ENVIRONMENT BUSINESS AMAZON

The world’s 10 most valuable brands in 2007 were Coca-Cola, Microsoft, IBM, GE, Nokia, Toyota, Intel, McDonald’s, Disney, and Mercedes-Benz, PART A (1) External Macro and Micro business environment of Amazon.com A. Societal Environment/External Macro PESTEL Factors Political

Economic

Social

Technological

Environmenta l

Key Point

Relevance to Amazon.com

Government policies promote competition through telecom liberalization, e-commerce promotion and legislation (Held et al., 1999) High government investment in national ICT infrastructures (DTI, 2002) Relaxed EU and North American competition policies on e-retailing as opposed to heavy industries (Kobrin S, 2001) High interest rates slow UK consumer spending. The credit squeeze and the housing slump has reduced consumer spending in the USA. However, consumer spending is rising in China and India due to high economic growth in both countries. (The Times online, 2008) Internet retailing will see tremendous growth between 2006 and 2011 with sales rising over 100%. This growth is fuelled by the number of online households in the US, which has increased by 85% since 2000. (Euromonitor International from national statistics) By 2011, 617 million households across the world will have an annual disposable income exceeding US$5,000. 143 million of these will be in AsiaPacific. Second only to Western Europe with 185 million. (Euromonitor International from national statistics) Increase in online social networking (e-Marketer online, 2008) Product category risk and financial risk decrease online shopping (Sorce et al, 2005) Growth of internet from 2002 to 2007 is 244.7%. 18.9% of world population use the internet (Internet World Stats, 2007) There is an increase in broadcasting, information and telecommunications technologies for internet access

More affordable internet access and increase in internet users

Rapid development of ‘high-speed’ network services (e.g. broadband) increases usability of media-rich applications Global Warming/ Pollution Awareness Have to become more “green” to attract consumers

Faster, better and more reliable internet access for national users Rapid expansion into new markets through acquisitions Amazon.com may consider entering India and developing the Chinese market.

More potential Amazon.com.

customers

for

More potential Amazon.com.

customers

for

Marketing needs to take advantage of this new channel. Need to consider overcoming risks to increase users. Opportunity to increase market share. Increased frequency of use and sources (e.g. mobile devices, TV etc) for internet access by online shoppers Media-rich contents are easily made available to online shoppers Less car journeys, more shopping online. (Matthews et al, 2001) Changing business methods and environment to become more “green”, i.e. with postage and

Legal

No uniform regulations governing e-commerce covering all the countries e.g Data Protection Act in UK and Federal Trade Commission in USA EU Electronic Commerce Directive

The Electronic Signatures Law: China's First National E-Commerce Legislation

packaging, work environment. Be aware of both the domestic and international laws (Bange, 2007) Could impact the growth of transatlantic e-commerce given its strict regulations (Jacobson, 1999 as cited in Zugelder et al, 2000). Removes legal obstacles and provides a more secure and transparent legal environment (Yan, 2005). Increased use of ecommerce for both consumers and businesses (Yan, 2005).

Summary of PESTEL Political, economic, social, technological progress indicates an increasing and attractive market to be exploited by Amazon.com. The Chinese and Indian markets have shown exceptional growth. The use of internet as a social networking channel has created new opportunities to be exploited. Additionally, as environmental awareness increases globally (Stern et al, 2006) it is important that Amazon.com’s strategy support environmentally friendly activities. The global nature of Amazon.com’s activities also suggests that strategies developed should comply with the different legal obligations internationally. B. Task Environment (Industry)/ External Micro (Porters Five Forces in the E-Retailing Industry)

Summary of key findings from Porter’s Five Forces   

The competitive rivalry amongst the e-retailing industry is intense. From some of the largest to the smallest companies, dotcom businesses are abundant, making competition intense. Amazon.com competes directly with big firms such as Barnes and Noble and Ebay. The threat of new entrants that are able to compete directly with Amazon.com is low The strong brand image of Amazon.com should be an advantage in any price wars

(2) Internal business environment Amazon.com A. The Value Chain B. Resource Based View

C. SWOT Analysis

STRENGTHS



Operational Network The company supplies products to end customers through an extensive network of facilities managing fulfillment, segregation, delivery, warehouse operations, data center, customer service, and other services across North America, Europe, and Asia. As of December 2014, the company’s facilities covered an area of 113.7 million square feet. Through its large fulfillment centers, the company stores, manages and distributes diverse goods.



