PESTEL ANALYSIS ON AMAZON

Political Factors Affecting Amazon’s Technology and Services Business

Amazon.com Inc. operates alongside political influence. This aspect of the PESTEL/PESTLE
analysis model focuses on governmental activity and its effects on businesses and their remote
or macro-environment. In Amazon’s case, the following political external factors are important
in the development of the e-commerce industry:

1. Political stability of developed countries, especially the U.S.A. and European countries
(opportunity)
2. Governmental support for e-commerce (opportunity & threat)
3. Increasing governmental efforts on cyber-security (opportunity)

Amazon benefits from political stability. In the PESTEL/PESTLE analysis framework, this
condition creates an opportunity for the company to expand or diversify its business in
developed countries. For example, Amazon could expand its brick-and-mortar operations in the
United States to complement its e-commerce business. On the other hand, the external factor
of overall governmental support for e-commerce is also an opportunity. Such governmental
support facilitates Amazon’s continuing expansion in relevant markets. However, the same
external factor threatens the company because of rising competition, such as that involving
Chinese online retail firms that are expanding their operations. Nonetheless, government’s
present improved business conditions through efforts in fighting cybercrime. This aspect of the
PESTEL/PESTLE analysis of Amazon shows major opportunities that the company can exploit to
increase its resilience in the remote or macro-environment of the information technology
services and e-commerce industry.

Economic Factors Important to Amazon.com Inc.

Amazon’s performance depends on the situation of the economies where it operates its online
and non-online businesses. The effects of economic trends and changes on the remote or
macro-environment are considered in this aspect of the PESTEL/PESTLE analysis model. In the
case of Amazon.com Inc., the following economic external factors are significant:

1. Economic stability of developed markets, especially the U.S. and European countries
(opportunity)
2. Increasing disposable incomes in developing countries (opportunity)
3. Potential economic recession of China (threat)
 The economic stability of developed countries increases the likelihood of success for
Amazon.com Inc. Based on the PESTEL/PESTLE analysis model, this situation minimizes
economic issues in the remote or macro-environment, thereby minimizing risks to the
company’s online retail business expansion. Amazon also has growth opportunities in
developing countries. For example, the increasing disposable incomes in developing markets
can boost the company’s financial performance. However, the potential economic recession of
China threatens Amazon’s business. China is one of the biggest markets that the company
hopes to increasingly penetrate. Based on the external factors in this aspect of the
PESTEL/PESTLE analysis of Amazon.com Inc., opportunities for growth in developing countries
must be included in the company’s strategy formulation.

Social/Sociocultural Factors Influencing Amazon

Social conditions are a determinant of Amazon.com Inc. This aspect of the PESTEL/PESTLE
analysis model identifies the impact of sociocultural changes or trends on the company’s
performance as a leading online retailer and provider of information technology goods and
services. Considering such trends in the remote or macro-environment, Amazon faces the
following sociocultural external factors:

1. Increasing wealth disparity (threat)

2. Increasing consumerism in developing countries (opportunity)
3. Increasing online buying habits (opportunity)

The increasing wealth disparity refers to the increasing gap between the rich and the poor in
many countries. This PESTEL/PESTLE analysis considers such a sociocultural trend a threat
against Amazon.com Inc. in terms of the potential stagnation of disposable income levels and
the corresponding stagnation of the remote or macro-environment of the industry. Higher
disposable income levels are more favorable in increasing the e-commerce company’s potential
revenues. In addition, an increasing degree of consumerism creates opportunities for growing
the e-commerce and IT services business. For example, higher consumerism in developing
markets increases the potential success of Amazon.com Inc.’s generic strategy for competitive
advantage and intensive strategies for growth, as the company looks to expand its global online
retail operations in these locations. In relation, the company stands to benefit from increasing
online buying habits, as more people around the world prefer to buy products through the
Internet. The external factors in this aspect of the PESTEL/PESTLE analysis of Amazon indicate
the benefits of focusing on market penetration and expansion in developing countries.
 Technological Factors in Amazon’s Business
Technological advancement directly affects Amazon, considering the centrality of technology in
its business. The consequences of technologies and related trends on the remote or macro-
environment are covered in this aspect of the PESTEL/PESTLE analysis of the e-commerce
company. The technological external factors important in Amazon.com Inc.’s business are as
follows:

