A PESTLE analysis of the macro-environmental factors specific to the business and its challenges Company Overview Amazon is a leading e-commerce multinational technology corporation established in 1994 by Jeff Bezos in Bellevue, Washington. It started as an online shop to sell books and later expanded to start offering different products, including computer hardware, web services, and many other commercial or personal products (Majed, Nuraddin, and Hama, 2018). Amazon continues to increase its market share because it is convenient to individuals to shop from their homes or offices. However, as a multinational corporation, Amazon’s business activities are impacted by various external factors, such as political, economic, social-cultural, technological, environmental, and legal factors. Therefore, this PESTEL analysis seeks to evaluate the external environmental factors that are likely to affect Amazon’s business activities in the market. PESTEL Analysis PESTEL Analysis is a strategic management model that helps to identify the external factors that shape the business conditions of macro-environment. In this respect, Amazon’s PESTEL analysis evaluates the external environmental factors likely to Amazon’s activities in the ecommerce industry (Greenspan, 2019). These external factors include political, economic, socio-cultural, technological, environmental/ecological, and legal factors. Amazon operates in the global market, thus boasts an extensive market reach, high popularity, and high capitalization. However, the ecommerce market is highly dynamic where new challenges for Amazon emerge regularly (Onyusheva and Seenalasataporn, 2018). There is a need to constantly scan external environment using PESTEL analysis tool and use the knowledge gained to uphold resilience and competence in tackling these emerging challenges. Political factors Business expansions and growth depend on government policies, politics, and other political factors such as change and leadership, tax and government policies, political factors or activities, and foreign trade policies. - Government imposes taxes which business organizations like Amazon must comply with in every country it operates for business growth (Greenspan, 2019). Moreover, government policies such as fiscal policies affect every organizations as they create more job opportunities and minimize poverty Supply and delivery disputes, government laws, and political pressure to force organizations to change workers’ minimum wages in different countries are likely to affect Amazon’s business activities (Majed, Nuraddin, and Hama, 2018). - - International policies from different countries are likely to affect Amazon’s expected growth, such as the banning of Google in China for threatening the community and national market with unsuitable contents (Majed, Nuraddin, and Hama, 2018). Political stability of countries where Amazon operates creates business opportunity Governmental policies on ecommerce can offer opportunity or threat Increased governmental efforts on cyber-security creates business opportunity Economic factors Amazon’s performance also depends on the existing economic conditions in various countries where it operates its business activities. Some of the economic factors likely to affect Amazon’s activities include; - Economic stability of the various countries it operates which creates business opportunity for the company Increased disposable incomes in developing countries also create business opportunity, as it increases product sales (Greenspan, 2019). Global economic recession is a threat to Amazon’s business activities. Currency fluctuations- various countries tend to devalue their currencies in relation to the dollar, leading to extra costs to Amazon (Greenspan, 2019) Governments’ taxation policies and aid are likely to affect Amazon’s business activities in different countries. Socio-cultural factors Amazon’s business activities are affected by the socio-cultural factors or trends. Socio-cultural factors describe the population’s general attitudes and beliefs related to demographical and cultural trends (Majed, Nuraddin, and Hama, 2018). Moreover, socio-cultural factors play an instrumental role in determining and then driving consumer behavior. - Shifting toward fast, convenient, and contactless delivery has created business opportunity for Amazon to increase its product sales Computer literate and savvy millennial consumers continue to create huge market for ecommerce companies (Greenspan, 2019). Amazon’s overreliance on technology has reduced job opportunities, thus increasing threat for the company regarding public relations and other social aspects. Increases in online shopping habit, especially after the COVID-19 pandemic coupled with the increased consumerism is likely to benefit Amazon. Increased wealth disparity poses a threat to Amazon’s growth, as the gap between the poor and the rich continues to sour in many countries. Technological factors Technology is the backbone of Amazon and continues to make Amazon one of the most vibrant and profitable companies worldwide. The company continues to focus on technology in terms of cloud computing to meet the needs of its customers (Greenspan, 2019). Therefore, technological advancement directly influences Amazon’s business operations in various ways. - - - Increasing rates of cybercrime is a threat to Amazon’s business operations. Amazon’s third party sellers and consumers are concerned about their sensitive data, such as debit care and credit card, as well as confidential personal information stored on the company’s website (Onyusheva and Seenalasataporn, 2018). Amazon continues to invest in technological advancements, including automation and cloud computing systems that has contributed to its success. Amazon has a sophisticated delivery system compared to its competitors, such as delivery drones that deliver products to customers without being operated by anyone (Greenspan, 2019). Amazon uses technology such as live chats, AI, and email to enhance customer engagement Environmental Factors Companies continue to experience immense pressure from environmental conscious groups and customers to become more environmentally friendly with the way they operate (Frue, 2023). In this respect, environmental factors have significant impact on how Amazon’s business operation in various ways. - - - Pressure from environmental conscious groups like Green Peace to become environmentally friendly in how the company operates (Frue, 2023). Increasing interest in environmental agendas because of the direct effects of environmental challenges like energy consumption and waste management Green Peace organization accused Amazon of having poor environmental practices in 2018, especially concerning disposal of their products (Onyusheva and Seenalasataporn, 2018). There is an increasing focus on business sustainability which has forced companies to adopt high sustainability standards to enhance their brand image and their environmental impact. The rising popularity of low-carbon lifestyle is also likely to affect the company’s operations as consumers look for products that have low-carbon Amazon strives to keep their packaging optimal for better waste management and minimize needless waste. Legal factors Legal factors deal with regulations and rules. Therefore, legal factors include government policies and laws that are likely to affect Amazon’s organizational structure, including consumer rights, labor laws, industry regulations, and product safety (Majed, Nuraddin, and Hama, 2018). - Also, Amazon is subjected to different environmental protection regulations from different countries Amazon’s activities are also affected by labor laws, including minimum wage and health policies to protect employees from different countries. As a global company, Amazon is required to have some permits and policies to be able to operate in any country (Frue, 2023). Amazon has also encountered the legal challenges concerning its tendency to subvert tax laws and shift profit into tax havens in countries like Luxembourg The company’s also grapples with counterfeit products regulations as consumers continue to pile more pressure on Amazon to ensure that such products are sold on its website. Different consumer privacy acts from different countries is also a threat to Amazon’s operations in different regions (Onyusheva and Seenalasataporn, 2018). The company has to abide by the General Data Protection Regulations (EU GDPR) which is likely to affect Amazon. Reference List Greenspan, R. (2019) Amazon.com Inc.. Pestel/Pestle analysis, recommendations, Panmore Institute. Available at: https://panmore.com/amazon-com-inc-pestel-pestle-analysisrecommendations (Accessed: February 1, 2023). Frue, K. (2023) Pest analysis of E-retail leader Amazon, PESTLE Analysis. Available at: https://pestleanalysis.com/pest-analysis-of-eretail-leader-amazon/ (Accessed: February 1, 2023). Onyusheva, I. and Seenalasataporn, T. (2018) “Strategic analysis of Global E-COMMERCE and diversification technology: the case of Amazon.com Inc,” The EUrASEANs: journal on global socio-economic dynamics, (1(8), pp. 48–63. Available at: https://doi.org/10.35678/2539-5645.1(8).2018.48-63. Majed, S., Nuraddin, S. and Hama, S. (2018) “Analyzing the amazon success strategies,” Journal of Process Management. New Technologies, 6(4), pp. 65–69. Available at: https://doi.org/10.5937/jouproman6-19264.
