Introduction and Background to Company
Market environment analysis is one of the most important tools that can be used by any organization to analyze the business strategically. It assists to recognize different internal and external factors of environment which impact the growth and operations of a business. This report is significantly focused on analyzing the marketing environment for Amazon.com. The major purpose of the report is to conduct SWOT analysis for this organization. SWOT analysis is a valuable tool for any company that assists it to evaluate its major strengths and weaknesses. The firms can use its strengths to deal with its weaknesses and threats faced in the industry. The below report includes SWOT table after analyzing the environments. In the last section, there are some recommendations which suggest target market, new products and services, customer value proposition and relevant marketing strategies.
Amazon.com is a United States based organization that was established in 1994. The company was founded by Jeff Bezos in Seattle, Washington, USA. It is one of the largest retailers all over the world in terms of revenues and market capitalization. Moreover, it is second largest after Alibaba Group in terms of sales in retail industry. In the year 2017, the company has recorded the revenues of US$177.86 billion. The figures of revenues are increasing with the passage of every year (Amazon.com., 2018). Amazon.com has initiated its business operations as online bookstore, and then it has diversified its operations in offering other products like consumer electronics, DVDs, CDs, software, furniture, video games, toys etc. It is the largest provider of cloud infrastructure (PaaS and IaaS) in the world. In addition to above products and services, the company also offers some low-end products under its in-house brand i.e. AmazonBasics. It has its online websites in different nations like Ireland, Spain, Canada, France, United Kingdom, Mexico, Italy, Australia, United States, China and Japan. The products and services of Amazon.com include online shopping, cloud computing and content development. As per the report of 2017, company has employed more than 566,000 employees across the world (Mitra, 2015). There are various players which are competing against Amazon.com such as Alibaba Group, Wal-Mart stores, Best Buy, Netflix, International Business Machine etc.
Analysis of Market Environments
Analysis of marketing environment is the most significant process that is used by each and every organization when it operates its business in a specific market (Wells, Danskin & Ellsworth, 2016). Under this analysis, an organization analyzes both external and internal factors which may affect the growth and success of organization in a specific industry. Internal and external analysis of Amazon.com is given below:
External Analysis (PEST Analysis)
External analysis of a company can be conducted by assessing different external factors. External analysis of Amazon.com is given below:
Amazon is having various benefits due to political stability. It offers an opportunity to the organization to expand its business in emerging nations. Political support for e-commerce business is a great opportunity. This external force threatens the organization due to increase in the competition (Turban, et al, 2018).
The economic stability of most of the emerged nations enhances the likelihood of success for this e-commerce giant. Currency fluctuations in the country cause various problems while selling the rich content on internet and websites. In a country, if there will be increase in the disposable income in emerging markets that could boost the financial performance of Amazon.com.
There are many areas in the world where internet is constrained just because of religious values and ethical factors. It has limited the sales in many areas for Amazon.com. With the innovation and development of technology, the number of internet users is increasing each year (Wells, Danskin & Ellsworth, 2016). The company is giving various ways that will assist to enhance its market share.
Advancement in technology directly influences Amazon, looking at the centrality of technology in its e-commerce business. It is an online platform so it assists to provide and search more innovative methods which outshine the competing brands. Development in technology assists the organization to enhance mobile devices and online shopping worldwide.
The internal analysis of Amazon.com can be analyzed by assessing its resources and capabilities. The internal analysis of the company is given below:
Amazon owns various tangible and intangible resources which assist the organization to make its operations and activities smoother. Tangible resources of the company are like distribution centers, storage houses, employees and its offices. It is an online business so tangible resources are not of much importance. Tangible resources of the firm help in its functioning. Moreover, intangible resources are company’s brand image, reputation and its position in the market. Enhanced brand image of the company helps it to maintain its position in the market and e-commerce industry. Another intangible resource of Amazon.com is the amount of customer awareness that it had gained over the years.
