A. Analyze Amazon.com using the competitive forces and value chain models. Five competitive forces shape fate of firm
According to Porter's Five Forces Model, in my opinion, competition has increased overall as a result of the internet and e-Commerce. The internet and IT has made it possible to both focus on the top and bottom lines and market share is expanded and costs are cut. Many products and services exist just online, major companies have gone online to successfully augment the brick and mortar corporations, and the playing field is all the way to edges of cyberspace, wherever that is Traditional competitors
Amazon has strong competitors like online retailing stores and a large number of physical stores(Books, Grocery,Electronics,Video games etc). Examples : Barnes & Noble, Inc., Wal-Mart.com USA, LLC (privately held), Catalog & Mail Order Houses High – As search engines are becoming the first choice for consumers when shopping on-line e.g. Google. This increases the opportunities for other retailers. High – There is an increasing amount of dotcom companies due to the little capital needed to start up. Smaller niche affiliate online stores when combined create even more competition
New market entrants
Threat of new entrants is high when it is easy for new competition to enter the market. As the technology is increasing and facilitating the businesses more and more so it is becoming easier for any business to start online retailing operations. Low – For online established retailers a strong brand image generates consumer trust. Low - Economies of scale – Retailers that have refined technology and processes and are able to buy in bulk can offer the lowest prices. This is a major competitive advantage as there is much choice online. Low - Strong experience in the online retail industry gives e-retailers advantages in terms of cost and customer loyalty. High - Capital requirement entry is a low for online businesses’ as cost of lease premises is minimal.
Substitute products and services
High - Physical stores and touch, feel, hear factors.
High - Renting products online instead of buying them is increasing in popularity. This is a major concern for Amazon in their book sales as online retailers such as Textbookflix.com and BookRenter.com are providing much cheaper options than buying. High – The internet is a “Global Market”, consumers can substitute any product by purchasing from companies overseas where products are cheaper, but of good quality. Low – Catalogue/mail order although not as popular still a substitute to online buying.
High – There is a large variety of online shops and comparison websites to compare best prices.
Buyer power is higher when buyers have more choices. Businesses are forced to add value to their products and services to get loyalty. Many loyalty programs include excellent services that customers demand on-line. Customers want to solve their problems and many times they are more successful on-line than on-phone. Also, we see internet savvy businesses springing up offering more valuable goods and services at lower costs. Now with the advent of eBay, many people are assuming roles as drop shippers. Individuals can have a thriving business selling goods of larger companies without having to carry inventory. Suppliers
Low – For standardized products that are easily available supplier power will be low. High - Specialized products and brands increase switching costs for buyers so the suppliers have higher power. With Amazon products such as the Harry Potter books are exclusive from publisher. High - Online shops making it easier for publishers/ brands to sell directly to consumers without a third party (e.g. Blackwell’s), suppliers may not need Amazon. High – If there is a concentration of suppliers for certain products in the industry rather than fragmented. Low - Global shipping has increased the amount of suppliers available. Value...
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