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Porter's Five Forces

Porter's five forces framework assesses the competitiveness of a business environment. It was developed by Michael Porter in 1979. The document then discusses each of Porter's five forces as they apply to Amazon: 1) bargaining power of suppliers is high since Amazon has many global suppliers but suppliers see Amazon as important; 2) bargaining power of buyers is high as Amazon has many customers worldwide and works to satisfy customers; 3) threat of new entrants is low given Amazon's size and reputation; 4) threat of substitutes is high since there are many alternative online retailers; 5) competitive rivalry is high as Amazon competes directly with companies like Barnes & Noble, eBay, and more recently Google.

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256 views3 pages

Porter's Five Forces

Porter's five forces framework assesses the competitiveness of a business environment. It was developed by Michael Porter in 1979. The document then discusses each of Porter's five forces as they apply to Amazon: 1) bargaining power of suppliers is high since Amazon has many global suppliers but suppliers see Amazon as important; 2) bargaining power of buyers is high as Amazon has many customers worldwide and works to satisfy customers; 3) threat of new entrants is low given Amazon's size and reputation; 4) threat of substitutes is high since there are many alternative online retailers; 5) competitive rivalry is high as Amazon competes directly with companies like Barnes & Noble, eBay, and more recently Google.

Uploaded by

DEVINA GURRIAH
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Porter’s Five Forces

Porter’s five forces were developed in 1979 by Michel. E. Porter of Harvard Business
School as a framework for assessing and evaluating the competitive strength and
position of a business organisation.

Amazon is an online retail company based in America which was founded in 1994. The
company started off by selling book. The company expanded by proposing several other
items to its customers. It even produces its own good now.

Bargaining power of supplier

 Supplier has high power


 Amazon has numerous suppliers across the globe
 Amazon providers of books, audio and technology do not charge their product
until the latter sell them. (It is a strategy used by big companies)
 Suppliers consider Amazon as an important and prestigious company. Hence, the
commitment with Amazon is clearly noticeable and essential

Bargaining power of buyer

 Buyer has high power


 Amazon has panoply of customers from across the world
 It offers wide variety of products in different categories
 Demand is high because of e-marketing era which is at its boom
 Amazon has very little overhead cost because it does not operate retail stores
(Low price)
 It is a customer centric company, over the years it has diligently provided new
customer service tactics so that customer is satisfied and does not make
purchase elsewhere
Threats of new entrance

 Low threats
 Easy for individual to enter
 Cannot compete with Amazon.com a giant company
 Massive reputation, loyal customers
 High cost involved in the equipment and technology use
 Amazon strategically buys off companies Example: Online shoes stores for $1.2
billion Zappos. Com and rare book seller Shelfari

Threats for new substitute

 High number of substitute


 High customer service by Amazon which others cannot- good quality sold by
Amazon

Competitive rivalry

 High rivalry Example: Direct competitors such as Internal Retail Websites;


Barnes and Noble.com; Ebay
 Amazon auctions and Zshops compete with other auctions companies like Ebay;
Ubid.com and Yahoo etc….
 Amazon’s Ag search engine compete with other search engine such as Google;
yahoo and Ask.com
 Amazon MP3 compete with Apple’s iTunes
 Lately the new form of competition arose with Google when the company
announced their aim to compete head to head to Amazon’s web services with
latest service offering, Google App Engine

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