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Benefits Provided by Five Forces of Amazon

   

Added on  2020-12-10

9 Pages2292 Words111 Views
REFLECTIVE REPORT

BENEFITS PROVIDED BY FIVE FORCES OF AMAZONPorter's five forces framework is comprised of individual five forces which help toprovide shape to overall competition in the particular industry which are discussed as below:Bargaining power of Amazon BuyersBargaining power of buyers for Amazon vary as it depends upon various situations, incase of online shopping, their power is very strong as there is an availability of many othercompetitive shopping sites which provide similar kinds of products and services as well as theswitching cost for opting another competitor is very less. In this scenario, customers are veryprice sensitive which results in having a glance on the options available at the best affordableprice. This also results in highly intensive market competition.Also, for web services which are provided by amazon, customer possesses lessbargaining power in respect to online shopping sites because the switching cost associated with itis very high. Another web services might require high amount of subscription fees which leads tonot only sustaining of customer but also presence of less competition in this market place.Accordingly, Amazon should use effective pricing strategy which can lead to minimisethe potential bargaining power of customers and would lead to attract and retain them for manyproducts and services. This will result in less switching rate of buyers (Chiu and et.al. 2017).Bargaining power of SuppliersBargaining power of suppliers is considerably high. With the aim of providing everythingto everyone, they have a huge inventory which needs to be ordered, supplied and stored.Therefore, they have to manage obtaining resources which are supplied by the suppliers as theydo not have their own plants. Therefore, this is the reason why suppliers have high bargainingpower and they have to negotiate with them for their products and services that can be forwardedfor further processing. These suppliers include not only those who supply inventories but alsohelps to make the products reach at the market place and also, further companies with whomthey have partnership of web services. The success of Amazon is completely dependent upon thecollaboration which they have with various online sellers and partnership in business such astarget, borders, etc. These two are considered as key providers which help it to maintain hugevariety of products (Cardoso-Castro, Swan and Mendes, 2017).Suggestions which can be provided in this case is that Amazon should collaborate withthose suppliers who are completely dependent on the organisation and cannot negotiate for more.

Threat of New EntrantsNew entrants possesses a low threat to company as amount of inventory and its status ishard to achieve for new competitor. The organisation is offering a tremendous variety ofproducts and services to the customers and was established 13 years back which means it has ahigh sustainability and an immense customer base which is a threat to new entrants becauseestablishing it in a short time span is very hard in this market place. Amazon has adequateamount of products that keep the loyalty of customers with various kinds of pricing strategies. Itis very difficult for a new comer for economies of scale, advantages related to cost factor whichis related to the large scale production.Threat of substitute productsIt is considered as a high threat as there is a wide variety of substitute for the productsand service which are offered by Amazon. Only exception present there is the technology whichis patented which is one click ordering. There are lots of alternatives present for the productswhich are offered by company. Such as books can be taken from the book stores, news standsand discount stores. Various kind of furniture can be taken from IKEA and also possiblesubstitute for this organisation can be Argos (Bommel and et.al., 2017). Whereas, the substitutefor Amazon's web service is least. For apparels, customers can buy from retailers may be on lessprice comparatively. So, there is more chances for the presence of similar products but thequality can vary due to many reasons.RivalryRivalry among different competitive firms in this market place is very high. There aremany reasons which can support this statement as the kind of products they provide are verysimilar and also, they have more or less same establishment time period making them acompetitor of long run with huge customer base. Internet retail websites such as Barnes andNoble.com as well as eBay are top most two strong rivals. For the MP3 of Amazon Apple's i-tunes provides a great competition. The most important reason why it still been on the topdespite of toughest competition in the market because the customer ratings for this website isvery high (Grant, 2016).RESOURCE AUDITINGResource auditing is considered to be one of the important aspects of a company. It is oneof the management tools for judging effectiveness and performance of Amazon. It refers to

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