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Internal External Factors Paper

Essay by   •  August 13, 2012  •  Research Paper  •  1,734 Words (7 Pages)  •  1,775 Views

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Internal and External Factors

Internal and external factors affect the four functions of management in various ways. Management is the process of working with people and resources to accomplish organizational goals (Bateman & Snell, 2011). The four functions of management are planning, organizing, leading and controlling. Planning involves delivering strategic value. Organizing involves building and leading incorporates mobilizing the individuals to accomplish the goal or mission of the organization. Conclusively, the fourth function, controlling, requires learning and changing.

In January 2012, Santaelle (2012) reported "Amazon is creating another facility in South Carolina, bringing with it a promise of hundreds of new full-time jobs" (para. 2). This announcement followed the establishment of the new distribution center in Lexington County in 2011 which created upwards of 1,000's of jobs. This was a pleasant change following several stories of the increased unemployment rate that South Carolinians were experiencing. Amazon is a fortune 500 company based in Seattle and opened on the internet in 1995. The company was founded by Jeff Bezos and offers an array of products and services on the site.

Growing and continuing to build the company requires focus and direction. In strategic planning, analysis of external opportunities and threats and analysis of internal strengths and weaknesses is important. This is a planning and decision process that incorporates the SWOT analysis. This strategy formulation is used as a framework to aide in planning strategies for the company.

Strengths of Amazon (Internal)

Until recent years Amazon was experiencing large losses because of its huge initial set up costs. In 2005 profits for the company showed that sales jumped $1.75bn. Fluctuations in sales were due to promotions that offered reduced delivery costs to consumers. The company carefully records data on customer buyer behavior and is supported in this business strategy by Customer Relationship Management (CRM) and Information Technology (IT). As a result of this practice their customers can be offered specific items, or bundles of items based upon preferences demonstrated through previously purchases or viewed items.

Asides from its profits, Amazon is an enormous global brand. It was one of the original dotcoms, and over the last decade it has developed a customer base of around 30 million people. It was an early trendsetter of online technologies for e-commerce making the company one of the first online retailers. Building on its early successes with books has enabled the company to expand its product categories to include electronics, toys and games, DIY and more.

Weakness of Amazon (Internal)

As Amazon adds new categories to its business, it risks damaging its brand. Amazon is the number one retailer for books. In the same way, many of the new categories, for example automotive, may prove to be too confusing for its loyal customers. Additionally, the company needs to reconsider its strategy of offering free shipping to customers in order to compete with a local retailer where customers can make a purchase with no shipping costs.

Opportunities of Amazon (External)

The company is now increasingly cashing in on its credentials as an online retail pioneer by selling its expertise to major store groups. For example, British retailer Marks and Spencer announced a joint venture with Amazon to sell its products and service online. Other recent collaborations have been with Target, Toys-R-Us and the NBA. Amazon's new Luxembourg-based division aims to provide tailored services to retailers as a technology service provider in Europe.

There are also opportunities for Amazon to build collaborations with the public sector. For example the company announced a deal with the British Library, London, in 2004. The benefit is that customer's can search for rare or antique books. The library's catalogue of published works is now on the Amazon website, meaning it has details of more than 2.5m books on the site.

In 2004 Amazon moved into the Chinese market by buying China's biggest online retailer Joyo.com. The deal was reported to be worth around $75million. Joyo.com has many similarities to its new owner, in that it retails books, movies, toys, and music are sold at discounted prices.

Threats of Amazon (External)

Amazon sells the same or similar products as high street retailers and other online businesses therefore it may become difficult to differentiate the brand from its competitors. Amazon does have its brand; however it also has a huge range of products and as a result, price competition could damage the business. International competitors may also intrude upon Amazon as it expands. The US-based rivals unable to compete with Amazon in the US may go overseas and compete with them on foreign fronts. Joint ventures, strategic alliances and mergers could see Amazon losing its top position in some markets. The products that Amazon sells are noted to be purchased as gifts during Christmas season. This means that there is an element of seasonality to the business. However, by trading in overseas markets in different cultures, such seasonality may not be as profitable.

In summary, the competitive advantage for Amazon is its customer loyalty, global expansion, marketing position, and website design and contents. Amazon's internal strengths are strong brand name, strong infrastructure due to its effective automated distribution centers, customer service and high quality management team. Some noted internal weakness are lack of Spanish website version, some items have high shipping costs and risk introducing wrong new category. External opportunities that affect Amazon are e-commerce expansion in Asia, there has been greater than 13% jump of Latinos now using the internet; there is a growth of internet

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