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Amazon Analysis Report

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Amazon is an American international electronic commerce company formed by Jeff Bezos in 1994. It is one the largest online retailer in the world.[1] Below is the analysis for the market valuation of Amazon.
PORTER’S FIVE FORCES ANALYSIS [8]
Threat of New Entrants
When it is easy to enter the industry, the threat would be big. A bigger threat will lower the potential profitability in the industry. Regarding the industry, the market entry barrier is low because the technology requirement is not high. However, economic of scale enables Amazon to provide services and products at a competitive low price. Also it has built up its reputation and accumulated a certain amount of loyalty customers. It is difficult for a new startup company to compete with Amazon. Profitability of Amazon is high due to the small threat of new entrants.
Threat of Substitute Products/ Service
When there are more substitute products or services, the threat would be larger and the profitability of Amazon would be lower. Amazon is an online retailer selling various products. It is an innovative service and hence has a high brand recognition. Compared with substitute service such as service of buying on customer’s behalf, Amazon can provide more confidence to customers. Also, traditional retailers are also a substitute service to Amazon. However, there would not be a big conflict between Amazon and the traditional retailers because of the consumer behavior. This means some consumers would insist in shopping in a physical stores while some would prefer to online shopping. Also with a wide spread use of smartphone and tablets, consumers are shifting to online purchasing. Therefore, the threat of substitute service is small.
Bargaining Power of Suppliers
With a lower bargaining power of suppliers, the cost would be lower and profitability would be higher. The bargaining power of supplier in the...

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