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1Strategic Financial Management
2Table of ContentsIntroduction.....................................................................................................................................3PEST Analysis of Online Retail Industry (Amazon)...........................................................................3Political Factors............................................................................................................................3Economic Factors.........................................................................................................................4Social Factors...............................................................................................................................4Technological Factors...................................................................................................................5Porter’s Five Forces for Amazon......................................................................................................6Threat of Existing Rivalry.............................................................................................................6Bargaining Power of Customers...................................................................................................6Bargaining Power of Suppliers.....................................................................................................7Threat of Substitutes....................................................................................................................7Threat of New Entrants................................................................................................................8Current Strategic Position of the Company.....................................................................................84 Future Strategies for Amazon.....................................................................................................11Screening of Options – A winning Strategy...................................................................................12Conclusion......................................................................................................................................13References.....................................................................................................................................14
3IntroductionThe second part of the assignment revolves around the strategic analysis of the businessselected for this purpose i.e. Amazon Inc. This part covers the PEST analysis, Porter’s five forces,and other strategic business analysis tools. At the end of this second part, the assignment isconcluded and recommendations pertaining to improvement of strategy for Amazon are alsoprovided for the even higher success of business.PEST Analysis of Online Retail Industry (Amazon)The PEST analysis is carried out to analyze the macro factors pertaining to an industry. It is oneof the most common tools to analyze the external environment for a business in specific orindustry in general. The term PEST stands for the study of political, economic, social,technological, environmental and legal factors that can affect an industry.1In this case, the samefactors are highlighted in the case of Amazon as discussed in the sub-sections below.Political FactorsMultiple political forces affect the online retail businesses at any given time. The global onlineretail businesses like Amazon are subject to political forces of more than one country as pertheir operations.2The following points summarize the key political factors that can affect theAmazon and other online retail businesses:The online retail companies mainly operates in multiple countries including thedeveloping countries; it has been observed that politics of developed countries arestable now. This political stability motivates the owner to increase investment for thegrowth of business.Another political factor is government support for e-commerce in the countries whereonline retail industries is operating. This factor presents an opportunity in somecountries and a threat to the others.31 Rothaermel, F. T. (2015).Strategic management. New York, NY: McGraw-Hill.2 Ibid, 1.
4The third political factor is that the governments of most of the countries are notfocused on cyber security which enhances customer confidence and experience in the e-commerce industry.Economic FactorsThe performance of Amazon is highly dependent on the economic cycle of the countries, it isoperating in. Being an e-commerce venture, the business operates in multiple economies and isaffected by an economic cycle of each country. The economic factors affecting the Amazon ande-commerce retail industry can be summarized as follows:The instabilities in an economic cycle around the globe and potential for globalrecessions are two big economic threats to the online retail industry. Recently, there hasbeen a global crisis which initiated in 2008 and affected almost all the economies. Theworld growth declined from 5% in 2007 to 3.75% in 2008 and further slumped to justover 2% in 2009. Initiation of any new global recession has great potential to harm theonline retail industry.

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