Introduction
Many businesses tend to falter or slow down during crises and pandemics. However, Amazon was one of the few companies that registered staggering growth during the COVID-19 pandemic. However, Russia invaded Ukraine in 2022, which has reversed Amazon’s growth prospects. The rationale for selecting Amazon to explore corporate resilience is that the company appeared to grow stronger during a global pandemic.
However, the onset of another crisis shows the company’s inability to cope with economic shocks, especially inflationary pressure. However, it appears the government has failed to manage the current crisis better than it did with COVID-19. The shifting trends raise questions regarding which crises are survivable by large tech companies.
Problem Statement and Situation Analysis
Amazon’s prospects for post-COVID business indicated sustained growth driven by increased online spending. However, Amazon currently faces new economic problems that are reversing the trend. In addition to declining profits, the company’s stock sales are down 49% over the past year (Mattioli and Toonkel). The company must find answers to the situation and halt the rapid downfall.
Amazon’s leadership has identified the root causes of the problem, including declining digital spending caused by a shift in consumer behavior. The current global economic situation causes inflationary pressure, which lowers overall consumer purchasing power. The war in Ukraine increases economic uncertainties since countries have not recovered or shown positive prospects of recovery from economic shocks caused by the war. Unionization issues present another economic challenge that contributes to the company’s financial problems. The main response by Amazon has been massive layoffs, which started in 2022 and will continue in 2023.
Competitive Situation
Amazon remains one of the most competitive e-commerce brands globally, aided by a strong brand reputation, market leadership, and a huge capital base. However, online retailers are rising, making the competition stiffer. Despite the company’s brand reputation, issues with customer loyalty make it difficult for the company to retain customers. For example, online purchasing had increased during COVID-19, but the trend has reversed, causing the company’s sales to decline.
The declining trend is not uniform across all business units within the company. Amazon Web Services is broadening its reach and recording significant growth (Kohan). Such an observation illustrates that the company has feasible opportunities to be exploited. Table 1 below shows a summary of Amazon’s competitive situation using a SWOT model:
Table 1: Amazon’s SWOT analysis
Strategic Alternatives
Leveraging Cloud Computing (AWS)
Despite the financial shortcomings faced by Amazon, AWS was a shining star in the past year. AWS sales in the first quarter of 2022 were up 37% on top of the 32% growth recorded in 2021 (Kohan). While the growth is still significant in 2023, the economic shocks have slowed the growth rate as companies seek to cut costs (Zaveri).
However, cloud computing remains one of the most effective ways of achieving cost efficiencies. Similar to how COVID-19 pushed more customers to online purchases, current economic shocks can push companies to adopt more inexpensive cloud computing solutions. Amazon can leverage such trends to revive AWS sales growth and offset financial losses elsewhere.
Layoffs in Non-Core Business Areas
Amazon is a large corporation with a massive workforce, making it a major cost center. In 2022 and 2023, the company has initiated efforts to cut costs across unprofitable units. The main strategy so far has been laying off workers. The devices unit, which includes Alexa, has been operating at a loss, reaching $5 billion annually (Mattioli and Toonkel).
The company can push such layoffs further to all business units with operating losses or those underperforming their expectations. For example, suppose the economic shocks cause a shift in purchase patterns. In that case, the company can lay off workers in those departments to prevent further financial losses or to stabilize the business units.
Cost Efficiencies
The last strategic alternative involves cost efficiencies, which can be achieved through cost reduction mechanisms. For example, remote working grew in significance during COVID-19 as a strategy to allow operations to continue. Today, remote working can be a cost-cutting approach to reduce operating expenses at companies’ facilities. Reducing operations in non-profitable units is another effective strategy for achieving cost efficiencies.
Conclusion
New growth opportunities could be Amazon’s best recommendation. The company is innovative and has the financial capital to invest in new opportunities. Besides innovations, globalization opens up new markets with massive economic potential. Expanding performing business units to increase revenue generation is also highly recommended. For example, companies seeking to cut costs in IT infrastructure can become potential targets for AWS as they embrace the idea of sharing resources.
Works Cited
Kohan, Shelley. “Amazon Loses $3.8 Billion In Profits But Andy Jassy Is Not Concerned.” Web.
Mattioli, Dana and Jessica Toonkel. “Amazon Layoffs to Hit Over 18,000 Workers, the Most in Recent Tech Wave.” 2023. The Wall Street Journal. Web.
Zaveri, Paayal. “Amazon’s AWS Just Notched Its Slowest Growth in Years. It Expects Customers to Tighten Their Belts Even More.” 2023. Business Insider. Web.