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The objective of this report is to determine how macro-environmental factors negatively influence business performance in a highly dynamic market environment and to come up with appropriate solutions and challenges. In this time, the research is based on Amazon, one of the prominent corporation having its presence worldwide. The company is known for offering retail, computer services, consumer electronics, digital content and other local services like daily deals and groceries. In 2020, the business generates net sales of nearly 386 billion U.S. dollars (Coppola, 2021). The company also has its own line of private label brands such as Kindle, Amazon Echo, and personal assistance service like Alexa. Amazon is also well known for grabbing various opportunities in the different market and this can be evident with its actions like purchase of Whole Foods Corporation, entering into grocery and pharmacy segment, tapping emerging markets of developing countries and so forth.
When an organisation operates in a society and economy, there are factors in its environment that it has no control over. These are essentials of its macro environment that directs or indirectly influence the company business functions or directions (Zinovieva et al, 2016). In the contexts of Amazon, the different macro environmental factors outlined as political/legal, economic, social, technological and environmental though considering the article, the key focus will be on social and technological factors within the study.
With having presence in 200 plus countries, Amazon must abide by the political and legal environment proactively to make it easier for higher growth. Technology business such as e-commerce and cloud are now more prone to political and regulatory scrutiny in order for the safeguard of local businesses. Moreover, government political and legal decisions further impact company policies like Amazon had to sell cloud assets in China due to tight regulations over online data (Liu, 2021). Similarly, in many other industries, local restrictions seem to favour domestic companies making business challenging for international companies like Amazon. Considering taxes can different (relying on the individual in power), it is necessary for to be up-to-date on the fluctuating factors.
Economic factors though includes country GDP, purchasing power, inflation level but disposable income is higher these days, enabling the population to spend more on luxury products and entertainment. In the Covid-19 pandemic where many economies face a downturn and many companies struggled to endure the pandemic, Amazon silently builds a nation-wide grocery chain. For instance, it has introduce 11 Amazon Fresh Stores in the United States with plans for nearly 28 more so that to entice mainstream buyers (Day, 2021). Amazon grocery analysts further state that Amazon Fresh stores are probably cheap to launch and even cheaper to operate – the viable weapon to pale a long term claim in a well low margin industry.
With the change in generations, higher awareness of products information and an increase in competition, Amazon is innovating on the behalf of the customers across its grocery business as according to the vice president of Amazon, the customers now care more about low price, convenience and a wider selection in their grocery. Amazon with its Fresh stores are likely cheap to launch and also cheaper to run – the right strategy to take a long term in a renewed low-margin industry. Amazon also targets population with low prices so far as a basket of 30 frequently bought grocery products in one of its store in Chicago undercut Jewel-Osco, by as much 20% when comprising products on sale, and is competitive with Walmart and Aldi (Day, 2021).
It is evident that Amazon is one of the biggest technology firm and therefore, this environmental factor can impact company future directions greatly. For instance, customers are now expecting company to provide them new ways of delivery having higher convenience and accessibility to which company also experimenting with new and creative ways for the consumers such as drone delivery (Polacco & Backes, 2018). Meanwhile, it is also stated in the article that the company is seeking to launch “Just Walk Out” technology in the future to make the cashier work automated (Day, 2021). The company also making Amazon Fresh stores integrated with technological flourishes including digital price tags, smart “Dash” shopping carts that tally up smaller purchases as consumers browse the aisles. Ultimately, this will raise the shopping experience for the customer and ultimately, provide various opportunities from future perspectives.
The legal environment is much embracing tight regulations where companies are much subject to international laws, defining the relationship between companies, employees, and this requires Amazon to recognise the legal significance of their actions in the general course of marketing. Amazon needs to be proactive regarding the regulations and legal challenges against the technological industry as well as the General Data Protection Regulation (GDPR) standards in the EU (Goddard, 2017).
