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Amazon.com Inc.

Socio-Economic and Legal Environment

Written: 15/08/2021


Executive Summary

Amazon.com Inc. was created and founded in 1994 as an online retailer for selling books. Although this was the primary function, Amazon’s founder, Jeff Bezos, had maintained that the company was a technology aimed at simplifying the online transaction process for customers. Over the years, Amazon has grown into a conglomerate with businesses ranging from subscription-based services that offer video and audio streaming content, to advertising service, to cloud computing where they are a market leader. An analysis was done on the company’s business model and the socioeconomic trends that could affect said model. It was seen that Amazon had an overwhelming positive effect on the US and UK economies through their tax contributions, ability to create jobs through their investments, and commitment to net-zero carbon emissions by 2040. The knowledge economy is defined, explained and analysed on how it is applied at Amazon and understanding how it fits the disruptive brand through its investment into 8 out of the 12 disruptive technologies. Furthermore, the macroeconomic dimensions that are influenced by Amazon are explored, as well as the key demographic and socioeconomic shifts. The key drivers of change are identified and the reasoning behind the influence on Amazon and vice versa is explained and analysed. Political factors influencing Amazon’s economic growth and development are analysed and the implications of the sharing economy is defined and Amazon’s response to it, Amazon Flex, is identified and explained. Antitrust laws and the legal systems are identified and analysed with focus on how Amazon lobbies antitrust laws and other issues, and how they manage to use their business model and strategy to remain aggressive. Lastly, recommendations are given on how to adhere and lessen the impact of the antitrust lawsuits, while identifying a potential new subsidiary for the company to remain disruptive in the industry.

1. Introduction

Amazon.com Inc., commonly referred to and henceforth referred to as Amazon, is the world’s largest e-commerce and online retailer which has extended its business offerings over the years adapting to new and upcoming technologies and trends. In 1994, a former Wall Street hedge fund executive, Jeff Bezos, had created and incorporated Amazon as an online retailer for selling any book, to any reader, anywhere. The name of the company was synonymous with the Amazon river given its size and dominance in South America, as well as beginning with the first letter of the alphabet (Hall, 2020). As the logo of the company evolved, the arrow moving from the “A” of Amazon to the “z” is symbolic of finding everything from “a to z” on the online store.

Although created as an online book retailer, Jeff Bezos had maintained that the company is a technology company aimed at making the process of online transactions for consumers a simpler process (Hall, 2020). By making the customer the focus of the business and its operations, Amazon’s mission and vision statements extend further than the company’s beginnings as an online retailer. The inclusion of the company’s subsidiaries and offerings have taken Amazon from an extensive e-commerce platform to a company that offers subscription-based services such as streaming services for both music and videos through Amazon Prime, e-books and audio books as well premium perks with its online store. In addition to this, Amazon’s cloud computing offering of Amazon Web Services (AWS) has made the company an industry leader by offering services of computational ability, storage, database and various services through the cloud itself. Over and above the cloud computing and subscription services, Amazon generates income through advertising services that it provides on its platform which are catered to users in the form of personalised advertisements (Amazon.com, Inc., 2021).

Throughout history and even presently, Amazon is seen as a constant disruptor in the industry, such that any companies that cause a disruption to the digital marketplace and e-commerce industry is known to be having “the Amazon Effect” (Mitchell, 2021). Amazon had initially disrupted the book industry forcing the likes of brick-and-mortar stores to adapt their business models as well. As technology advanced and Amazon’s business model with it, other industries were affected by the disruption caused by Amazon, with most recently brick-and-mortar grocery stores with their own grocery stores, Amazon Go, utilising the latest technology and making the shopping experience more efficient and enjoyable (Furth, 2018).

1.1. Amazon's Business Model

Figure 1
Fig.1 - High-Level, Simplified View of Amazon's Business Model adapted from (Fox, 2020)

Figure 1 presents a simplified version of Amazon’s Business Model, and as the business has evolved and adapted their business and offerings so has their various streams of revenue adapted and evolved (Fox, 2020). Currently, Amazon’s revenue streams are as follows:

  • Amazon Marketplace
  • Amazon Books
  • Amazon Music and Videos
  • Amazon Gaming
  • Amazon Web Services
  • Amazon Fire Products
  • Amazon Prime
  • Amazon Tickets
  • Amazon Patents
  • Amazon Advertising (Fox, 2020).

