Amazon's Business Model and Competition

This assignment delves into Amazon's business model, examining its core strategies and competitive landscape within the e-commerce industry. It explores how Amazon leverages factors such as technology, logistics, and customer experience to maintain its dominance. The analysis also considers the impact of Amazon's practices on innovation and competition within the broader market.

Introduction to management

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Table of Contents
Introduction.................................................................................................................................................1
Pestle analysis of Amazon...........................................................................................................................1
Political factors........................................................................................................................................1
Economic factors.....................................................................................................................................2
Socio-Cultural factors..............................................................................................................................2
Legal factors............................................................................................................................................2
Technological factors...............................................................................................................................2
Environmental factors.............................................................................................................................3
Porter Five Forces Analysis..........................................................................................................................3
Competitive rivalry – High.......................................................................................................................3
Bargaining power of customers – High....................................................................................................3
Bargaining power of Suppliers – Low.......................................................................................................4
Threat of substitution – high...................................................................................................................4
Threat of new entrants – low..................................................................................................................4
Recommendation........................................................................................................................................5
Social activities........................................................................................................................................5
Web services...........................................................................................................................................5
Offer value for money.............................................................................................................................5
Adopt the latest technology....................................................................................................................5
Conclusion...................................................................................................................................................6
References...................................................................................................................................................7
Introduction

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Amazon is one of the largest American multinational companies. The company provides
various products like clothes, grocery, and many products. The products that are offered by the
company are of cheap price that enhances the satisfaction level of the customers. Amazon was
founded by Jeff bozos in 1944 and headquarter is in Seattle. It is one of the marketplaces where
people sell and purchase various types of products and services.
The mission of the company is to enhance the shopping experience for the customers so
they can feel satisfied and happy. Fast delivery services were introduced by the company that
helps to increase the overall sales of the company. The product line of the company is more than
22 segments with more than 136 billion revenue. The biggest competitor of the company is
Alibaba who sell same products as Amazon in the market (Amazon, 2015).
The activities of the organization are conducted by considering three segments like North
America, international and web services. Customers are the main assets of the company.
Various discounts and benefits are offered to the consumers so that they can be attracted towards
the products and services offered by the company.
Pestle analysis of Amazon
Political factors
It is seen that there are many international policies which become a hurdle for the growth.
To expand in various countries it is difficult for the company as there are many online policies
that should be considered. Many rules and regulations also interfered in the e-commerce
shopping. The Internet is one of the biggest sources for shopping and consumers are also so
much engaged in online shopping. The government gives assistance towards the online industry.
Due to the high competition and many companies conducting the same activities gives major
threat to Amazon. For the company, the opportunity is that the government policies are many
but easy to conduct the activities through online (de Almeida Rocha, Pinto, Boubli and Grelle,
2015). The government also imposed many rules and regulations on cyber security.
It is an opportunity for the industry to enhance the business in digitally secured payments
and also public feel safe to purchase through online (Cozzolino and Rothaermel, 2018).

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Economic factors
There are many problems that are caused due to the fluctuation in currency. As the
company is based IN US then the major share is of US dollars. The economy of scale of the
company is low and is improving so that sales and revenue can be enhanced. The disposable
income of the population is increased that gives a chance to the company to penetrate the market
easily. The recession in China is also one of the major concerns for the company as China is the
largest market and Amazon also wants to penetrate but this causes a great threat to the company.
Socio-Cultural factors
In many areas, it is seen that the ethical factors and regional values have restricted that
limit the sale of the products. Just because of the mobile technology and digital technology the
sales have been enhanced. Many buyers are having mobile phones to purchase the products. The
change in the demographics of the consumers also affects the e- retail sector (Chopra, 2017). The
high-income group people want the best products and also the delivery should be on the door. So
this type of convenience is provided by the company to its customers. Amazon gain advantage
from the changing consumer demographics. The high-income range also creates the gap
between the income groups; this causes a great threat to the company.
Legal factors
To enhance the activities in the global market it is important to consider legal
compliances. It is essential for the company to remain compliant with the laws. The company
gives emphasis on making separate teams so that the legal issues and challenges can be analyzed
and evaluated easily. Enhancement of the rules and regulations also affects the growth of the
society and it offers an opportunity to the company to enhance the sales and revenues. The
company also enhanced the goodwill by considering cooperate social responsibility (Newcombe
Rath, Zhang, Munteanu, Brooker and Deardeuff, 2015).
Technological factors
Technological advancement has given a major role to increase overall sales and revenue
of the company. Innovation in technology has given success to the company. The company
conducts the activities on the online platform. The company searches for innovative ways to
compete with the competitors. But increase the in the cyber-crime is the threat to the company

