The level of profitability that Amazon enjoys in the ecommerce industry will be determined by systematic sources of competition that exert pressure on all ecommerce firms, making the industry either profitable for incumbents or a nightmare of price competition that leads to weak profit margins. Due to various factors including a winning strategy that has enabled Amazon sustain a competitive advantage over the years, the systematic sources of competition that influence competition and profitability in an industry have had minimal influence on the online retailer. Using Porters five forces, this report examines these sources of competition starting with competition from substitutes, competition from new entrants and competition from established rivals. The report then examines why the influence of buyer and supplier power on Amazon has acted to strengthen the book retailer rather than weaken it.
Amazon Strategy Case Study
Key Learning Outcomes
- Analyse the global online retailing industry and how the five forces have affected Amazon, as well as global rivals and the impact on industry structure, attractiveness, and profitability.
- Understand how Amazon manages to defend against intense competition from major players such e-Bay, Walmart etc, and the strategies it uses to create 'blue oceans' that are defensible, helping it capture and maintain top position.
- Analyse the various strategic business units in Amazon's portfolio and assess which ones are the stars and cash cows generating the most value, or the question marks, and dogs that may need further investment or divesting to achieve a balanced portfolio.
- To apply strategy business models and frameworks such as Porters five forces, BCG matrix etc. to real company cases.
Analyse the internal competitive environment of Amazon and asses the impact of porters five forces on the giant online retailer.
- See also, Amazon Pestel and Swot 2018
Amazon is an American electronic commerce and computing company based in Seattle Washington. Founded in 1994, it is the biggest internet retailer in the world in terms of both revenue and market value. On 4th September, Amazon became only the second company in history to reach a market capitalization of US$1 trillion, the other one being Apple (Bradshaw 2018).
Amazon is known for its vast array of products and services from electronics, books, clothing, and food. The giant retailer operates in a number of sectors including retail, consumer goods, publishing, and media etc. with subsidiaries include; Audible, Whole Foods, Twitch TV, Good Reads, Zappos etc (McQueeney 2017). The internet retailer has had continuous success over the years, dominating the global e-tail industry with its low-cost model that has enabled it to dominate likes of Alibaba, eBay, and Walmart to become the world’s retailer (Statista 2017).
As of 2017, the giant online retailer’s revenue was $178billion, 50% of it coming from electronics and media (Statista 2017). Amazon also commanded 44% of the USA e-commerce market in 2017 with sales representing $200billion in e-commerce revenues or about 4% of total US retail sales (McQueeney 2018).
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