The Amazon Marketplace represents the sellers and the customers of the company, being the core competency and main focus of its revenue. This further extends to the various books offered both as physical or digital copies tying back to the business’s inception and offering. The music and videos as well as gaming links with Amazon’s subscription service of Prime providing customers with services from the streaming platform twitch.tv as well as the Amazon Prime platform itself similar to that of their competitor, Netflix. The Amazon Fire products are those trademarked products of Amazon that provide their consumers with various technological products from operating systems, tablets and smart phones. The patents owned by Amazon allow companies to license them and utilise them within their industry and rights, whereas the advertising stream offers clients be it sellers or businesses to advertise on the platform itself (Fox, 2020).

The Amazon business model has a technological backbone with minimal capital and human capital intensity which results in the model being scalable. Regardless of Amazon shipping anywhere in the world, should the company find the need to enter a new country and begin selling products, it can do so without much difficulty. However, Amazon’s competitors are ever present and constantly growing, but due to the company’s presence in the industry, it has no fear of competitors as its strategy is more aggressive rather than defensive, looking to acquire more businesses and their respective customers (Juneja, n.d.).

Amazon’s vision “to be Earth’s most customer-centric company” is built around four principles: “customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking” (Amazon.com, Inc., 2021). Amazon’s business model includes the famous Amazon Flywheel, seen in Figure 2, where the company’s focus being the customer and offering them low prices and turning over their inventory in a fast manner. With the use of the flywheel, coupled with Amazon’s technology and advancement in the industry, the company has remained competitive and a market and industry leader with a truly unique business model that can adapt with the ongoing advancements in technology and changes in the world and industry.

Figure 2
Fig.2 - Amazon Flywheel Effect adapted from (Fox, 2020)

1.2. Socioeconomic Trends

Social economics, also known as socioeconomic, is a special branch economics and social sciences that looks at the relationship between the economics and social behaviour. Socioeconomics considers factors such as the environment, social groups and social classes, how these classes behave within their society and their surroundings as well as how they handle their finances, while looking at the social impact of the finances in terms of education, medical care, food and lifestyle (Tarver, 2021).

Amazon’s diverse business model not only opens up the company to more risks, but is impacted by more socioeconomic trends. Given its international presence and disruption in the industry, some of the economic trends that affect Amazon and their business model are highlighted in Table 1.

Table 1: Table Detailing the Socioeconomic Trends that Could Affect Amazon

Socioeconomic Trend

Explanation

Healthcare advancements have caused a growth in the world population

· Access to better healthcare in industrialised countries

· Vaccine development, nutritional advancement has reduced mortality in developing countries

· Less developed regions have seen a larger increase in population growth (specifically in the working age range)

· More developed regions have seen a steady population growth due to longer lifespans (Mor Barak & Travis, 2013).

Increase in demand for migrant workers

· With less developed regions spurring a larger population growth, immigration waves are seen across the globe

· Low birth rates and aging population in developed countries is a main attraction for working immigrants from developing countries

· New jobs in low economic regions are seen to be increasing (Mor Barak & Travis, 2013).

Increase of women in the workplace

· With more women being introduced into the labour force, economic, cultural and social effects have been seen on family life and the workplace environment (Mor Barak & Travis, 2013).

Increase in racial diversity has called for more equality and inclusion

· Coupled with immigration, companies have seen an increase in minority groups being employed

· With increase in racial diversity comes religious diversity and respecting the culture and religious beliefs in the workplace (Mor Barak & Travis, 2013).

Educational attainment and achievement in host countries increase immigration

· The type and quality of education received is a strong determinant of any job application

· Students are beginning to study abroad in hopes of attaining a degree from a more internationally recognised institution (Mor Barak & Travis, 2013).

Technological innovation and rapid enhancements in the industry

· COVID-19 pandemic forced the world to rely more on technology to maintain communication of the typical workplace environment

· Companies had to utilise and train, where necessary, employees on adapting to a new way of work while employees attempt to achieve the same results

· Remote working is now recognised throughout the world and presents multiple opportunities to people across the world without the need for immigration (Mor Barak & Travis, 2013)

· The use of AI and robotics is used in multiple industries making unskilled labour a thing of the past.

Customer empowerment

· Knowledge is now more readily available to customers at their fingertips

· Making informed decisions on what to purchase in terms of products or services is seen more often (Haron, 2019).

Monetisation and exchange of personal data

· Personal data such as items purchased, websites visited, locations visited, and much more personal activity and habits are being logged and tracked

· Personal data is becoming increasingly valuable to companies as it aids in strategic management and leadership

· The constant data collection and concerns of how it is used is constantly debated in society with multiple data protection laws being passed (Haron, 2019).

1.3. Effects of Socioeconomic Trends on Amazon's Business Model

Since 2010, Amazon has invested over $350 billion in USA through corporate offices, customer fulfilment, cloud computing infrastructure, renewable energy farms such solar and wind farms, machinery and equipment that is eco-friendlier and lastly compensating their employees, which includes increasing the company’s minimum wage to $15 per hour (Amazon, 2020).

