Five Forces of Amazon

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AADIL SHAIKH

Unit 33

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Amazon five forces

Competitive Rivalry

Amazon.com Inc has a lot of competition in the online retail market as the amount of risk for the organisation is high because there are many external factors which affect the business such as high aggressiveness of firms as Retail firms are generally aggressive, and they exert a strong competitive force against each other. For example, Amazon.com Inc. directly competes against giants like Walmart, which has a significant and expanding e-commerce website, furthermore Amazon also experiences the strong force of substitutes because of their high availability. For instance, Walmart’s physical or brick  stores are substitutes to Amazon’s online retail service. Other brick  bookstores and smaller retailers also compete against Amazon. Furthermore, low switching costs impose a strong force on the company. Low switching costs correspond to low barriers for consumers to transfer from one retailer to another, or from one company to a substitute provider.

Amazon, competition must be a strategic priority to ensure the company’s long-term competence.

Bargaining Power of Amazon’s Customers

 Amazon customers have a strong bargaining power against Amazon, for example the are able to get high quality of information consumers have access to high quality information regarding the services of online retailers and the products they sell. This external factor affects Amazon.com Inc. in terms of the ability of customers to find alternatives to Amazon’s online retail service, low switching costs this make it easy for consumers to transfer from Amazon to other firms, such as Walmart. And high availability of substitutes which further empowers consumers to change from one retailer to another. For example, instead of purchasing on Amazon’s e-commerce website, a customer can easily go to one of Walmart’s stores, which ae located everywhere in America. Amazon must consider the strong bargaining power of buyers as a major factor in addressing business challenges in the online retail industry environment.

Bargaining Power of Amazon’s Suppliers 

Amazon experiences the moderate intensity of the bargaining power of suppliers as the have a small population of suppliers which empowers suppliers to impose a strong force on Amazon.com e-commerce business. For example, changes in prices of equipment from a small number of large suppliers could directly impact the company’s online retail operational costs. Furthermore moderate forward integration limits suppliers’ actual effect on Amazon. Moderate forward integration is a moderate degree of control that suppliers have in the sale of their products to firms like Amazon. Moreover Moderate size of supplier’s manufacturers limits their influence on the company.