Amazon.com was founded in 1994 by Jeff Bezos. The firm started as an online bookshop but diversified later and started selling MP3 downloads, video games, software, audiobook downloads, toys, etc. The company has been ranked as the largest e-commerce marketplace and cloud computing platform. Globally, Amazon is the largest internet firm by revenue and has been credited as the second largest employer in the USA. In the early 90s, Amazon competed with other online booksellers such as computer literacy. Jeff Bezos discovered that more people were willing to read more books, but they could not access them.
The company went public in 1995 July where the founder declared the company as the ‘largest bookseller on earth.' However, the firm was not able to meet consumer demand since it took time to deliver the books to the customers. Bezos and his team would assemble books to the post office for distribution. In 1996 the firm made total revenue of $ 15.7 million. Consequently, the firm became familiar in 1997 hence generating more revenue which amounted to $54 million. In 1998, the firm started selling music and movies CDS. Due to the high revenue generated by the end of 1998, the company decided to venture in the sale of new products such as electronics, tools, and toys.
Since 2002 to date, the firm has significantly developed thus making more profit. It has partnered with various companies thus enabling it to penetrate new markets. For example, Amazon introduced service delivery in200 where individual sellers were allowed to market their products besides the company's products. In 2006, Amazon.com introduced cloud computing services, 2011 the firm introduced tablet computers, etc.
Amazon.com had significantly grown since 1995 when it dominated in bookselling. The firm has remained competitive in the international markets for more than 20 years. Amazon has dominated in various sectors such as logistics, data storage, hardware, e-commerce, and media and. The company operates in multiple industries. Amazon.com has created a platform which encourages sellers and buyers to interact. Recently, the firm has adopted the “flywheel” philosophy which was proposed by Jim Collins; - business consultant. The policy introduces a cycle in which entities can cut the prices of their products to entice the existing customers, increase the volume of sales and attract new customers. As a result, the company enjoys economies of scale and reduces the prices even more thus spinning the flywheel afresh.
Amazon offers a wide range of services and products and intends to join more sectors in the future. Consequently, the firm will generate more revenues and threaten new entrants. The following are examples of industries within which the company operates; grocery, since August 2017 the company has dominated the whole food market. The firm delivers commodities to their clients thus posing a challenge to local groceries. Secondly, Amazon is a leading company in the technology sector. Initially, the firm focused on online bookselling. However, in the present, the firm offers data storage services, manufacture of Fire Tablets and televisions and e-readers. Amazon is, therefore, a key competitor to companies such as; Samsung, Apple, Nokia, etc. Additionally, the firm intends to venture into the medical industry. Notably, this will be achieved through the acquisition of PillPack; - a setup which mails prescriptions to individuals taking multiple medications.
The paper uses the PESTEL model to analyze the company's external situation. The model consists of political, economic, social and environmental, and legal factors. The Porter’s Five Forces Analysis reviews competitive rivalry, bargaining power of suppliers, buyers and consumers as well as the threat of substitution and threat to new entrants.
Amazon operates along legislative powers. Political considerations are concerned with governmental activities and how they influence business operations and their macro-environment. Amazon.com is affected by the following political factors; political stability, government support for e-commerce and increased government support on cyber-security. Political stability positively impacts on Amazon.com. Political stability offers an opportunity for the firm to diversify its business in developed countries.
Similarly, increased governmental support for e-commerce is also beneficial to the firm since it can continue to expand its market. However, this may also act as a threat to Amazon.com due to increased competition from other firms. For example, Chinese online retails have significantly increased their operations with the USA thus posing a threat to Amazon.
Amazon’s performance highly depends on the economic situation. Changes in global economic trends affect the online e-commerce business. Amazon is influenced by the following economic factors; economic stability of the developed nations, increased disposable incomes in the third world countries and potential economic recessio
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