CONTENTS

Executive summary:................................................................................................................... 3

Overview of Amazon and the Amazon Prime Air: .................................................................... 4

PESTEL Analysis. ..................................................................................................................... 5

Political factors:...................................................................................................................... 5

Economic factors: ................................................................................................................... 5

Social factors: ......................................................................................................................... 6

Technological factors: ............................................................................................................ 6

Legal factors: .......................................................................................................................... 6

Environmental factors: ........................................................................................................... 6

Analysis of three factors of PESTEL which affecting the Amazon prime Air in the UK
market. ....................................................................................................................................... 7

Analysis of Legal factors........................................................................................................ 7

Analysis of Economic factors ................................................................................................ 8

Analysis of Technological factors. ......................................................................................... 9

Recommendation ..................................................................................................................... 10

References ................................................................................................................................ 11
Executive summary:
As 21st century moving forward quickly, there are a lot of innovative things shaping up the
future. Humankind using technology as an easy way through everything. On that path
technology is bringing us new things every day, out of those rapidly taking effect on the world
is now are drones. Now in every industry the usage of drones has become quite common but
the purposes vary. Drones are now replacing man force in industries and slowly replacing them
in logistics. The next big thing targeted with drones are quick deliveries, now the trials are
already conducting by many major companies. Statistics predicting the drones as most
successful devices in the future.

Amazon Prime Air is a delivery system introduce by Amazon as it has recognised the potential
and future of drones usage. Amazon in UK already conducted trials for a long time and came
into conclusion of the idea. While amazon finding its entry to UK with their delivery. It has
also gone through factors that are influencing the market. The usage of drones is already
allowed in military and film industries, now the amazon is carrying out with a commercial
purpose.

However before going into the usage, examining and evaluating the market is very important.
Most of the business organisations follow the PESTEL analysis as an essential way analyse the
impacts on their business through all the elements. Including political, economic, social, legal,
technology and environmental factors. Now Amazon prime Air entering the UK market
Overview of Amazon and the Amazon Prime Air:
Amazon.com, Inc headquartered in Seattle, Washington, US - is well known as a internet-base
company that selling goods from books to households, electronic devices and many other
products through its e-commerce platform. Amazon sells goods either directly to the customers
or playing the middleman role between the third-party retailers and customers. Besides the e-
commerce business, company is also successful as the market leader in the cloud-computing
industry and the manufacturing of e-book reader (Reuters.com, 2018).

Amazon first introduced the concept of the drone delivery in early 2013 as the effort to improve
its shipping services. It is call Amazon Prime Air – a delivery system that utilizes the remote-
control robotic vehicles (drones) to transport goods from company’s warehouses to the
customer’s location (Rouse, 2013). By using drone, the customers who lived within 10 miles
from the company’s fulfilment centre or warehouse would be able to receive the small package
in less than 30 minutes. According to Amazon, because of using electric motors, the drones
will be more environmental-friendly than the traditional delivery trucks (Amazon.com, 2018).
PESTEL Analysis.
This analysis is the framework to analyse the main factors that’s effecting organisation
externally. There are six elements in this framework, those are Political, Economical,
sociological, technological, legal and environmental. This is the most flexible analysis out there
to watch the organisations statistics. When an organisation is expanding their business to new
places, the key factors in the PESTEL analysis helps them to shape their plan conveniently.

Political factors:

Political factors are defined as how the state policies and regulations effect and control the
business. Those are mostly the consumer policy, labour, environment, competition and
copyright acts. As in every country these factors may not have the similar effect. When it comes
to global markets organisations have to adapt and change their policies accordingly, that way
the organisation will have the less impact of those factors in the long run. Any organisation
cannot go against these factors in the local states which is why they mould their business
procedures. The policies in these political factors changes according to time and growth, with
constant change is evitable in here organisations must be flexible to survive the changes.

Economic factors:

Under economic factors comes taxation, growth interest, economic trends, international rates,
global exchange rates, employment costs, inflation and industry growth to consider. Economic
factors will impact the industry’s course. Having an understanding on the effect of economic
factors in business is crucial for company’s goals and its path to reaching them. The exchange
rate and taxation are the factors that has control on importing in business. Organisations must
have a plan and follow up consequently with Industry growth and economic trends.