Due to these investments Amazon was able to:

  • Create over 2.7 million jobs in the USA
  • Employ more than 800 000 US expatriates across 40 states and 250 countries
  • Cause a ripple effect of 780 000 jobs being created indirectly in various communities
  • Allow small to medium businesses to create more than 1.1 million jobs in the USA
  • Invest $700 million to their employees in an upskilling initiative
  • Invest in 100 000 electric vehicles for the purpose of deliveries
  • Aim for net-zero carbon by 2040 with their $100 million investment into their Right Now Climate Fund (Amazon, 2020).

Over and above the socioeconomic effects seen in USA, Amazon has invested in the UK over £23 billion. Since 2019, Amazon’s UK investment has resulted in:

  • Amazon employing 30 00 people and creating 10 000 new jobs
  • Directly and indirectly creating 240 000 jobs
  • Assisting small to medium businesses by listing approximately 60% of all products from these businesses
  • Creating an economy with exporting reaching sales of £2.75 billion
  • Supporting the UK Government through COVID-19 by:
    • Delivering 2 million home test kits
    • Supporting 200 000 businesses through a business accelerator programme
    • Creating part-time and permanent employment positions
    • Delivering 800 000 healthy breakfasts to children across the UK(Day One Team, 2020).

2. Literature Review

2.1. Knowledge Economy

The knowledge economy can be defined as knowledge-intensive activities that form the basis of production and services which contribute to the acceleration of technology and science in conjunction with rapid obsolescence. The term knowledge economy encompasses a broad lines of research dating back in history including the rise of science-based industries and the role it played in the socioeconomic change in 1960; to the inclusion of services of other information-rich industries such as publishing and surge of employment seen in the sector over the last three decades, which has led to the idea of innovation being sourced from theoretical knowledge; and lastly marking the importance of knowledge in economic growth as discoveries over time has differed due to no rivalries leading to further innovation (Powell & Snellman, 2004).

In the modern knowledge economy, there are three main driving forces which are the knowledge, also known as the intellectual capital; changes, which is the creation of uncertainty and risk by reducing the level of predictability, i.e. being disruptive in the industry; and globalisation, which is the unification of finance, production, trade, information and communication technology, scientific research and competition (Draskovic, et al., 2013). Figure 3 is recreation of levels of knowledge and the amount of attention that is given to each, and where knowledge management is focused on an organisational level. Knowledge management is driver behind using an organisation’s existing knowledge and leveraging it to support the development of new knowledge. The subsequent development of the new knowledge is what leads to innovation in companies; and aligning innovation and knowledge management is being seen more and more in organisations around the world. The convergence of these two spaces should be targeted at real business problems with the benefits being realised throughout the innovation process itself (APQC, 2021).

Figure 3
Fig.3 - Levels of Attention Given to Knowledge recreated from (Draskovic, et al., 2013)

The various innovations that will breakthrough in the industry, specifically in the technology industry, may not always affect the current business and social landscape. However, there are some innovations will cause the disruption to the industry and current status quo. In 2013, McKinsey Global Institute reported on various disruptive technologies that would change businesses, life and the global economy. The 12 technologies identified are estimated to have anywhere between a $14 trillion to $33 trillion a year impact in 2025 (Manyika, et al., 2013). The 12 disruptive technologies include:

  • Mobile internet
  • Automation of knowledge work
  • Internet of Things
  • Cloud
  • Advanced robotics
  • Autonomous & near-autonomous vehicles
  • Next-generation genomics
  • Energy storage
  • 3-D printing
  • Advanced materials
  • Advanced oil & gas exploration & recovery
  • Renewable energy (Manyika, et al., 2013).

Of those 12 technologies, Amazon have publicly invested in eight of the twelve technologies. Mobile internet saw Amazon put focus on their Kindle e-book reader, specifically the capabilities of the reader itself, ensuring that it was able to read a more versatile format of e-books. By doing this, Amazon were able to establish a core competency around its own format and publishing network giving them a huge competitive advantage. This in turn resulted in Amazon being the market leader in the market, with 60% of all worldwide sales (Swannell, n.d.).

The automation of knowledge work saw Amazon invest more into the development of AI catered to the business and services that they offer. This included the marketplace, the streaming services provided through Prime Video and Amazon Music, even their own custom AI, Alexa, and most recently in their Amazon Go stores. Amazon had and continuously has successfully leveraged recent technology, such as AI, and ensure that the company remains competitive in gaining every benefit possible across their business. Amazon, continued to disrupt the industry by commercialising their AI, built on top of their AWS service. This commercialisation of AI generates data from the customers, and the various machine learning models used and ultimately plays into Amazon’s flywheel on how they continuously improve their customer experience (Swannell, n.d.).

