PESTLE Analysis of Amazon

Internet and Globalization are the two major contributors towards the state of the organizational structure today.  It is due to rapid globalization and proliferation of internet and digital technologies which has led to numerous innovation and disruptions to the existing business models. Amazon is one such company which was founded soon after the Internet started spreading its wings. The company Amazon was founded in the year 1994 by Jeff Bezos as an online book seller(Zhou & Wang, 2018). The company which was founded at the back of a garage has now presence in more than 12 countries and ships products across 130 countries. In the last decade Amazon has evolved from a online book seller, to a full- fledged online seller and now it has further transformed into a technology company. The vision of Jeff Bezos is to be the most customer centric company on the face of planet and he also aims to sell anything to everything that I customer might search online. Amazon is the largest e-commerce player which sells products in the category of lifestyle, home décor, home appliances, consumer electronics, consumer durables, Kids, tech products and many more such offerings(Tran et. al., 2014).

The e-commerce behemoth which has its headquarters in Seattle, earned a revenue of US $ 136 Billion in the year 2016 and has more than 300 million active consumers on its platform. The strategy of Jeff Bezos here is to provide customers with an enriched customer shopping experience and provide them value deals so they always return back(Wang & Luo,2017). Jeff believes in the power of remarketing and retargeting, which helps the company to stay loyal to its customers. Policies and procedures at Amazon are seen as customer centric, as the company gives paramount importance to its huge customer base. Amazon has earned a great name for itself owing to its great customer centric policies, selection of goods, fast delivery, superior quality of products, curated shopping list and many such elements, which makes the company one of the greatest the world has so far witnessed(Epstein, 2018).

Considering the above introduction as the preamble to the report, the report will provide an understanding of the workplace culture and context with the view of improving one’s ability to function within the norms of the organization. The report will focus critically assess the culture and the context of the organization, evaluate the organization using the management tools such as PESTLE and SWOT. The report will delve into a deeper understanding of the concepts of impact of external environmental forces on the organization, formal and informal relationships between the department and the people in the organization. The report will also discuss in brief about the culture of the organization which is the reason for its workplace sustainability. The readers will also get an insight on the ethical standards in the company, its value and belief system, along with the communication channels used for sharing and building relationship with the stakeholders. Towards the end, certain barriers to effective functioning of the organization will be discussed along with the recommendation to overcome them.

SWOT Analysis of Amazon

This section will focus on the external and internal environmental analysis of Amazon with the focus on its workplace culture, values, beliefs, communication culture, ethical standards and corporate social and environmental responsibility.

PESTLE analysis can be understood as an analytic tool which is used for strategic business planning. The extremely important strategic framework is used to understand the external influence on a business. The influence on the business is ascertained according to different forces viz; Political, economic, socio/cultural, technological, legal and environmental .The impact of these forces on Amazon will be ascertained in this section.

The impact of political forces on Amazon can be ascertained by considering the following three cases, which are:

• Political stability of the developed nations can be considered as an opportunity for Amazon, as it gives the company leverage to expand its business operation and do addition to its existing product lie. The political stability also provides the company with the advantage of experimentation, this is the reason behind Amazon’s drone delivery and Amazon go store are in beta testing in the developed countries(Zhang et. al., 2015).
• Government support towards e-commerce can be considered both as a threat and an opportunity for Amazon. The opportunity can be seen as the government provides tax benefits and lax in its policies to develop the e-commerce sector. The threat can be in terms of increasing competition owing to the support of the government towards the start-ups in the e-commerce sector.
• The increasing efforts of the government towards the increasing threat of cyber security will help in bringing more customers to online shopping, thus benefitting Amazon significantly.

