A Comprehensive Study of Challenges Faced by Amazon Business in a Competitive Landscape

Risks Faced by Amazon Business

Amazon just like any other business in the world face various challenges and risks making it feel the entrepreneurial heat diseconomies of scale. In terms of revenue and market capitalization, Amazon has developed to become one of the leading businesses in the world. However, a variety of unusual threats occur with these fantastic measurements (Wadhwa et al., 2020). The greatest risk of investment is the increased productivity, future earnings fluctuations, uncertainty regarding sales, market valuing and share-price instability in Amazon.com, Inc. (NASDAQ: AMZN). Indeed, since its public release in 1997, Amazon has posted strong sales growth which makes investors positive about future results. Investors have also overlooked the inability of the organization to produce sustainable net profit from this development. If these optimistic hopes are not satisfied, Amazon's stock will definitely be diminished by a poor market result. This betting increases the risk by rendering the stock price of Amazon extremely unpredictable and exposing customers to market volatility excessively. Precisely, competition and profit uncertainty are the two major risks and challenges that face Amazon's international company.

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Competition

Competition is Amazon's most significant operating challenge. The product department is incredibly dynamic and involves strong rivals such as Wal-Mart Outlets, Inc., Costco Wholesale, and Target Company. As physical showrooms and categorization experts have been gaining momentum from niche stores including Staples, Inc., Best Buy Co., Inc., Home Depot Inc. and Bath & Beyond, Inc. Both these big retailers have made substantial investments in online purchases in response to the changing desires of the customer. The creation of well-established shopping websites is disrupting the dominance of Amazon in the market. However, these advances appear to be a clear danger, as Amazon still owns more than 40% of the increasingly competitive online shopping market in 2019. The rapid growth of Amazon has forced other retailers to build plans designed particularly to counteract the impact of the online giant. Staples and Best Buy also offer discounts and offers that directly equal the rates and discounts of Amazon and surpass them3 4. Aggressive pricing not only eliminates the market dominance for Amazon, it also lowers market players' general profits. Shop Runner provides the Amazon Prime option and several retailers have collaborated with the distribution service the economic turf of Amazon is causing the buying power and volumes to be reduced. Services of this nature.

Amazon Web Services was introduced in 2006 as a cloud network that produced 12 percent of overall sales in 2019, the organization has a significant business diversification and a new growth segment for the future. In 2006, Amazon Web Services was introduced. Cloud computing as a service is a market in which strong pricing provides the most competitive competition and many of the biggest technology corporations have developed themselves in space. Hewlett-Packard Group, Google, Inc., AT&T, Inc., IBM & Microsoft Corporation are among Amazon’s biggest cloud storage rivals (Semprini, 2017). These rivals each build a different niche on the broader market and, as a provider or a loss leader, some also sell their infrastructure.

Profit Uncertainty

In early to mid-2010, with net losses in FY 2012 and FY 2014.89, Amazon had very slim profit margins and did not maintain net profits. Prior to 2019, the highest net profit margin recorded for the whole year was 3.7%, which had been achieved in 2009. Amazon’s management commits to improving the facilities and rising spending in research and growth, resulting in high running costs (Terman et al., 2020). Competitive prices guarantee that Amazon’s harsh margins remain merely a limited set of moderate values. For 2019, the gross margin for Amazon hit a high average of just over 4%. Investors are secure with eschewing income for potential growth, but strange analysts remain suspicious about the market capacity of the company to produce the required sales in order to support the continued development expenditures. For some buyers, these fears are supported by previous ventures by Amazon in unfinished initiatives such as an aborted smartphone industry venture. Amazon must return to growth as an enticing investment opportunity to quickly expand in the face of a more and more dynamic market. For the bull thesis, this is a big challenge.

The risk of profit uncertainty is caused mainly due to the slow growth rate of the company. Over the past decade, Amazon has posted high growth rates, with annualized sales growth rates never below 20% and often above 40%. This has fueled the optimistic mood of buyers and positive analyst forecasts. However, the annual rise decreased over the 2010s, with Amazon's twelve-month sales expiry from September 30, 2019, reporting an improvement of 20.14 percent year after year 12. If the simple amount grows per year, exponential growth is normally hard to maintain, which means that nominal improvement is needed in order to contribute to continuous growth.

Sales growth rates are also influenced by intensifying market competition in both retail and online services. Electronic commerce still accounts for just around double the percentage of the overall retail market, despite a major move into online distribution channels. This could mean a natural limit for businesses without locations for bricks and mortars which impairs the capacity of Amazon. The whole bull story for Amazon is based on the premise that the business will continue to expand exponentially. If the increase in sales is too sluggish, investments that have caused high overhead costs would be inefficient. If sales and profits in the future do not demonstrate continued fast growth rates, the valuation by Amazon would prove unjustifiable. The danger that investors should track is a slowdown in income growth.

Recommendations on Curbing the Risks of Competition and Uncertainties

Risk prevention is more about risk avoidance in many enterprises; the rationale is that avoiding costly ventures is the only way to reduce risks. Conditions for each company today are rising with increasing rivalry and facing competitive risk, which may prove critical to evaluating the fate of a business. It is not only to wait before the warning bells go off to handle this danger but also to be ready to tackle the ensuing situations (Cusumano, Gawer, Yoffie, 2019). It also requires being sufficiently involved to turn a chance into a lucky break. Build a squad. Establish a squad. Choose from any of the division's main people — risk management, communications, training, banking, IT, and legal. Invite the vendors and specialist experts. Develop an advisory committee for competitive risk that aims to help the organization appreciate the nature of its competitive risks.

Identify the rivals of your company. Locate in the same category as other firms. Collect information about their goods and their prospects from public domain records. Review the fields and the money they have spent on their studies. Assess if the business share will be threatened by these rivals. Concentrate on clients. Create feedback systems to match up the preferences of consumers. Before you plan to create a new product, check if it suits the needs of customers. See the customer who is going to buy the product from the eyes. To guarantee that consumers choose your offering over that of their rivals, decide what you need to add. Keep technical advancement and consumer satisfaction in check. Besides, there is a dire need to track the trends of the business. Look for risks that can contribute to market opportunities. The more successful the company is in most situations, the greater the harm.

Reference List

Canter, H.D. and Gomez, T.J., 2017. Amazon business and GSA Advantage: a comparative analysis. Naval Postgraduate School Monterey United States. https://calhoun.nps.edu/handle/10945/56880

Cusumano, M.A., Gawer, A. and Yoffie, D.B., 2019. The business of platforms: Strategy in the age of digital competition, innovation, and power. New York: Harper Business.

Semprini, P., 2017. Amazon (Doctoral dissertation).

Terman, J.N., Feiock, R.C. and Youm, J., 2020. When collaboration is risky business: The influence of collaboration risks on formal and informal collaboration. The American Review of Public Administration, 50(1), pp.33-44. https://journals.sagepub.com/doi/abs/10.1177/0275074019867421

Wadhwa, B., Vashisht, A. and Phutela, N., 2020. Business model of amazon India-A case study. South Asian Journal of Marketing & Management Research, 10(1), pp.32-40. https://scholar.google.com/citations?user=j3lnz5oAAAAJ&hl=en