The internet of things technology was instantly utilised at Amazon with the creation of their Amazon Echo and Amazon Dot products. Both of these products grant customers a fully functional Alexa AI which can do a variety of things such as make purchases, suggest recommendations, take notes, set reminders, adjust the connected devices within the home and more. Coupled with this, user voice data is constantly being analysed and worked on to improve the feedback and responsiveness of Alexa, with $1.1 billion going into “intangible assets” or research and development (Amazon.com, Inc., 2021) (Swannell, n.d.).

Microsoft has had the Azure cloud platform available for years, and when Amazon introduced AWS, it immediately disrupted the market and gave Microsoft a worthy competitor, so much so that AWS is now a cloud market leader alongside Microsoft. (Swannell, n.d.). The investment that has been placed in cloud computing and the cloud technology has drastically increased over the last decade. Initially being seen as a cheaper way to store data and run applications, the cloud computing infrastructure and market has been a pivotal driver in digital transformation. More recently, companies have looked to cloud, with approximately more than 50% of all software having been developed on the cloud by 2020. The US is estimated as $49.2 billion of the global government cloud market by 2023, whereas the UK government is spending over £1 billion every year to transition to the cloud (Mariani, et al., 2019).

Over the years, Amazon have increased the number of patents that they own exponentially, and by licensing these patents out have given them a revenue stream that caters to their business model. By constantly investing into their intangible assets and knowledge management, Amazon is able to continuously disrupt the various markets and industry without difficulty and maintain a strong competitive advantage.

2.2. Macroeconomic Dimensions

Macroeconomics is the branch of economics that focuses on the how the large-scale economy behaves, this includes inflation, economic growth rate, price levels, gross domestic product (GDP), national income, and unemployment changes. It deals with the entire economy’s performance, structure, and behaviour (Investopedia, 2020).

Amazon has always had a large effect on macroeconomic dimensions. In 2019, Amazon have estimated a £45 billion value-add into the GDP since 2010. At the end of the year, Amazon had employed 30 000 in various regions, and as a result have raised the economic activity within that region. This economic boost creates a ripple effect as it increased the spending of businesses that supply various goods and services and in turn also increased the spending in households (Day One Team, 2020).

In 2020, Amazon further created 10 000 permanent roles across the UK, where the roles ranged from engineers to HR and IT professionals to recent graduates to healthy and safety specialists to financial specialists and lastly to manual labourers that would work in the warehouses packing and shipping the orders. Over and above this, Amazon’s contribution to the UK government through tax, including both indirect and direct, was £1.147 billion in 2019, which was £354 million (Day One Team, 2020).

In USA, Amazon’s investments resulting in 2.7 million jobs being created, estimating an additional $315 billion contributed to the USA’s GDP since 2010. In 2019, Amazon contributed $1 billion in federal income tax expense, over $2.4 billion in other federal taxes, and more than $1.6 billion in state and local taxes (Amazon, 2020).

2.3. Demographic and Socioeconomic Shift

The socioeconomic trends identified in Table 1 are the major socioeconomic factors that can affect Amazon. The monetisation and exchange of personal data is a socioeconomic trend that is constantly being debated in the industry today. While Amazon does use this data to create a personalised experience for their customers, through the analysing of all the data ranging from voice, shopping preferences and interactions; it is generally queried how safe the data is, and how well is it used by the company.

The COVID-19 pandemic did have a positive impact on Amazon, as the world went into states of lockdown, many businesses and people looked to online services to complete their ordinary day-to-day tasks. Amazon in turn assisted governments, such as the UK government, in delivering of home test kits to the population (Day One Team, 2020).

Furthermore, Amazon’s investment into countries by creating more warehouses and business allows a larger demographic to explore these opportunities. With its global workforce, skilled employees could be given a chance to immigrate to different countries within the company and become residents of the host nation. In conjunction to this, Amazon’s investment into countries where distribution warehouses are built gives rise to the employment of unskilled immigrants, paying them double the minimum wage. These immigrants are able to live in various communities and in turn allow others to learn and invest in their culture, creating a more diverse and culturally rich society and economy (Mor Barak & Travis, 2013).

2.4. Key Drivers of Economic Change

Drivers of economic change are those disruptive and influential changes in various industries that ultimately affect the economy both on a macroeconomic and microeconomic level. In 2016, the World Economic Forum identified multiple drivers of change in both the technological and socioeconomic and demographic areas that have affected various business models (World Economic Forum, 2016). Table 2 presents the key drivers of economic change that are affecting Amazon, with all but two technological drivers of change being identified and influencing Amazon.

