Amazon.com (“Amazon”) is one of the most globally recognized online e-commerce retailers, offering the world’s biggest variety of goods and services – all while not operating a single physical retail sales location. Yahoo! Finance provides one of the most precise and concise descriptions concerning the business and product variety of Amazon.com: “Amazon.com, Inc. operates as an online retailer in North America and internationally. The company operates various retail Web sites, including amazon.com, amazon.co.uk, amazon.de, amazon.fr, amazon.co.jp, amazon.ca, and amazon.cn. Its product categories include books; movies, music, and games; digital downloads; electronics and computers; home and garden; toys, kids, and baby; grocery; apparel, shoes, and jewelry; health and beauty; sports and outdoors; and tools, auto, and industrial. The company serves its consumer customers through its retail Websites and focuses on selection, price, and convenience. It also offers programs that enable seller customers to sell their products on its Websites and their own branded Websites. In addition, the company serves developer customers through Amazon Web Services, which provides access to technology infrastructure that developers can use to enable virtually any type of business. Further, it manufactures and sells the kindle e-reader. Additionally, the company offers co-branded credit card programs, fulfillment, and other marketing and promotional services, such as online advertising. Amazon.com, Inc. was founded in 1994 and is headquartered in Seattle, Washington.” – Yahoo! Finance, 2010 Amazon focuses on building a strong brand reputation by spending tremendous efforts on, and continuously reinvesting in online marketing and sales promotions. As stated by Jeff Bezos, Amazon’s CEO and founder, Amazon employs a “long-term perspective with regards to returns from its relentless customer-oriented initiatives”. This resulted in Amazon becoming one of the most widely recognized online brand names, yet it also produced a six year series of net losses from 1996 to 2002. This in return led to the company stockholders owning negative equity from 2000 to 2004, after which earnings finally produced positive equity in 2005. Since 2003, however, Amazon has been on a winning streak, coming out as winner from the burst of the dot-com bubble, producing positive earnings ever since, and thus, proving that the long-term perspective in its business strategy is sustainable and profitable. Even throughout the current recession, Amazon has produced increasingly (!) positive earnings. PESTEL analysis
To evaluate the macroeconomic environment of Amazon a PESTEL (Political, Environmental, Social, Technological, Economic, Legal) analysis was conducted: •
Amazon is subject to, and could be increasingly facing restrictions on international trade and import/export agreements. These could alter rapidly with changes in the political and geopolitical environment. As Amazon’s operations span globally, it is of major importance to continuously monitor the political developments and prepare for possible consequences on Amazon’s business. •
Amazon has a high reliance on a good brand reputation, as one of their main intangible assets and the foundation of most of its online sales. A decline in brand image through adverse events, leading to a decrease in Amazon’s market share, could hurt the company’s earnings dramatically due to its high fixed costs. Amazon is also subject to the “Digital Age Divide”. This means that the older consumer segment of the retail market cannot or does not want to access the internet for its online services to fulfill their needs. Though there is an increase in the members of the older generations utilizing computers and the internet, Amazon still misses out on a substantial part of the retail consumers. Arguably, people without internet access do not fall within Amazon’s target market; however, consumer behavior...
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