Table of Contents

Introduction......................................................................................................................................3
External analysis of the industry......................................................................................................4
PESTLE analysis:........................................................................................................................4
Porter’s five forces model:...........................................................................................................5
Internal analysis of the industry.......................................................................................................5
VRIO analysis:.............................................................................................................................5
Value chain of Amazon.com:.......................................................................................................7
Corporate Social Responsibility:.....................................................................................................8
Carroll’s pyramid in context of Amazon:....................................................................................8
Evaluation:.....................................................................................................................................10
Recommendations:........................................................................................................................10
Global development:..................................................................................................................10
CSR and Sustainability:.............................................................................................................11
Conclusion.....................................................................................................................................11
Reference:......................................................................................................................................12

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Introduction
With a mission to improve the user experience by using the internet and technologies to assist
users in finding, discovering, and purchasing something, as well as empowering companies and
content makers to achieve maximum success, Amazon.com is one of the leading e-retail brands
in the world (Smith and Linden, 2017). Amazon.com, Inc. is an e-commerce, cloud computing,
digital streaming, and artificial intelligence-focused American international technology
corporation headquartered in Seattle, Washington. The group has been dubbed "one of the
world's most powerful economic and cultural powers," as well as "the world's most successful
brand." Amazon is founded by Jeff Bezos in 1994 as an online book delivery site and gradually
increased its product differentiation with product development and innovation (Chua et al.,
2017). The report is based on the internal and external factor that impact the business operations
of Amazon as well as its CSR and sustainability approaches are describes with appropriate
theories and models. Finally, recommendations are given to develop the current practices of
Amazon.

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External analysis of the industry
External study involved analyzing the market landscape of a firm, including aspects such as
competitive environment, strategic status, trends, and background (Shtal et al., 2018). On a
broader level, external research encompasses macroeconomic, financial, political, societal,
demographic, and technical analysis. The primary goal of external analysis is to identify the
opportunities and risks which will drive performance, expansion, and uncertainty in a particular
industry. External analysis of Amazom.com is described through PESTLE analysis and Porter’s
five forces model.

PESTLE analysis:
PESTLE analysis is done to know the external opportunities and risks in the UK’s market which
enable to implement the business operations of Amazon.com.
Political factor: This factor describes the government initiatives and its impact on the industry
which offers opportunity as well threats. Political stability of UK offer opportunity for Amazon
or others business operations. Government support for this sector provide opportunity for further
development and also a threat as new entrants or small businesses can easily prosper in the
market. The increasing support for the security in online businesses provides opportunity for
further business extension and a secure online market in UK (Jones and Comfort, 2019).
Economical factor: Increasing economic growth rate, high per capita income, recession,
inflation etc. are the factor of an economy. In terms of GDP, UK has the 6 th largest economy with
a growth rate of 1.5% despite the pandemic and $46008 per capita income (Lea, 2019). So, UK
is a developed country and stable economic conditions is surely an opportunity for businesses.
Economic recession may occur threats for businesses like pandemic, natural disaster etc. but
comparing to other element UK is a hugely potential market for Amazon.com.
Societal factor: customers behavior and the way of leaving which effect the business operation
are the societal factor. Pandemic force people to stay at home and buy necessary goods through
online which offer opportunity for online retailers. Wealth disparity is a treat and may lower the
potential customer base for products other than the basic.
Technological factor: UK witnessed the first technological evaluation and allocate huge
investment in this sector. Amazon.com is a tech-based corporation with innovative business
practices which provide opportunity as well as government incentives to it. Technological
advancement enables them to make an efficient business operation and lower its product price
which is their competitive advantages. On the other hand, cyber security is big issues to be
threaten.
Environmental factor: Environmental sustainability, low carbon emission etc. can lower the
negative impact on the environment as well as recognize as CSR activity (Moreau et al., 2019).
Amazon.com highly focused on sustainability which motivates them to stay in the long run,
efficient use of resources, proper waste management and lower carbon emission. Recently, UK’s
government enforce carbon-emission law and giving incentives for lower emission.