Table 2: Drivers of Economic Change affecting Amazon (World Economic Forum, 2016)

Driver of Change

Percentage Trend

How it affects Amazon

Changing nature of work, flexible work

44%

The COVID-19 pandemic forced businesses around the world to revaluate current working conditions and had to ensure that employees could work remotely and still achieve results. With Amazon’s AWS architecture being the choice for many businesses, Amazon’s adaption to changing the nature of work should have been seamless.

Climate change, natural resources

23%

Amazon are continuously working on reaching the goals set out in the Paris Agreement, by investing in 100 000 electric delivery vehicles and investing $100 million into their nature-based climate solution to be net-zero carbon by 2040 (Amazon, 2020).

Consumer ethics and privacy issues

16%

Being a technology company with the focus of your vision and mission being solely on your customer, Amazon’s use of customer data and how they use it in their flywheel is a major influence on the company.

Rapid urbanisation

8%

Amazon’s constant growth in developed countries is an ongoing process, however with rapid urbanisation seen throughout the world in developing countries, it allows Amazon to seek new opportunities and possibilities in new countries.

Mobile internet and cloud technology

34%

Amazon’s offerings from AWS to their products are constantly disrupting the market itself, giving them a major competitive advantage.

Processing power and big data

26%

With AWS’s architecture and cloud computing capabilities, Amazon remain a market leader in the industry benefitting from this driver of change.

New energy supplies and technology

22%

Amazon’s investment to be net-zero carbon by 2040 is heavily influenced by this driver in conjunction with the Paris Agreement. Combine this with the constantly changing technology, Amazon remains disruptive by either implementing new technology or creating it themselves.

Internet of Things

14%

As mentioned before, Amazon’s ability to be influenced by this driver is seen in their adaption of their Kindle.

Sharing economy and crowdsourcing

12%

The sharing economy has influenced Amazon by allowing people to use their own vehicles to deliver packages through their Amazon Flex program.

Robotics and autonomous transport

9%

Amazon is known to have multiple autonomous robots working in their warehouse alongside humans, and is continuously looking towards optimising their business through the likes of robotics and AI.

Artificial Intelligence

7%

AI is one of the technology industries biggest disruptor, and Amazon has invested heavily into this driver while continuously improving their own AI and offering it to customers.

3. Impact of Legal Framework and Political Factors

A PESTLE analysis is a commonly used framework that allows an organisation to understand, identify and analyse the external factors that are affecting it. Organisations that use the framework can identify the external threats and even opportunities that face the business, and some of the aspects addressed in each factor can be seen in Figure 4.

Figure 4
Fig.4 - PESTLE Analysis Framework

3.1. Role of Political Factors

Political factors can influence businesses in both positive and negative ways no matter how large or small the enterprise is. Amazon has been affected by various political factors, some which offer opportunity and some that pose a threat due to pressures from various politicians.

Political stability is something that offers Amazon many opportunities, specifically political stability in developed countries. The stability of a government in a developed country allows Amazon to seek ways of expanding the business into these countries, creating their very own Amazon-specific marketplace. In conjunction to this, government support for e-commerce presents both an opportunity and threat to Amazon as although governments support a large corporation such as Amazon due to their substantial investments, it must ensure that the company does abide by the laws and regulations set out. For example, in 2019, India had halted all sales of products that e-commerce companies in which they have an equity stake (Farooq, 2019).

Another opportunity that presents itself to Amazon is the increasing efforts of governments on cybersecurity. The investment into cybersecurity poses a great opportunity for Amazon and their current technological business and capabilities. Since Amazon’s focus is always on the customer and their needs, support from government in fighting cybercrimes and improving cybersecurity gives Amazon’s customers more faith in the online transactions presented by the company (Dudovsky, 2020).

However, large corporations such as Amazon are always subject to criticism from government officials. In 2018, President Donald Trump of USA had criticised Amazon and their practices specifically on the topic of how much tax is actually paid, the rates paid to the US Postal Service, and potential lobbying practices (Yglesias, 2018). The government pressure was not only seen on the US government front, but also in the UK from GMB union and the Archbishop of Canterbury. The pressure from these political figures had forced Amazon to increase the minimum wage to $15 per hour in the US which was double that of the federal minimum wage, with a 28% and 18% minimum wage increase in London and the rest of the UK respectively (Elliot, 2018). The pressures of the political environment do force Amazon to engage in lobbying practices in order to minimise the implications of the political pressure. This includes spending more, almost exponentially on a yearly basis to focus these efforts in policy issues related to tax, antitrust lawsuits among others (Dudovsky, 2020).

