STRATEGICANAGEMERE

V I R O S S H A N .V B
III BBA – FINAL YEAR
RKMVC ,MYLAPORE
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AN INTRODUCTION TO AMAZON

Amazon was founded on July 5, 1994, by Jeff Bezos in Bellevue,

Washington.The company originally started as an online marketplace
for books but gradually expanded its offerings to include a wide
range of product categories. This diversification led to it being
referred to as "The Everything Store".

The company has multiple subsidiaries, including Amazon Web

Services, providing cloud computing, Zoox, a self-driving car division,
Kuiper Systems, a satellite Internet provider, and Amazon Lab126, a
computer hardware R&D provider. Other subsidiaries include Ring,
Twitch, IMDb, and Whole Foods Market. Its acquisition of Whole
Foods in August 2017 for US$13.4 billion substantially increased its
market share and presence as a physical retailer.[8] Amazon also
distributes a variety of downloadable and streaming content through
its Amazon Prime Video, MGM+, Amazon Music, Twitch, Audible and
Wondery[9] units. It publishes books through its publishing arm,
Amazon Publishing, film and television content through Amazon
MGM Studios, including the Metro-Goldwyn-Mayer studio, which
was acquired in March 2022, and owns Brilliance Audio and Audible,
which produce and distribute audiobooks, respectively. Amazon also
produces consumer electronics—most notably, Kindle e-readers,
Echo devices, Fire tablets, and Fire TVs.

History
Amazon saw large growth during the COVID-19 pandemic, hiring more than
100,000 staff in the United States and Canada.Some Amazon workers in the
US, France, and Italy protested the company's decision to "run normal shifts"
due to COVID-19's ease of spread in warehouses.In Spain, the company
faced legal complaints over its policieswhile a group of US Senators wrote an
open letter to Bezos expressing concerns about workplace safety.

On February 2, 2021, Bezos announced that he would step down as CEO to

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become executive chair of Amazon's board. The transition officially took

place on July 5, 2021, with former CEO of AWS Andy Jassy replacing him as
CEO.In January 2023, Amazon cut over 18,000 jobs, primarily in consumer
retail and its human resources division in an attempt to cut costs.

On November 8, 2023, a plan was adopted for Jeff Bezos to sell

approximately 50 million shares of the company over the next year (the
deadline for the entire sales plan is January 31, 2025). The first step was the
sale of 12 million shares for about $2 billion.

Vision and Mission

Vision: Our vision is to be earth's most customer-centric company; to build

a place where people can come to find and discover anything they might
want to buy online.

Mission: Amazon is guided by four principles: customer obsession rather

than competitor focus, passion for invention, commitment to operational
excellence, and long-term thinking. Customer reviews, 1-Click shopping,
personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle
Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are
some of the products and services pioneered by Amazon."

Key service
Amazon key service

Amazon Key is a service provided by Amazon that allows delivery drivers to

securely deliver packages inside customers' homes, garages, or vehicles.
The service aims to prevent theft and weather damage to packages. Here
are some key features:

Amazon Key In-Home Delivery: Enables delivery personnel to place

packages just inside your front door.
Amazon Key In-Garage Delivery: Allows packages to be delivered securely
inside your garage.
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Amazon Key In-Car Delivery: Permits packages to be delivered to your

vehicle's trunk or back seat if it's parked in a publicly accessible location.
The service uses a compatible smart lock and a security camera, which can
be monitored through the Amazon Key app. Customers can control access
and view live or recorded video of deliveries for added security.

SWOT ANALYSIS

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

A SWOT analysis is a framework to help assess and understand the
internal and external forces that may create opportunities or risks for
an organization. Strengths and weaknesses are internal factors. They
are characteristics of a business that give it a relative advantage (or
disadvantage, respectively) over its competition. Opportunities and
threats, on the other hand, are external factors.

Strong brand recognition and reputation

Consumers’ familiarity with both Amazon’s logo and name attests to the
company’s excellent brand recognition and reputation. The company’s history in
the market and successful advertising campaigns are both contributing factors to
its current position of dominance. Amazon has established itself as a trusted and
reliable brand in the eyes of consumers through its customer-centric approach,
which includes a focus on providing excellent customer service and a wide range
of convenient delivery options.

