analysis of a multinational

Course name: International business and Accounting (1540)

Chosen multinational: AMAZON e-commerce company
Report made by: Amna Amjad

DECEMBER 1, 2023
student id: 230710119
 Contents
Introduction: -..............................................................................................................................................................2
The beginning of Amazon............................................................................................................................................2
Quick stats about Amazon.......................................................................................................................................3
Figure 1.1: statistical analysis of the company....................................................................................................3
PESTLE analysis of Amazon..........................................................................................................................................3
Political conditions:.................................................................................................................................................3
Figure1.2Lobbying by Amazon report.................................................................................................................4
Economic conditions:...............................................................................................................................................4
Figure 1.3: Amazon as top R and D leader..........................................................................................................5
Social conditions:.....................................................................................................................................................5
Technological factors:............................................................................................................................................. 5
Legal factors............................................................................................................................................................5
Environmental factors.............................................................................................................................................6
PORTERS FIVE FORCES Applied on Amazon.................................................................................................................6
Competitive rivals of Amazon..................................................................................................................................6
Figure1.4: Amazon’s comparison with competitors (Richter, 2013)....................................................................6
Threat of new entrants............................................................................................................................................7
Bargaining power of suppliers.................................................................................................................................7
Bargaining power of buyers....................................................................................................................................8

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 Introduction: -

The world has become a global village. Not just people all across the world connected and
linked with one another but different businesses and industries have also become
globalized to supply their unique and innovative products and receive appreciation not just
locally but internationally. The word globalization is derived from the word “global” which
means all over the globe. In business terms, globalization is the process of world shrinkage
that involves the exchange of value from one end of the world to another. (AlRodhan, Nayef
RF and Stoudmann, 2006). Today there are approximately 334.34 million businesses in the
world that work globally (Joel, 2021). The most important step towards becoming a global
or multinational enterprise is to build an effective and strong communication strategy to
maintain good relations not just with customers but all the key stakeholders to meet
economies of scale and gain comparative competitive advantage over other firms. The
multinational enterprise I’ve chosen to analyze for my assignment is Amazon. I shall
discuss the unique communication strategy of Amazon and critically analyze the success of
the globally recognized multinational by using PESTLE analysis and Porter's 5 forces.

The beginning of Amazon

Amazon initially known as CADABRA was founded by Jeff Bezos in the year 1994 as an
online book store. Bezos left his job along with his wife from the investment bank in 1994
and moved to Seattle where he worked 12 hours a day. No one had ever thought that a
small online bookstore founded in a garage would one day turn into the most successful
and largest e commerce company in the world operating in more than 50 countries and
over a 100 fulfillment centers in the US and over 185 centers globally. (Johnson, 2021)

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PESTLE analysis of Amazon

In this portion of the report PESTLE analysis is applied on Amazon along with the
discussion of effective communication strategy that makes Amazon such a distinguished
and renowned brand.

Political conditions:
Even great companies like Amazon are not immune to the globally faced political
challenges that can be imposed in the form of taxes, tariffs, unstable government, trade
policies and sanctions etc. For example, in 2021 during the COVID pandemic when former
CEO Jeff Bezos decided to leave the company Amazon was facing some serious legal
impositions by the lawmakers and it was a politically challenging time for the company.
(Zakrzewski, 2021) Some other political challenges faced by the company include the
imposition of tariffs on imports from China in 2018(Team, 2019) and the infliction of the
digital services tax by the European union in 2020(Greenspan, 2023).

Overall, the political conditions are favorable for the multinational because most of the
government policies encourage and support e commerce. Moreover, the company tries to
deal with political challenges by engaging in lobbying practices and it also hired a former
press secretary of the US president to deal with political issues.

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 Figure1.2Lobbying by Amazon report (Dudovskiy, 2022)

Economic conditions:
The fluctuations in currency exchange rates can have a great impact on the overall sales of
Amazon. Amazon has a very effective way to communicate and attract its consumers as it
has a diverse target audience and tends to provide customized and desired products to
people of all age groups, race and genders. As Amazon is largely based on consumerism any
inflation across developing countries can lead to reduced purchasing power of customers.
Amazon experienced a phenomenal increase in R & D and was the R & D leader in 2017.

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 Figure 1.3: Amazon as top R and D leader

Social conditions:
The rapidly increasing human population seem to have a positive impact on the companies’
overall consumer base. According to the United Nations survey the human population is
said to increase from 7.8 billion in 2020 to 8.5 billion in 2030 (United Nations, 2023). But
the innovative services of amazon are somehow having a negative impact on consumer
health by providing them with extra ease of service resulting in limited exertion.

Technological factors:
Amazon has been highly innovative and creative ever since the start that has enabled it to
gain considerable edge over its competitors along with building a loyal consumer base.
Amazon has successfully launched the cloud computing service, Amazon prime with
original content available, drone technology to manage its supply chain and to make
delivery more efficient, reliable and quick and AI robots to decrease labor force all that
highly reduces the switching cost of customers.

Legal factors
Amazon has been accused by various legal accusations such as using its dominant profile to
manipulate prices and exploit data from third party vendors and Amazon has also been

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accused of avoiding tax obligations (Greenspan, 2023). However, Amazon abides by the
basic laws including health coverage, security of workplace and reasonable salaries etc.

