Conducting a SWOT analysis – An Amazon Case Study

amazon swot analysis


Remember that time when you wanted to launch a new product and were clueless where to begin?

A SWOT analysis should have been the first step on that long road to the attainment of your aim.

But what is a SWOT analysis? What is it used for? Why do you need it?

The good news is that we will answer all these questions for you and carry out a SWOT analysis on one of the biggest companies in the world: Amazon. But before that, let’s get a little bit of context.

The Right First Step Towards Success

A business does not operate in a vacuum.

We all know that, right?

There are many internal and external factors that affect the ability of a business to reach its goals and be successful.

Aaah, the trigger word. Success.

Whether you are a small, medium-sized or large business, you want to see it succeed. Success may mean any number of different things to you. But at the end of the day, you want to achieve all your goals and witness your business moving forward.

But what is the catch?

Well, before you can work on improving your business, you need to determine where you stand.

The process of analyzing your business is daunting to most business owners, partly because of the fear of what they will find. But it doesn’t have to be.

amazon swot analysis

A SWOT analysis can be easy to carry out and highly beneficial to your business in the long term.

But how do you do it?

That’s where we come into the picture.

In this blog post, we are going to teach you all about how to conduct a successful SWOT analysis. But that’s not all – we will help you understand better by conducting a SWOT analysis of Amazon!

Let’s dive right in!

What Exactly is a SWOT Analysis?

In simple words, it is a tool that lets you do what we mentioned above – determine and study the internal and external factors that have a role to play in your success.

To be more specific, it helps you identify

  • Your Strengths as a business (internal).
  • Any Weaknesses you may have (internal).
  • The Opportunities you can use to your advantage (external).
  • The Threats you face (external).

Once you have all this information in front of you, you can focus on what’s important.  You can reinforce the good, tackle the bad, make the best use of opportunities you had been unaware of until now, and be prepared to tackle any issues that come your way.

Confused?

Don’t be!

You will understand perfectly once we walk you through the steps with the SWOT analysis for Amazon as a guide.

But before that:

Why Are You Carrying Out a SWOT Analysis?

Before you begin the analysis, you need to be clear about your motivation to do so.

What is it that you are trying to achieve? Are you launching a new product or revamping your website? Do you want to slightly modify your business game plan or implement an entirely new marketing strategy?

Do you want to carry it out on the entire company, a single product or service or even an individual?

Are you willing to take the steps necessary to rectify a potentially messy situation that you may discover?

Once you have determined your motivation to carry out the analysis, you can get started.

Amazon Overview

swot analysis of amazon

E-commerce giant, Amazon, is a leader in the industry. With over 350 million items for sale on the platform and 300 active customers, Amazon is the first place people go to find the best deals and check prices.

According to Repricer Express, Amazon conducts sales of $17 million an hour. Yes, you read that right. $17 million in one hour!

In addition to that, eMarketer estimated Amazon’s e-commerce sales to be nearly half of all the retail spending in the US in 2018. So they must be doing something right!

Like all other businesses though, they also have weaknesses, as well as potential opportunities and threats they need to address.

Amazon is a company that has been an inspiration for many others while also having witnessed its own fair share of bumps in the road along the way. It is, thus, the perfect case study for your understanding.

Let’s begin!

Conducting a SWOT Analysis – Explained with an Amazon SWOT Analysis

swot analysis for amazon

Now we come to the fun part. We will teach you just what you need to do to conduct the analysis, illustrated by discussing the example of Amazon every step of the way.

Identify Your STRENGTHS

If you will recall, the first internal factor that affects where you stand in the market is the strengths you possess.

This could be any number of things, including things that you do well, processes that have a high ROI, and the characteristics that make you better than your competitors. Some other examples of your strengths include:

  • A highly qualified and dedicated team
  • Efficient processes
  • A smooth workflow
  • Tangible assets such as solid capital, state-of-the-art equipment, and more
  • Integrated IT functions
  • Being ahead of competitors in most, if not all, aspects

Identifying your strength allows you to know what areas you are doing well in. This, in turn, allows you to focus on them more without changing too much and reap the maximum possible benefit that you can.

amazon strengths

Amazon’s Strengths

The strengths of Amazon can be summed up in their own words; the company is guided by “customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.”

Here are some other strengths of Amazon that set it apart:

  • Brand Image and Recognition

    Everyone knows about Amazon. Most people have also shopped there. It is a household name, one that is often spoken of as an example of a great deal someone got to enjoy on their favorite product. In other words, it has a positive brand image and high recognition.

  • Cost Leadership

    Amazon is an e-commerce site and does not have a physical presence and the costs associated with it. Through this, as well as many strategic partnerships and well-implemented strategies, Amazon maintains its image in the market as a low-cost vendor.

