Overview of PESTLE Analysis
The PESTLE analysis is an important framework used to analyze various macro factors within a business environment. It is a key strategic management tool used by organizations in different scenarios.
In business school, PESTLE analysis encompasses a common course assessment exercise. Sometimes appearing in its variant PEST, PESTLE is an acronym for Political (P), Economic (E), Social (S), Technological (T), Legal (L), and Environmental (E).
Note that the PESTLE analysis is used interchangeably with PESTEL analysis. That said, in college, you are likely to come across an Amazon PEST and SWOT analysis, a PEST analysis for Amazon Go, or a complete PESTLE analysis for Amazon.
Such an exercise demands the use of a suitable PESTLE analysis template. The template should adequately cover all the respective areas. These areas are as explained below.
1. Political factors: These look at government’s influence on economy or an industry. Issues to consider under this category include taxes, duties, trade tariffs, and fiscal policies.
2. Economic factors: These pertain to the elements that affect the performance of an economy and the company, as a result. They may include inflation rate, foreign exchange rates, interest rates, foreign direct investment (FDI), and economic growth rates.
3. Social factors: These entail the different social environmental elements affecting the market. They are critical in the PESTLE analysis and include demographics, population analytics, and cultural changes.
4. Technological factors: These are elements that relate to technological innovations that affect the market and the industry. They may encompass R&D, automation, and technological awareness in the market.
5. Legal factors: These involve the different laws and regulations a business enterprise is required to abide by in its operations. They include laws to be adhered to when dealing with the outside world as well as inside operations. Examples are safety standards, consumer laws, and labor laws.
6. Environmental factors: These are also critical to the PESTLE analysis and look at the different elements of the surrounding environment. Entailed factors include geographical location, weather, climate, environmental offsets, and climatic changes.
The above highlights of the factors likely to affect a business enterprise. They provide a good background information when it comes to how to do a PESTLE analysis. This can be extrapolated in the case of Amazon. Note that just like a SWOT analysis for Tesla, a PESTLE analysis for Amazon is a common assessment in college.
Per se, the PESTLE analysis for Amazon is as illustrated below.
Political Factors in PESTLE Analysis for Amazon
PESTLE analysis for Amazon has to consider key political areas that could affect its business. That said, some of the political factors would have implications the company’s operations include:
1. Political stability in advanced societies.
2. Political lobbying.
3. Government red tapes.
First, the political stability in the North America, Europe, and Parts of Asia presents a huge opportunity for Amazon. The company can expand its operations to and within countries in such regions.
Note that political stability in these regions is also likely to result into economic stability. This works to the advantage of Amazon since the economic stability is expected to positively affect citizens’ disposable income and purchasing power parity.
Second, political lobbying could have serious implications on Amazon’s operations. The influence of political factors like pressure groups, trade unions, and the press cannot be overlooked. These institutions could with ease have a negative impact on the company.
For instance, the constant conflict between Amazon and President Trump, who has endlessly accused the company of unscrupulous practices like tax evasion and exploitation of US Postal Service has compelled Amazon to hire experts to deal with these serious allegations.
Third, government red tapes in Asian countries like China, India, and Arab countries are likely to negatively affect the company. There are serious political concerns in Europe where governments are formulating restrictive policies in areas like anti-trust issues.
Note that the anti-trust policies are particularly going to seriously affect Amazon’s operations in the e-books sector.
Economics Factors in PESTLE Analysis for Amazon
Economic factors are also a critical consideration when it comes to how to do a PESTLE analysis for Amazon. They entail dynamics like:
1. Economic growth.
2. Currency exchange rates.
4. Employment, etc.
These economic factors are likely to have a serious impact of Amazon. Accordingly, a PEST analysis for Amazon Go has to particularly consider how these factors combine together to influence its operations in both local and global markets.
Per se, economic growth in different sectors, including online retail, groceries, electronics, apparel, and e-books will have a positive impact on the company, and vise-versa.