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as it helps the customers to spend online. So by this factor, the impact is seen in the overall sales
and revenue of the company (Ruiz, Winter, and Amatte, 2017).
Environmental factors
Amazon gives cloud storage that reduces the risk of the storage device. Sustainability is
one of the major factors that are present in every country. To increase the goodwill and image in
the market the company sues CSR activities (Salam, 2016).
Porter Five Forces Analysis
Competitive rivalry – High
It is analyzed that the rivalry in the online retail industry sector is high. This is due to
many players prevailing in the market. Traditional brands are also offered an online sale that
helps to compete in the competitive environment. The competitors of the company are Alibaba,
flip kart and eBay. For Amazon, it is not just that many competitors are giving tough
competition but also many online stores are fighting to grab the market share (Stratopoulos,
2016).
There are various online retailers that give emphasis on targeting particular segment
products like daily products, electronics, and apparels. There is a high availability of the
substitutes in the market. All of this has given an intense rival competition to the company
Bargaining power of customers – High
Amazon is known as a customer-centric company and gives emphasis on enhancing the
satisfaction level of the customers by offering quality products. The company sees that the
products should be delivered on time and also the replacement should be done on time so that the
buyers are satisfied with the services offered by the company. Buyers have a strong bargaining
power as there are many other substitutes or competitors present in the market. Customers think
to switch easily by purchasing products form retail store as every product is available in retail
outlets (Haucap and Heimeshoff, 2014).

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Bargaining power of Suppliers – Low
The company always has the hand over the suppliers. There are many suppliers
available for the company and they also follow certain rules and regulations. The company
ensures that the suppliers should conduct the activities under certain ethical working principles.
The supplier has no right to take forward integration. The sale of the product increases
as there are large numbers of suppliers that are ready to supply the products of the company to
the consumers. The network of the company is strong that helps to control the bargaining power
of the suppliers (Kantor and Streitfeld, 2015).
Threat of substitution – high
In the company, the threat of substitution is high as there are many firms who offer same
products to the consumers like Wal-Mart and flip kart. The threat of substitution is high for
Amazon as there are many substitutes available for the customers and also the switching cost is
low for the consumers.
All the factors give impact on the threat of substitutes as the company has a strong force.
If the customer faces any bad experience then it will drive the customer's away from the retailers.
At the same time, there are many people who prefer to purchase products from retailers as
compared to online to satisfy their needs. This all factors give high substitution for the company
(Kang, 2015).
Threat of new entrants – low
It is seen that to create an online store is not difficult, but to reach on the level of the
company is difficult as it requires a lot of investment and time. The growth in the digital sector
has brought a drastic change in the retail sector as consumers can purchase the products by
sitting at home. There are various brands that have entered into the retail segment. Many
international and domestic brands have emerged.
It is seen that there are many brands that can enter the market but will not be able to take
over the company. It requires a large investment in warehousing, marketing, logistics and
various other factors. Also, there are many factors like brand and time image that is difficult for
every organization to enter the market so that the large market share as compared to Amazon can
be grabbed. This threat of low entrants is low for Amazon (Peer, Vosgerau and Acquisti, 2014).

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Recommendation
Social activities
Amazon is one of the largest companies' globally. It is seen it is important to take into
consideration social activities so that the goodwill can be maintained in the market. The
company helps to attract many customers if the company considers social activities. The
company should use predictive and sentimental analysis so that the target segment can be
attracted towards the products and services of the company. It is important to target the
customer on the basis of attractive online activities of the organization (Farrell, Grenier and
Leiby, 2016).
Web services
The company web services were established on a small cloud platform that gives
assistance to the online information of the company. In the present scenario, the web services
that are provided by the company is large than google. The company should give emphasis to
maintain the cloud system so that the information of the customers can be maintained in a
secured manner. If proper management is considered to manage cloud system then the company
can enhance the services in an effective manner. Proper internet connection should be there so
that the customer can purchase products easily (Dolata, 2017).
Offer value for money
The company has many reasons for attaining success in the business environment. The
services that are offered to the customers should be value for money as it helps to enhance the
satisfaction level of the customers. Customer avail the services of the company as they trust the
products and services offered by the company. The company should also consider innovative
approaches so that the customer's satisfaction level can be enhanced. Amazon should give
emphasis on offering value for money so that trust can be maintained by the customers towards
the products and services of the company (Dallas, Ponte, and Sturgeon, 2017).
Adopt the latest technology
The company gives emphasis on developing the technology so that the customers can
purchase the products and services easily. It is essential for the company to consider the latest
technology as all the activities are conducted on the online platform. If there is no proper