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Legal factor: Different laws and regulations that enforce by the UK’s government to operate the
business successfully such as, working hour, wages, import and export barrier, environmental
protection and so on. Amazon.com is highly recognized corporation and they must obey those
regulations.

Porter’s five forces model:

Porter’s five forces model is analyzed to know the existing and future competitiveness in the
industry (Kurnianto et al., 2019). This is a recognized tool to analyze the external environment.
Threat of New Entrant: Low
Amazon.com is the leading online retailer their brand value on economic scale and customer
loyalty keeps the new entrant’s threat low. Despite the low switching cost in the industry,
Amazon’s huge investment on its brand and efficient supply keeps them ahead.
Bargaining power of buyers: High
Amazon.com follow the bottom-up approach which means a customer centric business
operation. Customer’s bargaining power is high due to the extensive competition in the market
and retain the existing customer base (Lai et al., 2018). Amazon provide a huge variety of
products at a lower possible cost which provides competitive advantage as well as customers
satisfaction.
Threat of substitute: High
Lower switching which enable the customers to change brand at a little or no cost and this is the
reason of high threat of substitutes. Amazon.com and related brands deals with similar products
where superior customer experience and product price make the difference (LI, 2020). Amazon
invest huge sum to improve customer experiences because a bad experience may affect brand
switch.
Bargaining Power of Suppliers: Low to Moderate
This depends on supplier and Amazon deals with millions of products. If a product has less
supplier than the bargaining power is high and if there are available supplier than the power is
low. Amazon.com usually deals with in general usable products which has a huge supplier so,
the power is low to moderate.
Competitive Rivalry – Moderate to High
Increased amount of competitor in the online retail industry and lower switching cost in the retail
e-commerce platform produce high rate of rivalry. Amazon’s high-quality products, superior
customer service and efficient business operations create competitive advantages for them with
strong brand value and loyalty (Rahe et al., 2020).

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Internal analysis of the industry
VRIO analysis:
This model is used to analyze the internal key competencies of a business where the sources and
abilities are described from which these key competencies arise (Hernández et al., 2018). VRIO
analysis is described in context of Amazon to evaluate the competitive edge that comes from
those competencies.
Core competencies Valuable Rare Imitable Organized Competitive edge

Brand value     Perfect

Customer experience    Temporary

R&D     Perfect

Distribution network     Perfect

Customer base     Perfect

Customer loyalty    Temporary

Marketing    Temporary

HRM     Perfect

Core competencies of Amazon: The key elements of Amazon's market organization are the
source of its long-term comparative edge. There are four tools that constitute the basis of long-
term comparative edge in this VRIO analysis scenario (Lakaze, 2020). The Amazon.com brand,
for example, has a lot of value in the worldwide industry. The company uses this name to draw
buyers to its present and future products. Customer experience is not only a differentiating factor
for e-commerce businesses, but it is also a source of awareness and desire for digital retailers.
Amazon has experienced significant sales growth over the last decade, and its emphasis on
customer service is one of the major factors of its increasing brand awareness and success in both
the UK and global marketspace. Amazon's R&D expenditures increased to about $36 billion in
2019, which was greater than any other company, even Google, which invested approximately
$26 billion on R&D (Tou et al., 2019). Amazon has developed excellent abilities through
advanced analytics that include personalized recommendations and improve the chances for both
buyers and sellers due to a constant emphasis on R&D. Amazon’s distribution efficiency enable
them to charge lower price than the competitor which helps them to gain competitive edge in the
industry (Houde et al., 2017). Amazon has the biggest delivery channel in e-retain industry and
this competency is the primary element of competitive edge. Customer satisfaction is a primary
source of competitive edge and an effective source of revenue generation Amazon earned good

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consumer loyalty as an e-retail brand, thanks to its strategic role, strong brand image, pricing
strategy, and supply chain. Amazon Prime is a major component of customer engagement for the
company. The advantages provided by Amazon Prime, which appears at a quite low cost.