The value of strong brand recognition and reputation for a company cannot be
overstated. When consumers are familiar with a brand and have positive
associations with it, they are more likely to consider purchasing products or
services from that company. This can be particularly important in the competitive
world of e-commerce, where consumers have many options to choose from. A
strong brand can also help a company to differentiate itself from its competitors

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and can be a valuable asset in attracting and retaining customers. In Amazon’s

case, its strong brand recognition and reputation have played a significant role in
the company’s success and have helped it to become one of the most influential
companies in the world.

2. Diverse product offerings

Amazon’s ability to appeal to a broad variety of customers and address the

demands of those customers is a major asset of the company. The company offers
a broad variety of products, such as clothing, books, electronics, household goods,
etc. This diverse product offering has played a significant role in the company’s
success, as it has helped the company capture a significant share of the e-
commerce market and remain competitive in the face of changing consumer
preferences and market trends.

Amazon’s partnerships and collaborations with other businesses are the primary
reason for the company’s continued success in providing such a wide selection of
products. The company has formed partnerships with numerous brands and
manufacturers, which allows it to offer a wide range of products to its customers.
Amazon has also leveraged its technology and data capabilities to identify and
respond to changing consumer preferences, which has allowed the company to
adapt its product offerings to meet the needs of its customers. This combination
of partnerships and data-driven decision-making has helped Amazon remain a
leader in the e-commerce industry and maintain its diverse product offering.

3. Well-established distribution network

Amazon’s extensive distribution network is a key competitive advantage, allowing

the corporation to quickly and affordably ship items to consumers all over the
globe. To store and transport items to clients quickly and affordably, the
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corporation has set up a global network of fulfillment centers, distribution

centers, and sorting facilities. In addition to its facilities, Amazon also utilizes a
variety of delivery options, including its fleet of delivery vehicles and partnerships
with third-party delivery companies, to ensure that products are delivered to
customers in a timely and convenient manner.

Amazon’s use of technology and data has been critical to the success of its
distribution network. The company has invested heavily in technology and data
analytics to optimize its fulfillment and delivery operations and to continuously
improve its efficiency and effectiveness. This includes the use of advanced
algorithms to predict demand and optimize inventory management, as well as the
use of robotics and automation in fulfillment centers. These efforts have allowed
Amazon to maintain a well-established distribution network that can efficiently
deliver products to customers all over the world, which has played a significant
role in the company’s success.

4. Cutting-edge technology

One of the key ways that Amazon has leveraged cutting-edge technology is
through its use of data analytics and artificial intelligence (AI). The company has
invested heavily in data analytics and AI to optimize its operations and improve its
customer experience. For example, the company uses data analytics to predict
demand and optimize inventory management, as well as to personalize
recommendations and advertisements for customers. The company has also
implemented AI-powered chatbots and virtual assistants to improve customer
service and support.

In addition to data analytics and AI, Amazon has also leveraged cutting-edge
technology in other areas of its business. The company has implemented
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advanced robotics and automation in its fulfillment centers to improve efficiency

and accuracy. It has developed a wide range of innovative products and services,
such as its Amazon Web Services (AWS) cloud computing platform and its Amazon
Prime streaming service. These efforts have helped Amazon to remain at the
forefront of technological innovation and have played a significant role in the
company’s success.

5. Strong financial performance

Amazon’s strong financial performance is a significant strength for the company,

as it demonstrates the company’s ability to generate profits and grow its business.
Revenue and profits have continually increased year after year, and the
corporation has reported solid financial performance. This strong financial
performance can be attributed to several factors, including the company’s diverse
product offerings, well-established distribution network, and cutting-edge
technology.

The company has a healthy balance sheet, with substantial cash reserves and low
debt levels to complement its healthy revenue and profit streams. This financial
stability gives the company the flexibility to make strategic investments and
acquisitions and weather economic downturns and other challenges. This financial
strength has helped Amazon to remain a leader in the e-commerce and
technology industries and has played a significant role in the company’s success.

6. Large customer base

Among the top reasons for Amazon’s success is the sheer variety of goods it sells.
The company’s success in the e-commerce sector may be attributed in large part
to the breadth of its product selection, which has allowed it to attract and retain
customers from a variety of demographics. In addition, Amazon’s strong brand
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recognition and reputation, as well as its customer-centric approach, have helped

the company attract and retain customers.

Another factor that has contributed to Amazon’s large customer base is the
company’s strong distribution network, which allows the company to efficiently
deliver products to customers all over the world. This convenience and reliability
have helped the company attract and retain customers. Amazon’s large customer
base has played a significant role in the company’s success and has helped the
company become a leader in the e-commerce industry.

