amazon swot analysis 2017

AMAZON.COM SWOT ANALYSIS 2017

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ABOUT AMAZONName Amazon.com, Inc.

Logo

Industries served• Internet, Amazon Web Services, Amazon Video)• Retail (Amazon Marketplace, Amazon Prime• Consumer Electronics (Amazon Kindle, Fire HD, Fire TV,

Amazon Echo)Geographic areas served WorldwideHeadquarters Seattle, Washington U.S.Current CEO Jeff Bezos

Revenue US$107.006 billion (2015) increased 20.2% over $88.988 billion (2014)

Profit US$595 million (2015) increased 347% over $(241) million (2014)Employees 230,800 (2016)

Main CompetitorsAlibaba Group, Apple Inc., eBay Inc., Facebook Inc., Google Inc., IBM, Microsoft Corporation, Netflix, Wal-Mart Stores Inc.,, and many other Internet and retail companies.

Amazon.com business overview from the company’s financial report:

“Amazon.com opened its virtual doors on the World Wide Web in July 1995. We seek to be Earth’s most customer-centric company. We are guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. In each of our two geographic segments, we serve our primary customer sets, consisting of consumers, sellers, enterprises, and content creators. In addition, we provide services, such as advertising services and co-branded credit card agreements. We serve consumers through our retail websites and focus on selection, price, and convenience. We design our websites to enable millions of unique products to be sold by us and by third parties across dozens of product categories. Customers access our websites directly and through our mobile websites and apps.

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BUSINESS DESCRIPTION (1/4)“ ”

We also manufacture and sell electronic devices, including Kindle e- readers, Fire tablets, Fire TVs, Echo, and Fire phones. We strive to offer our customers the lowest prices possible through low everyday product pricing and shipping offers, and to improve our operating efficiencies so that we can continue to lower prices for our customers. We also provide easy-to-use functionality, fast and reliable fulfillment, and timely customer service. In addition, we offer Amazon Prime, an annual membership program that includes unlimited free shipping on millions of items, access to unlimited instant streaming of thousands of movies and TV episodes, and other benefits.

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BUSINESS DESCRIPTION (2/4)“ ”

1. online, offline, and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to consumers and businesses;

2. publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels;

3. web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers;

4. companies that provide e-commerce services, including website development, advertising, fulfillment, customer service, and payment processing;

5. companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline;

6. companies that provide information technology services or products, including onpremises or cloud-based infrastructure and other services; and

7. companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices. SLIDE | 5

BUSINESS DESCRIPTION (3/4) Our current

and potential

competitors include

“ ”

We believe that the principal competitive factors in our retail businesses include:

• Selection• Price• Convenience• Fast and reliable fulfillment

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BUSINESS DESCRIPTION (4/4) “ ”

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STRENGTHS

1. Low cost structure, the largest merchandise selection and a huge number of third party sellers

S WO T

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

22.5%

26.1%

38.5%

28.9%

27.9%

39.5%40.5%

27.0%

21.9%19.5%

16.3%

26.0%

24.0%20.5%

3.8% 2.6%

16.6%17.2%

14.7%16.5%15.4%15.0%

Amazon Growth Rate U.S. E-commerce Growth Rate

In 2006-2015, Amazon has grown much faster than the entire U.S. e-

commerce market.

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STRENGTHS

Amazon follows a cost leadership strategy, but so do many other online and offline retailers. Why then does Amazon outperform them?

S WO T

What is the key to such success? According to Jeff Bezos, the founder and CEO of Amazon.com, the company’s success lies in its:

• Low-cost structure

• Selection

• Third-party sellers

Amazon sells around 339.7 million of stock keeping units (SKU’s) in its Amazon.com Marketplace. In

comparison, Walmart offers only 8 million SKU’s[5] in its online shop, or just 2.35% of the number of products that Amazon offers.

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STRENGTHSS WO T

Figure 3. Walmart prices compared to Amazon.com prices

Source: Boomerang[6]

1. Increasing long-term obligations-to-assets ratioAmazon’s debt-to-asset ratio has risen significantly over the past few years and it is now one of the highest among its competitors.