The major core competency of Amazon is offering one of the largest collections of products online. It combines excellent customer services and information technology services. Professional and skilled employees are the major capabilities of the company that assists to maintain negotiation power over the suppliers (Reimers, and Waldfogel, 2017). In the case of e-retailer, suppliers are very significant. Each and every person in the company is focused on satisfying the needs and demands of customers. Cost leadership strategy is one of the major capabilities at Amazon.com.
From the above market environment analysis, it can be stated that company has better position in the market (Agarwal, Grassl & Pahl, 2012). There are various factors which are in the favor of Amazon.com but some factors have adverse impact on the organization. The summary of internal and external market analysis can be presented in the below SWOT table:
- Strong brand image in e-commerce industry.
- A large variety of products and services.
- Cost Leadership strategy
- Focused on the needs and demands of customers.
- Extensive delivery network
- Advancement and development of technology
- Effective relationships with suppliers
- Large customer base
- Decrease in disposable income of people can affect the sales of Amazon adversely.
- Easily imitable business model
- Restriction on internet in various areas due to religious values.
- Unawareness of online shopping in rural areas.
- There is a less penetration of online shopping and e-business.
- Business expansion in developed countries.
- Establishment of physical stores in strategic locations (Helms & Nixon, 2010).
- Introduction of more products and service lines.
- Increase awareness about usage of modern technology.
- There is a growth in cloud computing services.
- Intense competition in e-commerce industry.
- Major competitors are Alibaba Group, Wal-Mart stores, Best Buy, Netflix, International Business Machine etc.
- Business model imitation threat
- Domestic low cost retailers and physical retail stores.
- Economic fluctuations in any specific country.
Target market is the specific customer segment that is chosen by an organization to which it plans to serve through its products and services (Pandit, et al, 2017). Amazon.com targets its customers considering different characteristics of market segmentation approach. These bases are stated below:
Under demographic segmentation, Amazon targets its customers by focusing on different characteristics like age, income and gender of population. The company offers the products by aiming both the males and females of 18 years or more. In addition to this, it targets the students, working population and business professionals who spend money on online shopping.
Through psychographic segmentation, Amazon.com focuses on all the classes of society like middle class, lower class, working class and upper class. The reason behind this is its cost leadership strategy so that every social class can afford the products available on Amazon (Mishra, & Kotkar, 2015).
By considering the geographic bases, this company is offering its products and services in urban areas only as they are more aware about e-commerce. The country has expanded its business in more than 100 nations. It should focus on the rural areas as well so that it can increase its sales.
Amazon offers various benefits to its customers like a wide range of products, competitive prices and convenience of e-shopping. The products and services of the company are most appropriate for the people who are very choosy at shopping.
New Product/Service Description
From the SWOT analysis, it can be stated that Amazon.com should include more products and services in its product range (Turban, et al, 2018). Looking at the competition in the market, the company should increase its offering by comprising attractive and innovative products in its vast collection. However, Amazon.com is already a reputed and established giant in e-commerce industry, but now company should expand its business by including new products and services in its widest product range (Das, 2015). The company should introduce a unique and attractive product that can enhance its customer base and sales. In addition to this, the organization should introduce an online auction hosting software across the world.
An online auction is the auction that is held over the internet and by using the software. This type of auction can be in different formats but most famous formats are such as descending Dutch auctions, English auctions, Vickrey auctions, first-priced sealed bid etc. There are some major competitors of Amazon.com such as eBay and Alibaba.com which are already offering this type of services to its targeted population all over the world (Gmelin, and Seuring, 2014). From now, Amazon.com should introduce this new service under its product collection and this new service of online auction will increase its product range that can be bought and sold by using online auction techniques. In the recent online and highly technological environment, it will be very profitable service for this organization. This new service will offer new benefits to above targeted customers such as usage of computerized bids via electronic forms. It will develop a search engine to get the products and services. The customers and website users can search the products by categories. Through this service, users of Amazon.com bid or sell for the products and services which are available on internet (Murphy, 2017). This new service concept will help the company to create a new customer base for the company.