Value chain of Amazon.com:

Internal firm operations are analyzed using value chain model which have two activities primary
and supportive (Purcell et al., 2017). Its aim is to identify which practices are most important to
the company and which could be strengthened to provide a competitive edge.

Primary activity

Support activity

Primary activities of Amazon.com are:

Inbound logistics:
 Vertically integrated suppliers
 Decentralized fulfillment centers to route the items a put-away location
 Item replenishment
 Quality control, fulfillment from prime location
Operations:
 Market place operation, packaging
 Device and content creation
 AI software development
 AWS operations
Outbound logistics:
 Order fulfillment
 Order handling and dispatch
 Invoicing

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Marketing and sales:
 Amazon prime
 World’s most customer centric company
 Hassle free return
 Customer service
 Promotion
 Order and customer tracking
Service:
• Marketplace, AWS, Amazon device, and other providers provide warranties and support.
• Teaching and education
Secondary activity of Amazon.com:
Procurement: vast number of vertical suppliers which manage the efficient distribution and
delivery process.
Technology development: For suggestion and customization, an advanced consumer profile and
analytic software are used. Amazon online service that is reliable for Amazon's technology
infrastructure, as well as B2C and B2B users. Robotics technology and automated warehouse
operations and delivery processes. Drone-assisted shipping, voice shopping with Alexa, and the
Echo system
Human resource management: Hiring a skilled team, generating a stable operating cash flow,
and minimizing disruption are also important aspects of risk management.

Corporate Social Responsibility:

In conjunction with Global Optimism, Amazon unveiled one of its largest CSR campaigns, The
Climate Agreement, in 2019, encouraging businesses to target net-zero annual carbon dioxide
emissions by 2040 (Caraway, 2020). To help businesses build goods and technologies that
encourage and maintain a low-carbon environment, Amazon pledged $2 billion in 2020 to
achieve strategic goal.

Carroll’s pyramid in context of Amazon:

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Economical: The bottom of the pyramid reflects the very first duty of a company, that is to be
profitable (Brin and Nehme, 2019). Without benefit, the corporation would be unable to pay its
staff, and staff would lose their employment long before CSR operations began. Profitability is
the best way for a business to thrive in the long run and serve society. Economic situation in UK
is sable and Amazon has a strong brand value which helps them to survive in the long run
through economically and sustainably.
Legal: UK’s government has several strict laws which must be obeyed by the existing
companies. Employment law, environmental protection law, tax and import-export barrier,
consumer’s rights etc. have to be followed to survive or continue business operation in that
region. Amazon build a huge brand value through their consumer centric approaches and
obeying all the legal policies in respective countries.
Ethical: The major difference between a corporation's ethical obligations and its legal and
economic duties is that ethical considerations are up to the leadership's choice and are not
requested of the firm to meet, but are needed by society. Amazon’s intention is clear, they want
to build the companies image and brand value which motivates them to work ethically by
providing the best product with reasonable price and follow environmental and customer centric
approach.
Philanthropic: This collection of obligations is at the very top of the pyramid, emphasizing the
importance of becoming a successful corporate citizen and providing fuel for enhancing the
society's and people's standard of living. Amazon focused on developing their brand at a higher
level so, practicing CSR activities is the best approach to do so.

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Evaluation:
SWOT analysis to evaluate the internal and external factors of Amazon. Strengths and
weaknesses are the internal factors on the other hand, opportunities and threats are external
factors (Gürel and Tat, 2017).
Strengths Weaknesses
 Brand value of Amazon  Lower switching cost
 Customer-centric marketing approach  Limited brick-and-mortar presence
 Differentiation and innovation  Overdependence on distributor
 Cost leadership

Opportunities Threats
 technological advancement in product  Huge competitions in the retail industry
innovation and distribution. with some giant brand.
 Expanding physical stores to reduce  Government laws and regulations that
competitiveness along-side e- must be followed.
commerce.  Economic downturn such as the recent
pandemics.

