Ans: From the traditional bricks and mortar industry, Amazon. com is the first company to evolve “book retailing” by going online on a large-scale. To date, Amazon. com provides an online retail store which constitutes of numerous products across a common platform. The company’s retail website includes established web portals pning across all leading economies as depicted in the case. In revolutionizing the e-commerce industry, Amazon. com is able to leverage information by making use of existing and new technology effectively in order to gain a competitive advantage.
In attaining a competitive advantage, Porter’s five competitive forces can be used to analyze Amazon. com. These forces include threat of new entrants within the market, bargaining power of suppliers, substitution of products and services, bargaining power of buyers and industry competition. The Internet has changed the nature of doing business, so has the competition that surrounds it. By supplying a wide range of products to the consumer, Amazon. com shares a market space with the likes of Wal-Mart and eBay.
Rivalries amongst existing firms are strong as the industry is growing and the products that are being sold to the consumer are not so differentiated. Amazon’s business strategy “to become the best place to buy, find and discover any product or services available online”, has allowed for further competition within online and offline retailers. An example of online retailers would be eBay and offline retailers being Exclusive Books. Since the industry is increasingly attractive, it gives way to new entrants in the market as the Internet facilitates in reducing barriers to entries.
Offline competitors such Wal-Mart which traditionally followed the brick and mortar approach is using technology such as the Internet to increase buyer awareness, capture a wider market of customers to increase its revenue. As the numbers of offline competitors that adapt their business strategy towards becoming online competitors are increasing, they pose a threat to existing online businesses such as Amazon. com by broadening the consumer’s choice of vendors. By broadening the consumer’s choice of vendors, the Internet offers customers an opportunity to compare product prices in the industry across various mediums.
These mediums range from high-street book shops, online web portals such as Kalahari. net and online book databases such as Google books. These factors play an important role as high bargaining power is given to the consumer allowing them to easily switch to a competitor within the industry based on price where there is minimal product differentiation. Amazon. com offers several services such as loyalty discounts thereby making consumer switching to a competitor difficult. There is minimal loyalty to a brand as consumers are provided with numerous options in the industry.
In general, Amazon’s supplier bargaining power is low because the products existing in this industry are sold by numerous online and offline firms. Products such as books, CD’s, DVD’s and electronics provide a lower supplier bargaining power, caused by an existence of many suppliers in the industry. Amazon’s diversified product portfolio range allows them to gain greater control in terms of price, delivery schedule and quality. Bargaining power of suppliers within the retail industry is limited as market dynamics dictate power to the retailers such as Amazon. om who have built the necessary infrastructure and scale required for the online retail industry. Information based industries such as Amazon. com can easily sell products to consumers over the internet which bring upon threats of substitute products or services within the industry. Substitute products or services that are priced lower such as books, DVD’s and reduced online delivery charges can be a threat to Amazon. com as the consumer will be drawn to a lower price.
Amazon’s Value Chain: Primary Activities and Support Activities. Primary activities are those needed to produce a product or services for the end customers. These activities typically include: ?Inbound Logistics: receiving goods from suppliers, and storing and moving those good ?Operations: Manufacturing or assembling the product ?Outbound Logistics: Sending the goods to wholesalers, retailers or directly to the end customer ?Marketing and Sales: Marketing involves understanding customer needs, communicating those needs, and promoting the end products. ?Service: Involves after-sales support (e. g. handling, complaints, installation, training) Support activities help to facilitate or assist the primary activities of producing product. Examples include: ?Procurement: purchasing raw material and other items used in operations ?Human Resource Management: recruiting, hiring, firing, training, developing, compensating ?Technological Development: research and development, process automation, software, hardware, equipment, etc. , to support operations ?Infrastructure: May include accounting, legal, finance, planning, public affairs, government relations, quality assurance and general management.
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