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WEAKNESSES

Company 2011 2012 2013 2014 2015Total long-term debt

Amazon 2.625 5.361 7.433 15.675 18.161Wal-Mart 47.079 41.417 44.459 40.889 38.214

Long-term debt growth

Amazon 68% 104% 38.6% 110% 15.9%Wal-Mart 7.4% (12%) 7.3% (8.0%) (6.5%)

Debt/asset ratio

Amazon 10.3% 16.5% 18.5% 28.7% 27.8%Wal-Mart 24.3% 20.4% 21.8% 20.1% 19.14%

Figure 7. Amazon’s and Wal-Mart’s long-term obligations and debt-to-asset ratios (debt in US$ billions)

Source: The respective companies’ financial reports [1][5]

S WO T

1. The e-commerce market is forecast to reach US$2.5 trillion by 2018, a projected growth of 89.1% in 4 years

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OPPORTUNITIESS WO T

Figure 10. Total e-commerce sales worldwide (actual and forecast), 2013-2018

2013 2014 2015 2016 2017 2018

1.0771.316

1.5921.888

2.1892.489

25.9% 22.2% 20.9% 18.6% 16.4% 13.3%

Total E-Commerce Sales (in trillions, US$) Change (%)Source: eMarketer[30]

• Amazon currently operates in 7 of the 10 largest e-commerce markets in the world, including China, the U.S., the U.K., Japan, Canada, France and Germany.

• China is also forecast to become the largest e-commerce market in the world

• Amazon should open in Brazil, South Korea and Russia.

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OPPORTUNITIES

Countries 2014 2015 2016 2017 2018

1. China 315.75 426.26 562.66 871.79 1,011.282. U.S. 264.28 305.65 349.06 442.55 493.893. UK 70.39 82.00 93.89 114.64 124.964. Japan 62.13 70.83 79.33 96.87 106.075. Germany 51.91 63.38 73.46 91.97 99.336. France 34.21 38.36 42.62 49.71 53.267. South Korea 29.30 33.11 36.76 44.07 47.828. Canada 20.98 24.63 28.77 37.61 42.679. Russia 15.06 17.47 20.30 26.88 30.9110. Brazil 13.34 16.28 18.80 23.79 26.17

Figure 11. Top 10 countries ranked by total e-commerce sales worldwide (actual and forecast, 2014-2018 (in US$ billions)

Source: eMarketer[30]

S WO T

1. Wal-Mart’s efforts to establish itself as a leading online retailer

The retail sales of physical stores compared to e-commerce sales are declining. Many retail companies, including Amazon’s key rival Wal-Mart, are making huge efforts to establish themselves as electronic commerce retailers.

• In 2016, Wal-Mart’s e-commerce sales grew to over US$13 billion.[5]

• Wal-Mart now has e-commerce websites in 11 countries and competes with Amazon in the U.S., U.K., Canada, China, India and Japan.

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THREATSS WO T

Wal-Mart cannot compare to Amazon.com yet, but the company is strongly focusing on expanding its e-commerce operations:

• New fulfillment centers• Fastest-growing retail app• Grocery deliveries• In-store pick up service

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THREATSS WO T

Although Walmart is still new to the e-commerce market, it already has some strengths that even Amazon cannot match.

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2. Internet Retailer (2016). TOP 500. Available at: https://www.internetretailer.com/top500/?cid=2015Top500-IRT-Lead#!/ Accessed January 8, 2017

3. Wingo, S. (2009). Amazon's Wheel of Growth. Available at: http://seekingalpha.com/article/121955-amazons-wheel-of-growth Accessed January 8, 2017

4. Monsoon Commerce (2015). How Many Products Does Amazon Really Sell? Available at: https://www.monsooncommerce.com/2015/06/how-many-products-does-amazon-really-sell/ Accessed January 8, 2017

5. Walmart (2016). Annual Report. Available at: http://s2.q4cdn.com/056532643/files/doc_financials/2015/annual/2015-annual-report.pdf Accessed January 8, 2017

6. Boomerang Commerce (2015). Introduction to Price Perception Index (PPI). Available at: http://www.boomerangcommerce.com/ppi-whitepaper-rboomerang/ Accessed January 8, 2017

7. Liddle, J. (2008). Amazon found every 100ms of latency cost them 1% in sales. Available at: http://blog.gigaspaces.com/amazon-found-every-100ms-of-latency-cost-them-1-in-sales/ Accessed January 8, 2017

8. Smith, C. (2016). By The Numbers: 110+ Amazing Amazon Statistics. Available at: http://expandedramblings.com/index.php/amazon-statistics/ Accessed January 8, 2017

9. Interbrand (2016). Best Global Brands 2015. Available at: http://interbrand.com/best-brands/best-global-brands/2015/ranking/ Accessed January 8, 2017

10. Forbes (2016). The World’s Most Valuable Brands. Available at: http://www.forbes.com/powerful-brands/list/ Accessed January 8, 2017

11. Kline, D. B. (2015). Amazon's Sustainable Competitive Advantage. Available at: http://www.fool.com/investing/general/2015/05/18/amazons-sustainable-competitive-advantage.aspx?source=eptmsmlnk0000001 Accessed January 8, 2017

12. Mamiit, A. (2014). Amazon Order Fulfillment More Efficient with its Fleet of Robots. Available at: http://www.techtimes.com/articles/21229/20141201/amazon-order-fulfillment-more-efficient-with-its-fleet-of-robots.htm Accessed January 8, 2017

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SOURCES (4/4)

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