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technology adopted by the company then the negative impact can be seen in the sales and
revenue of the company. Innovative technology helps to operate the activities in a smooth
manner (He, 2015).
Conclusion
By evaluating the report it is concluded that the company has attained a large market
share and it is important to consider innovative technologies. Innovative technologies help to
enhance the sales and revenue of the company. The current market environment gives emphasis
on quick delivery and also on logistics. The company has a pressure to expand the operations and
has to Target India and China that will help to earn more profits. It is seen that in the market
ecosystem the company is a leader that consider calculative strategy so that proper track can be
kept on the activities.
In the first phase of the report pestle and porter, analysis is discussed. In the last phase of
the report, four recommendations are discussed that will help the organization to grab large
market share and also to enhance the overall profitability of the organization.

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References
Amazon, E. C. (2015). Amazon web services. Available in: http://aws. amazon.
com/es/ec2/(November 2012).
Chopra, S. (2017). The Future of Same-Day Delivery: Same as the Past?. Kellogg School of
Management Cases, 1-2.
Cozzolino, A., & Rothaermel, F. T. (2018). Discontinuities, Competition, and Cooperation:
Coopetitive Dynamics between Incumbents and Entrants. Strategic Management Journal.
Dallas, M., Ponte, S., & Sturgeon, T. (2017). A Typology of Power in Global Value Chains (No.
91). Working Paper in Business and Politics.
de Almeida Rocha, J. M., Pinto, M. P., Boubli, J. P., & Grelle, C. E. V. (2015). The role of
competition in structuring primate communities under different productivity regimes in the
Amazon. PloS one, 10(12), e0145699.
Dolata, U. (2017). Apple, Amazon, Google, Facebook, Microsoft: Market concentration-
competition-innovation strategies (No. 2017-01). Stuttgarter Beiträge zur Organisations-
und Innovationsforschung, SOI Discussion Paper.
Farrell, A. M., Grenier, J. H., & Leiby, J. (2016). Scoundrels or stars? Theory and evidence on
the quality of workers in online labor markets. The Accounting Review, 92(1), 93-114.
Haucap, J., & Heimeshoff, U. (2014). Google, Facebook, Amazon, eBay: Is the Internet driving
competition or market monopolization?. International Economics and Economic
Policy, 11(1-2), 49-61.
He, Z., 2015, August. External Environment Analysis of Commercial-use drones. In 2015-1st
International Symposium on Social Science. Atlantis Press.
Kang, H. (2015). Toward Entrepreneurial Success: A Strategic Planning and Analysis
Model. Business Journal for Entrepreneurs, 2015(3).

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Kantor, J., & Streitfeld, D. (2015). Inside Amazon: Wrestling big ideas in a bruising
workplace. New York Times, 15, 74-80.
Newcombe, C., Rath, T., Zhang, F., Munteanu, B., Brooker, M., & Deardeuff, M. (2015). How
Amazon web services uses formal methods. Communications of the ACM, 58(4), 66-73.
Peer, E., Vosgerau, J., & Acquisti, A. (2014). Reputation as a sufficient condition for data quality
on Amazon Mechanical Turk. Behavior research methods, 46(4), 1023-1031.
Ruiz, R., Winter, R., & Amatte, F. (2017). The leakage of passwords from home banking sites: A
threat to global cyber security?. Journal of Payments Strategy & Systems, 11(2), 174-186.
Salam, M. T. (2016). Devising a Business Model of Amazon's 1995-2004 Journey. Browser
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Stratopoulos, T. C. (2016). Expected Duration of Competitive Advantage Due to Technology
Adoption. In Academy of Management Annual Meeting, Anaheim, CA. Available at
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