7. Wide range of services, including e-commerce, cloud computing, and

streaming media

Through its Amazon Web Services (AWS) subsidiary, which provides a variety of
cloud computing offerings to companies and organizations all over the world,
Amazon has been able to broaden its services beyond e-commerce. AWS has
become a leader in the cloud computing industry and has helped Amazon
diversify its revenue streams and reduce its reliance on the e-commerce business.

Amazon Prime is an example of the company’s expansion outside its core cloud
computing business. This service offers a wide range of movies, TV shows, and
other content to subscribers, and it has become a major player in the streaming
media industry. These efforts have helped Amazon diversify its revenue streams
and have played a significant role in the company’s success.

8. Strong partnerships and collaborations

Amazon’s ability to form and sustain productive relationships and collaborations

with a diverse spectrum of businesses and organizations is indicative of this
strength.

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Amazon’s supplier and vendor relationships are among the most notable
examples of the company’s successful use of partnership and collaboration. The
firm has partnered with many different brands and manufacturers to provide its
clients with a vast range of products. These collaborations have allowed Amazon
to diversify its product catalog and lessen its dependence on any one source.

Amazon has not only built ties with vendors and suppliers, but also with
businesses and organizations across many other sectors. For example, the
company has formed partnerships with transportation and logistics companies to
improve its delivery capabilities, and it has collaborated with healthcare
organizations to develop innovative healthcare solutions. These partnerships and
collaborations have helped Amazon expand its business and have played a
significant role in the company’s success.

9. Global presence with operations in numerous countries

Amazon has shown its robustness by successfully expanding its operations to a

worldwide scale.

Amazon’s e-commerce platform is one of the main reasons for the firm’s
worldwide success. It enables the company to reach consumers in every corner of
the globe. Because of its worldwide presence, Amazon has cornered a sizable
portion of the online retail market and established itself as a front-runner in the
sector.

In addition to its e-commerce operations, Amazon has also established a presence

in various countries around the world through its other business ventures, such as
its Amazon Web Services (AWS) division and its Prime streaming service. These
efforts have helped the company diversify its revenue streams and expand its
global presence.
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Amazon Weaknesses
1. Dependence on third-party sellers

Amazon relies on third-party sellers to provide a large portion of its product

offerings, which can create certain risks for the company. One of the main risks
associated with this reliance is the potential for fraud or low-quality products to
be sold on the platform. If customers have negative experiences with these
products, it could damage Amazon’s reputation and lead to lost sales.

Additionally, Amazon’s reliance on third-party sellers can also create challenges in

terms of product control and customer satisfaction. While Amazon sets certain
guidelines for sellers, it does not have complete control over the products that are
sold on its platform. This can lead to issues with product quality, availability, and
delivery, which can impact the customer experience. Ensuring that third-party
sellers meet Amazon’s standards and provide high-quality products is essential to
maintaining customer trust and satisfaction.

2. Data security concerns

Ensuring the security of customer data is essential for any company that handles
sensitive information, and Amazon is no exception. The company handles a large
amount of customer data, including personal and financial information, which can
make it a target for cyberattacks. If this data were to be compromised, it could
lead to significant issues for Amazon and its customers, including identity theft
and financial losses.

To address these data security concerns, Amazon has implemented various

measures, including encryption and secure servers, to protect customer data.
However, the risk of cyberattacks is constantly evolving, and Amazon must remain

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vigilant in its efforts to protect customer data. Failure to do so could lead to lost
customer trust and potentially damaging consequences for the company.

3. A business model that is easy to copy

One potential weakness for Amazon is that its business model is easily imitable. As
a leader in the online retail market, Amazon has developed a successful formula
for selling products online, which includes a wide range of products, fast shipping,
and a convenient customer experience. However, other companies can easily
replicate this model and compete with Amazon in the market.

This lack of uniqueness can make it more difficult for Amazon to differentiate itself
from competitors and maintain its market position. It also means that the
company must continually innovate and evolve its business model to stay ahead
of the competition.

4. Regulatory issues

Amazon has faced regulatory scrutiny in various markets, which can create risks
and challenges for the company. Some of the main regulatory issues that Amazon
has encountered include concerns about its business practices and potential
antitrust violations.

For example, Amazon has faced criticism for its treatment of third-party sellers on
its platform and allegations that it has used its data to gain an unfair advantage in
the marketplace. The company has also been accused of engaging in
anticompetitive practices, such as using its dominance in the online retail market
to squeeze out smaller competitors.