The impact of the economic forces on Amazon can be ascertained in the following manner:

• The economic stability of the develop markets is a big opportunity as people are open to buy good online, plus they have high purchasing power parity, which helps Amazon to scale up its revenue and business.
• There has been an increasing trend in the disposable income of the people living in developing countries, especially the APAC countries, this indicates that a large number of people are shopping online, thus creating opportunity for Amazon.
• A threat of Amazon can be a possible economic recession in China, which would impact the ability of Amazon to make a mark in the Chinese market(Rangel, 2018).

This is one of the major forces in the PESTLE framework, and its impact on Amazon can be ascertained as:

• Growing wealth disparity of the people living in both the developed and developing countries can be seen as a threat, as the rich and wealthy would look for other ways of shopping due to the rising wealth disparity.
• The developing countries serve as an open market to Amazon, and the growing consumerism in these markets can be seen as an opportunity for the organization.
• The people are moving towards online buying, their habits have transformed from traditional ways of shopping to online shopping. Thus creating opportunity for Amazon(Jindal & Jindal, 2016).

Technology has a major role to play in the business model of e-commerce, the impact of the force can be ascertained as:

• Technology in the present business day is getting obsolete with every passing day, this serves as both opportunity and threat for Amazon. The threat in the sense, technology can make the business model of Amazon look weak in front of a new company with advanced tech. At the same time, R&D investment and innovation in technology can help Amazon to outsmart all the existing and future competition in the e-commerce sector.
• Increasing IT efficiency in the overall sector is a big opportunity of Amazon, as it calls for better IT development to further expedite the process of online shopping.
• Cyber-crime over the last couple of years is an alarming condition for Amazon. The people would get wary in doing transaction online, thus limiting the ability of Amazon to penetrate in the market(Drummond, 2017).

Legal Factors

The impact of legal factors on Amazon can be ascertained in the following ways:

• Increasing product regulation by government will help Amazon in curtailing the counterfeiting activity, and will increase the ability of the company to provide quality and original goods to the consumers.
• The ease in the import and export policies will help Amazon to cater to different markets, and also to get sellers from across the globe on its platform, this is most definitely an opportunity for the company(Vaidya & Khachane, 2017).

Every country is increasing its efforts to clean the nature and is punishing organization which is degrading the environment.  The impact of environmental forces on Amazon can be ascertained in the following ways:

• The interest of government in the environmental program can benefit Amazon through its corporate social responsibility. The company would also spend more to ensure the sustainability of the environment.
• The company is pushing its efforts to bring in 100% recyclable packaging, so that the company can reduce its waste to the environment.
• Increasing popularity of the low carbon style is an opportunity for Amazon, as the company can create an extensive energy saving process to build a brand image in the market(Kumar & Qureshi, 2017).

The PESTLE analysis shows that Amazon has less impact of the environmental forces on its business operations, however, it is advised that the company rolls up its sleeves to leverage the existing technology and speed up its efforts towards the environmental sustainability programs.

SWOT analysis is an internal environment framework which helps the organization to identify its strength and weakness which are internal to the firm, and also helps to focus on the opportunity ad threat which is external to the organization. The takeaway of SWOT analysis is that organization get to leverage on its strength, while minimizing its weakness and staying strong towards the potential opportunity and threats(Poornima et. al., 2016).

• The company has a strong background and a rich experience in the e-commerce sector which is its biggest strength,
• The company’s policies are customer centric in nature, which makes its customer’s value the firm.
• The company has a cost leadership as it always thrives to offer the goods at lowest prices possible.
• Amazon has highly efficient delivery network and strong strategic partnership with sellers who fulfil the requirement of the company.
• Amazon adopts GLOCAL strategy, which is its international expansion strategy which goes as “Go Global and Think Local”. This strategy has helped Amazon to create a successful base in different countries.
• com believes in acquisitions, the company has had several acquisitions in the past which have helped the company to scale up its operations.
• Amazon cloud services AWS is the largest cloud service provider and also helps the company in ensuring safety of the customer data.
• Amazon focuses on innovation and creativity in the organization, this has led the company to create products such as Amazon Alexa, Kindle and Fire stick. This helps the company in leading the race of tech companies(Belk et. al., 2014).
• Excellent customer service and social listening skills.

