External Environmental Analysis Student`s

  • Uncategorized

ExternalEnvironmental Analysis

ExternalEnvironmental Analysis

Anexternal business environment entails all the factors outside thecompany that influences the normal operation of the firm. The firmhas no control over such an environment. This paper aims to performan environmental analysis of Amazon Company. The company offers avariety of services that include advertisement, credit cardagreements, web services, and electronic devices, for example, Echo,Kindle e-reader, Fire tablets and Fire TVs.

Lawsand Regulations

Governmentallegislation and regulations have significantly affected Amazonbusiness especially the state policies on labor and taxes. Some ofthe Amazon products are highly taxed, and that leads to a reductionin the profit margin (Botha, Kourie &amp Snyman, 2014).


Thestate of the economy has a crucial influence on the purchasing powerof customers and thus affects the business benefits. A weak economyleads to low sales and little gains from business proceeds (Botha,Kourie &amp Snyman, 2014).


Amazon is placed ahead of its competitors by the usage ofwell-developed communication Information Technology (CIT)infrastructure in marketing and e-commerce schemes (Bateman &ampSnell, 2011). The firm registers steady retail websites that permitassortment of products, convenience, and pricing. The business cansell a lot of products and at the same instant, accommodatestockbrokers. Despite the growing IT systems, Amazon stillexperiences explicit confidentiality worries that can compromiseinformation security.


Population distribution and composition affects how services aredelivered by the Amazon Company. The Amazon Managers greatly considerstaff demographics in the formulation of the human resourcestrategies. That incorporate the skill level and education.


Thedynamics in socio-cultural affects the manner of service delivery bya business entity. An individual belief informs how what to purchaseand what not to buy. That has hit some of the Amazon products.


Suppliersare instrumental for business continuity. Amazon cooperates with itssuppliers for the different products to ensure business continuity.Some vendors supply low quality and expensive products, and thataffects the amount of profit that the firm can realize (Klaus, 2013).


Klaus(2013) asserted that competition affects each and every business.Amazon Corporation is no exemption notwithstanding the broad array ofproducts that the corporation sells. Major competitors in the presscategory include Time Google, Netflix, eBay, Apple, and WarmerCables. The contenders in the electronic segment encompassRadioShack, Wal-Mart, Staple, Family Dollar, and Big Lots. Also,Amazon also has various online marketing competitors particularly onelectronic classes, and they include, Wayfair Inc., Zulily, JD.com,and Overstock.com. Besides, Amazon faces competition with some majorworld administrations in operation set, and these are Accenture,Citrix Systems and Oracle (Klaus, 2013).


Newentrants have significantly affected Amazon business by lowering theprices of similar products and therefore sets a lot of unfaircompetition.

Substitutesand Complements

Amazonworks on its alternatives by reducing the prices of its products thusmaking it scale high above the competitors. Next, the companydeveloped the Amazon marketplace where it partnered with otherbusinesses and efficiently sold their complementary products.


Customerdynamic especially, the spending behavior has tremendously affectedthe Amazon business. The clients demand very high-quality products atvery low prices which tentatively leads to losses when not wellorganized (Bateman &amp Snell, 2011).

WhatHas the Company Done to Adapt to Its Environment?

Themajor issue Amazon faces in its environment is competition and thushas since adopted competitive advantage strategies. The organizationhas undertaken several steps to adapt to its business environment.The company provides lower prices for its products, and that led toan upsurge in the number of clients visiting and augmented the volumeof sales. Moreover, it attracted a huge percentage of differentthird-party merchants and vendors to this site who pay commission.The state empowered Amazon to realize higher values out of the fixedcosts, for example, network servers that can control the site. Suchsuperior efficiency values led to further reduction in the itemprizes (Klaus, 2013).

Remarkably, Amazon developed an all-around shopping gateway AmazonMarketplace where all players of any magnitude used its online podiumand technology to present their products to several customers besidethe same merchandises accessible by Amazon. Such collaborationhappens amid Amazon and Apple that spearheaded Kindle e-readingintroduction where Apple agreed to dispense e-books over its iPadKindle application. Nonetheless, Apple received a broader marketplacefor its Kindle, and the iPad became a more intricate content supplierfor the Amazon Establishment, hence netting it an improvedcompetitive advantage beyond similar businesses (Klaus, 2013).

Amazonefficiently utilizes CIT to perform supply chain on a better scale toaccomplish advantages of large-scale production that permits it togain in inventory velocity and capital efficacy (Klaus, 2013).

HowDoes That Company Attempt to Influence Its Environment?

Theexternal environment has particular concerns that an institutionneeds to capitalize on to expand its profitability while ensuring theloyalty of customers and market base. The company has an opportunityin utilizing an online payment system which scales up and alienatesthe issues of confidentiality and security (Botha, Kourie &ampSnyman, 2014). Equally, the corporation plans to garner more productsunder its peculiar brand instead of single functioning as aforwarding point of third-party merchandisers aggregating some goodsunder its name. The firm is expanding the portfolio of its offeringsby supplying more products with the view of creating more returns inthe long-run.

The company efficiently utilizes Amazon Video, Amazon Marketplace,and Amazon Web Services to ensure the satisfaction of the clients.Besides, the local domain allows the organization to utilize ofAmazon Prime and Marketplace to distribute online retail services tothe customers’ expectations. Finally, the company reaches out toits customers by recognizing and using consumer electronics as seenin Amazon Echo, Amazon Kindle, and Amazon Fire apps (Botha, Kourie &ampSnyman, 2014).

DoYou Think the Company Has Made Sound Decisions? Why or Why Not?

The company has made good decisions in dealing with the externalenvironment that it has no control over. That is reflected by thestrategies it did put in place to ensure it has a competitiveadvantage over the other similar businesses.

The organization makes proper use of significant proceduresaccomplish the wants of the clients, and that comprises networks andglobal fulfillment while other measures by outsourcing andco-sourcing programs of various nations.

TheAmazon similarly offers platforms that inspire the customers to selltheir stuff on the corporation’s website, and the brand stays asthat of the client. The society incorporates enterprises and everyextent developer such as national agencies, and academic bodies. Thesection in charge of services offers various sets of storagefacilities and global computers. The content creators are in chargeof independent publishers and authors.

Thedecisions are significant and made it an essential online company.That is portrayed by the tremendous growth attracting internationalrecognition.


Itcan be censoriously summarized that the external environment is achallenge to every business entity. The company needs to developtactful strategies to fight the undue influence of such anenvironment. Amazon concentrated on competitive advantage strategy,technology, and competition to challenge competitors in their line ofbusiness. Decision-making is a key ingredient in ensuring thebusiness scores on its mandate.


Bateman,T. S., &amp Snell, S. (2011). Management: Leading &ampcollaborating in a competitive world.

Botha,A., Kourie, D., &amp Snyman, R. (2014).&nbspCopingwith continuous change in the business environment: Knowledgemanagement and knowledge management technology.Elsevier.

Klaus,P. (2013). The case of Amazon. com: towards a conceptual framework ofonline customer service experience (OCSE) using the emergingconsensus technique (ECT).&nbspJournalof Services Marketing,&nbsp27(6),443-457.