Environmental factors
As Amazonis basically is an e commerce company hence environmental factors do not have
a significant impact on its overall sales or revenue but there are certain ways by which
Amazon can play its role to make the environment better like including the 3Rs in its
manufacturing policies. Amazon has also launched certain programs such as Amazon smile
and climate pledge friendly to address the environmental problems (Amazon, 2021).

PORTERS FIVE FORCES Applied on Amazon

Competitive rivals of Amazon
With increasing presence of Amazon in physical retail stores apart from online stores it
may experience rivalry from competitors like Target, Walmart, best buy, Costco etc.
According to a statement issued by former CEO the greatest rival of Amazon is auction site
eBay (Segal, 2022). E bay is one of the greatest competitors of Amazon as it has more
customer centric approach and offers greater number of diverse and niche products. It also
uses highly advanced technologies to provide personalized recommendations along with
fraud detection (Rupley, 2016).

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 Figure1.4: Amazon’s comparison with competitors (Richter, 2013)

The threat of new entrants

In Amazon's leadership principles, the company states itself to be the most customer-oriented company
along with the highest employability rates and safest place to work making it highly differentiated and as
a consequence, it faces comparatively less threat of new entrants. Moreover, Amazon critically focuses
on a diverse range of employment without discrimination of gender, religion, political background
ethics, etc., and focuses on providing equal salaries to all. Since it has a very strong brand image so new
entrants would need a lot of time, investment, and effort to compete and would face barriers like
patents, customer loyalty, etc.

Bargaining power of suppliers

Amazon is highly dependent on certain wholesales as well as retail markets for example
many successful brands have a business strategy of buying from Alibaba and then selling

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their products on Amazon as Alibaba has the largest retail market share of 80% while
Amazon Is 50% in the US market (Connoly,2023). On the other hand, most of the Amazon
FBA wholesale suppliers are present in China around 70%. However, Amazon has an
advantage over most of its suppliers as the switching cost is low and it can even
manufacture its own products. In short, the bargaining power of suppliers is moderate for
Amazon due to the moderate rate of forward integration.

Bargaining power of buyers

Amazon communicates effectively with its consumers by providing a large number of
promotions discounts and highly personalized experiences to consumers to deliver their
individual recommendations. The main focus of Amazon's innovation strategy is to satisfy
the long-term needs of its customers. Amazon uses machine learning to engage and
converse with its consumers. In spite of all the innovative methodologies of Amazon, the
switching cost of consumers is low due to greater substitutes available and as a
consequence, buyers have high bargaining power.

Threat of substitutes
Amazon is mainly an e-commerce company and it can easily be substituted by means of
offline entertainment, physical stores, and even online stores and media sites. The reason
for low switching costs is the availability of cheap substitutes that enter the market and
gain a competitive advantage by offering low-priced products compared to Amazon.
Amazon can overcome this problem by being highly innovative and making its website
more consumer-friendly. E bay has a more effective way of dealing with its key
stakeholders as it charges less fees and commission from the sellers that tend to attract
more buyers as they get cheaper substitutes. E bay also offers products in 25 currencies
while Amazon provides products available in 16 currencies showing that e bay has a
greater international approach (Ali, 2023).

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 Figure1.5:Comparison of Amazon with E bay(Slade, 2023)

Uppsala model on Amazon

Amazon has followed the model to some extent. Initially it preferred entering into
developed markets such as UK and Germany as the consumers in these markets had
somewhat same preferences as the customers in the US. One of the strategies that Amazon
adopts while entering a new market is acquiring an existing market place in the area
instead of starting the business from the beginning. For example, when Amazon acquired
the e commerce firm Souq it indirectly became the market leader of Middle East as well. It
benefited Amazon a lot as Souq had already built a large and loyal customer base in the
region (Russell, 2017). Amazon does not fully follow this model as it expanded its business
in countries like India it seemed to have faced some challenges. Regulatory barriers,
cultural and religious differences, financial pressures etc. Initially it impacted the firm but

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later it gained the trust of suppliers and managed to convince them to build an army with
Amazon.

Conclusion

Amazon is undoubtedly one of the leading e-commerce multinationals in the world. One of
the main reasons for massive success of the multinational is its effective communication
strategy. For an e-commerce company building strong relations with its key stake holders
is even more important because everything occurs online. Even the customers cannot
physically go to the store to purchase products. Amazon has built a strong relation of trust
with its consumers by guaranteeing the authenticity and quality of its products. Amazon
has a large community of more than 2 million selling partners and it detects the
authenticity of seller accounts by using highly advanced technologies such as facial
recognition, expert reviews, and liveness detection along with reviews from experts
regarding the seller. All this greatly increase the confidence and reliability of consumers
towards the company. Amazon has a large number of competitors so it mainly follows the
principle of innovation and maintenance of brand loyalty to distinguish itself from
competitors. Amazon is currently facing some challenges including legal challenges in
different countries, criticism on lack of environmental protection, large and strong
competitors but overall, it continues to maintain its dominant brand profile by strategically
dealing with all challenges in the best possible ways.

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