amazon Porter's Five Forces Analysis shows some forces in the threat of substitute products and services. These
forces are low switching costs, high availability of substitutes, and low cost of substitutes. The low switching costs
mean customers can easily choose a customer without any extra cost. So, if they buy from Walmart or Amazon, they
do not pay any extra cost. Then many low-scale substitutes offer low-cost substitutes. So, Amazon is continuously
fighting against these substitutes to maintain its leadership image. But Amazon's brand image is a successful shield
against these threats. Also, its infrastructure, distribution, warehousing network, and service quality are hard to beat.
Amazon’s PESTEL Analysis

The various factors that PESTEL analysis includes are- Political, Ecological, Social, Technological, Economical and
Legal:
Political Factors:
The government, its policies, and its rules determine the growth of an organization in any given state or country. It
includes tax rules and regulations, corruption, foreign trade policy, labor law, and all these components are the
political factors of a PESTEL analysis.
 It studies the government intervention and the scope of the industry at flourishing in that particular area.
 Governmental support cybersecurity and smooth operation of e-commerce, which favors Amazon's business.
Moreover, the political stability of developed countries works in favor of Amazon.
 The growing popularity of the online retail business is a result of governmental encouragement. However,
this growing industry of online retailing can also prove to be a risk for Amazon facing tough competition
from big brands, especially foreign companies making their way into online retail.
Ecological Factors:
Challenges like pollution, climate change have raised more concern about environmental factors. The ecological
factor examines if the company stands a good chance of thriving considering its ecological sensitivity. Companies that
focus on environment-friendly products and services, utilize renewable energy, and think about a sustainable future
have an additional benefit.
 According to PESTEL analysis, Amazon has growth opportunities assessing its ecological factor. Its
increasing interest in environmental programs, promotion of business sustainability, and low-carbon lifestyle
and waste management strategies could enhance its growth opportunities.
Social Factors:
Understanding consumer behavior leads to an understanding of the need and demand of products. Primarily it is
determined by the socio-cultural background of a place. Social factors like people's cultural change, education level,
population help companies assess the potential market.
 Amazon depends on technology to replace employees. The rate of decreasing job opportunities can be a
threat for the company in terms of social factors.
 On the other hand, the growing tendency of online shopping and increased consumerism will benefit the
company. Easy availability of products and doorstep delivery are some reasons behind the popularity of
Amazon among the young ones and aged people for whom leaving home is a concern.
Technological Factors:
Technological advancement is another crucial factor in determining an organization's strengths and weaknesses.
Automation, technical innovation, change, and technical awareness are the factors that help companies to plan for
their future intelligently. It guides them to adopt new technologies, plan their manufacturing, logistics, and
distribution.
 The expansion of operations of Amazon has led it to face challenges even from the technology firms.
Amazon's innovative and creative ways to reach out to its customers are unparalleled. They are ever
exploring new and effective ways of shipping and delivering packages.
 The live chat option makes them easily accessible. Therefore, Amazon has plans to hire more people for
technological advancement. It will help them to ensure a better customer experience.
Economic Factors:
Economic factors are directly related to the company's revenue. It includes unemployment rates, interest rates, raw
material costs, and more. This factor gives the company an idea about the consumer's purchasing power and plans
prices, products, and services accordingly. It directly influences the company's profitability.
 Though Amazon has extended its services worldwide with the help of government aid, the taxes remain a
constant challenge with its ever-changing number, especially in Asian countries.
 The large variety that Amazon offers attracts consumers even when they are not seeking something
expensive. In developing countries, economic stability has growth opportunities for Amazon.
Legal Factors:
Legal factors similar to political factors deal with rules and regulations. Organizations must abide by the laws such as
industry regulation, health & safety of the employees, consumer law, and more to have thorough knowledge about the
dos and don'ts of operating in a particular area.
 While expanding its wings worldwide, Amazon abides by the rules and regulations. It focuses on
cybersecurity, keeping the safety of the consumers in mind.
 Efforts such as complicating the environmental protection regulations have helped it to strengthen the brand
image. Besides this, changes in the import and export policies will lead the company to face challenges from
the competitors easily.

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Porter’s Five Force Model

Competition in the industry (Strong force)

3.2. The threat of new entrants (weak force)

3.3. The bargaining power of suppliers(moderate force)

3.4. The bargaining power of customers(Strong force)

3.5. Threat of substitute products or services(Weak Force)

Amazon’s PESTEL Analysis

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