Amazon SWOT Analysis

Amazon SWOT Analysis 2020 – What’s Next?

The SWOT analysis of Amazon shows that this global eCommerce player aims to fuel its growth through acquisitions and by transforming the retail experience.

Amazon was launched in 1994 by president and CEO Jeff Bezos in Seattle, Washington. It is now a global eCommerce giant with a turnover in excess of $280 billion.

Through a keen strategic vision of the future and seizing opportunities to innovate with emerging technologies, this global power brand is set to dominate where and how we buy products and services.

Despite this, there are several competitors investing heavily to compete against Amazon in its different market. The Amazon business model might be secure but many of its new initiatives might be under threat.

Amazon Quick Facts

Company name:Amazon
Founders:Jeff Bezos
Annual revenue:2019: $280.522 Billion
Profit | Net Income:2019: $11.58 Billion
Year founded:1994
Company CEO:Jeff Bezos
Headquarters:Seattle, USA
Link:Amazon
Number of employees:(FY 2019): 798,000
Type of business:Public
Ticker symbol:AMZN

Analysis of Amazon

In this Amazon SWOT analysis, I’ll take a look into the external challenges Apple faces – the Opportunities and Threats, as well as its internal capabilities to realize the opportunities and deal with the threats – Strengths and Weaknesses.

As the New York Times reports,

“[Amazon] isn’t just secretive, the way Apple is, but in a deeper sense, Jeff Bezos’ e-commerce and cloud-storage giant is opaque. Amazon rarely explains either its near-term tactical aims or its long-term strategic vision. It values surprise.”

New York Times

What is the SWOT Analysis For Amazon?

The SWOT analysis of Amazon shows that this global eCommerce giant is set to rapidly expand into retail but its weakness is Asia could pose a major threat.

The SWOT Analysis of Amazon

amazon financial analysis

Amazon has continued to demonstrate growth but the retail segment (physical stores) is struggling to grow and make a profit. However, its AWS cloud services show strong and profitable growth.

amazon how does amazon make money
How Amazon makes money
amazon business anlaysis
The growth of Amazon’s profits

Apple’s Strengths

What are Amazon’s major strengths?

Amazon’s key strengths are based on its scale, brand and expertise in technology. These enable Amazon to offer quick deliveries, online services such as Prime Video and superior customer experience to competitors.

  1. Strong Brand Value

    Amazon is the third most valuable brand in the world according to Interbrand. This reflects not only its strong financial performance but also the popularity of Amazon with consumers.
  2. Global Scale

    amazon global scale Amazon is the largest online retailer in the world. Its scale is hard to appreciate. Last year, Amazon shipped over 5 billion Prime packages, and the retail giant’s eCommerce market share in the U.S. was close to 37%. During February 2020, Amazon.com had over 2.01 billion combined desktop and mobile visits. For years Amazon didn’t make a profit because it continually invested in its operations: technology, distribution centres and acquisitions to improve its capabilities. Jeff Bezos called this strategy the Amazon Flywheel effect. In other words, Amazon benefits from economies of scale. amazon flywheel how amazon cash rich By scaling its operations Amazon is able to lower its costs, improve margins which in turn drives its scale.
  3. Operational Synergies

    All four of Amazon’s main services help to reinforce each other delivering efficiencies across the organization and improving profitability. Furthermore, the subscription business model across many of these services provides Amazon with repeatable revenue. amazon global scale
  4. Customer Experience

    The global tech giant has a core focus on customer experience which in turn increases the amount each returning customer spends at Amazon. Furthermore, customer benefits from positive word of mouth which helps to further grow the business.
  5. Cost Leadership

    With economies of scale comes lower costs and that means Amazon can buy cheap, offer low prices and maintain good profit margins. Amazon also benefits from its exceptionally good cash-flow. As an organization, it has acquired companies that have helped it to optimize its pricing strategy e.g. using AI.
  6. Range & Merchants

    Amazon.com has a total of 119,928,851 products as of April 2019. Amazon offers a huge range of products many of which are from key brands and suppliers across a very broad range of products. However, over 58% of all sales on Amazon come from merchants.
  7. Technology

    Amazon has cutting edge technology that it uses to optimise its operations. From drone delivery to Amazon Go, it continues to explore new ways to compete and grow.
  8. Superior logistics and distribution systems

    Amazon has an incredibly efficient logistics and distribution system. It can not handle a massive range of products, it also gets them delivered to customers quickly.

Apple’s Weaknesses

What are some of Amazon’s weaknesses?

Amazon has yet to conquer the hardware market in any meaningful way. Additionally, Amazon is struggling in Asia due to strong local competition.

Apple’s Opportunities

What are some opportunities for Amazon?

Amazon is expanding into the $3 trillion healthcare market. Strategic acquisitions could see growth in retail stores as well as help fuel growth in Asia.

  1. Developing Markets

    Developing countries have dynamic markets that are rapidly evolving as incumbent organizations and startups are battling for growth. Through strategic acquisitions and partnership Amazon could establish a much stronger presence in these developing countries.
  2. Further Expansion of Physical Stores

    Amazon has a large pot of money to acquire further physical stores. This is a far quicker way to expand than waiting for the right locations to be available for development. Acquisitions could accelerate its presence not only in the US but across different geographical regions.
  3. Hardware Partnerships

    Expanding the Alexa and AI capabilities across different categories of hardware. AI, speech recognition, virtual reality and augmented reality represent new growth opportunities for Amazon through partnerships. With its strength in technology and AWS platform, it can provide the backbone and integrations necessary to innovate.
  4. Amazon branded products

    Most large supermarkets offer a ‘white label’ or an own-brand version of products. These offer the retailer a significantly more margin that branded products. Amazon is perfectly positioned to produce its own branded label of products.
  5. Healthcare

    Amazon acquired PillPack for nearly $1B. It has announced a joint healthcare venture called Haven with JPMorgan Chase and Berkshire Hathaway. Amazon has huge advantages already with its large distribution network not to mention over 300M active customers, 100M Prime Members, and approximately 5M sellers on the site.

Apple’s Threats

What are the threats to Amazon?

Amazon faces stiff competition from Apple, Google, Alibaba as well as lots of new startups. With relatively low margins and a growing number of e-commerce platforms, Amazon’s online business faces threats e.g. Walmart.

Summary of Amazon SWOT Analysis

Amazon’s ecosystem has also given it more cash to deploy, which is why it can afford to pursue low-profit initiatives. As Amazon enters new markets and exapnds, it follows a strategic playbook:

amazon flywheel how amazon cash rich
Amazon’s flywheel
  1. Attract and retain customers to the platform by providing a better customer experience.
  2. Invest in operations e.g. warehouses, distribution and data centres.
  3. Optimize operations using intelligent systems that reduce duplication, waste and improve efficiencies.
  4. Monetize operations by allowing others to use the platform(s).

Amazon SWOT Analysis Infographic

amazon swot analysis infographic
Amazon SWOT analysis infographic
Amazon SWOT Analysis 2020 - What\'s Next?

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