Recommendations:
Global development:
Amazon’s global competitive advantages derives from its strengths and opportunities in the retail
industry as well as the weaknesses and threats are the barriers in global competitiveness.
Amazon has a huge brand value and continuously work to develop the brand value of the
company. Its customer-centric product development approach, product differentiation and
innovative products are the strengths of Amazon which provides it the competitive advantages in
the global market. also, the efficient product processing and distribution unit allow them to
become the cost leader in the respective industry. There are several opportunities that may enable
them to become the market leader by continuous product innovation and development,
technological advancement in distribution process, introducing physical stores that reduce
competitiveness with the retail giants like Walmart. But there are several weakness and threats
for Amazon to expand its global market which reduce its competitiveness in the market. E-retail
industry has lower switching cost and any misconduct may causes customer’s switch to another
brand. Amazon has huge third-party retailer and dependent mostly on its distribution network.
So, if the distributor denies to deliver the products then the whole system will lose its efficiency.
There are several threats in the retail industry, those are huge competitions with some retail
giants and Amazon develop strategy to overcome the situation by introducing physical stores to
gain competitiveness. Pandemics or any natural calamities may call to economic downturn and
its threats to all businesses in this industry. But the recent pandemic offers a great opportunity for
the e-retail industry because physical stores are closed and people force to stay at home. So,
people order products from online and Amazon make a huge turnover during that time.

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CSR and Sustainability:
Sales tax issue in US and taking government subsidies in Germany were the ethical dilemmas if
Amazon which are against the CSR and sustainability development of the business.
Sales tax: Amazon has been criticized of evading taxes over the last decade by only applying
sales tax to shoppers in 8 of the 45 states that have a statewide sales tax. Understanding the
discrepancies in tax collections and recovery in the U.s vs. Europe is critical from a European
point of view. Amazon is one of the many businesses taking advantage of this legal loophole.
The point of contention is that the corporation is deliberately attempting to stop paying the tax.
Amazon operates in all 50 states, 45 of which have a regional sales tax, but it only charges sales
tax in the five states where it has a stronghold.
Taking public subsidies: Amazon has to add additional staff during the Christmas period to
cope with the increased volume of orders. It is enough to hire an extra 4500 employees at the
largest German factory in Leipzig (Polacco et al., 2018). In order to encourage businesses to
recruit unemployed workers, the German government has established incentives to cover the
expense of a newly recruited individual's first 2 weeks of training. During these two weeks, the
company will decide whether or not to recruit the candidate. This subsidy was created to help
displaced employees re-enter the workforce by making it more economically attractive for
employers. In fact, this indicates Amazon will only have to account for four weeks rather than
the entire six. Since the busy festive season is over, most contract jobs are not employed until
these six weeks. Despite the fact that Amazon is employing employees and therefore benefits
from the subsidy, the organization is still rehiring staff after their first deal expires. This allows
the business to bid for a subsidy. This allows the business to apply for the incentive a second
time and without having to educate the newly employed workers. Local municipalities in
Germany are mindful of the company's corporate policies and are unhappy. However, Amazon is
not the only organization taking advantage of the subsidy, since it is not against the law.
For sustainability development, Amazon may start to practice circular supply chain and products
ownership which helps them to reduce the pollution and responsible for products disposal.
Alongside, ethical consideration is also important to keep the brand value and customers
awareness with the brand.

Conclusion
The report discussed the opportunities and threats that external environmental factors offers for
Amazon. There are some recommendations which may help to capture those opportunities in the
industry and reduce the related threats. Internal environmental factors also described which
enable strengths and weaknesses that the business may face due to the business operations.
Sustainability and CSR management also describes. Circular supply chain is the best way to
practice sustainability development for Amazon.com.
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