Amazon PESTLE Analysis

Published by MBA Skool Team, Last Updated: December 22, 2019

PESTLE Analysis of Amazon analyses the brand on its business tactics. Amazon PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.

PESTLE analysis is a framework which is imperative for companies such as Amazon, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.

Let us start the Amazon PESTLE Analysis:

Political Factors:

The political factors in the Amazon PESTLE Analysis can be explained as follows:

Amazon is a leading E-commerce portal which is a major market all over the world and it is affected by various political factors such as the trade unions and their activities, the extent of corruption, freedom of the press, etc. The government support for the e-commerce segment and the FDI norms influence its functioning in the countries especially the major markets of Amazon i.e. the U.S.A. and European Union. Amazon is also affected by cybersecurity bills. As Amazon is a global company its goods come from various regions across the world so import tariffs and taxes play a major role in the company's revenue. The government of respective countries has put various taxes on the e-commerce retailers which they need to pay in accordance with selling products.


Image: Wikimedia


Economic Factors:

Below are the economic factors in the PESTLE Analysis of Amazon:

The growth factors such as the economic stability of the countries majorly the U.S. and European Union, increasing disposable incomes in the developing countries, the economic recession of a country, employment rate, inflation rates, etc. If the U.S. dollar value decreases or increases then it will have a great impact on the net sales and operating expenses. Amazon is helping in the growth of the economy of the country by creating more jobs, especially in the U.S.A. and U.K. One positive side for Amazon is that whether the economy falls in a country or not the sale will not be affected that much, people always buy basic daily commodities. And as the disposable income, as well as the purchasing power of people, is increasing, people spend more on the expensive/luxurious goods thus Amazon's revenue hikes.


Social Factors:

Following are the social factors impacting Amazon PESTLE Analysis:

Amazon has just fulfilled the desires of the youth, everyone wants to just sit at home and have their orders delivered. That's what is made possible by Amazon. The lifestyle is changing and this is what is the need of the hour, customers want to access thousands of products on a single page and get the products on the doorstep on the very next day. An escalating level of consumerism is also creating opportunities for Amazon. High-speed internet access is also serving as a supporting factor as everyone just searches for a product online and they get their product delivered. Amazon has extended its customer base as it sells everything from a tiny pin to a large refrigerator, grocery, you name it and the product is available. So it is not only easily accessible for the young generation but also for the old people.


Technological Factors:

The technological factors in the PESTLE Analysis of Amazon are mentioned below:

Advancing in technology is the basic requirement for a company like Amazon, the whole online retailing market depends on the suitable use of technology. They rely on various degrees of technology to deliver their products from the warehouses to the respective customers. Amazon always tries to be innovative in terms of technology, in 2017 Amazon started to test a new kind of delivery system i.e. drone deliveries. However, is this way of delivering goods feasible in real is a question. research and development are very important for any business to be ahead of the competitors. So to achieve this Amazon has doubled its staff for the research and development department. One of the threats in online business is if cybercrime, customers and the sellers both have a fear in their mind of data security. All the bank details, credit card or debit card details need to be filled in the website so it is very risky to use Amazon. Amazon needs to increase some cybersecurity so that people don't have a fear of losing their data.


Legal Factors:

Following are the legal factors in the Amazon PESTLE Analysis:

Talking about the legal factors which can affect Amazon are antitrust laws, consumer protection laws, data protection laws, discrimination laws associated with an E-commerce business. The anti-counterfeit policy is already followed in Amazon to reduce the counterfeit sale of products and increase the trust of consumers, every product which is sold on the Amazon platform needs to be verified. European Union has General Data Protection Laws which implies to every company which collects details of the customers, like name phone number, bank details, etc. All the data given should be protected with the utmost sincerity. Amazon is under federal investigation as there is a claim made that amazon sold its products to the people who are listed in the terrorist watchlist thus violating U.S. sanctions, which is reflected as a disregard for international laws and justice.


Environmental Factors:

In the Amazon PESTLE Analysis, the environmental elements affecting its business are as below:

Amazon's largest part of the business, from where it incurs a major share of revenue is logistics i.e. delivering products ordered by various customers around the world. So there is a concern about how Amazon is regulating its emissions and making the business sustainable. There is a requirement of disclosing the impact of the company on the environment. Amazon has a feature in which products are delivered in one or two days (Prime membership), and the members have a count of more than 100 million. So when a product needs to be delivered in one or two days the carbon emission increases substantially.

To conclude, the above Amazon PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.

This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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