SWOT analysis concepts and applications

SWOT Analysis: AMAZON.COM

Amazon.com is one of the largest online stores offering everything from books to CDs, to toys to tools and prescription drugs. Below is a SWOT analysis of this Amazonian online store which has carved a niche for itself in e-commerce and has managed to change the very definition of the term: American corporation.

Strengths:

Amazon.com believes in diversity and unlike the restricted approach of its starting days, Amazon is now venturing into other directions-offering more than just books. By the end of last year, Amazon displayed healthy revenues of $6,921 million which was a significant increase from 2003 when revenues came at $5,263 million. (Hoover) Amazon has also managed to expand its customer base by offering services internationally. They have kept their advertising budget in check by refusing to advertise on television but instead use web as its primary channel of advertising. The shipping costs are reasonable-giving international customers more reasons to purchase from this site than the competitor's. With multiple selling points, Amazon offers ease to customer while expanding its revenue collection centers. The various selling points include the multiple online shopping locations such as www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.joyo.com. Another interesting reason to look for books on Amazon.com is the fact that it also offers books in the used category. These books are cheaper and in good condition allowing readers to spend less for a good book and great service. The strategy of continued lower prices has also won Amazon more customers and better quarterly revenues: "Amazon.com continues to lower shipping and product prices for its worldwide customers. Customers shopping at www.amazon.co.uk now qualify for free shipping on orders of GBP 19 or more, down from the prior threshold of GBP 25." (Business Wire, 2004)

Weaknesses:

Amazon's diversification can be a problem for the firm in the long run since it can lose it niche. The company was first known as earth's largest bookstore but that distinction is no longer applicable since Amazon is selling a lot more than just books. Amazon doesn't have a brick-and-mortar presence which might help reduce costs but can be a problem for a firm its size since e-commerce itself has a shaky existence. They have some strong rivals in the field including Barnes and Nobles and Ebay. While Amazon offers services internationally, this is still very limited compared to Ebay that has actually gone worldwide. While Amazon ships to almost all countries, it doesn't allow people from many countries to auction their goods at their site which limits its auctioning service.

Opportunities:

E-commerce is an exciting field with abundance of opportunities that are yet to be explored. It offers Amazon the ability to reach much greater number of customers than it would have had if it had tried to be a brick-and-mortar only firm. With internet access increasing, Amazon has only a lot more to gain. Online shopping has increased considerably with greater access to computers and the Internet. According to a news report, it was "found that the online shopping has increased dramatically. Nearly two-thirds of 2,900 Web surfers Ipsos-Reid surveyed says they had at some point in time bought something online, up from 36 per cent of those surveyed in 2000." (The tribune, 2003) And this increase has been more prominently in the U.S. And UK which means Amazon has more reasons to believe its profits will increase in the coming years. While diversification can be a weakness in many cases, it can offer numerous opportunities if Amazon doesn't lose sight of its niche and keeps expanding. This means that on the one hand, people should know that if you need a book, Amazon is the place to visit. But at the same time, it can enhance the shopping experience of individuals by offering them a host of other opportunities.

Threats:

At the moment, Amazon has only its rivals to worry about. Ebay has always been hugely successful compared to Amazon that was worst hit but dot.com burst of late 1990s. Ebay remained strong and successful even when all other dot.com around were dying everyday. This is something that Amazon must not forget. Secondly its main rivals like Barnes and Nobles and Ebay have strong holds on their niche markets and this can turn into a nightmare if Amazon loses sight of its niche.