Background of Company

Amazon, is an American e-commerce and cloud computing company founded in year 1994
by Jeff Bezos. It is headquartered in Seattle, Washington. It is one of largest internet based
retailer by its sales and market capitalization throughout the world.

Political Factors Affecting Amazon

Amazon.com Inc. operates alongside political influence. This aspect of the 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)
4. Policy decisions relating to foreign trade and tax or laws relating to labor or the
environment (opportunity)

Amazon benefits from political stability. In the 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 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

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 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)
4. Flourishing retail industry (opportunity & threat)

The economic stability of developed countries increases the likelihood of success for
Amazon.com Inc. Based on the 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 PESTLE
analysis of Amazon.com Inc., opportunities for growth in developing countries must be
included in the company’s strategy formulation.

Sociocultural Factors Influencing Amazon

Social conditions are a determinant of Amazon.com Inc. This aspect of the 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)
4. Understanding the culture and interests of different age groups (opportunity & threat)

The increasing wealth disparity refers to the increasing gap between the rich and the poor
in many countries. This 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 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 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 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 PESTLE analysis, Amazon needs
to emphasize continuous improvement of its technologies.

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
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)
4. Intellectual Property Protection (threat)

Rising product regulation is seen as a result of societal demands on consumer safety and
customer security. In the 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 PESTLE analysis model,
Amazon can ensure long-term e-commerce success through regulatory compliance.

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 PESTLE analysis model presents
how the company’s remote or macro-environment relates with environmental changes.
Amazon considers the following environmental 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)
4. Climate and Weather Changes (opportunity & threat)

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 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 PESTLE analysis
of Amazon shows the significance of a comprehensive corporate social responsibility
strategy to increase the company’s competence in addressing the environmental concerns
its remote or macro-environment.
References

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