Introduction
As an online retailer, Amazon has continued to lead in the online business platform space, attracting other retail businesses to the online space. People often equate Amazon with Walmart due to its global reach and pricing strategy. The founder, Jeff Bezos, has a confident risk-taking trait that allows the business to thrive (Amazon, 2022).
Opportunities discovered in emerging global markets are not wasted. Amazon ensures a global supply chain, delivering actual products to customers, which increases value for the business and its stakeholders. This paper examines Amazon’s SWOT analysis, the challenges that Bezos, the founder, may face in the future, and the creation of a five-year plan and a mitigating strategy for the entrepreneur.
SWOT Analysis
Amazon needs to improve and develop a more effective business model to help it operate more efficiently. The SWOT analysis discusses the strengths, weaknesses, opportunities, and threats Amazon faces.
Strengths
Cost leadership, focus, and differentiation are the primary strengths that have contributed to Amazon’s success. Through these strategies, the company has benefited from its actions, which have helped derive value for the shareholders (Greenspan, 2022). The company also gains a decisive advantage in competing with other companies through Information technology and e-commerce. These two tools enable the company to gain more customers than its competitors. Through e-commerce, the company has prioritized its customers’ top needs, including mind recall.
Weakness
The diversification strategy adopted by Amazon has led to a shift in its focus, which was initially centered on retailing books online. The company now concentrates on new focus areas. Despite this being a brilliant strategy, the company risks losing strategic advantage as it diverts from its primary focus. Such diversions may be the start of failure to concentrate on their primary business and give priority to other ventures.
Amazon also provided customers with free shipping benefits, which puts the company at risk of losing its margins, thereby hindering its ability to optimize costs (Benzaghta et al., 2021). Industry analysts have also noted that Amazon’s operations are near-zero margins. Operating near zero margins has impacted its profits, despite its substantial revenues.
Opportunities
The company developed an online payment system allowing customers to purchase its products and services worldwide. The development covers issues of online security and privacy, as these are the main concerns of their customers. The payment system will also help improve the company’s margins, and it will use its payment system. Amazon can also produce its own branded products rather than selling those of its partners. Besides, the company can expand its footprint by opening more companies in emerging markets, thereby increasing its competitive edge in online retail.
Threats
Increased concerns about online shopping threaten Amazon’s success due to hacking and thefts that expose customers’ data. The company, therefore, needs to address such insecurities to ensure customer trust. Due to its aggressive pricing strategies, the company has faced many lawsuits in the retail industry. Due to cost leadership, competitors view it as a business snatcher and a source of trouble (Greenspan, 2022). Amazon also faces stiff competition from other online retail businesses, so it must focus on both local and global market strategies.
Future Challenges
Many people still consider Amazon primarily an e-commerce platform. However, obtaining maximum profit from e-commerce is becoming increasingly harder nowadays. Jeff Bezos, therefore, shifted and merged the e-commerce strategy with technology, advertising, supply chain management, and other currently beneficial areas. This indicates that the entrepreneur must face the challenge of staying on track, as the development of new formulas disrupts the functionality of emerging industries, such as banking, healthcare, and insurance. The company will also face the challenge of making improvements to become a better business partner, as growth requires effective changes (Pisani & D’Innocenzio, 2021).
Bezos’ company will also experience increased scrutiny in the future. Globally, regulators are constantly examining Amazon’s business practices. More focus is put on how it uses information from its partners to rebrand its products. This has resulted in hiM being questioned on his company’s policies and violations, which is just the beginning. Making its brands is an opportunity to venture into the broader market, posing a potential future challenge. The company has been subjected to investigations and accused of using information from third-party sellers, thereby engaging in unfair competition.
Most online retail businesses view Amazon as a significant competitor to their own businesses. Many of the company’s employees have not fully embraced its success. Hence, Amazon has been accused of selling counterfeit products and experiencing safety issues with its brands, which negatively impact customers’ experiences with Amazon.
Therefore, as this challenge may persist, Amazon must foster strong, long-lasting relationships with its partners to maintain a good reputation and avoid multiple accusations. Making plans for the company has always been challenging for Bezos, as he is constantly worried that the company’s investments will produce better profits in the coming years. Despite reducing delivery charges for Prime members, this has proved to be a challenge for the future, as more costs will be incurred to invest in air hubs and cargo planes (Chanta, 2019).
There exists uncertainty whether this will result in profits or losses. Amazon is also known for the variety of products it offers. Amazon Web Services helps the company achieve its substantial profit margins. AWS provides cloud computing services. However, it faces competition from companies like Microsoft, which has acquired contracts from governments and big companies, hence snatching lucrative opportunities from Amazon. Companies are expanding their cloud services, and Amazon needs to consider this, as it may pose a significant challenge to its future opportunities, despite its extensive cloud computing capabilities.
Business Plan and Mitigation Strategies
The internet has been the center of Amazon’s growth. Incorporating technological innovation, effective business models, and strategic market approaches has enabled the company to be one of the most innovative today. Amazon looked beyond book selling as a website and ventured into other areas, such as logistics, cloud computing, and consumer technology. Currently, the company has expanded into media and entertainment (Team GreyB, 2022).
Entertainment and media have contributed significantly to the company’s worth of a trillion dollars (Foer, 2022). In its five-year plan, the company must thoroughly research technological innovations and develop effective strategies to help propel the company to greater heights. Long-term futuristic innovations will also help Amazon develop its brand to the next level among online retailers. By capturing the worldwide internet, delivery, and fulfillment space and being a customer-centered company, Amazon can develop and achieve its ambitious plan for the next five years (Amazon, 2022).
As a mitigation strategy, the company needs to view every slight chance as an opportunity to enhance its development. In this case, failure does not mean the end, but it means a presented opportunity (Llopis, 2017). Another mitigation strategy may involve the development of prototypes that aid in the exploration and identification of risks associated with new products being developed. Prototypes can also be used to identify market risks. Amazon should also not let failure define its success, as it should be able to adopt several parallel approaches and even identify other strategies that may replace the primary approach when it fails (Murphy, 2019).
The company should also partner with honorable, moral, and ethical business partners, shareholders, stakeholders, employees, and customers, enabling them to avoid moral risk. Lastly, Amazon should ensure its resource allocation techniques are practical and that employees are trained to recover and rescue resources.
Conclusion
In conclusion, Amazon has numerous tasks to perform to ensure the success of its future strategies and plans. Despite the company’s leading position in the online retail business, Bezos needs to identify and develop a plan to benefit the company by increasing profits and achieving greater success for its stakeholders, shareholders, employees, and the company itself. The company’s SWOT analysis identified solutions that it may implement to ensure success.
The findings highlight apparent gaps that need improvement for the company to thrive. Despite branching into several ventures beyond online books, the company needs to focus on pricing more than volume to remain competitive in the future. The challenges Bezos will likely face can be easily avoided by implementing proper mitigation strategies.
References
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