With increasing in government intervention and customer awareness, it is enforced on Amazon to be more sustainable for gaining long term competitive advantage in the industry. Moreover, Amazon has already been slashed and criticized for limited disclosure on environmental initiatives and sustainability practices (Gilligan & Vandenbergh, 2020) and therefore, Amazon Fresh must embrace over open policies while undertaking its sustainability measures and practices. It will better attract customers towards the brand for both the grocery segment and other areas of business.
As discussed above, Amazon is seeking and embracing various opportunities in the macro environment though one of the major threat for the company arises in terms of competition. For instance, the article stated that Aldi is making a greater push in the U.S. market with plan to open nearly 100 stores in 2021 (Day, 2021). On the other hand, Walmart and other stores chain such as Jewel-Osco already developed their presence giving tough competition to Amazon in its grocery business segment. As per the analyst, it is stated that Amazon Fresh stores are likely cheap to introduce the right strategy for gaining presence in the low-margin industry though company former practice like acquisition of Whole Foods Market not seen to be much transformative like expected initially. It is true that that acquisition helped the brand in cutting down the price with adding of online ordering however, its struggles to re-invent itself as a typical destination and even achieved only steady sales even at the recent boom in home-cooked foods.
Ultimately, this challenge can be mitigated with the long term play where the company must look to increase its Whole Food stores to nearly 500 locations while coming up with a bigger build out in terms of technological advancement. Private-label brands, together with the Whole Foods 365 line, are prominent and in the same way, Amazon must strengthen its grocery business with Amazon Fresh while looking outside for talented pool and perspectives. To lower down the competition from Walmart, Target and other players in the market, Amazon can further diversify the grocery market and its products with more varieties with starting venturing in both developed and developing countries (Munoz & Dimov, 2015). Moreover, the company needs to present itself as a more sustainable brand with moving the needle towards higher transparency and compatibility. The future of company will further be based on the company ability to make positive relations with the government and different regulatory bodies and therefore, the higher the number of skills will quickly resolve Amazon antitrust settlements.
In the limelight of the above discussion, it can be said that Amazon is going great though to scale its grocery business, the company needs to monitor consumer behaviour in the context from different perspectives. Meanwhile, the competition is high due to aggressive practices by Target, Walmart and other players in the market, Amazon Fresh needs to embrace moreover technological advancement such as “cashier-less” technology or stores. The acquisition of Whole Foods can further help Amazon to increase the number of stores in order to be more competitive against Walmart who is now seeking an Omni-channel strategy to counter Amazon business. Ultimately, it will help the company to gain a competitive advantage in the industry.
Coppola, D. (2021). Amazon - Statistics & Facts. https://www.statista.com/topics/846/amazon/ [Statista.com].
Day, M. (2021). Amazon Quietly Began Building a Grocery Chain During Pandemic. https://www.bloomberg.com/news/articles/2021-03-11/amazon-quietly-began-building-a-grocery-chain-during-pandemic [Bloomberg.com].
Gilligan, J. M., & Vandenbergh, M. P. (2020). A framework for assessing the impact of private climate governance. Energy Research & Social Science, 60(1), 101400.
Goddard, M. (2017). The EU General Data Protection Regulation (GDPR): European regulation that has a global impact. International Journal of Market Research, 59(6), 703-705.
Liu, L. (2021). The Rise of Data Politics: Digital China and the World. Studies in Comparative International Development, 1-23.
Muñoz, P., & Dimov, D. (2015). The call of the whole in understanding the development of sustainable ventures. Journal of Business Venturing, 30(4), 632-654.
Polacco, A., & Backes, K. (2018). The amazon go concept: Implications, applications, and sustainability. Journal of Business and Management, 24(1), 79-92.
Zinovieva, C. G., Kuznetsova, M. V., Dorfman, T. V., Limarev, P. V., & Limareva, J. A. (2016). Study of external and internal factors affecting enterprise’s stability. Advances in Systems Science and Applications, 16(1), 62-71.
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