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Industry Analysis of Amazon

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Select a company with a significant e-commerce strategy. Using the Porter five forces model, describe some of the current dynamics in the firm's industry which are creating either strategic opportunities or strategic threats to existing business models.

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Guidance on Porter's Five Forces model - Amazon
Amazon.com
Amazon.com is the leading American company in online retailing space offering wide range of product offerings and attractive easy to use online shopping website selling
Porter's Five Forces Model
Inter-segment Rivalry/competition
Amazon is the leading U.S online retailer with a 23% market share more than its 12 major competitors including Walmart and Staples (Bowman, 2015: Jan. 15). The market is highly concentrated with the domination of Amazon in terms of online e-commerce revenues as the company earned revenues of U.S $ 78.9 million followed by Apple which was a distant second with earnings of U.S. $20.62 billion followed by Walmart which earned revenues of U.S. $12.14 million (Statista, 2015: n.d). One set of competitors for Amazon are the brick and mortar retailers who are also having e-commerce through their web portals. Another set of competitors for the company are online retailers such as e-bay which is a popular auction site and is a challenger to Amazon and had 19% market share of the global e-commerce market (Gregoire, 2014: Oct. 21). There is a strong price competition with Amazon and e-bay having similar pricing strategies although the website features are different as Amazon's Buy Box that and e-Bay's auction feature (Gregoire, 2014: Oct. 21). There is a stronger product differentiation and competitive pricing strategies in the industry. This is leading to a stronger competition. Due to low switching costs among competitors, the rivalry becomes more intensive.

Threat of New Entrants
Jet.com is a new entrant in the U.S online retail market and is offering competitive prices and can be a stronger threat to Amazon (King, 2015: July 22). The brand loyalty towards Amazon is very strong with a high consumer engagement score of 93% in a research conducted brand keys in 2014 which means that consumers have a strong trust in the brand and are willing to go for repeat purchases towards Amazon brand (Dunn, 2014: June 11). This brand loyalty is acting as a barrier to the new entrant willing to enter the U.S market. Along with this, there are stronger economies of scale enjoyed by Amazon and e-bay as these companies are selling products in large volumes (Gregoire, 2014: Oct. 21) and therefore, the per units costs are lower with an option wherein the sellers can offer lower price than those quoted by them (Souza, 2013: Oct. 28). This can also act as a barrier to the new entrants in the market. Analysis of the new entrant Jet.com reveals that the household and boxed goods are cheaper at this new entrant's website as compared to Amazon but electronic products are more economical at Amazon (King, 2015: July 22). This means that in such durable products, Amazon has a stronger low cost supply chain and new entrant may face difficulties although the new entrant may bring in some categories such as grocery and other household goods at lower price to compete with Amazon and e-Bay. There are other new entrants in the form of Chinese companies Alibaba and Jingdong which will pose strong competition in the form of aggressive pricing strategies
Bargaining Power of Suppliers
As Amazon is an online ...

Solution Summary

The solution provide guidance on conducting industry analysis of Amazon using Porters Five Forces Mode.

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