Social factors:

Social factors include health, population, religion, culture, majority age groups and beliefs.
Same as the other factors, change in social factors is constant. Majorly tastes and fashions are
social factors that’s causing change. The organisations often take advantage of changes in
social factors such as population and culture. Population growth is always a benefit for the
organisation. For organisations having Statistics and information on social factors such as
majority age groups and lifestyle trends is a precaution, so they can always be prepared for the
change and make their business plans favourable to the crowd.

Technological factors:

Technology has grown so much in the last few decades which opened gates to easy business
methods and made things less expensive. As those methods include such as in promotion and
in services. Mainly networking now depends on social media. Nowadays Organisations mostly
rely on social media to promote their brand, out of all the factors technology is most beneficial
to the companies for their global or local business expansion. In any kind of business it has
become such a necessity in transportation, customer service, sales and marketing. Virtual
extent, advertising and physical use of the technology has reduced the cost for business.

Legal factors:

As every country has its own regulations and laws, it’s a requirement for organisations and
firms to follow those local state rules. Organisations consider the impact of legal factors on
their business, sometimes those can be favourable and sometimes they can be detrimental.
Those factors mostly depend on health, employment, safety, taxes, international and domestic
regulations. The companies should always the requirements of those state laws as it should not
affect the local states environment and safety in any aspect. Therefore, they already get the
image to run the business under those circumstances.

Environmental factors:
Environmental factors are those effecting business externally from legal to political, sometimes
it also refers to ecological factors. This defines the climate change, health, pollution, energy
and resources. It also defines availability of resources, goods and how they affect the business.
Sometimes these factors are not as good for the business as its uncertain all the time. In this
case the organisation which is located in the state must not break any environmental laws by
effecting the climate of the particular state or health of the people.

Analysis of three factors of PESTEL which affecting the Amazon prime Air in the UK
market.
Analysis of Legal factors.

In UK, the operation of drones is controlled by the Civil Aviation Authority (CAA), and all the
regulations emphasized the public safety in the using of drones for either commercial or non-
commercial purposes. According to the laws, the permission from CAA is required for the
commercial operation of drones or flying the drone:

- Within the range of 50 meters from people except for the process of landing and taking
off;
- At the height more than 400 ft above the ground;
- Within 150 meters in congested area (Caa.co.uk, 2018).

Because of the implementing of these laws in UK, it would be difficult for the commercial
operation of drones as the delivery solution, because it is inevitable for drones to fly over the
city or any resident congested area during the shipping process.

Moreover, CAA requires the operators of drones to keep their devices within the visual line of
sight at all times, which means that the drones are not allowed to fly further than 500 meters
horizontally and 400 ft vertically from the operators without specific permits (Caa.co.uk,
2018). This requirement restricts the advantage of using drones as reducing manpower since
every drone need at least one person during the operation. Furthermore, the using the drone is
also limited since they may not be used during night time or in bad weather causing the
reduction of vision range. Those legal difficulty in operating commercial drone eventually will
affect the service cost of Prime Air. Amazon declare that 85 percent of its items can be
delivered by drones, most of them are low price items, so it would be not efficiency for
customers to pay addition fee for the Prime Air services.
Therefore, to launch the Prime Air in UK, Amazon have to work with the UK’s authority to
prove the safety of Prime Air and get the commercial use certificate. Currently, the drone laws
in UK are being changed to facilitate the drone delivery services as soon as the year 2019
(Keach, 2018). Hence, it would be much straightforward for Amazon to launch Prime Air in
UK in the coming time.

Analysis of Economic factors

Nowadays, enterprises are struggling to be more competitive. The most popular approach for
firms in 21st century is to take advantage of the technology development to reduce cost and
enhance the satisfaction of customers. Regarding the development of drone technology
recently, apart from the military purpose, one of the most potential application for this
technology is in the e-commerce logistic and shipping. In fact, the booming of e-commerce has
impact significantly to the using of drone delivery.

Figure 1. Online retail sales in UK from 2012 to 2017

Source: Statista.com, 2018.

The UK E-commerce market has been growing quickly and steadily since 2012. The total value
of online sales in 2017 is 67.38 billion GBP, double the value in 2012 with 33.24 billion GBP
(statista.com, 2018). The data in the year 2016 shows that share of online buyers was at 77
percent in the UK. Moreover, online retail sales contribute up to 15.2 percent of total UK retail
sales as of January 2017 (statista.com, 2018). The rapid expansion of e-commerce in UK results
in the high level of competition. In this case, utilizing drone delivery would be a good approach
for e-commerce firms in UK such as Amazon, Domino, UPS to gain the competitive
advantages and satisfy the customers.

