M RahmanPESTEL analysis of Amazon
This detailed PESTEL analysis of Amazon examines how and what external factors impact on the operations of Amazon.com, Inc. It aims to explore how some of the political, economic, social, technological, environmental, and legal factors have been influencing both the strategic and the operational decisions of the company.
Needless to say that online shopping is very popular now-a-days and has over the years changed the consumer behaviour significantly. The company that has been a key factor in this change of behaviour is Amazon. It is the market leader in the online shopping industry in many countries.
Political factors affecting Amazon
Amazon is an American multinational technology company based in Washington. It operates a number of worldwide marketplaces e.g. Amazon US, Amazon UK, Amazon Australia, Amazon Brazil, Amazon Canada, Amazon China, Amazon France, Amazon Germany, Amazon India, Amazon Italy, Amazon Japan, Amazon Mexico, Amazon Netherlands, and Amazon Spain.
As Amazon’s operations span across may countries, it can be affected by the political storms in each location. For instance, it was criticised by Donald Trump, Bernie Sanders, the GMB union (UK), the Archbishop of Canterbury, and many other politicians over several issues.
Many analysts argue that Amazon’s decision to increase the minimum wages for its workers in the USA and the UK is the result of both political and economic pressures. However, it should also be mentioned that political decisions may also provide it with opportunities for further growth.
Economic factors affecting Amazon
Economic discussion is a key part of this PESTEL analysis of Amazon. While economic lockdowns have been devastating for many companies around the globe, Amazon seems to be different and has had rather positive results.
Amazon is efficiently addressing customers’ needs of household essentials, groceries, streaming, gaming, crafts, news, entertainment, and many more and consequently, consumer spending is on the rise as well.
Amazon has created more jobs in the past decade than any other U.S. company. It has invested more than $530 billion in the U.S. alone over the last decade. Apart from its own workforce, its investments have supported nearly 1.6 million indirect jobs in industries such as construction and hospitality (Amazon, 2023).
The global economy has influenced Amazon’s ability to innovate. With increased demand for online services, the company has been able to invest more into research and development, allowing it to stay ahead of the competition.
However, it should be mentioned that high labour cost particularly in the UK, and the USA and changes in taxation may jeopardize Amazon’s profits with direct implications on its long-term growth of the business. Similarly, other small competitors coming into the market with cheaper offers may also affect it to some extent.
Social factors affecting Amazon
Consumer behaviour has been changing rapidly around the globe. People are more inclined to ‘getting things done’ now-a-days. Well, this is exactly what Amazon is doing for them i.e. delivering everything at their doorsteps which is easy and convenient for them!
Likewise, Amazon has opened the world of opportunities to anyone who has patience and a little bit of tech knowledge. Many people have become financially solvent by trading on Amazon.
There are many reasons as to why people like shopping with Amazon. Chevalier (2022) reports that fast and free shipping was the most popular reason for U.S. online users to use the company. Likewise, broad selection, Prime membership, and best pricing are some other popular factors.
Amazon works very actively to help communities by responding to the pressing needs of reducing hunger and homelessness and investing in education for children and young adults (Amazon, 2023). This shows that it has a very good CSR strategy in place.
However, it is worth noting that some analysts argue that Amazon is making many people lazy that may have some social and health implications. Many people are concerned about the impact of online tsunami on the society overall. This is indeed a reflection of the foundational loss of human communications.
Technological factors affecting Amazon
Technology is the next element to address in the PESTEL analysis of Amazon. Needless to say that Amazon is all about technology. No technology, no Amazon.com! Amazon is a key player that has made online shopping a global consumer habit.
Amazon is working on a very rapid delivery system called Amazon Prime Air that aims to deliver packages up to five pounds in 30 minutes or less using unmanned aerial vehicles (small drones). It aims to improve the safety and efficiency of Amazon’s delivery system significantly (Amazon, 2023).
However, many people are concerned about the impact of technology on togetherness and the social fabric of our society. Likewise, many Amazon traders and customers are concerned about safety of sensitive data e.g. credit card and debit card and any identifiable personal information stored on Amazon website.
Environmental factors affecting Amazon
Though it is hard to measure the impact of Amazon on the environment, many people argue that the company is contributing to environmental damages. Volume of packaging, traffic-related emissions, and environmentally dangerous products have been the main areas of their criticism.
However, it should be mentioned that Amazon aims to make 50% its shipments zero carbon (Shipment Zero) by 2030 and net zero carbon across its businesses by 2040 (Amazon, 2023).
Legal factors affecting Amazon
Legal environment is the final part of discussion in this PESTEL analysis of Amazon. Amazon must abide by rules and regulations of each country in which it operates. Otherwise, it must face lawsuits and fines.
For instance, in the USA, it was recently fined more than $60,000 for putting warehouse employees at risk for lower back injuries and other musculoskeletal disorders (Soper, 2023). Though this amount is literally nothing for Amazon, the verdict can affect its brand reputation.
Amazon was fined $134,523 in the USA for selling products or services to people in sanctioned countries. Likewise, it was also fined £55,000 by the UK Competition and Markets Authority (CMA) over late documents in Deliveroo probe.
Summary of PESTEL analysis of Amazon
Amazon has been a revolutionary force in the business landscape for a long time. Since the beginning, it has seen exponential growth in its business model, transforming the way businesses operate. From the way people shop to the way people do business, it has had a huge impact on how businesses operate across the world.
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Last update: 26 February 2023
References:
Amazon (2023) About Amazon, available at: https://www.aboutamazon.com/ (accessed 26 February 2023)
Chevalier, S. (2022) Key factors for U.S. users to shop via Amazon, available at: https://www.statista.com/statistics/670499/us-amazon-usage-reason/ (25 February 2023)
Soper, S. (2023) Amazon Fined for Worker Safety Violations in Three US States, available at: https://www.bloomberg.com/news/articles/2023-01-18/amazon-fined-for-worker-safety-violations-in-three-us-states? (accessed 26 February 2023)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.
