Amazon's Five Forces

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-1Successful examples such as Amazon.com and Dell have significant implications to the potentials for e-Retail businesses to take over the market shares of their traditional retailing competitors. This phenomenon can be explained using Porter’s five forces:

Supplier Power- In the case of Amazon.com, like its retailing competitors, its supplier companies are mainly publishers. Just as many readers, there are thousands of publishers in the world, thus they are not concentrated at all. The 24-hour easily-accessible service of Amazon.com provides a broader range of potential buyers than its retailing competitors, which attracts suppliers more.

Buyer Power
Amazon’s customized and reliable service helps creating loyalty and thus the “lock-in” effects - the customers might consider buying books online more even when they walk pass a bookshop physically, simply because they don’t bother to carry heavy books which are not needed urgent! Compare to those of the conventional retail bookshops, these “lock-in” effects further weaken the already-weaken bargaining power of buyers.

Threats of Substitutes
The impacts of typical Business-to-Consumers (B2C) e-Retail business are mainly regarding to the reforms in distribution channels and value chains. Retailers traditionally take goods from wholesalers and distribute them to consumers. The chain model is being challenged by the Internet’s distance-shortening power, where wholesalers and even manufacturers can now distribute their goods to consumers easily and directly. The B2C model imposes a new type of substitutes which was unforeseeable for conventional retailers in the old days, resulting in making them become less attractive.

Barriers to entry
Many people are threatened to enter the game. This is because e-Retail businesses such as Amazon.com have high entry barriers, which include the expensive setup (or switching) and maintenance costs of equipments and expertise; compliance of government regulations on data...
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