3.2. Implications of the Sharing Economy

The sharing economy is an economic model where resources and goods are collaboratively shared between individuals and groups such that physical assets become services (Corporate Finance Institute, n.d.). The sharing economy is seen to be appealing in cities where the population is growing, ultimately satisfying various user demands, while providing competition to market leaders by staking a claim in the market itself throughout various industries (Nica & Potcovaru, 2015).

Amazon had seen the opportunity that the sharing economy had presented, and saw that it could cater to their customers, specifically those that pay for Amazon Prime. The customers that are subscribed to Amazon Prime do see benefits of faster and free shipping. Since Amazon is a large corporation with a global reach, it has a distinct advantage in the sharing economy, as having a large route density provides them with one of the two ways of being productive in an on-demand economy (Lockridge, 2016). As a result, Amazon had created their own Uber-like delivery service called Amazon Flex. Rather than trying to compete with the sharing economy, Amazon embraced it and saw an opportunity to further dominate the market in which they currently lead and already dominate.

By participating in the sharing economy, Amazon allows people to earn a wage that is slightly higher than the minimum wage offered in the company itself. While certain rules and policies exist for anyone looking to become an Amazon Flex driver such as the company not covering any damages to the packages being delivered, it is advertised as a lucrative sharing economy opportunity. This is done by advertising the above-minimum wage salary with the option to take on more deliveries should you have time in your day, earning a set amount based on where one is delivering, being your own boss in a sense of no person watching how you are delivering your packages, advertising an active lifestyle of being in and out of your vehicle constantly, and gaining the benefits of working for Amazon such as “efficiency, reliability, and innovation” (Amazon.com Inc., 2021).

3.3. Legal Systems and Anti-Trust Laws

Antitrust laws are developed by governments as a way to ensure that competition among businesses is fair and that consumers are protected from predatory business practices. In USA, the antitrust laws are based off three core federal laws: the Sherman Act in 1890, the Federal Trade Commission Act, and the Clayton Act in 1914. The Sherman Act attempts to prevent monopolisation of a business; the Federal Trade Commission Act prohibits competition methods, acts, or practices that are unfair or deceptive; and the Clayton Act addresses practices not covered by the Sherman Act such as mergers and business decisions being made for competitors (Federal Trade Commission, n.d.).

Amazon has been subject to multiple antitrust lawsuits in recent history. One of the cases addressed a clause in Amazon’s contracts with third-party sellers who are responsible high volumes of sale on the Amazon store. The clause stipulates that the seller cannot sell their product at a lower price on any other website, including their own. This clause is an indirect way for Amazon to prevent competition from any other e-commerce websites (Edelman, 2021).

Amazon is the second largest corporation that have spent approximately $18 million on lobbying antitrust laws among other issues. This is due to multiple small businesses who are pressing the US Congress to change antitrust laws as Amazon is able to sell specific data and insights and ultimately remove small business owners out of the supply chain (Ryan, 2021).

Lina Khan had analysed Amazon’s business model and how the current antitrust framework is incapable of understanding the true market power of large corporations in the modern economy. It is seen that while Amazon records exponential gains in revenue year on year, their profits are seemingly low in comparison. This is due to Amazon’s business model looking to continuously grow the business, even if it means operating at a loss. By doing so, it allows Amazon to remain dominant and maintain a monopoly in the market. An example is the subscribers of the Amazon Prime Service that result in Amazon experiencing a loss of $1 billion to $2 billion a year. Although running at a significant loss, Amazon Prime subscribers comprise of 47% of Amazon’s US consumers. However, these consumers are more likely to spend on Amazon due to the free and fast shipping and ease of the platform itself. The willingness of Amazon to operate at a loss in order to grow is in violation of the premise of predator pricing. However, Amazon’s business strategy allows the company to utilise the advantage of predatory pricing without violating any laws (Khan, 2017).

4. Drivers of Change

Drivers of change are those disruptive and influential changes in various industries that ultimately affect the economy both on a macroeconomic and microeconomic level. Based on the World Economic Forum’s 2016 report on the “Future of Jobs”, 18 drivers of change were identified, 9 demographic and socioeconomic drivers as well as 9 technological drivers. These drivers of change were then rated as a top trend and the respective timeframes, significance and definitions were explored (World Economic Forum, 2016).

Amazon being a leader in the technology industry with its various businesses in different markets, the company is constantly disrupting various industries. In the report that follows, significant drivers of change are identified, defined and analysed with respect to their rated trend, timeframe, and significance. Further research and supporting evidence are presented based on the World Economic Forum’s “Future of Jobs” report of 2020.

