PESTEL Analysis of the E-Commerce Industry
Photo: Public Domain Amazon. Other markets or segments included in this external analysis of Amazon are cloud computing services, consumer electronics, and retail. As one of the largest players in the global market for information technologies and related online services, the company enjoys the benefits of extensive market reach, high capitalization, and high popularity. However, the online market is dynamic and continually presents new challenges for Amazon.
Maintaining resilience and competence in addressing such challenges is essential to fulfilling Amazon. Also, the company now has its own microchips used in its cloud infrastructure, thereby making Intel a potential competitor. For example, Amazon could expand its brick-and-mortar operations in the United States to complement its e-commerce business.
On the other hand, the external factor of overall governmental support for e-commerce is also an opportunity. However, the same external factor threatens the company because of rising competition, such as that involving Chinese online retail firms that are expanding their operations.
Nonetheless, governments present improved business conditions through efforts in fighting cybercrime. Economic Factors Important to Amazon. In the case of Amazon. Amazon also has growth opportunities in developing countries. China is one of the biggest markets that the company hopes to increasingly penetrate. Considering such trends in the remote or macro-environment, Amazon faces the following sociocultural external factors: Increasing wealth disparity threat Increasing consumerism in developing countries opportunity Increasing online buying habits opportunity The increasing wealth disparity refers to the increasing gap between the rich and the poor in many countries.
In addition, an increasing degree of consumerism creates opportunities for growing the e-commerce and IT services business. For example, higher consumerism in developing markets increases the potential success of Amazon.
In relation, the company stands to benefit from increasing online buying habits, as more people around the world prefer to buy products through the Internet.
The technological external factors important in Amazon. Amazon also has opportunities to further improve its performance based on the rapid increase of IT resource efficiencies. For instance, new computing technologies can maximize online retail productivity and minimize operational costs. However, the company also faces the constant threat of cybercrime.
Amazon considers the following ecological external factors in its strategic formulation: Rising interest in environmental programs opportunity Rising emphasis on business sustainability opportunity Increasing popularity of low-carbon lifestyles opportunity Amazon has opportunities to improve its environmental impact in response to the rising interest in environmental programs. Such interest is a direct consequence of ecological challenges, such as waste management and energy consumption.
Based on this external factor, an improvement in Amazon. For example, higher sustainability standards can further improve environmental impact and strengthen the brand image of the e-commerce organization, based on the business strengths identified in the SWOT Analysis of Amazon. Furthermore, the increasing popularity of low-carbon lifestyles provides opportunities for the company to boost its corporate image as a leader in the e-commerce industry.
The company could implement extensive energy-saving policies in its operations for this purpose. Legal Factors Amazon. Also, the company has opportunities to grow, based on the external factor of changing import and export regulations. For example, Amazon can expand its global operations to exploit the increasing ability of sellers to access overseas suppliers. Moreover, the e-commerce company has opportunities to strengthen its brand image through appropriate corporate social responsibility policies that address rising environmental protection regulations.
Such effort can increase business competitiveness in the remote or macro-environment. The company has shown resilience despite increasing competition with companies like Walmart.
Also, the company must address IT security issues by continuing and enhancing its current strategies for IT security and integrity.
What is a PESTLE analysis?
It is common for managers to assess each of these factors closely. Some common factors are political, economic, social and technological known as PEST analysis.
Political factors It includes the role of government legislation, initiatives and funding to support the use and development of e-commerce and information technology.
Several aspects of government policy can affect e-commerce business. All firms must follow the law. Managers must find how upcoming legislations can affect their activities. Economic factors It includes the general wealth and commercial health of the nation and the elements that contribute to it.
Economic efficiency results in the reduction of communications costs, low-cost technological infrastructure, speedier and more economic electronic transactions with suppliers, lower global information sharing and advertising costs, and cheaper customer service alternatives. Economic integration is either external or internal. Internal integration, on the other hand, is the networking of the various departments within a corporation, and of business operations and processes.
This allows critical business information to be stored in a digital form that can be retrieved instantly and transmitted electronically.