  • Innovation and Uniqueness

    Every day, you see new kinds of products and services being added to the Amazon platform (many times through third-party sellers). You also see new trends with a focus on user-friendly functionality and a great shopping experience that sets it apart from competitors – this is a great example of Amazon’s strategic differentiation.

  • Scalability and IT

    As we just mentioned, Amazon expands its inventory regularly and its customer base isn’t shrinking either. It keeps up by using state-of-the-art technology to refine its processes and tools, ensuring the user experience isn’t compromised. This allows the e-commerce giant to stay ahead of the game.

  • Customers’ First Choice

    Amazon’s customers are its priority – the company offers low costs, great deals, and a phenomenal shopping experience to keep them satisfied. This makes it the go-to for millions of people.

  • Partnerships

    Whether it is a strategic alliance with Evi Technologies or the acquisition of Whole Foods among other things, the partnerships Amazon forms result in a massive increase in profits for the company.

  • Distribution System

    Consumers want a smooth shopping experience and quick delivery – a process that does not create any unnecessary hassle for them. And Amazon delivers immaculately. With the use of top-notch logistics and distribution methods at play, it dominates the market when it comes to customer satisfaction.

  • Expansion

    Amazon taps into new markets whenever it sees the opportunity to do something big. Its unmatched brand recognition at an international level paired with its dedication to providing top-notch services makes it a success anywhere it goes.

These strengths, among many others, help Amazon stay ahead in the race to be the best.

Discover Your WEAKNESSES

Your weaknesses are areas that may be holding you back from reaching your full potential as a business.

amazon swot analysis 2017

It’s true that they may just consist of hurdles that are very easy for you to overcome. But how can you take corrective measures if you don’t even know what is wrong?

On the other hand, there could be problem areas that need your immediate attention. And you are unable to give that attention because you aren’t even aware of the problem.

This is why it is important to list down all your weaknesses. This list can then form the basis for your future course of action.

Here are some examples of weaknesses for your clarity:

  • Processes that offer a low ROI
  • The inability to overcome competitors in certain activities
  • Limited amounts of resources
  • An incompetent team
  • No USP that sets you apart

Let’s take a look at where, according to the SWOT analysis, Amazon stands when it comes to weaknesses.

Amazon’s Weaknesses

  • Lack of Physical Presence

    This point proves that a single factor can act as both an advantage and a hurdle. While the online-only approach helps the company save a large amount in costs, it prevents Amazon from tapping into markets where e-commerce is still an emerging trend.

  • Free Shipping

    Amazon usually offers free shipping to its customers (on eligible items) when a consumer places an order over $25. This has a role to play in its popularity because no one likes to pay shipping. However, it is a costly approach and can affect the company’s margins by a great deal. While it seems to be working for now, the strategy may require some consideration in the future.

  • Low Profitability Margins

    Although Amazon generates a huge revenue, its profitability margins are thin. While this is great in the sense that the company gets to offer great value and incredible experience to its customers, it doesn’t make much of a profit. And while it may have found great ways to offset the losses, the company could potentially run into trouble in the future.

  • Competition

    Retail businesses are popping up online every other day. However small to begin with, they are Amazon’s competitors. What’s more, is that many of them have imitated Amazon’s business model, which takes away one of its major competitive advantages.

  • Losses

    While Amazon excels at its core business operation, it has faced trouble in other areas. One example of this is the Fire Phone disaster. The phone, developed by Amazon, did not do well and resulted in massive losses for the company.

  • Loss of Competitive Advantage

    Amazon started out as an online bookstore. Since then, it has turned into a full-fledged online retail marketplace that aims to sell everything. That has worked out in its favor but the company still lost its focus and competitive edge in that particular industry.

Uncover OPPORTUNITIES

Now we come to the external factors that affect the running of any business. The first of these is the opportunities that your business can grab.

An opportunity is anything that you can make use of in a timely and effective manner to gain an advantage.

amazon opportunities swot

Important note:

Just like a particular component can be a strength and a weakness at the same time, an opportunity can also act as a threat to another element of the business. All these things are connected as opposed to being standalone factors.

Some opportunities that are common to many businesses include:

  • New and innovative technology solutions
  • Expansion into a new market
  • A partnership, acquisition or another kind of deal
  • A small number of competitors in a particular market
  • Publicity through the media
  • A sudden need for your products or services

Opportunities can take any shape and form. The trick is to identify them as soon as they become available and grab them before anyone else does. And that is where the SWOT analysis comes into the picture.

Amazon’s Opportunities

To effectively identify all of Amazon’s opportunities, the SWOT analysis is definitely the way to go.

Let’s discuss some of them, one by one.

  • Market Expansion

    This was previously discussed as one of Amazon’s strengths. It, thus, makes perfect sense for it to be an opportunity. Why? Because there are MANY more markets that Amazon can yet penetrate and make the most of. With an increase in the trend of online retailing in developing countries among others, the possibilities are limitless.

