Introduction
Amazon is among the world’s largest and most successful e-commerce companies. The company is known for having a diverse range of products and services. It has its strongest international market in Europe, specifically Germany and the UK. It also has an efficient supply chain and logistics system and a leading position in cloud computing. However, Amazon has a strong presence in various international markets, such as Europe (Germany), Asia, and South America. Therefore, this paper aims to present a SWOT analysis of Amazon Company in Europe as its strongest international market while exploring the future trends that may impact its growth and success.
Strengths
Strong Market Position and Brand Recognition
In the e-commerce business, Amazon is a key player, accounting for 38 percent of the total in Europe. Its strong brand recognition and reputation have helped it build customer trust and loyalty in Germany (Lima et al., 2023). Besides, Amazon has been able to expand its products and services across its strongest international market, Germany. For instance, Amazon Prime has grown recently by offering customers free and fast shipping, video streaming, and other benefits in Germany and the UK.
Diverse Product Offerings and Services
Although Amazon Inc. was started with the primary goal of selling e-books, it has grown to offer the market a wide range of products and services. These services and products include e-commerce, cloud computing, digital streaming, and artificial intelligence. These products offered by Amazon have facilitated the company’s growth in different global markets, especially in Germany (Jurevicius, 2023). Amazon customers are known for having different tastes and preferences (Lima et al., 2023). Therefore, by offering a wide range of products and services, Amazon has reached many consumers in Germany since buyers find it easy to access products and services from a single source. From this analysis, Amazon’s ability to offer diverse products has helped it attract a wide range of customers and provide multiple revenue streams.
Third-Party Seller Marketplace
The third-party market is a suitable and reliable source of revenue for Amazon. Income from the third-party market seller for Amazon is estimated to be about 58% of all merchandise sold (Parbat et al., 2022). As a result, Amazon has expanded its product offerings without incurring significant inventory costs in Germany, its strongest international market. Besides, Amazon has created a platform for small business organizations to reach a larger audience (Jurevicius, 2023). As a result, many retailers have been able to grow their businesses and thus add to Amazon’s reputation. Therefore, the third-party marketplace has effectively ensured that Amazon grows diversely in revenues and profit margins.
Data-Driven Approach
The emergence of data processing and artificial intelligence has helped aggressive companies such as Amazon improve their operations in their strongest international markets. For instance, artificial intelligence and data processing have helped Amazon strengthen its operations, personalize the customer experience, and increase efficiency in Germany (Parbat et al., 2022). Besides, Amazon’s data-driven approach has enabled it to develop innovative products and services. For instance, Amazon Go is a cashier-less grocery store that has successfully performed in the current world, helping Amazon grow its revenue and service delivery processes in Germany and the UK.
Investment in Innovation
Amazon has currently grown to the point of employing innovation in its operations. For instance, Amazon has diverged into artificial intelligence, where it has been able to operationalize and personalize its customers and, thus, its growth in its strongest international markets and other local markets (Jurevicius, 2023). For instance, Amazon Web Services (AWS) has become a dominant player in the cloud computing market, with a substantial market share of 32% in Germany (Parbat et al., 2022). Therefore, Amazon has built its market share by applying its innovation to artificial intelligence.
Weaknesses
Reliance on Third-Party Sellers
Although the third-party seller marketplace has been a significant source of revenue, it risks the company’s brand reputation. Essentially, the third-party seller marketplace is known for diverging services for small business owners to sell their products and services through their platform (Parbat et al., 2022). However, the company’s reliance on third-party sellers has led to issues with counterfeit products and poor customer experiences in several German cities. Poor customer experiences harm the company’s reputation and customer loyalty in this market.
Low-Profit Margins
Amazon’s profit margin is lower than many people expected. As evidenced on the Business Insider website, in 2021, the company had an operating profit margin of 4.4% (Parbat et al., 2022). According to a research report by Parbat et al. (2022), the company’s focus on growth investment and innovation rather than maximizing short-term profits has decreased its profit margin in Germany. However, this can also be a significant move if it meets its long-term goals.
Poor working conditions
In today’s world, Amazon has faced various criticisms for its working conditions. Many consumers claimed that the company’s warehouses could be better organized, failing to meet customer and employee needs. For instance, German employees report long working hours, low pay, and unsafe working conditions (Jurevicius, 2023). However, the company uses much of its profits to ship products to its customers, which could have led to difficulties in optimizing costs.
Opportunities
Expansion into Emerging Markets
Amazon needs to enter new markets to grow its client base and revenue. It is free to explore expanding into new domestic markets in Germany and whole new product classes (Jurevicius, 2023). Since Amazon is a virtual company, it can expand its strengths into emerging and third-world markets beyond its most substantial international market, the United States. By venturing into new markets, Amazon will likely grow and diversify its customers into different markets, which can help maximize its profit.