• Amazon is facing troubles due to the shrinking profits margins; the revenue is on an upward trend, but due to increasing competition and marketing efforts of the organization its profits are being impacted significantly.
• Amazon has been at the centre of many tax avoidance issues in the US and India, this creates troubles for the e-commerce giant.
• Some of the created products of Amazon did not scale up to the organization’s perception, thus putting a deep hole in the pockets of the company.
• Amazon’s refund policy is not as effective in comparison to other players, and it takes a lot of time to get the refund on the product returned(Herbich, 2017).

• Many countries are giving a nod to the click and mortar model, thus Amazon has the opportunity of scaling up the customer experience by opening up Amazon retail stores for its customers(Dhawan , Singh & Kumar, 2017).
• Increasing globalization makes it an opportunity for Amazon to foray into other international markets.
• The growth in online entertainment will help Amazon to focus on Amazon prime and make it a strong revenue generator.
• The company has strong growth opportunities in the Asian countries owing to the strong growth and potential shown by these countries.
• Amazon cloud services are the largest cloud service platform, this will be used by various organizations to not only store data, but also be reliant on Amazon for the cloud services.

• One of the major threats to Amazon is from its competitors Walmart and Alibaba. Alibaba is the leader in China which restricts the growth opportunity for Amazon, at the same time Walmart is getting into a click model which will further impact the revenue of Amazon.
• There is a high governmental regulation related to foreign direct investment, it can curtail down the expansion plans of Amazon(Flanagin et. al., 2014).
• Increasing threat from the domestic competition is another major worry for Amazon.
• The recent cyber-attack RANSOMWARE puts a big question on the security on the internet; this is another major threat for Amazon.

The SWOT analysis of Amazon reflects that the company has to expedite its work in the technology sector and stay focussed on improving the customer experience and journey on the website and other social and digital media platforms.

In a business organization formation of groups is extremely essential; the formation of group can be either formal or informal. Formal group in the organization is created by the top management to ensure the delivery of the organizational goals, whereas the informal groups are created naturally in the organization with the intention of fulfilling the social needs. At Amazon, due to high decentralization in the organization, plethora of formal groups is created to work on a particular project. For instance, the marketing team of Amazon web services is entirely different from that of the parent company Amazon, each geographical location has its own group which handles the activities pertaining to that particular area(Alvesson, 2012).

Formal and Informal Groups in Amazon

The different kinds of Formal group which exist in Amazon are:

• Command Group-This is the group which comprises of managers and their subordinates.
• Committees-Committees in Amazon are created for a short duration, primarily to handle or resolve the conflict in the organization.
• Task Forces-This type of formal group is created to work on a particular task. For instance, Amazon creates a task force while planning for an event for its shareholders and stakeholders.

As mentioned earlier, the informal groups in Amazon are created on the basis of shared interest, similar cultural values, likes and dislikes, language and attitude. These kind of informal groups are pivotal to the organization as they help in building strong bonds amongst the employees in the organization.

Culture at Amazon is one of the strongest reasons behind the success of Amazon. The chief at Amazon, Jeff Bezos believes in creating such a culture which would drive sustainability in the business organization. In order to do so, Jeff ensures a high level of engagement with its team and always pushes the team to work on delivering smile on the face of its customers. Jeff Bezos is a highly ethical leader, who takes accountability for some of the unethical decision made by him at the start of Amazon journey. However, he thinks those decision are callous and were important to the organization. He does demands and portrays a high level of ethical leadership in the organization which sets the tone of the culture at Amazon(Browaeys et. al., 2011).

Another important aspect of organizational culture at Amazon is the fitment of the employees with the goals of Amazon. Jeff Bezos has clearly instructed the HR team to look for the candidates not only on the basis of their skills, knowledge and experience, but there have to be a fit with the organization. This helps Amazon in getting the right candidates for the job, which is the right fit to their job roles and organization, thus creating a culture of fitment in the organization(Deal et. al.,2011).