Figure 2. UK Gross Minimum Hourly wage from 2008 to 2018

Source: Tradingeconomics.com, 2018

Another motivation for e-commerce and logistic firm to consider using drones in delivery is to
reduce the operation cost by saving manpower. The Figure 2 shows that the minimum hourly
wage in UK has increased continuously and rapidly from 5.73 GBP/hour in 2008 to 7.83
GBP/hour in 2018. Therefore, using drones would be much efficient than the traditional
delivery in terms of cost saving, especially in long-term.

Analysis of Technological factors.

UK is a developed country with the advancement in technological infrastructure. This is one

of the most important conditions to facilitate the commercial drone delivery. In fact, the
operation of drones requires the combination of a lot of high technology components, including
sensors, engines, battery, etc. Moreover, the internet speed also play important role in the
operation of drones since drones are remote-controlled. UK is the forth-best country in terms
of communication technology in the worlds in 2015 (Bolton, 2015).

Figure 3. The countries with best communication technology

Source: Independent.co.uk, 2015

Another factor that significantly important for drone delivery in particular and e-commerce in
general is the electronic payment system. According to Christie (2017), UK is the third most
cashless society in the world, behind Canada and Sweden.

Generally, the technological infrastructure condition in UK is highly suitable and could boost
the drone delivery. In this market, Amazon can save a lot of costs for the investment in facility
and infrastructure to launch its Prime Air service.

Recommendation
UK is a potential market for the application of drone delivery. The economic and technological
condition in this country is highly suitable for this type of logistic, especially for the large e-
commerce firms such as Amazon. The legal factors in UK is currently an obstacle for launching
commercial drones as limiting the range of use and requiring the visual control. However, in
the near future, the drone delivery service will be highly possible as the UK government has
been revising the laws and will allow the operation of operation drones in 2019.

For Amazon, in order to provide the Prime Air to British customers, they need to continue
invest, conduct service test in UK. The ultimate purpose is to prove the safety of drone delivery
to the authority as well as getting the certificate for commercial operation of drones.
References
Amazon.com. (2018). Amazone Prime Air. [online] Available at:
https://www.amazon.com/Amazon-Prime-Air/b?ie=UTF8&node=8037720011 [Accessed 18
Oct. 2018].

Bolton, D. (2015). UK is the fourth most technologically advanced country in the world.
[online] Independent.co.uk. Available at: https://www.independent.co.uk/life-style/gadgets-
and-tech/news/the-uk-is-the-fourth-most-technologically-advanced-country-in-the-world-
a6757196.html [Accessed 18 Oct. 2018].

caa.co.uk. (2018). Permissions and exemptions for commercial work involving small drones.
[online] Available at: https://www.caa.co.uk/Commercial-industry/Aircraft/Unmanned-
aircraft/Small-drones/Permissions-and-exemptions-for-commercial-work-involving-small-
drones/ [Accessed 18 Oct. 2018].

Christie, S. (2017). The 10 most cashless countries in the world - where does the UK rank?.
[online] telegraph.co.uk. Available at: https://www.telegraph.co.uk/money/future-of-
money/10-cashless-countries-world-does-uk-rank/ [Accessed 18 Oct. 2018].

Reuters.com. (2018). Amazon.com Inc (AMZN.O). [online] Available at:

https://www.reuters.com/finance/stocks/company-profile/AMZN.O [Accessed 18 Oct. 2018].

Rouse, M. (2013). Amazon Prime Air drone. [online] internetofthingsagenda.techtarget.com.

Available at: https://internetofthingsagenda.techtarget.com/definition/Amazon-Prime-Air-
drone [Accessed 18 Oct. 2018].

Statista.com. (2018). Value of online retail sales in the United Kingdom (UK) from 2012 to
2017 (in billion GBP). [online] Available at:
https://www.statista.com/statistics/315506/online-retail-sales-in-the-united-kingdom/
[Accessed 18 Oct. 2018].

Tradingeconomics.com. (2018). United Kingdom Gross Minimum Hourly Wage. [online]

Available at: https://tradingeconomics.com/united-kingdom/minimum-wages [Accessed 18
Oct. 2018].