Running Head: PORTER’S FIVE FORCES ON AMAZON PORTER’S FIVE FORCES ON AMAZON By StateDate Porter’s Five Forces on Amazon Consumer Power Many Amazon buyers purchase popular products such as books simply because they either do not have the time to visit stores physically or find the conventional purchasing practice tedious. Second, Amazon buyers are inclined to become loyal because of Amazon’s low price offers that arise from low overhead costs (Cukier, Hodson, and Ryan, 2009, p. 4). These two factors raise the bargaining power of Amazon buyers. When Amazon fails to offer the lowest possible offers, the customer will simply search the internet for the next best price. Supplier Power Amazon enjoys a great deal of benefits from suppliers such as publishers, smartphone and tablet manufacturers, and video game distributors. The most significant benefit is charging Amazon only when consumers make the actual purchase. This room for allowance reveals just how willing suppliers are to offer their commodities and services to Amazon. Amazon maintains a low of five items from small suppliers to lower overhead costs. Suppliers reasonably treat Amazon like a pivotal and prestigious partner, which is the source of their explicitly evident and necessary devotion (Cukier, Hodson, and Ryan, 2009, p. 5). Competition Amazon is among the pioneers of the e-commerce sector. This advantage offers amazon a significant degree of presence in the online retail market. Amazon’s superior customer satisfaction guarantees Amazon’s market share in the end. At the same time, Amazon has numerous rivals who offer a nearly similar diverse array of products and services with almost the same low prices (Cukier, Hodson, and Ryan, 2009, p. 3). Examples of such rival companies are Barnes and Noble, eBay, and Alibaba. Amazon’s presence on the internet compelled the company to improve its search engine capabilities to rival with those of Google and Yahoo. Substitution Risk The risk of the substitution of Amazon is significant. There are a great deal of options to amazon’s products and services for online shoppers. Currently, Amazon is unique for only its patented features such as the one-click ordering. Many stores with physical outlets have an online presence. This presence means nearly all of Amazon’s inventory are available on the internet on other websites such as the direct manufacturer’s site. Products on such sites often do not have the same low prices or offers (Cukier, Hodson, and Ryan, 2009, p. 2). However, when Amazon does not present a better offer, consumers who really want the product will always substitute Amazon with other online retailers. Risk of New Players The internet is a platform for the prevalence of new ideas into behemoth corporations within a relatively short period. Amazon is proof of this element of the online world. Entrepreneurs are aware of this potential and will always attempt to launch ideas and compete in the same market. However, Amazon’s market manifestation and position is too immense and established for new entrants to ever virtually achieve Amazon’s magnitude (Cukier, Hodson, and Ryan, 2009, p. 8). Start-up online retailers cannot amass capital equal to Amazon to pose any serious competition. In conclusion, Amazon consumers can choose to purchase books or electronics they want on the hundreds of thousands of retail stores that have an online presence. Amazon compensates suppliers for their commodities over a month following the sale of the commodity or service. Amazon has the upper hand of decades of innovation that enables it to enjoy ultimate consumer gratification. Many of amazon’s items are available on the internet on other websites such as the direct manufacturer’s site. These five forces are the structural drivers for change at Amazon that can make the company achieve greater value formation potentials and make use of original move benefits.ReferencesCukier, W, Hodson, J, and Ryan, PM 2009, A Critical Discourse Analysis of Amazon.coms Rise in the Media 1995-2008, Privacy, Security, Trust and the Management of e- Business, CONGRESS 09. World Congress, pp. 1-10.
5 Porter’s Five Forces on Amazon