Amazon PESTEL Analysis

Introduction

Amazon PESTEL analysis is a strategic planning tool to evaluate the external factors that affect an organization or e-commerce enterprise based on marketing principles and the impacting macro-environment. PESTEL is an acronym for the six factors that shape a company's operating environment. It represents political, economic, social, technological, environmental, and legal factors. The PESTEL framework help companies analyze market trends and the wider business environment and overview the positives and negatives for business growth and expansion in the market. With PESTEL analysis, companies carefully design marketing strategies for various scenarios to create a flexible marketing structure that maximizes business growth opportunities. 

Companies use PESTEL analysis to study the key factors that influence the firm and evaluate the current and future state of the market to improve their performance and expansion plans. PESTEL also allows companies to identify and resolve threats. To get accurate PESTEL analysis results, a firm must regularly conduct the analysis after a specific time to keep track of remote environment changes. Here, we will discuss the details of Amazon PESTEL analysis to learn how the company's performance relates to the PESTEL framework. Download the PDF for PESTEL analysis of Amazon and edit or convert that report online using PDF Agile.

Background of Amazon

Amazon is the world’s leading retailer and marketplace founded by Jeff Bezos in his garage on July 5, 1994, in Bellevue, Washington. It is a multinational technology company and is one of the world's most valuable brands alongside apple, Microsoft, etc. The company started as an online shop for books which later expanded its collections and began selling lots of other stuff, including web services, computer hardware, autonomous vehicles, and everything you want to buy for personal or commercial use. Generally, Amazon is an “everything” store with multiple subsidiaries, including many big-name brands like Twitch, IMDb, Whole Food Market, etc. 

PESTEL Analysis of Amazon

Online shopping stores gain more popularity by the next day because it is convenient for people to shop from their homes without needing to dress up and go to the market. When it comes to online stores, Amazon is the most trusted and largest e-commerce brand. The PESTEL analysis of Amazon evaluates the external factors that impact the company and its business, including political, economic, environmental, social, technological, and legal aspects. Here are the details about the factors in the Amazon PESTEL analysis.

Political Factor

Business growth and expansions depend on politics, government policies, and other political factors like leadership and change, government and tax policies, foreign trade policies, and political activities or factors that might affect your company. Analyzing political factors is essential before launching a new business.

• The tax imposed by the government varies for each organization or business, and a multinational company must pay taxes in every country it operates for business growth. 
• The government introduced policies like the Fiscal policy impacts every business as it works to reduce poverty and create more job opportunities. 
• Delivery and supply disputes, direct competition from other online retail brands, and government laws can also be a risk to business growth. 

Political Factor Example:

The rise in minimum wages of all Amazon employees results from political factors impacting the company's operations. The economic and political pressure forced Amazon to change employees' minimum wages in the United States and the United Kingdom. Still, many other policies support the business expansion of the company. 

Economic Factor

Amazon’s economic analysis evaluates the company's economic growth by accounting for the affecting financial aspects such as inflation and interest rates, exchange rates, and employment rates. 

• Product sales on Amazon are higher than ever because the consumer's disposable income increases due to a better economy, giving them a chance to buy the products they want.
• Although economic conditions play a huge role in retail store sales, online stores like Amazon still have decent sales even in the worst economic conditions because people always need some products.
• Amazon received criticism for its advanced technology as it reduced job opportunities. Still, the company pressed on by hiring highly-skilled employees and providing training programs and three-month gross salaries so that employees could start their delivery services. 

Economic Factor Example:

Other companies like Walmart are also advancing their online retail stores to increase sales and become direct competition for Amazon. The Chinese economy makes it harder for the company to penetrate the market and establish a presence. 

Social Factor

The Amazon PESTEL analysis evaluates social factors like society's cultural trends, including demographics, living standards, culture, population growth, religious trends, diversity of race, and other factors that refer to the way of life of stakeholders.

• As the company sells all types of goods and technologies, identifying the target customers for each product type is only possible with demographics. 
• Understanding the culture and interests of different age groups allows Amazon to show products to the respective audiences with the highest chance of buying those products.
• Although there are some negative social impacts of having an efficient online retail marketplace like Amazon, the company is still considered the leading technology company with the highest positive impact on society.

