Amazon future success is influenced by Political (new regulations and potential breakups of the company), Economic (new global economic dynamics influencing e-commerce adoption), Social (changing consumer behavior at a global level), Technological (new technological challenges, like last-mile delivery at scale), Environmental (enabling sustainable operations), and Legal (compliance with international laws).
Amazon PESTEL Analysis Introduction
This article will evaluate the global retail giant Amazon in the context of a PESTEL Analysis.
A PESTEL analysis is a framework businesses can use to assess the external (macro) factors of the environment they operate in.
PESTEL is an acronym of the following external factors:
- P – Political.
- E – Economic.
- S – Social.
- T – Technological.
- E – Environmental.
- L – Legal.
Amazon PESTEL Analysis
Let’s now perform a PESTEL Analysis on Amazon, addressing each factor in more detail.
Political factors encompass the level of governmental intervention in an economy. This may include policy decisions relating to foreign trade and tax or laws relating to labor or the environment.
As a global retailer, Amazon is not immune to political factors. Politically stable western countries with similar laws to the USA offer Amazon expansion opportunities. However, the company has faced stiff competition in China where the government tends to back Chinese e-commerce companies.
Economic factors are those that directly impact on the performance of the economy. In turn, these factors influence the profitability of an organization. Economic factors may include unemployment rates, raw material costs, and foreign exchange rates.
In the wake of the coronavirus pandemic, Amazon has benefitted tremendously from economic stimulus measures that have increased consumer discretionary income. However, this income has also allowed competitors to enter the market.
Social factors describe the general beliefs and attitudes of a population, most often related to cultural and demographical trends. These factors ultimately determine and then drive consumer behavior.
With the shift toward convenient, fast, and contactless delivery, Amazon has again taken advantage. Savvy and computer literate millennial consumers are also driving huge growth in mobile shopping as the availability of 5G networks increases.
This describes the rate of technological innovation and development and how it might influence a given market. Digital technology is often the focus, but non-tech companies also look for advances in distribution, manufacturing, and logistics.
Amazon is highly innovative within the retail sector. The company has invested heavily in drones to deliver parcels. It has also created an unattended locker system called Amazon Hub so that consumers can receive parcels when it is convenient for them to do so.
In the 21st century, environmental factors are becoming increasingly prevalent. They encompass such things as carbon footprint, waste disposal, and sustainable access to raw materials. Climate change has also meant that businesses must be more adaptable to frequent natural disasters.
As Amazon’s distribution network grows, the company must sustainably address its greenhouse gas emissions. In the United States, Amazon Prime is particularly polluting because of the promise of 1 or 2-day delivery.
Large organizations that operate in many countries must have a detailed understanding of the laws applicable to each. This is especially true in countries where employment, consumer, tax, and trade law directly impacts on business operations.
Amazon has had to deal with legal challenges regarding its tendency to subvert tax law and move profits into tax havens such as Luxembourg. The company was also recently investigated by the US Federal Trade Commission for misleading discount claims on over 1000 of its products.
- The PESTEL analysis is a tool that businesses use to analyze macro-environmental factors that have the potential to impact on performance.
- PESTEL is an acronym for six factors: political, economic, social, technological, environmental, and legal.
- As a large, global retail company, Amazon has been able to take advantage of the shift toward convenient and contactless consumer goods delivery. However, it’s global reach also leaves it vulnerable to sustainability trends and investigation for tax evasion.
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