PEST ANALYSIS OF AMAZON

Topics: Amazon.com, Amazon Kindle, Electronic commerce Pages: 8 (2013 words) Published: October 15, 2014


Since the internationalization of Chinese economy to now, China has become the world’s second largest economy by nominal GDP. However, the best measure for comparing output across countries is the GDP by purchasing power parity since China’s exchange rate is determined not by market forces.

What’s more, over the past 30 years, China has an average growth rate of 10% per year, which indicates that it is the fastest growing major economy. In this context, we are going to analyze the political, economical, socio-cultural and technological issues of Amazon, which is called PEST analysis. It’s a simple business measurement tool but important and widely used that helps understanding the market growth.

Political point of view
Amazon arrived in China in 2004. Implementing itself in China was not a simple task to do. Even if the firm was number one in all the countries it was already implanted in (the US, the UK, France, Germany, Canada, Japan), Amazon had to follow a certain kind of rules imposed by Beijing Government.

In order to find it place in the Chinese Market, Amazon had to submit to the control of the goods that are sold in the Chinese territory. Knowing that the censorship is very present in China, every single fluctuation of goods is monitored. It is the same case, for example in Germany, where the neo-Nazi books are banned from sale (prohibited by the government).

On August 2013, a new policy has been implanted by the Chinese government in order to support the development of cross border e-commerce, and therefore introduced six new measures concerning customs clearance, quarantine inspections, taxes and exchange rate.

Also, on August 2014, Amazon has signed a memorandum of agreement with the authorities of the Free Zone oh Shanghai. Under the agreement, from the fourth quarter of the year, Chinese Internet users can make purchases on Amazon at prices much lower than before. This new method allows the Chinese to greatly reduce the cost of cross-border shopping and shorten delivery time. Under the tax regulations in the free zone, less than 500 yuan order is tax free, while orders between 500 and 1000 yuan will be subject to a postal mailing fee personal items by 10%.

The major players in the e-commerce in China are Alibaba and Jingdong, which are listed on the NASQAD. They are Amazon’s direct competitors, but the Us firm has advantages in terms of storage and logistics. Networks around the world will help to be worthy competitors against the Chinese competitors, whereas Alibaba and Jingdong will be forced to spend time and financial resources to develop their own ways of purchasing and logistics abroad.

Amazon can still pull out of the game, but is still has gaps in cross-border ecommerce compared to rivals.

Economic point of view
In the economic point of view, Amazon.com is a new kind of business as it is considered as an e-commerce company. Indeed, Amazon.com Inc is an American international electronic commerce company created in 1995 by Jeff Bezos. Started as an online bookstore, it rapidly enlarged its products and started selling DVDs, CDs, software, furniture, toys and so on. Also, Amazon has separated retail website for the different countries as the United States, France and Italy.

Firstly, let’s take a look at Chinese currency fluctuations. In many countries, when currencies are highly devaluated compared to the dollar, it may bring additional costs to the company. Moreover, some products prices may be increased, affecting the main attraction (lowest prices). Also, we know that the Chinese state continues its tight control of the financial system in order to manage the economy.

And even after receiving multiple complains and being criticized by Washington and other trading partners in different countries, Beijing decided to release some of their control on the exchange rate. Indeed, suppressing the value of the Yuan will unfairly make China exports...
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