Social Factor Example:

The best example of social factors influencing any company is how the government is under extreme pressure due to Amazon Online retail services as it is making people, especially the younger generation, lazier because they can buy anything they want without stepping out of their house, which results in less social meetings, social anxiety, and bad health problems.

Technological Factor

The technological factors in the PESTEL analysis, like research and development of new tech, efficient delivery channels, new production methods, and technology for the advanced production process, create a huge impact for companies like Amazon. 

• Amazon is mainly known for its technological advancements in cloud computing systems and automation, which brought the company to its current success.
• As an online retail platform, cybersecurity for sellers and customers who sell or purchase from Amazon is important because many sellers lose their monthly sales through hacking and other illegal means.
• Amazon's delivery services are the best compared to any other online retail store. The company is working on delivery drones that can deliver goods to customers without someone operating them.

Technological Factor Example:

The cloud interface for other online retail stores is similar to Amazon, as the company claims itself as the largest online retail enterprise. Still, it also puts a lot of pressure on the research and development team as they continuously introduce new and improved technologies to outperform others and gain a competitive advantage.

Environmental Factor

Amazon PESTEL analysis evaluates the influence of the environment on your business and the adverse effects of your business on the environment, including carbon footprints, pollution, global warming, climate, weather changes, etc.

• Companies like Amazon, whose business growth depends on environmental factors like climate change, and critical weather conditions, regularly examine the ecological sensitivity and use eco-friendly activities to save the world.
• The tracking of carbon footprint and use of green activities places Amazon at a competitive advantage because it provides excellent publicity. People prefer companies who promote eco-friendly activities like Amazon.
• Amazon tries to keep its packaging optimal for better waste management and reduce unnecessary waste.

 Environmental Factor Example:

All companies must follow the state-provided guidelines on how publicly traded companies should evaluate their carbon footprint after some period to identify climate and ESG disclosure and introduce eco-friendly activities. 

Legal Factor

The legal factors in the PESTEL analysis include government laws and policies that legally affect the organizational structure of companies, such as consumer rights, industry regulations, labor laws, product safety, etc.

• The regulations regarding an organization's operations depend on the industry to which it belongs, such as Amazon following rules similar to other online retail enterprises.
• As a multinational company, Amazon provides its services in different countries. Some permits and policies are a must-have for the company to operate in any region.
• The legal factor evaluates the various federal laws that protect employees, like minimum wages, health coverage, workplace safety, social security, etc.  

 Legal Factor Example:

Cobalt is the main raw material used in the production of various Tesla models making the demand for cobalt higher than ever. The Democratic Republic of Congo provides 60% of global cobalt production. The gradual increase in demand by Tesla and other electric car manufacturers gave rise to a few political issues like child labor and corruption that might affect the supply chain of cobalt.

Amazon PESTEL Analysis PDF

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Key Takeaways

PESTEL Analysis is a visual tool which allows a company to identify threats and opportunities for business growth and a competitive advantage over its rival. It helps them measure the effectiveness of their marketing strategies through always-changing marketing trends and macro environment. Amazon PESTEL analysis is an excellent example of how a company analyzes its business's current and projected growth and creates strategic plans for its future. PDF Agile is the best PDF editor and convertor, with many creative tools for editing, converting, and compressing your PDF document. It supports multiple formats and comes with an easy-to-use interface.

References 

1. Wondershare EdrawMax “Amazon Pestel Analysis”: From https://www.edrawmax.com/article/amazon-pestel-analysis.html
2. Panmore Institute “Amazon.com, Inc. PESTEL/PESTLE Analysis & Recommendations”: From http://panmore.com/amazon-com-inc-pestel-pestle-analysis-recommendations
3. MarketingTutor “Pestle Analysis of Amazon”: From https://www.marketingtutor.net/pestle-analysis-of-amazon/
4. How and What “Pestel Analysis of Amazon”: From https://howandwhat.net/pestel-analysis-amazon/.