The socioeconomic drivers of change that could have a significant impact on Amazon are:

  • Changing the nature of the work environment and flexible working arrangements
  • Climate change, constraints of natural resources and transition to a green economy
  • Consumer ethics and privacy issues
  • Rapid urbanisation (World Economic Forum, 2016).

The technological drivers of change that could have a significant impact on Amazon are:

  • Mobile internet and cloud technology
  • Advances in computer processing power and big data
  • New energy supplies and technology
  • Internet of Things
  • Crowdsourcing, the sharing economy and peer-to-peer platforms
  • Advances in robotics and autonomous transport
  • Artificial Intelligence and machine learning (World Economic Forum, 2016).

The changing nature of the work environment and flexible working arrangements was rated 44% as a top trend. This socioeconomic driver is defined by the new innovations in technology that have allowed employees to work from a remote location, teleconference with ease, and accomplish more in a collaborative way. While the impact of the driver was felt immediately in 2016, this driver of change will be ongoing for the foreseeable future. The COVID-19 pandemic had forced the use of technology and the innovation in it to allow employees to work from home in an attempt to handle the pandemic. Since companies have seen that productivity and the output of work from their employees have not changed since working remotely, many companies are allowing continued remote working for the future. Amazon being a leader in the technology industry, has provided other companies the ability to work remotely through their AWS platform, which in turn is used throughout the company by their own employees. This is further extended into their other business of Amazon Flex, where similar to Uber, has people schedule Amazon package deliveries at their own time and convenience, in an area of their choosing.

Climate change, the constraints of natural resources and the transition to a green economy was rated at 23% as a top trend. With the impact having been felt already and an ongoing battle in the world, this socioeconomic trend looks at how organisations can lower their carbon footprint, with the likes of the Paris Agreement ensuring that many companies are net-zero carbon by 2050. Amazon’s investment into renewable energy, autonomous vehicles and their personal goal of being net-zero carbon by 2040 is a constant driver in the business.

Consumer ethics and privacy issues, being rated at 16% as a top trend and having an expected timeline between 2015 and 2017. This trend looks into the ethics related to consumer’s habits such as purchasing options, environmental options, and labour workforce standards; more importantly it looks at how consumer’s data is being used and or sold by the company. Amazon is greatly affected by this trend, as they use the data of their consumers to not only improve their own business, but to sell the data to their partners to help in personalised advertising, personalised shopping, and overall a better online experience. Although the expected timeline was between 2015 and 2017, data privacy issues, and concerns around personal data being sold and used for unethical issues is a major concern for consumer’s worldwide, and as a result of this is an ongoing matter that will continue to be taken into consideration for the foreseeable future.

Rapid urbanisation is the lowest rated socioeconomic trend at 8% and is defined by the rise in the urban population, specifically looking at how it will reach approximately a population of 5.2 billion by 2050. While the impact is being felt already and an ongoing trend, this impacts Amazon as the rise of urbanisation can lead to the company finding new countries to invest in, building warehouses and having a macroeconomic effect similar to that seen in USA and the UK.

Mobile internet and cloud technology are the highest rated trend of the technological drivers of change, at 34%, it was expected to be introduced and implemented between 2015 and 2017. Cloud technology is now the forefront of most modern businesses with a dependency on technology, and this is expected to continue for the foreseeable future. Amazon’s investment and leadership in the cloud technology market through AWS has made them a market leader and one of the standards for efficient cloud technology, ultimately improving productivity, security, efficiency and processing power.

In order for cloud technology to be as effective as it is, advances in computer processing power and its ability to process big data is rated at 26% as a technological trend. Defined by the potential to utilise technology’s full potential to process the large amounts of data, Amazon’s investment into AWS offers unprecedented computing power to the likes of businesses and themselves around the world, capable of processing large amounts of data in the shortest amount of time. With the most requested job of 2020 being that of data analysts and data scientists, it can be seen that with these jobs, the handling and processing of copious amounts of data is a requirement and will be for the remainder for the century.

New energy supplies and technologies looks into more eco-friendly methods of handling the world’s energy requirements. Rated at 22%, is now the forefront of many large corporations. Ensuring that these companies are net-carbon zero by 2050, Amazon’s investment into renewable energy and autonomous electric vehicles is an ongoing venture as the company is targeting net-zero carbon by 2040, making this trend a focus of the company for the next 20 years.

Internet of Things, rated at 14%, is defined as looking at how the large amounts of data that will be produced from everyday objects and processes will lead to new opportunities being identified to be able to scale production to new levels. With the estimated timeframe being 2015 to 2017, it can be seen that Amazon’s Flywheel is a prime example of how the Internet of Things can be used in businesses. With constant adaption and catering towards the customers, Amazon is one of the largest companies affected and driven by this technological trend.

