Porter’s Five Forces analysis is used to assess the attractiveness of different industries, and therefore, it can help in illustrating the sources of competition in a particular industry.
The competitive rivalry amongst the e-retailing industry is intense. From some of the largest to the smallest companies, dotcom businesses are making competition intense. Amazon.com competes directly with big firms such as Ebay. The threat of new entrants that are able to compete directly with Amazon.com is low. The strong brand image of Amazon.com should be an advantage in any price wars.
Political. Government invests money in IT Infrastructure. In consequence, more people can have Internet, which means an increase in users. Faster and better Internet access for users.
Economic. In UK high interest rate slow consumer spending, but situation is different in China due to high economic growth that brought and idea enter Chinese market. More potential customers for Amazon.com
Social. Increase in online social networking, which can give an advantage of this new channel. Some people are still afraid of shopping online which needs to be overcome in order to increase users.
Technological. There is an increase in broadcasting, information and telecommunications technologies for Internet access. Increased rate of Internet sources usage. Rapid development of ‘high-speed’ network services (e.g. broadband) increases usability of media. Contents are easily made available to online shoppers.
Environmental. Less movements (car trips), more shopping online. Changing business methods and environment to become more “green”, e.g. with postage and packaging, work environment.
Legal. No common regulations governing e-commerce covering all the countries. Be aware of both the domestic and international laws. Removes legal obstacles and provides a more secure and transparent legal environment.
Summary of PESTEL
PEST progress indicates an increasing and attractive market to be exploited by Amazon. The Chinese and Indian markets have shown exceptional growth. The use of Internet as a social networking channel has created new opportunities to be exploited. Additionally, as environmental awareness increases globally it is important that Amazon.com’s strategy support environmentally friendly activities.
The value chain analysis undertaken examines the operational effectiveness of activities that enable Amazon.com to perform better than its competitors; i.e. the distinctive value chain activities that are difficult to imitate. Using the framework proposed this analysis focuses on ‘value creation’ and ‘transaction cost economies’; where Amazon.com configures its value chain activities to create unique value for customers, reduce its costs of carrying out these activities and reduce the cost of its customers’ transactions.
Resources and Core Competencies
The resource-based view of a firm suggests that the sustainable competitive advantage and superior performance of an organization are determined by its distinct capabilities i.e. resources and competences. Therefore, in order for Amazon.com to develop, implement and sustain effective strategies, the capabilities of the organization need to be exploited.
Reliable Web Infrastructure
Management and maintenance of infrastructure. Use of recyclable cardboard for packaging. Use of economies of scale. Consistency of service. Tangible:
Amazon.com has the largest and most sophisticated collection of online retailing technologies available. Intangible:
Centrally managed web services Between 1995 to 2008 Amazon.com has released over...