Internal integration is best exemplified by corporate intranets. Social factors Incorporating the level and advancement in IT education and training which will enable both potential buyers and the workforce to understand and use the technology.
Rising standards of living and a burgeoning,upwardly mobile middle class with high disposable incomes,Busy lifestyles,urban traffic congestion and lack of time for offline shopping have given boost to e-commerce.
Evolution of websites such as Flipkart, Snapdeal, ebay etc. Technological factors The development of ICT is a key factor in the growth of e-commerce.
It has made communication more efficient, faster, easier, and more economical as the need to set up separate networks for telephone services, television broadcast, cable television, and Internet access is eliminated. Due to technological advances economic transactions have become much easier and faster and this has given boost to the development of e-commerce.
Macro Environmental Analysis of The E-commerce Industry
SWOT Analysis of the eCommerce Industry
It is common for managers to assess each of these factors closely. Some common factors are political, economic, social and technological known as PEST analysis. Political factors It includes the role of government legislation, initiatives and funding to support the use and development of e-commerce and information technology. Several aspects of government policy can affect e-commerce business. All firms must follow the law. Managers must find how upcoming legislations can affect their activities.
If the regulators found Amazon guilty it can face severe consequences. Such political issues are affect Amazon brand image and profitability at the same time. Another political factor that is worth mention is the government laws for e-commerce businesses. For example, few months back the Indian government stopped Amazon and Flipkart for selling products of those companies they have equity stakes.
Government supports companies like Amazon due to their huge investments but it still have to comply with government laws and regulations which is sometimes very difficult. However this political factor becomes a threat when its supports other companies in the industry.
For example, in China government support Chinese e-commerce companies to flourish their businesses. Other external environment factors that can affect Amazon Inc.
If any government what to improve the e-tailing business environment it must fight against cybercrime. This can create an opportunity for the businesses. How Economic Factors Affect Amazon Amazon will grow fast if the economic conditions are positive in the areas where it is operating. Retailing is a medium how producers offer their products and services to consumers.
Consumer buy from retailers in any economic condition and sometimes the retail business survive even in the worst economic conditions. Higher disposable income means consumer will shop products of their choice.
This will provide companies like Amazon, WalmartEbay an opportunity to expand its business to increase their market share and brand presence.
Pestle Analysis of Amazon
According to the National Retail Federation, the U. No doubt Amazon is advanced Technology Company and facing criticism for offering fewer job opportunities and prefer to use technology where it is possible. The company denied the news and replied the Amazon is looking forward to hire highly skilled staff in the UK. But in May the company announced a program for those employees who want to quite. Economic recession is another key macro environment indicator that can affect Amazon.
For example Chinese economy is slowing these days and this Chinese recession is considered a threat to Amazon business expansion. Chinese market is one of the key markets where Amazon want to penetrate.
Amazon.com Inc. PESTEL/PESTLE Analysis, Recommendations
Flourishing retail industry creates opportunities but not only for Amazon. Economic Factor: Economic and governmental factors often overlap in areas such as import laws, export laws, and inflation which can decrease consumer purchasing power.
The nature of retail sales itself is navigated by the economic environment. E-commerce performance relies on the situation of the economies where business operations take place, be it online or non-online.
The likelihood of e-commerce success is increased by economic stability. There is the opportunity for growth in developing countries for e-commerce businesses. Contrastingly, an economic recession can present a threat to e-commerce businesses. A weak economy decreases consumer confidence which can lead to less spending, declining sales and force retailers to lower prices. Social Factor: The retail industry is often under pressure to develop and implement socially responsible business practices.
A few examples of these practices are selling environmentally friendly products, placing warnings or restrictions on potentially harmful goods, or even removing recalled or controversial products. One sociocultural dynamic in particular that impacts the e-commerce industry is increasing wealth disparity. Wealth disparity is the gap between the rich and the poor.
This exists in many countries and poses a threat against e-commerce businesses. The threat lies in the decrease of disposable income and the corresponding decrease of the macro-environment of the industry.
An increasing amount of consumerism creates opportunities for growing the e-commerce and IT services business. Ultimately, the changes in social values and trends impact the goods being sold and how retailers relate to consumers.