CS4264 E-Commerce: B2C Applications |
Assignment 1: Amazon.com|
Rachel Lin Peishi (U078952B)|
Five Forces Analysis
1. Threat of New Entrants
Threat of new entrants is low: The online books retailing industry has a high entry barrier. Newcomers will need high capital which includes website development costs, distribution channels establishment costs, branding costs and etc to startup. As such, the threat of new entrants is low.
2. Bargaining Power of Suppliers
BP of suppliers is high: Although there are about 85,000 book publishers in America, there are only a few dominant publishers in the industry. Based on the website bookstatictics.com (Poynter, 2004), there are only 6 large publishers in New York and the rest are the small or medium-sized publishers. This means that the book supplying industry is considered quite concentrated and hence, suppliers have high bargaining power.
3. Bargaining Power of Customers
BP of customers is high: Generally customers are price sensitive, especially when it comes to normal products such as books. It is very easy for customers to find alternate sources to purchase books, which are cheaper, either through online or offline bookstores. In this case, the switching cost for consumers is low and hence, customers have high bargaining power.
4. Competitive Rivalry between Existing Players
Rivalry is high: The rival intensity in the online books retailing market is high because there are a large number of online bookstores such as Barnes and Nobles, AbeBooks.com, alibris.com and etc, selling the same products – books. They compete with each others for the same source of customers. Although they are not as well established as Amazon.com at that period, it is possible that they will gain market share through marketing means and price wars.
5. Threat of Substitutes
Threat of substitutes is low: The current trend is to provide convenience for customers so that they can purchase...