These regulatory issues can result in costly legal battles and damage to the
company’s reputation, which can impact its profitability and growth. Amazon

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must navigate these regulatory challenges to maintain compliance and avoid

negative consequences.

5. Limited customer loyalty

While Amazon has a large customer base, some customers may be more loyal to
specific brands or products than the Amazon platform itself. This limited customer
loyalty can be a weakness for the company, as it may be more difficult to retain
these customers if they have other options available to them.

One potential consequence of limited customer loyalty is that customers may be

more likely to switch to competitors if they feel that they are not receiving the
best value or service from Amazon. This could lead to lost sales and decreased
market share for the company. Additionally, limited customer loyalty may make it
more difficult for Amazon to expand into new markets, as it may face greater
competition from established brands that have a stronger customer base.

6. Limited product control

As a marketplace, Amazon does not have complete control over the products that
are sold on its platform. While the company sets certain guidelines for third-party
sellers, it cannot guarantee the quality or availability of all products listed on its
site. This limited product control can create challenges for Amazon in terms of
customer satisfaction and product safety.

For example, if customers purchase low-quality or defective products from third-

party sellers on Amazon, it can lead to negative reviews and lost sales for the
company. Additionally, if products sold on Amazon do not meet safety standards,
it could lead to customer injuries and legal liability for the company. Ensuring that

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all products sold on its platform meet quality and safety standards is essential for
Amazon to maintain customer trust and satisfaction.

Amazon Opportunities
1. Expansion into emerging markets

Expanding into new markets is a key opportunity for Amazon to increase its
customer base and revenue. This can involve entering new geographic regions,
both domestically and internationally, as well as expanding into new product
categories or customer segments.

For example, Amazon can target markets where it has limited or no presence,
such as certain countries in Asia or South America.

Expanding into new markets can help Amazon diversify its revenue streams and
reduce its dependence on specific markets or products. It also presents the
opportunity to capture a larger share of the overall retail market and increase its
competitiveness. To successfully expand into new markets, Amazon must carefully
evaluate the potential risks and rewards of each market and develop strategies
that are tailored to the unique needs and preferences of those customers.

2. Expanding physical stores

Expanding its physical store presence is an opportunity for Amazon to reach new
customers and create a tangible shopping experience. While the company has a
limited number of physical stores compared to other retailers, it has been
experimenting with various formats, such as its Amazon Go stores, which offer a
convenient and innovative shopping experience.

Expanding its physical store presence can also help Amazon better compete with
traditional retailers and capture a larger share of the overall retail market. This
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can be particularly beneficial in markets where e-commerce penetration is lower,

as it allows Amazon to reach customers who may not be comfortable shopping
online.

To successfully expand its physical store presence, Amazon must carefully

evaluate the potential risks and rewards of each market and develop strategies
that are tailored to the unique needs and preferences of those customers. This
may involve adapting its store formats, offering a wide range of products and
services, and leveraging technology to enhance the customer experience

3. Investment in new ventures

Investing in new ventures is an opportunity for Amazon to diversify its revenue

streams and drive growth. This can involve investing in or acquiring companies in
complementary industries, such as cloud computing, advertising, or healthcare, to
expand their capabilities and reach.

Investing in new ventures can also allow Amazon to take advantage of emerging
trends and technologies, such as artificial intelligence or the Internet of Things, to
create new products and services. This can help the company stay ahead of the
competition and maintain its position as an industry leader.

4. Planned Entry into Crypto

One of the main ways that Amazon plans to enter the cryptocurrency market is by
offering cryptocurrency payment options for its products and services. This would
allow customers to use cryptocurrencies, such as Bitcoin and Ethereum, to
purchase products on the Amazon platform.

Offering cryptocurrency payment options could help Amazon attract new

customers who are interested in using cryptocurrencies for online payments. It
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could also help the company capture a larger share of the e-commerce market as
more consumers begin to use cryptocurrencies for online payments.

5. More acquisitions

Acquiring complementary companies is an opportunity for Amazon to diversify its

product offerings, expand its capabilities, and drive growth. This can involve
acquiring companies in related industries, such as e-commerce, technology, or
logistics, to create synergies and leverage the strengths of those companies.

Acquiring complementary companies can also help Amazon enter new markets
and customer segments, as well as bring new talent and expertise into the
company. This is particularly valuable in fast-changing industries, where staying
ahead of the competition requires continuous innovation and adaptation.