Crowdsourcing, the sharing economy and peer-to-peer platforms is being seen more in the world today. Rated at 12%, the use of the sharing economy is being introduced into the modern economy with the likes of Uber being at the forefront of the economic drive. However, the impact was analysed by Amazon and instantly utilised to adapt and work with the sharing economy rather than trying to mitigate its effects.

Advances in robotics and autonomous transport is at the forefront of the technology industry, looking at how to reduce the manual human labour in manufacturing, cleaning and maintenance. Furthermore, the influence of companies like Tesla in the autonomous vehicle industry is a constant disruptor and a market leader. While rated at 9%, it can be seen how Amazon’s investment into robotics and autonomous transport for their warehouse and deliveries is being consistently influence by this technological driver.

Artificial Intelligence and machine learning are the most desired skill set in data analysts and data scientists. Having the ability to develop and create intelligent robots through artificial intelligence and use predictive modelling to assist businesses in strategic decisions, Amazon is a leader in the market using this technological driver in their business to become for customer-focused. Although rated at 7%, this is technological driver that will be the focus of the technological and business industry for the foreseeable future.

5. Recommendations and Conclusions

5.1. Recommendations

Amazon is a leader in the technology industry and continues to be a leader in the industry itself. While it’s business model of being an e-commerce website is a simple one, it does leave it open to imitation and multiple competitors. However, due to the company’s large presence in the industry and the market, Amazon’s competition is not something that is taken lightly and is met with fierce reaction. This has led to Amazon being aggressive in their attempt to remain competitive and dominant, resulting in antitrust lawsuits and lobbying for such issues. It could be recommended to adapt the business model to be that of something more inclusive for smaller businesses and the sharing economy in its marketplace.

Subsequently, its impact on the brick-and-mortar retail stores, Amazon’s effect is seen throughout all countries that it expands to. While utilising technology and its disruptive nature, Amazon should utilise this to further disrupt the market and claim a dominance in the brick-and-mortar grocery market. Although their purchase of Whole Foods Market was a success, Amazon could harness their technological abilities and create something truly unique, effective and more customer friendly.

Amazon’s investment into lobbying antitrust laws and other issues is a constant threat to the company. The company must revisit their current strategy and model and adapt it such that smaller businesses do not seek a need to sue the company. By investing in a strategy catered to all businesses, large and small, while ensuring better adherence to antitrust regulations, Amazon could see a surge in partnerships and third-party sellers on their platform working with them rather than against them.

Amazon’s AWS offering and their base business is focused in technology and data. With the increasing risk and occurrences of cybercrimes, Amazon should invest more into developing their own cybersecurity and methods of protection against cybercrime. This would not only give customers more faith in the safety and security of their online transactions and data that they share with the company, but could leave Amazon with a new subsidiary catered and dedicated to cybersecurity, allowing them to penetrate a new market and be a disruptor.

5.2. Conclusion

Amazon is one of the most famous companies and brands in the world, with their vision and mission being catered and focused around the customer. Throughout history, Amazon has been a disruptor in the industry and over time has invested and developed a business model with subsidiaries that is ever growing and constantly being competitive throughout the respective markets. With multiple business offerings ranging from subscription-based services to cloud computing and advertising, Amazon continues to build on its revenue year on year, and with the use of their Flywheel can continue to improve the company to better serve their customers.

The socioeconomic trends that could affect the business model were investigated and explained, and it could be seen how Amazon has invested and contributed to the US and UK economy through tax contributions, job creations, environmental and climate change, and aiding governments during the COVID-19 pandemic. The knowledge economy was explained and how it applies to Amazon is analysed and investigated, with specific focus on how Amazon utilises knowledge management and the investment of disruptive technologies to maintain a competitive advantage and remain a dominant figure in the industry. Furthermore, macroeconomic dimensions are explored and the effect that Amazon has on those dimensions as well as understanding the shifts experienced from demographic and socioeconomic trends. The key drivers of change that influence Amazon are identified and analysed on the influence that it has on Amazon, or vice versa.

The report identifies the political factors and the roles played by them in the economic growth and development of Amazon, while also investigating and analysing the sharing economy and how Amazon has been affected and introduced themselves to this. Antitrust lawsuits against Amazon are investigated among other legal systems, and an analysis is done on the implications of the lawsuits and the response by Amazon, while subsequently understanding how Amazon is able to adhere to the law while remaining aggressive. Lastly, recommendations are given on how to remain a leader in the industry, while looking at potential ways to lessen the negativity around the antitrust laws, as well as suggestions on potential new subsidiaries.

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