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Amazon Case: Strategic Management

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CASE STUDY 2 : AMAZON.COM |

1. By using Porter’s 5 forces’ framework, describe the forces that affect the core initial market of amazon (the online retailing industry) (5 points).

Threat of new entrants: MEDIUM TO LOW

* Creating a website is cheap, unskilled or old people can set up a little retail business shops fairly easily but E-Retail is a difficult-to-master business. Moreover, since the “technology bubble” burst two years ago, many people are threatened to enter the game. * BUT cost to establish an online retail outlet is high: * Start up capital with long term investors * Maintenance cost of equipment and expertise * Compliance of government regulations on data protection and privacy * The possible use of patents and proprietary resources * Marketing and advertising cost * Technology cost R&D * Distribution cost * By the way, Internet has shown to us that a simple idea well developed can offer extraordinary results, examples such as Facebook.com, Plentyoffish.com, Youtube.com and so forth, these companies have developed their web sites in a short period of time with incredible final results. This can be the proof that a threat of new entries into the market is possible.

Threat of substitutes: MEDIUM RISK

* The way how e-Retail business works today creates a lot of substitute threats to conventional retailing players. Amazon.com itself started as a substitute of conventional bookstore – it provides other means and sources for the same products, services, or information as its retailing competitors provide. The impacts of typical B2C (Business-to-Consumers) e-Retail business are mainly regarding to the reforms in distribution channels and value chains. Retailers traditionally take goods from wholesalers and distribute them to consumers. The chain model is

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