PESTEL 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) and the Archbishop of Canterbury (Elliott, 2018).
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
While economic lockdowns have been devastating for many companies around the globe, Amazon seems to be different and has had rather positive results. It 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.
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 the 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, it 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.
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 society overall. This is indeed a reflection of the foundational loss of human communications (Patricof, 2018).
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. It 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, 2022).
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.
Legal factors affecting Amazon
Amazon must abide by rules and regulations of each country in which it operates. Otherwise, it must face lawsuits and fines. For instance, a French court has ruled that Amazon must stop selling ‘non-essential’ items or face a fine of €1m a day until it can come up with a safety plan to protect the health of its employees (Hern, 2020).
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.
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Last update:27 January 2022
Amazon (2022) Amazon Prime Air, available at: https://www.amazon.com/Amazon-Prime-Air/b?ie=UTF8&node=8037720011 (accessed 27 January 2022)
Elliott, L. (2018) Even Amazon isn’t immune to political and economic pressure, available at: https://www.theguardian.com/technology/2018/oct/02/even-amazon-must-heed-laws-politics-and-economics (accessed 30 September 2020)
Hern, A. (2020) Amazon faces €1m a day fine for selling ‘non-essential’ goods, available at: https://www.irishtimes.com/business/technology/amazon-faces-1m-a-day-fine-for-selling-non-essential-goods-1.4229733 (accessed 29 September 2020)
Patricof, A. (2018) The Amazon effect could potentially leave all Americans neighborless, available at: https://www.cnbc.com/2018/05/02/the-amazon-effect-could-leave-all-americans-neighborless-commentary.html (accessed 28 September 2020)
Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.