Another important aspect of culture at Amazon is the concept of work life harmony which is strongly promoted by Jeff Bezos. Jeff is of the opinion that one should always carry forward the positive energy at the workplace, and the same should be transformed into bundle of positive energy in personal life. This will help the employees to perform at their optimum best and not feel any kind of negativity while working at the organization(Cork,2011)

Ethics- Amazon practices ethics in all its business dealings and transaction, ethics is also practiced by all the employees working at Amazon.

Relationship building- Amazon believes that in order to build a sustainable business model, the essential thing is to build strong relationships with all the stakeholders of the organization.

Integrity- Amazon asks all of its employees to adopt integrity in all their business dealings and transactions.

Culture at Amazon

Customer centricity-Amazon keeps customers as their top priority and all the organizational policies and procedures at Amazon are a reflection of its high customer centricity.

Jeff Bezos the chief at Amazon understands that life cycle of Business models are shrinking year on year, and if the company has to create a sustainable business model in the organization, it has to focus on creating a culture which nurtures and promotes sustainability. Some of the elements of sustainability of culture at Amazon are:

At Amazon, there is an ingrained culture of innovation and creativity. Jeff Bezos is a firm believer that in order to create a sustainable business model it has to encourage innovation and creativity in the organization. Thus, the employees of the organization are rewarded for their innovation effort towards the sustainability of business model(Rogoff, 2003).

Customer is the king, holds true even to the present day. Amazon has taken it to a whole new height by keeping the customer at the centre of every business process and policies. All the process in Amazon is inclined towards the customers and how to make their lives easier. This value as the culture is deep rooted in the organization, which creates a culture of sustainability in the organization(Prince & Prince, 2011).

The vision of Amazon is to become the most customer centric company on the planet earth and provide every possible item which a customer might search on the web. Jeff Bezos has made it mandatory for all the employees working in the organization to by heart the vision, and translate the vision into the culture of the organization.

There are no two arguments over the fact that Amazon and Jeff Bezos are the biggest of philanthropist for the community, however, the contribution of Amazon towards the environment and CSR is not that minute. Amazon has created a website by the name of Amazon smile as its initiative towards its CSR activity. The company here allows for fund collection through the website, and also lets the people purchase a product for a needy person. This effort and unique strategy of Jeff Bezos is strong appreciated by its stakeholders all across the globe. In addition to this, Amazon also makes significant contributions towards the improvement of education and the knowledge of Internet amongst the growing population.

As an initiative towards environmental sustainability, Amazon is coming up with 100% recyclable packaging material. This will be a noble step of Amazon towards keeping the environment the way it is. Another initiative of Amazon is planting of trees, Jeff Bezos requests all its employees to at least plant two trees in a month. Another initiative of Amazon is inclined towards reducing the carbon footprint, in order to do so, Amazon is using energy efficient device as part of its environmental responsibility. Thus, it can be easily said that Amazon is behaving like one good citizen, who is focussed on uplifting the community and also ensure the sustainability of the environment.

Ethical Standards at Amazon

Amazon is not only the largest e-commerce company on the planet, but it is also one of the largest tech companies which are changing the lives of people across the globe. At Amazon, communication plays a central role, and technology and techniques are used to ensure a good communication channel in the organization. The communication channels are the combination of both the traditional and contemporary tools, some of which are:

Amazon Chime is the latest tool of Amazon which provides a unified communication service to the employees of the organization. The collaborative communication tool is an excellent service which makes the meetings in the organization easier and more efficient than earlier. Amazon Chime also allows for an audio or video playback without any hassle, it also facilitates for smoother chat while in meeting, sharing of screens, sharing of content and can be easily integrated with any of the devices. Thus, Amazon Chime is one in –house service used by Amazon which helps it in delivering better engagement with the employees. Such an effective system helps in building strong relationship with the stakeholders in the organization(Handy, 1984).