Customer Value Proposition
A customer value proposition is the marketing statement of a business which describes why a customer should purchase product or service of a company. The value proposition of the company is specifically targeted to the potential customers of company (Riefa, 2016). The customer value proposition of amazon.com should be that it is very reliable and trusted brand that offers the opportunities for e-commerce and online shopping. For this new service of Amazon, the value proposition of Amazon should be “the company will be offering a range of products with ensured quality at bargained prices.” For instance, bid $1 policy of company provides the lucky customers to buy any product that is being auctioned for $1 (Laverie, et al, 2017). This new product can deliver a significant value to its customers. Despite of auction’s closing price, when the bid is closed with reserve price then end bidder will have that item. Thus, through this new service of online auction hosting, the company will be able to provide the customers with the pleasure of winning the products that may not be available in near future. In addition to this, the organization should provide the short-term live auctions as well (Pinkerton, 2013).
Marketing mix variables (4Ps)
In order to promote this new service, Amazon.com should develop some marketing strategies which can attract more customers towards these services. The marketing mix variables of Amazon.com are given below:
As mentioned above, Amazon.com should include a new product in its product range so that it can increase its customer base. The recommended product or service is online auction hosting service that should be introduced by Amazon.com. An online auction is the auction that is hosted on internet and by using the software. The company should offer the quality services to its potential customers. It should provide the products with higher quality at bargained prices. This service should offer the customers direct access to product manufacturers. The people should be able to bid for items by their mobile phones (Eagle and Dahl, 2015).
However, Amazon.com is operating its business by using a cost leadership strategy. For this product, the organization should use effective pricing strategy in the initial phase so that it can attract more customers. The prices of auction will vary according the prices of products offered by the organization (Baack, and Boggs, 2008). It should be afforded by all types of customers in targeted population. The company should adopt a value based pricing strategy for this new service.
Amazon.com is an e-commerce business so it should use its official website to approach a larger and targeted population. There are some websites which are the subsidiaries of Amazon like Audible.com. It should be used for reaching to the potential customers. Moreover, it should encourage its targeted customers to visit its official and other websites and to buy the products and items under online auction hosting (Dutta, 2017). By using this strategy, the company will be able to deliver its services to its targeted population.
Promotion is the most crucial component that can be used by Amazon.com to advertise its new products and services to potential customers. The organization should use effective modes for promoting its products. It should use both offline and online modes of advertising. Under online mode, the company should advertise its products on internet sources and social media networking sites. Additionally, it can promote online auction hosting through newspapers and magazines (Vijaylaxmi and Srinivasa, 2015). It should display the auction hosting ads on the official website of Amazon.com. So that people can be aware about the services of the company. These are the ways through which this organization can promote its new products and services among targeted population. Promotion and advertising is the best way to increase brand awareness among customers.
Conclusion and Recommendations
In the limelight of above report, it can be concluded that Amazon.com is the largest e-commerce retailer that is offering its services across the world. Through its website, the company offers its products in more than 100 nations and supplying different products like consumer electronics, books, stationary items, DVDs, CDs etc. The company is able to establish a strong brand image in the global e-commerce industry. The above study includes the internal and external analysis of marketing environment of Amazon.com. After analyzing the SWOT analysis, it is recommended that company should introduce a new product or service in the market i.e. online auction software. It should use effective marketing strategies to promote its new services among targeted population.
Thus, it is hereby recommended that Amazon.com should use effective strategies to stay competitive in the industry. It should launch more products considering the product range of its major competitor i.e. Alibaba.com. It should implement more strategies to entice more customers towards its new services. Moreover, it should emphasize on the profitability more than volumes. The above strengths and opportunities should be used to overcome the weaknesses and threats in the industry. The company should focus on expanding its business in global market and it should open its physical stores in developed nations. It will assist in producing more revenues in online retail sector.
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