Alibaba and Wal-MartĬomparing Amazon with two of its key competitors, Alibaba and Wal-Mart, shows that the company shows stable growth. Nevertheless, the threat of new entrants is a weak force due to the increased costs of developing a brand and large economies of scale, which entrants have to achieve to become threatening for Amazon. Amazon also experiences a strong force of threats of substitutions due to the highly competitive market with lower costs for substitutes, their high availability and low switching costs these factors make the company quite vulnerable to the threat of substitution, so it is the priority of the management to create a strategy that would ensure long-term success in the industry with a high number of replacements for companies. On the other end of the spectrum, Amazon’s suppliers’ bargaining power shows a moderate effect since there is a relatively small number of vendors, which are all moderately sized and show moderate forward integration (Greenspan, 2017). Some external factors support the intensity of customers’ bargaining power these include the high quality of information, low switching costs, and the availability of substitutes (all three factors exhibit a strong force). Because the company’s vision is directly linked to establishing a customer-centric business (Greenspan, 2017), customers’ bargaining power plays a large role in how the company operates and whether its revenue increases. A strong force of influence is also seen in the bargaining power of Amazon’s customers. Direct competitors of Amazon include websites such as eBay, Apple, Wal-Mart, Alibaba, Barns & Noble, MediaBay, Priceline, and others (Hoffman, 2015). Regarding competitive rivalry in e-commerce, Amazon experiences a strong force of influence since competition is always fierce with other retailers such as physical bookstores or even electronics retailers. According to the report by Stevens (2016), in 2016, shoppers made 51% of their purchases online compared to 47% in 2014 this shows the tremendous demand for websites such as Amazon and the declining interest in physical stores that do not offer enough convenience and as many products compared to online stores. In the recent decade, the industry of online shopping has shown a dramatic increase in scope. , Inc is a retail trade business (Primary NAICS Code: 454113 – Mail-order Houses) that provides online shopping services and an abundance of products from which customers can choose. However, it is important first to examine the industry in which the company operates to have an idea about the dynamics of its interactions with customers, competitors, and suppliers. When evaluating a company, the application of Porter’s Five Forces can be an effective method for identifying what conditions influence or do not influence the company’s operation. Therefore, it is not a surprise that Amazon invests a lot of time, effort, and funds into developing a website to serve prospective customers’ needs. When it comes to the sphere of the company’s operation, the creation of a convenient and user-friendly website is a primary objective since customers are expecting to get accurate search results, reliable customer services, true fulfillment, and an accurate system of transactions. With the increased demand for online shopping services, Amazon began investing in developing a website that would keep up with the increasing traffic and serve all customers effectively. Furthermore, by 2012, Amazon employed up to 56,300 workers in different countries (Hoffman, 2015). As Amazon was the longest river on the planet and was a natural phenomenon, Jeff Bezos wanted his brand to be associated with the worldwide phenomenon of the largest online marketplace.īy the year 2008, Amazon reached a global brand status with websites operating in the largest countries in the world (Canada, US, UK, Germany, France, Japan, and China). The name “Amazon” was mostly connected with the principal objective of the company’s management. The key financial objective of the organization was to reach long-term sustainable growth to achieve this, Amazon integrated and maintained a lean culture that predominantly focused on widening the operational income while managing operational costs.
Later, it extended its product offerings to cater to the needs of diverse customers around the globe.
Established in 1994 by Jeff Bezos, Amazon quickly became the world’s most popular and successful online bookstore.