  • Creation of Own Product Line

    One of the main functions of Amazon is to serve as an online vendor for third parties to sell their products. Something that would be more beneficial to the company is if it started creating and selling its own products more. This must be done in a smart, strategic way, however, to prevent it from becoming another Fire Phone fiasco.

  • Expansion of Offerings

    Having said what we covered in the point above, there is always room for expanding the platform and adding all kinds of products from more third-party sellers to its already massive list of offerings. The focus, here, can be on products that are currently not found in abundance on the website.

  • Partnerships

    Strategic alliances or acquisitions among other steps that strengthen the brand and allow it to expand its horizons are clearly a good option. Such partnerships have benefited Amazon in the past; there is no reason why they won’t prove to be instrumental to the growth of the company in the future.

Recognize THREATS

Threats are the second of the major external factors that can have a role to play in how far a business gets. A threat is anything that endangers the brand from the outside and can cause problems for it in the short and long term.

swot analysis amazon

Identifying threats early on is essential if you don’t want to be left behind while your competitors achieve all their goals.

Once you are aware of the possible issues that your company can encounter, you can devise a game plan to tackle the concerns.

Before we go into the potential threats Amazon faces, let’s take a look at some examples of what a threat to a business can look like:

  • A massive increase in competitors
  • Customer turnover
  • Political unrest in a local or global location
  • A great increase in the costs of doing business
  • A change in customer preferences
  • Negative publicity

Amazon’s Threats

  • Cybercrime

    Cybercrime and data theft are modern-day criminal activities that put internet users at risk, especially those individuals who shop online. There is an increased awareness among the public about the perils of sharing personal and bank account details over the web today. This has forced people to avoid shopping online when they can to some extent.

  • Increased Competition

    One of the major issues that threatens Amazon at all times is that more and more online retail stores are springing up every day. While Amazon dominates the e-commerce industry by a great margin, some, if not many, of the newbies will always possess the potential to grow at an exponential rate and leave the undisputed giant (for now) behind.

  • Policy Constraints

    Because of conflicts between the US and many countries, Amazon cannot look at them as potential future markets. This gives a competitor from another region a great advantage as they can tap into markets Amazon does not have access to.

  • Unhappy Competitors

    A major strength of Amazon, as you will recall, is cost leadership – the company strives to provide its consumers with the best products at the lowest prices. This, understandably, infuriates its competitors and Amazon often finds itself in the middle of a legal battle.

What To Do Next – Analysis

Once you have completed the four stages we just mentioned – identifying the strengths, weaknesses, opportunities, and threats – it is now time to analyze them and devise a game plan.

amazon swot analysis 2017

All the information you need to tackle any issues and determine what areas to focus on is in front of you at this point.

Here are the steps you can take next:

Prioritize

With everything in front of you at one time, you will be able to do what was impossible before. Take a guess. That’s right, you will be able to determine which issues need your immediate attention and which ones you can come to later.

Devise a Game Plan

It is now time for you to devise a game plan for all the issues identified, Start with the ones that cannot be delayed.

Gather experts from all the relevant niches, put your heads together, and figure out what needs to change. Also determine how it will be changed and who will lead the effort among many other things.

Try to focus on how you can use your strengths and minimize your weaknesses to tackle the threats and make full use of the opportunities in front of you.

Implement the New Strategies

Kick off the plan by putting the strategies to fix the most crucial issues into place first.

Follow with the rest until all the issues are on the way to being dealt with.

Potential Strategies for Amazon

We have walked you through the brand’s strengths, weaknesses, opportunities, and threats. It would be unfair to leave you without closure.

So here are some of the potential strategies the company can put into play, derived from the SWOT analysis of Amazon.

  • Amazon can consider expanding its services and moving from an online-only model to online and physical stores in certain areas. This will allow it to tap into otherwise inaccessible markets and increase its revenue.
  • One thing Amazon needs to do is to always work on enhancing security so that customers feel safe sharing their data to make a purchase.
  • Another thing that can help is to enter into more partnerships that are beneficial for the company.

There are, of course, hundreds of areas in which a huge business like Amazon can make changes – this is just scratching the surface to give you an idea of the kind of solution companies can go for against their strengths, weaknesses, opportunities, and threats.

Final Thoughts

The ability to conduct a SWOT analysis with perfection is a skill every marketer and business owner should have – it should come to you as easy as counting one, two, three.

The reason is simple:

It lets you identify what you’re doing right, where you’re going wrong, what opportunities you have the chance of grabbing, and what obstacles can come in your way.

We hope the Amazon SWOT analysis gave you more clarity regarding the whole process. If you have any questions or would like us to analyze another company or discuss another analysis method, let us know in the comments below!

 

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