Social media has become a pervasive technology right since its inception a decade back. Amazon, which is an e-commerce company, focuses on Social media channels to build a strong community of its employees and also to create informal groups in the organization. Various stakeholders in the orgniazation use the social media channels to communicate important notification, reward the employees and also to create small project specific group. The 2 way communication platform acts as a good tool for relationship building due to high levels of engagement and the ease of usability of the platform. Besides managing the communication internally, the company also uses the channel to do effective social media listening of its customers. The platform allows for fast revert to the concern and query of the customers.

Jeff Bezos is of the opinion that it takes two to tango in the business space, he believes that openness in communication has to be from both sides. He believes that both type of communication makes sense to the business, such as the top down and bottom up approach. Thus, in order to ensure transparency of communication in the organization, Jeff Bezos asks its manager to be highly transparent and empower the employees in the decision making. This would ensure good participation of the employees and they would be able to communicate their concerns, feedback or grievances more openly. As an extension to this culture, Amazon conducts a monthly open forum discussion where employees can communicate freely on matter of important and strategic discussion in front of the top management. This is one of the best communication channel strategy which is deployed by Amazon and it helps the company in building a strong relationship with its employees(Lawn & Grace, 1987).

Relationship Building and Corporate Social Responsibility

Organization faces various barriers which have to be dealt with seriousness to ensure high momentum in the organization. Some of the barriers which are faced are:

Organizations are big promoters of workforce diversity because of the realized benefits of the diversity concept. It helps in fast decision making and puts new ideas on the table which helps the organization to learn and grow. However, workforce diversity in the organization is difficult to implement due to high resistance shown by the employees and managers. They see people with diversity to be a threat to their jobs and are unable to understand the cultural difference, which creates troubles in the organization(Molla, 2017).

In order to overcome the barrier of workforce diversity, the organization has to focus on increasing the understanding of cultural differences in the organization. Training will also aide the employees to adopt and better understand the culture, also, efforts by managers to build diverse functioning teams which will help in better decision making.

A lot of organization falters in the absence of ineffective communication in the organization. In the absence of formal and informal channels of communication, the employees are left to perceive and interpret the things on their own, which creates troubles in the organization. Ineffective communication also leads to inability of the organization to pass clear set of instruction and goals to the employees(D’Onfro,2015).

In order to alleviate the trouble of ineffective communication in the organization, a lot of communication channels and tools have to be used. Social media can be used as an effective tool for communication, other than that the managers in the organization can build a culture of openness in the organization.

It is important that organization continuously monitors the performance of its employees and allow for feedback on a continuous basis. At the same time, the goals for the employees have to be set in accordance to the goals of the organization. In absence of clear goal setting the employees are left with no clear direction or path to follow. Thus, they are aimlessly working in the organization as their goals and KPI are not been defined. In the similar manner, in absence of a comprehensive performance management plan, the employee is not able to identify the gap in his performance which in turn affects the productivity of the organization(Das & Ara, 2015).

In order to overcome the challenge of performance management, a 360 degree performance management plan has to be implemented in the organization. This plan will help in providing a timely and continuous feedback to the employees, which then can be used to improve the performance. Akin to PMS, SMART goals have to be defined for the employees in sync with the organizational goals and objectives. This would result in enhanced productivity in the organization.

Sustainability of Culture at Amazon

Conclusion

Amazon is the largest e-commerce company on the planet and its founder and CEO are determined to make Amazon as the greatest company in the world. In order to make Amazon greatest sustainability in its business model and culture is a must. The organization also has to ensure that a smooth communication prevails in the organization, and the company uses plethora of communication devices to ensure the same. Workforce diversity brings out the best decision and also helps in creativity and innovation in the firm; this should also be the culture of the organization. It can thus be concluded by saying that the organization has to work towards its culture in order to be sustainable in the longer run.

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