Expanding Physical Stores
Amazon can use the opportunities presented by expanding physical locations to reach more customers and offer a physical shopping experience. Since the company mainly operates virtually, some customers fear being scammed due to the negative criticism many individuals create about online businesses (Dudovskiy, 2022). Additionally, by increasing the number of physical locations in different German cities, Amazon will be better able to compete with traditional retailers and increase its market share in the direct retail sector.
Investing in New Ventures
Amazon can also gain strength by investing in overseas markets that benefit the most from diversified revenue streams. For instance, it can focus on acquiring companies that operate in complementary industries. These companies include cloud computing, advertising, and healthcare, which can facilitate capabilities and inventions (Majed et al., 2018). Besides employing the strategy, Amazon can use emerging trends and technologies to improve its production abilities in Germany (Dudovskiy, 2022). As a result, the company will likely stay ahead of the competition, thus maintaining its position as an industry leader.
Planning Entry into Crypto
Amazon can risk entering the cryptocurrency market by creating an option for customers to use cryptocurrencies while buying from the company. As a result, more customers from Germany and other countries can use these cryptocurrencies, such as Bitcoin and Ethereum, to purchase goods and services from Amazon (Lima et al., 2023). Amazon may attract people interested in cryptocurrencies if it accepts them as payment.
Threats
Intense Competition
Amazon faces stiff competition from similar companies with significant strengths in Germany. These companies include eBay and Walmart and are known for significantly negatively impacting Amazon’s profit margin and market share. However, rivals include well-known businesses and small companies that provide comparable goods and services (Gupta, 2023). Therefore, to ensure success in the competitive environment, Amazon should focus on innovation and develop its business model to attract more customers.
Regulatory Issues
The current regulations by the German government have raised concerns about the company among its consumers. The regulatory issues have raised the risks and challenges of changing business practices, including fines and penalties (Dudovskiy, 2022). Besides, the fines and penalties experienced by Amazon in Germany have damaged the company’s reputation. Damage to a company’s reputation results in limited sales and, thus, a reduced revenue margin.
Cybersecurity Threats
Due to the volume of consumer data it processes throughout operations, Amazon is particularly susceptible to cyberattacks. Cybersecurity issues threaten a company’s profits, thus risking a company’s venture into malpractice (Gupta, 2023). Due to the compromise of the security of consumer information, these assaults result in a loss of customer confidence and associated liability (Gupta, 2023). As a result, to maintain security, Amazon must make significant security investments and keep track of new threats by continuously monitoring and updating its systems.
Economic Recession
The economic recession affects customer disposable income due to high inflation rates. As a result, consumer spending is highly reduced, leading to decreased sales and profitability for the company (Parbat et al., 2022). In times of uncertainty, consumers usually focus on buying essential goods and services based on their disposable income, which can lead to decreased profits for the selling companies (Lima et al., 2023). On the other hand, companies focus on advancing their levels of competition to ensure sustainability in the market. Amazon is not immune to the challenges of the economic recession. As a result, it faces the threat of competitive companies trying to stay ahead to ensure sustainability.
Conclusion
In summary, the strengths of Amazon in Germany and the UK, two of its international markets, include its strong brand reputation, diverse product offerings, and efficient supply chain. These strengths have helped Amazon to achieve different success points in Germany, where they meet different consumers and make various forms of progress due to increased sales. On the other hand, Amazon experiences various threats and challenges, such as a limited physical presence in some international markets.
Amazon faces serious dangers from regulation difficulties, fierce rivalry, and cybersecurity concerns. In the future, the company should focus on linking with emerging trends such as e-commerce growth and sustainability awareness that could impact its growth. For instance, the company should ensure that it remains updated and works with updated systems that can facilitate the control of increased cybercrimes, which could affect its profitability negatively.
References
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Gupta, S. K. (2023). SWOT analysis of amazon (2022 updated). BStrategy Insights. Web.
Jurevicius, O. (2023). SWOT analysis of Amazon 2023, Strategic Management Insight. Web.
Lima, M. de, Souza, Á. N., Teixeira, D. E., Souza, H. J., Matricardi, E. A., Miguel, É. P., Borges, L. A., & Silva, M. L. (2023). A SWOT analysis of AWH project implementation in the Brazilian amazon as perceived by affordable housing stakeholders. Forests, 14(3), 594. Web.
Majed, S., Nuraddin, S., & Hama, S. (2018). Analyzing the amazon success strategies. Journal of Process Management. New Technologies, 6(4), 65–69. Web.
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