External Assessment of Amazon Inc

Adam Smith once described competition in a market economy as “the invisible hand” that guides the economy. For economic growth to occur, competition must be present. It pushes productivity, innovation, and high-quality. In the presence of competition, most firms focus on product differentiation, gaining market share, and product innovation. To remain competitive firms must able to scan the internal and external environment and develop corporate strategies based on their findings. By performing an external analysis companies can gain a better understanding of the opportunities and threats within their industry. It is important to recognize that both opportunities and threats are independent from the company. This external assessment will be based on a competitive analysis that evaluates performance.

Competitive Profile

This section will analyze Amazon Inc. ’s key success factors and market performance as compared to Walmart and eBay through the use of a Competitive Profile Matrix (CPM). The purpose of Competitive Profile Matrix (CPM) is to identify a company’s strengths and weaknesses and then compared them to those of its competition. By utilizing industry’s critical success factors, a firm can do an in-depth comparison of its main rivals. Based on the results, companies can determine what strategies need improvement or what a should be eliminated from their business plan. Amazon, Inc is a relatively young company but with an outstanding track record. Founded in the early 90’s by current CEO Jeff Bezos, the company has managed to become the first of its kind. When we discuss a company’s success, we need to analyze their business model and study in depth their business strategy for sustainability and growth. One of the strongest points for Amazon, Inc are product diversity, customer loyalty, brand awareness and financial position. Based on the weighted score of when compared to Walmart and eBay, Amazon is outperforming them. Amazon’s weighted score was 3. 45 whereas Walmart’s weighted score was 2. 91 and eBay’s was 2. 93. However, Walmart can be considered to be Amazon’s top contender partly due to their recent move into the e-commerce industry. Innovations such as online grocery and website design aided Walmart’s earnings to surpass what Wall Street had originally predicted; $122. 69 billion vs. $120. 51 billion.

On the other hand, eBay’s revenue did meet expectations according to Yahoo! Finance. Analysts forecasted earnings of $2. 31 billion, subsequently the company posted $2. 33 billion in revenue at the end of the fiscal year. Competition with giants such as Amazon, and other companies joining the e-commerce movement has forced eBay to employ new strategies. According to CEO Devin Wening they have “made significant progress to modernize eBay and drive growth by improving the customer experience, creating a product catalog that covers more than half of our inventory, and sharpening the eBay brand”. The above CPM shows Amazon dominating the market within those same Walmart and eBay industries. In terms of revenue, in 2016 Amazon’s net sales were $136 billion; $94. 7 billion coming from products and the rest from services.

An EFE Matrix analyzes opportunities and threats much like a SWOT analysis. The purpose is to get a general idea of how well a company is performing based on important external factors that affect a company, while at the same time gaining valuable information on how well a company responds to those factors. For instance, new e-commerce competition emerging from companies such as Walmart or Target are increasingly posing a threat to Amazon’s profitability. Another important aspect to consider is the power of online social media; it could be either negative or positive depending on the user’s motive. For example, President Donald Trump has explicitly stated his dislike for Amazon. In a recent tweet he stated that Amazon “pays little or no taxes to state & local governments, uses our Postal System as their Delivery Boy (causing tremendous loss to the U. S. ), and are putting many thousands of retailers out of business!” As a result of this tweet, Amazon’s stocks plummeted nearly 9% - causing a $10. 7 billion loss from the net worth of Bezos.

Based on the weights assigned, we can conclude that new technological innovation, expanded product categories, and the convenience of shopping online are without a doubt significant factors that will boost Amazon’s chance of attracting more costumers and will have a significant impact on the business. With a weighted score of 3. 09, it is clear that Amazon’s strategy of product and market expansion have been key in counterattacking threats from other online retail rivals. Additionally, one of the biggest threat Amazon has is their inability to penetrate and expand their business activities in Asia. To alleviate this threat, Amazon has attracted a rising number of Chinese buyers by setting up “Amazon Global Stores” where buyers can purchase foreign products in an actual physical store. One of the reasons Amazon has struggle to gain traction in the Chinese market is mainly because its Prime subscription offerings and mobile app are not appealing to the every-day consumer. Another threat to Amazon in the Chinese market that are worth-mentioning are fierce competitors such as Alibaba and JD. com. The purpose of perceptual maps is to provide a picture of how customers view a company’s products and services compared to their competition. This information is useful because it helps marketers create innovation in strategic areas in order to maintain or gain a greater market space.

When it comes to online shopping, Walmart is stepping up their game and will continue to improve. Walmart sales increased by at least 33% last years and it is predicted to continue to grow exponentially. However, Amazon having much more experience in the online retail market space, has an estimated sales growth of 39% yearly.

While both Amazon and Walmart are somewhat similar, there are a few notable differences in availability of products, prices and delivery-times. For instance, sometimes Walmart will have certain items on their website that will not be available right away for delivery. Amazon has a great variety of products and services that are second to none in terms of quality, prices, and delivery. Products range from clothing, make-up, gadgets, gardening, and streaming services plus everything in between; hence the arrow from A-Z underneath the logo. Additionally, eBay when compared to Amazon seems to be a much more outdated platform. At the end of 2014, eBay had approximately 800 million listings and 155 million active buyers. One way their greatest assets that has helped them remain profitable despite their lack of competitive attributes is PayPal. The money/transfer payment is highly profitable and has contributed to at least half of the company’s revenue.

In terms of user-friendliness, I believe amazon offers much more advantages to the every-day shopper. Unlike eBay, Amazon’s website design makes it easy to navigate through products, compare prices, check out generated product suggestions, and they also have a great return policy.