1. Rapid technological obsolescence (threat & opportunity)

2. Increasing efficiencies of IT resources (opportunity)
3. Increasing rates of cybercrime (threat)

Amazon.com Inc. faces the threat of rapid technological obsolescence, which imposes pressure
on the company to continuously develop its technological assets. However, in the context of
this PESTEL/PESTLE analysis, such a condition is also an opportunity in optimizing the business.
For example, the corporation’s continued heavy investment in information technology can
boost its competitive advantage and protect the business from new entrants in the e-
commerce industry. Amazon also has opportunities to further improve its performance based
on the rapid increase of IT resource efficiencies. For instance, new computing technologies can
maximize online retail productivity and minimize operational costs. However, the company also
faces the constant threat of cybercrime. This external factor threatens the quality of customer
experience as well as the integrity of Amazon’s business. Thus, significant investment in
appropriate technological measures is critical to the company’s long-term survival despite
technology-related issues in the industry’s remote or macro-environment. Based on this aspect
of the PESTEL/PESTLE analysis, Amazon needs to emphasize continuous improvement of its
technologies.

Ecological/Environmental Factors
Even though Amazon.com Inc. is mainly an online business, its operations are subject to the
influence of the natural environment. This aspect of the PESTEL/PESTLE analysis model presents
how the company’s remote or macro-environment relates with ecological changes. Amazon
considers the following ecological external factors in its strategic formulation:

1. Rising interest in environmental programs (opportunity)

2. Rising emphasis on business sustainability (opportunity)
3. Increasing popularity of low-carbon lifestyles (opportunity)

Amazon has opportunities to improve its environmental impact in response to the rising
interest in environmental programs. Such interest is a direct consequence of ecological
 challenges, such as waste management and energy consumption. Based on this external factor,
an improvement in Amazon.com Inc.’s corporate social responsibility strategy could enhance
the company’s environmental impact. In relation, this PESTEL/PESTLE analysis notes major
opportunities in the area of business sustainability. For example, higher sustainability standards
can further improve environmental impact and strengthen the brand image of the e-commerce
organization, based on the business strengths identified in the SWOT Analysis of Amazon.com
Inc. Furthermore, the increasing popularity of low-carbon lifestyles provides opportunities for
the company to boost its corporate image as a leader in the e-commerce industry. The
company could implement extensive energy-saving policies in its operations for this purpose.
This aspect of the PESTEL/PESTLE analysis of Amazon shows the significance of a
comprehensive corporate social responsibility strategy to increase the company’s competence
in addressing the ecological concerns its remote or macro-environment.

Legal Factors
Amazon.com Inc.’s e-commerce operations must adhere to legal requirements. The effects of
regulations on the remote or macro-environment are determined in this aspect of the
PESTEL/PESTLE analysis model. In Amazon’s case, the following legal external factors are
significant:

1. Rising product regulation (opportunity)

2. Changing import and export regulations (opportunity)
3. Rising environmental protection regulations on businesses (opportunity)

Rising product regulation is seen as a result of societal demands on consumer safety and
customer security. In the PESTEL/PESTLE analysis framework, this external factor creates
opportunities for Amazon.com Inc. to intensify its efforts in reducing counterfeit sale on its
online retail website. Also, the company has opportunities to grow, based on the external
factor of changing import and export regulations. For example, Amazon can expand its global
operations to exploit the increasing ability of sellers to access overseas suppliers. Moreover, the
e-commerce company has opportunities to strengthen its brand image through appropriate
corporate social responsibility policies that address rising environmental protection regulations.
Such effort can increase business competitiveness in the remote or macro-environment. Based
on this aspect of the PESTEL/PESTLE analysis model, Amazon can ensure long-term e-commerce
success through regulatory compliance.