Customer-Centric Business Amazon has adopted a number of technologies to make its websites customer friendly. Some of the key features of the websites include editorial and customer reviews, manufacturer product information, gift guides, web pages customized to individual preferences such as recommendations and notifications, 1-Click technology, secure payment systems, digital content and 'Search Inside the Book' feature



Strong Business Model The company has strategically enhanced its business operations through expanding its business areas to different products. The company diversified its operations from online bookstore to wide variety of online merchandising. Its direct-to-consumer online model helps in increasing its inventory turnover and better returns.

WEAKNESS  Declined Financial Performance In FY2014, Amazon recorded decline in its financial performance. Though, the company's total revenue increased to US$88,988 million in FY2014, an increase of 19.52% over 2013 (US$74,452 million), its bottom line declined. Amazon’s revenues increased largely due to significant growth in electronics and other general merchandise. 

Operational Issues Amazon is subject to lawsuits and claims, actual and potential. Currently, the company is involved in defending several of its cases. Legal proceeding, regardless of the outcome, could drain the financial resources and divert the time and effort of any management. Most of these are related to patent, employee relations, contract, product liability, environmental, antitrust and others.

OPPORTUNITY  Expansion Initiatives In September 2015, the company announced its plans to expand its Kindle Scout, a reader-powered publishing platform, to more authors and readers across the world. The company plans to partner with authors in Europe, Canada, Australia, New Zealand, South Africa, Mexico, Brazil, Japan and India to publish their works under its digital publishing banner, Kindle Press. In August 2015, the company also announced its plans to open a fulfillment center in Joliet, Illinois and San Marcos, Texas. In June 2015, the company expanded its operations into Mexico by launching a Spanish-language website that offers a wide selection of products at low prices. 

Growth Prospects: E-Commerce With the increasing trend of e-commerce business, there is huge potential for the company to increase its sales and customer base. A large number of customers prefer to shop online and place their orders through credit cards, thereby avoiding the time consuming journey and billing queues.

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Strategic Acquisitions Amazon continues to view acquisitions as a key part of its growth strategy. These acquisitions are intended to supplement the company’s core growth and assure ongoing expansion of its business, including new technologies, additional products, and geographic reach. Inorganic growth strategy adopted by the company may significantly increase its market share. In September 2015, the company signed an agreement for the acquisition of Elemental Technologies, Inc. (Elemental), a provider of software-defined video solutions for multi screen content delivery.

THREAT  Foreign Exchange Risk Amazon carries out transactions in Euro, British Pounds, Japanese Yen, and Chinese Yuan and others. However, the functional currency of the company is the United States Dollar (USD). The company has potential threats for reduction in its overall revenue due to weak exchange rates for the US$ against all major currencies. 

Market Competition Some of its major competitors Amazon are eBay Inc., Yahoo Inc., Books-A-Million, Inc., Barnes & Noble, Inc., Value Vision Media, Inc., Walmart, Macy’s, and Netflix, Inc. Some of the company's current and potential competitors may have access to greater resources, wider customer base and greater brand recognition.



Stringent Government Regulations The US Supreme Court decisions restrict the collection of state and local taxes for Internet sales. But, a number of states and the US Congress have been considering initiatives, which may limit the Supreme Court’s position regarding sales and use taxes related to Internet sales. If these initiatives are successful, the company may be required to collect sales and use taxes in additional states or change its business practices. The imposition of taxes by state and local governments may create administrative burden on the company. Such existing and future regulations may reduce the demand for the company’s products and services and increase its operating costs.

(3) Strategy implementation Amazon.com a) Power and leadership b) Programs c) Organizational Structure d) Procedures (SOP) e) Organizational Culture f) Budget

(4) Evaluation & Control Amazon.com a) Performance b) Resolution PART B (5) Lingkungan Eksternal Makro dan Mikro IBM (6) Lingkungan Internal IBM (7) Formulasi Strategi Bisnis IBM a) Corporate Srtrategy b) SBU Strategy c) Functional Strategy (8) Implementasi Strategi g) Power and leadership h) Programs i) Organizational Structure j) Procedures (SOP) k) Organizational Culture l) Budget (9) Evaluasi & Kontrol c) Performance d) Resolution