As well, currency exchange will significantly affect Amazon’s operations. This is considering that as high as about 30% of the company’s sales are derived from international markets. As a result, a strong dollar will positively affect its costs of operations and consolidated net sales.
Taxation also has serious implications on the company. Introduction of or exemption from taxes will have a serious impact on the company. For instance, the suggested ‘internet tax’ if passed would increase the company’s operational costs.
Equally, employment in domestic and global economies will have serious implications on consumers’ disposable income and their purchasing power. Differently, the rising costs of labor would force Amazon to reevaluate its business model.
Social Factors in PESTLE Analysis for Amazon
Social factors also have potential impacts on Amazon’s business operations. Some of these factors include
1. Changing purchasing patterns.
2. Changing consumer demographics.
The changing purchasing patterns could be an opportunity that Amazon should align its operations against. One, consumerism has become a common trend among consumers in in the US and other regions. The company can capitalize on this to make more sales.
Two, customers have globally adopted the door delivery purchasing system. This requires the company to process orders made online and avail the products to the customers’ locations. Note that this has in a greater extent influenced the way Amazon do business.
As well, changing demographics are significantly influencing Amazon’s operations. This particularly is in consideration of the rising Millennials consumer category. This category of customers is one of the largest globally and approaches the market and shopping differently.
Of note is the way the Millennials have embraced the online shopping model. This change in behavior is supported by their preference for smartphones and the access to efficient internet that comes along with these gadgets.
Technological Factors in PESTLE Analysis for Amazon
Technology also plays an integral role in shaping Amazon’s operations. The company has to consider how technology influences different aspects of its business. Such aspects include:
1. Customer service.
2. Customer engagement.
3. Cyber security.
First, Amazon has to be conscious of the place of IT in the delivery of services. This is particularly because the business is predominantly online. The company has to leverage of the best innovations in internet and other IT infrastructure to help provide efficient services.
Further, Amazon requires to consider other technologies like AI in serving customers. This is essential in increasing service delivery efficiency and saving on operational costs.
Second, Amazon will be required to explore ways to use technology to help effectively engage its customers. Note that customers particularly the Millennials give a lot of preference to customer engagement.
Such engagement is key to good customer service and the company should adopt technologies like huge data to enhance its understanding of customer needs.
Third, Amazon has to consider the negative implications of online transactions. This should focus on cyber security issues like fraud. Cybercrimes like “form-jacking” and skimming are a serious threat to online business enterprises.
Even more serious, online fraud associated with shopping on platforms like Amazon keeps evolving and the company has to be ahead of the fraudsters. This requires continuous technological innovation.
Legal Factors in PESTLE Analysis for Amazon
Legal compliance is another area that has immense impacts on Amazon’s business operations. Some of the factors the company has to consider are:
1. Laws in different countries.
2. Labor laws.
Markedly, Amazon has to comply with the laws set in other countries. This is a serious area of concern since the company has established its extensive operations in foreign markets. Failure to adhere to these laws could result into heavy fines.
For instance, the company is required to observe the European Union General Data Protection Regulations. In the past, the EU has investigated Facebook and Google for breach of these regulations.
As well, labor laws is another area where Amazon is likely to face substantial legal challenges. This is because law suits emanating from labor disputes could cost the company a lot of money in compensation and fines.
Environmental Factors in PESTLE Analysis for Amazon
The environment has become a major concern for business enterprises across the world. Factors to consider in this area include:
1. Ecological management.
2. Sustainable operations.
Notably, sustainability is an area Amazon has to contest with in its operations. This mainly looks at the natural environment and Amazon’s corporate social responsibility. For instance, the company has to adopt practices that promote proper disposal of wastes.
As well, it is important that the company uses raw materials and products that support sustainable exploitation of natural resources. This looks at approaches that seek to reduce consumption of electricity, minimize water usage, moderate plastic bags usage, and promote use of solar energy.