Amazon Case Study
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- Category: Politics: Economics
- Date Submitted: 01/18/2011 04:13 AM
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Strategic Management – Amazon Case Study 2
1- Using the Porter Five Forces framework, identify key stakeholders in the online retailing industry and assess competition’s intensity.
The power of buyers
Amazon sells directly to the final customers. Therefore, it does not face any competition from intermediate firms or have to deal with concentrated buyers who would try to bargain with them. Nonetheless, the buyers are the most important stakeholders of Amazon because its entire strategy is centered on consumer satisfaction. Creating additional value for the final customers is the primary objective. Therefore, the customers not only have a high interest in the company, they also have a significant amount of power over it.
One power factor is that the switching costs for customers are very low for many products sold by Amazon since they can also be found on other online retailing sites and even offline; customers can easily find substitutes for the Amazon products. This is why Amazon is constantly trying to appeal to the customers through innovation and services. For example, if a customer finds a cheaper price for a product elsewhere, Amazon will systematically lower the price for everyone.
The power of suppliers
Amazon depends on its suppliers to offer its products, and its products include basically everything. Amazon has relied on its suppliers’ support to make timely deliveries of the products. However, this doesn’t mean that suppliers have a significant power over Amazon. Indeed, as the example of drugstore.com demonstrates, Amazon will ‘partner with you today, but compete against you tomorrow”. This shows that the cost of switching between suppliers is low for Amazon.
The Competitive Rivalry
There are many competitors but with different revenues so there is not a total equilibrium on the competitor balance. There is a low differentiation rate in the market because there are many competitors, small or big, that sell same...
1- Using the Porter Five Forces framework, identify key stakeholders in the online retailing industry and assess competition’s intensity.
The power of buyers
Amazon sells directly to the final customers. Therefore, it does not face any competition from intermediate firms or have to deal with concentrated buyers who would try to bargain with them. Nonetheless, the buyers are the most important stakeholders of Amazon because its entire strategy is centered on consumer satisfaction. Creating additional value for the final customers is the primary objective. Therefore, the customers not only have a high interest in the company, they also have a significant amount of power over it.
One power factor is that the switching costs for customers are very low for many products sold by Amazon since they can also be found on other online retailing sites and even offline; customers can easily find substitutes for the Amazon products. This is why Amazon is constantly trying to appeal to the customers through innovation and services. For example, if a customer finds a cheaper price for a product elsewhere, Amazon will systematically lower the price for everyone.
The power of suppliers
Amazon depends on its suppliers to offer its products, and its products include basically everything. Amazon has relied on its suppliers’ support to make timely deliveries of the products. However, this doesn’t mean that suppliers have a significant power over Amazon. Indeed, as the example of drugstore.com demonstrates, Amazon will ‘partner with you today, but compete against you tomorrow”. This shows that the cost of switching between suppliers is low for Amazon.
The Competitive Rivalry
There are many competitors but with different revenues so there is not a total equilibrium on the competitor balance. There is a low differentiation rate in the market because there are many competitors, small or big, that sell same...