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Amazon EFE Matrix
Table 1 External Factors Evaluation Matrix
|Key External Factors||Weights||Rating||Weighted Scores|
|0.0 to 1.0||1 to 4||Weights x Rating|
|An increasing number of buyers over the internet||0.2||3||0.4|
|Positive dynamics of electronic bookselling business and market||0.04||2||0.16|
|An increasing number of internet users on a worldwide scale||0.15||3||0.3|
|E-commerce activities in Asia and the Pacific region||0.06||2||0.24|
|An increasing number of product categories||0.2||4||0.6|
|An increasing number of competitors and copycat sites||0.2||3||0.6|
|Lack of innovations in finding new revenue streams||0.07||2||0.14|
Business success can be divided into two major categories: occasional and sustainable. The first category includes all successful beginnings in various markets that lead to temporary success and then to decay. A young, ambitious company has a brilliant, competitive idea that can be implemented in form of a product/service, for example. They produce this product/service, reach success, and then have no clear vision of what should be done next.
Such lack of development strategy is the consequence case time was not spent on the development of sustainable marketing strategy. Eventually, such companies disappear from the markets. The second category of success is initially built on the right foundation, so the sustainability of the successful development is not a surprise for the company’s top managers. This is the difference between a quick but temporary success without a particular strategy and evolutional development, according to the appropriate marketing strategy.
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External influences can be explained rather simply, as they were described before. Every company operates in the business-interconnected medium. Logically, the situation in the market, the successes, or failures of the competitors, and a vast variety of other reasons influence any company in various ways. The influence of the external factors cannot be controlled directly, so they can be called Opportunities and Threats, as SWOT analysis defines them (Ferrell and Hartline).
Opportunities and Threats
There are no ways to influence the competitors directly to gain an advantageous position in the targeted market segment. The only possible thing to do is to evaluate the current competitors’ positions and assess their strong and weak sides. Thus, the company with good analysts on board will get an opportunity to use such weaknesses of competitors, such as the problems with the product quality or lack of appropriate service, as an advantage to gain a bigger share in the market (Ferrell and Hartline).
However, it is very important to recognize potential threats and be ready to deal with those. Threats can vary from new improved or revolutionary products offered by competitors to the falling demand for their products due to the economic situation in the country, for example. Only timely and adequate reaction to the threats and weaknesses and a prospective vision of opportunities and strengths can make success possible for any company, in any targeted segment of the market (Ferrell and Hartline). The EFE matrix presents the current situation of Amazon inc. in terms of opportunities and threats the company faces.
Thus, the opportunities are as follows: an increasing number of buyers over the internet; positive dynamics of electronic bookselling business and market; an increasing number of internet users worldwide; E-commerce activities in Asia and the Pacific region; an increasing number of product categories. These opportunities influence company’s present and future considering the response of Amazon.com to each of them (Kalogeropoulos; Qineqt).
An increasing number of buyers over the internet is one of the most influential opportunities due to the extensive and steady impact on sales it has. Sales over the internet have become a common thing over the past decade, therefore, more and more people entrust their money to internet-based companies through electronic payments. The generation of baby boomers in the developed countries is being gradually replaced with new progressive people that see nothing wrong in buying products over the internet (Kalogeropoulos; Qineqt). Therefore, it is one of the opportunities Amazon.com should count on in the next decade because the number the internet users will only increase.
The positive dynamics of the electronic bookselling business and market is another modern trend that can provide Amazon.com with additional sales. Paper books are not that popular anymore among the masses due to the invention of more convenient electronic books that can contain hundreds and thousands of books on one device. People, however, began paying more attention to books when the attractiveness of the internet and TV-based entertainment decreased. In other words, people started to read more, therefore, the market for electronic books increased (Kalogeropoulos; Qineqt). Amazon.com and its Kindle brand are the major players in the targeted market, so the growth of the market means increased revenue opportunities.
An increasing number of internet users on a worldwide scale may seem similar to the increasing number of buyers over the internet. However, these terms are different and refer to different trends. The number of users and buyers over the internet is very different – the first category still outnumbers the second. Internet access and electronic means providing it become more and more affordable across the world. Therefore, more and more people become internet users every day – these users are potential buyers. It is one of the opportunities for Amazon.com to increase its market share in different markets worldwide, providing reliable and trustworthy services (Kalogeropoulos; Qineqt).
E-commerce activities in Asia and the Pacific region are among the most promising opportunities for Amazon.com due to the size of the Asian market. The Pacific market is more advanced, but it does not have as many potential customers as the Asian has. China is one of the largest markets for any company, so the increasing activity of e-commerce companies gives hope for Amazon.com to get access to more than one billion potential clients (Kalogeropoulos; Qineqt). This opportunity is controversial because local markets in these regions are rather strong and many local companies are providing similar services. However, competition is not a new word for Amazon.com executives; therefore, it is one of the opportunities.
Finally, the increasing number of product categories is one of the logical opportunities for Amazon.com to gain a larger market share, attract new customers, and provide regular customers with more products. This is the opportunity to provide services to all possible categories of people; the creation of an “ecosystem” for loyal customers would keep them away from leaving Amazon.com (Kalogeropoulos; Qineqt).
Among the threats the most obvious are: an increasing number of competitors and copycat sites; Kindle’s competition; and a lack of innovations in finding new revenue streams (Chan; Qineqt). Increasing the number of competitors and copycat sites' emergence is a natural way of market development. Amazon.com is one of the pioneers of the market and has a reputation as a trustworthy partner, gaining billions of dollars in revenue each year, so it is not possible to imagine the situation that other companies and new ventures would not try to get some of Amazon’s share. The threat is logical and understandable for Amazon.com executives, so the response to it is adequate.
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Kindle’s competition is one of the disturbing threats for Amazon.com because Kindle is one of the bestsellers of the company. Numerous companies are developing and selling e-readers (IREX through Barnes & Noble, for example), so the competition in this market is rather strong (Chan; Qineqt). The competition will escalate in the future because modern technologies made e-readers cheaper to produce and more affordable. This is one of the threats to consider for the Board of directors of Amazon.com.
Finally, the company experiences a lack of innovation in finding new revenue streams. Extensive increases in categories and the development of new versions of Kindle are good and stable directions of revenue generation, but considering the threats, they might become unreliable in the nearest future (Chan; Qineqt). Amazon.com needs to find other sources of revenue generation and the approaches should be innovative, fresh, and undiscovered by the direct competitors and hundreds of copycat websites.
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