Amazon's Competitive Forces and Value Chain Model

This report illustrates the ways in which Amazon is working its competitive power and on its business strategy along with the markets in which they can expand. Company’s 5P’s has been provided in the report.

INFORMATION SYSTEMS
MANAGEMENT

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Contents
Introduction...........................................................................................................................................1
Amazon’s competitive forces and value chain model............................................................................1
Competitive forces.............................................................................................................................1
Value chain model.............................................................................................................................1
Amazon’s evolving business strategy....................................................................................................2
Different markets in which Amazon.com is expanding.........................................................................3
Competitive advantage of Amazon.com................................................................................................3
Product marketing.................................................................................................................................3
Future success.......................................................................................................................................4
Conclusion.............................................................................................................................................4
References.............................................................................................................................................5
Introduction
In the time when the e-commerce has a critical role to play in the modern day business,
companies like Amazom.com are leading the industry (Ritala, Golnam & Wegmann, 2014).

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Not only the competitive power of Amazon has become extensively better but it has also
improved the ways in which they enhance the customer satisfaction. This report is going to
illustrate the ways in which Amazon is working its competitive power and on its business
strategy along with the markets in which they can expand. Company’s 5P’s has been
provided in the report.
Amazon’s competitive forces and value chain model
Competitive forces
 It has small producers as their main suppliers which help them in reducing the cost of
items they are selling.
 Use of advanced technologies especially marketing technologies better than
competitors.
 Huge financial resources and investors base that helps in making investments
whenever they find opportunities.
 It is everything store hence people find it first option when they have to purchase
anything (Rothaermel, 2013).
Value chain model
Primary activities
 Inbound logistics: Since this company has long-term arrangements or contracts with
their vendors that ensure the availability of merchandises, specific payment terms or
the extension of credit limits. This firm takes the full responsibility of their customer
service, logistics and also return of product.
 Outbound logistics: Amazon uses the concept of overnight delivery and ensures that
products are delivered to the customers on time and with proper care (Peppers &
Rogers, 2013).
 Marketing and sales: Their marketing expenses are increasing every year. The major
component of their marketing and sales initiatives is the message their deliver through
their marketing where they promise the largest section of services and products, fast
delivery of products, fast delivery of products along with super customer services.
 Operations: Amazon.com operates at the international levels. They are looking for
other countries as well for their expansion. Continuous rise in the international sales
of the company has been noticed.

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 Services: The after-service that is provided by the company is excellent and hence
quick service is provided to the customers. They have seven days return policy in case
customer’s faces and defect in their purchased product.
Secondary activities
 Human Resource: Highly trained and skilled labour force.
 Infrastructure: They have bigger warehouse along with effective transportation in
many cities that ensures timely delivery of product.
 Technology development: Their technological infrastructure is better than their
competitors along with the infrastructure that is present for selling the products.
 Procurement: They have large numbers of small and bigger suppliers that ensures that
procurement done by the company is on time and they have best quality products to
offer to their customers (Madsen & Walker, 2015).
It has responded to its business environment by working on its strengths and reducing the
leak points in their business. With the help of its customer centric approach they add value to
their products.
Amazon’s evolving business strategy
Their strategy is to add largest possible numbers of small suppliers in its base. This is
different from its past strategy of getting dependent on the larger suppliers. There is a change
in the strategy as the price war and fast delivery of the products has become the key to
success which can be fulfilled by attaching with the small scale suppliers in every town and
cities (Furey & Friedman, 2012).
Different markets in which Amazon.com is expanding
Amazon understands the value of being everything store and hence they are expanding into
different markets. Their major expansion is in the business of Cloud computing as the
demand for data and storage is increasing. Amazon.com is expanding in the new markets
such as delivery logistics and pharmaceuticals. They are pushing in pharmaceutical market by
acquiring PillPack. In Delivery logistics market they are expanding with their traditional
partners.

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Competitive advantage of Amazon.com
There are larger numbers of books available with this website when compared with other
competitors. In video and music market they have come up with new plan which will make it
the biggest store for music and videos. In general merchandising they have the competitive
advantage that merchandises are available in different designs and prices. In cloud computing
their technological resources are increasing on everyday basis hence making it easier for the
company to improve the data services provided to its customers (Fleerackers, 2010). No the
competitive advantage of Amazon.com in these diverse markets is not the same. The major
reason for the difference is that in some markets they have better and cheaper suppliers where
as in some markets they have suppliers which do not differentiate themselves from others.
Product marketing
In marketing there are five P’s. These are:
 Product: They have all the products available at their website. These are from
different brands in all the pricing rates. In this they follow the approach of product
differentiation which makes them better than their rivals. They rely on frugal
innovation.
 Price: They have all the type of pricing available with them. Their approach remains
to sell products at lowest possible price which gives them advantage over the rivals.
 Promotions: They are providing different types of offers on their products such as free
delivery. In Amazon week they sell products at lowest possible pricing. They are
using different internet and social media tools for doing their promotions and hence
staying ahead of their rivals.
 Place: They offer their products only through the online website or through their apps.
Their approach remains to increase the customer engagement at these places. Data
handling software enhances their competitive advantage over the rivals (The 5 Ps of
marketing, 2018).
 Profits: They have placed profits to the lowest level even the overall profit of the
company were negative for many years but they kept revenue to highest which gave
them financial base which helped them to outlast their rivals.

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Future success
In future this company will continue to be successful. This is because it has gained larger
amount of financial base along with strong support from their customers (Skalicky &
Crossley, 2015). This will make their expansion faster.
Conclusion
It can be concluded that Amazon.com has a competitive advantage over the rivals because of
the resources, business process and their strategy. They are keeping pricing at the lowest level
so as to ensure that they become the best in the market but due to this they are losing on the
profits they can earn.

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References
Fleerackers, T. (2010). Case: Amazon.com. Retrieved May 23, 2016, from
https://flatworldbusiness.wordpress.com/flat-education/intensify/creating-a-flat-
business/case-amazon-com/
Furey, T., & Friedman, L. (2012). Channel Advantage, The. Routledge.
Madsen, T. L., & Walker, G. (2015). Modern competitive strategy. McGraw Hill.
Peppers, D., & Rogers, M. (2013). Extreme trust: the new competitive advantage. Strategy &
Leadership, 41(6), 31-34.
Ritala, P., Golnam, A., & Wegmann, A. (2014). Coopetition-based business models: The case
of Amazon. com. Industrial Marketing Management, 43(2), 236-249.
Rothaermel, F. T. (2013). Strategic management: concepts. New York, NY: McGraw-Hill
Irwin.
Skalicky, S., & Crossley, S. (2015). A statistical analysis of satirical Amazon. com product
reviews. The European Journal of Humour Research, 2(3), 66-85.
The 5 Ps of marketing (2018, August 16). Australian Government Business. Retrieved from:
https://www.business.gov.au/marketing/advertising/the-5-ps-of-marketing