Amazon Threat
1. Intense competition

Amazon faces intense competition from both online and offline retailers
like eBay and Walmart, which can impact its market share and profitability.
Competitors can range from small startups to large, well-established companies,
and they can offer similar products and services at competitive prices. To succeed
in this competitive environment, Amazon must continually innovate and evolve its
business model to maintain its competitive advantage and attract customers.

2. Regulatory issues

Regulatory issues are a potential threat for Amazon, as the company has faced
regulatory scrutiny in various markets. This can create risks and challenges for the
company, as it may be required to make changes to its business practices or pay

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fines or other penalties. Regulatory issues can also damage the company’s
reputation and impact its ability to operate in certain markets.

3. Cybersecurity threats

As a company that handles a large amount of customer data, Amazon is

vulnerable to cybersecurity threats, which can create risks and challenges for the
company. Cyberattacks can result in the compromise of sensitive customer
information, such as personal and financial data, which can lead to lost customer
trust and potential legal liabilities. To protect against cybersecurity threats,
Amazon must invest in robust security measures, follow AWS security best
practices and continually monitor and update its systems to stay ahead of
evolving threats.

4. Economic recessions

This is a threat to Amazon, as it can impact consumer spending and result in

decreased sales and profitability for the company. During times of economic
uncertainty, consumers may be more hesitant to make non-essential purchases,
which could negatively impact Amazon’s sales. Additionally, economic downturns
can also lead to increased competition as companies try to maintain market share,
which could further impact Amazon’s profitability.

5. Natural disasters

Natural disasters, such as hurricanes or earthquakes, can pose a threat to

Amazon’s operations and supply chain. These disasters can disrupt the company’s
ability to fulfill orders, as well as damage its warehouses, transportation networks,
and other infrastructure. This can lead to delays in delivery and customer
dissatisfaction, which can impact Amazon’s sales and profitability. To mitigate this

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threat, Amazon must have contingency plans in place to handle natural disasters
and ensure that its operations and supply chain are as resilient as possible.

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BCG MATRIX

The BCG matrix is a strategic management tool that was created by

the Boston Consulting Group, which helps in analysing the position of
a strategic business unit and the potential it has to offer. The matrix
consists of 4 classifications that are based on two dimensions.
Strategic business units with high market growth rate and high
relative market share are called stars. Strategic business units with
high market growth rate and low relative market share are called
question marks. Strategic business units with low market growth rate
but with high relative market share are called cash cows. Lastly, the
strategic business units with low market growth rate and low relative
market share are called dogs.

The Boston Consulting Group (BCG) growth-share matrix is a graphical

planning tool for a company's products, services and stand alone business
units to assess their standing and growth chances in the market. The basic
purpose of a BCG matrix is to determine which units require investment for
further expansion and growth and which units are self sufficient or not
worthy of investments. The BCG matrix has market growth rate at the y-
axis and market share at the x-axis. Let us analyze the BCG matrix of
Amazon to understand the scenario better.

2. Background of Amazon

Amazon was founded in 1994 by Jeff Bezos based in Seattle. Amazon was
first launched as an online bookstore but the business model was so
appreciated that gradually it moved on to become the world’s largest e-
commerce store with a huge variety of products. It deals in books, music,
films, household products, furniture, digital products, gadgets, garments and
what not. Amazon has another business unit that deals with Amazon's digital
service like Cloud and AWS etc.

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3. Amazon BCG Matrix

The BCG matrix of Amazon com helps us understand the current position of
different products and services in the Amazon business model and we can
also see the business level strategies for its business units.

A BCG matrix is categorized into four types of products based on the market
share and growth potential. These four types are dogs, stars, cash cows and
question marks.

Source: EdrawMax Online

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3.1. Dogs

The dogs are the products in the BCG Matrix that are not generating high
sales and also do not have a noticeable market share. These products in turn
do not generate revenue but use the cash investments that is why these are
called the cash traps. In the BCG matrix of Amazon, we can observe that
mp3 is a dog product because it doesn’t have significant market share and
the industry is also growing very lazily.

Amazon's physical stores are also categorized as the dogs for the company
because they are the least competitive in terms of market share. They
represent only about 0.015% of market share which is almost negligible.

Amazon Alexa can also be categorized as a dog in the Amazon BCG matrix
because its market that was a whooping 80% in 2017 is shrinking and
showing negative market growth.

3.2. Stars

Stars are the products that hold a high market share and are emerging as
promising revenue generators for the company. Investment in such products
can yield good growth and profit perspective and a chance to become cash
cows.

Amazon's claim to fame is definitely its online store called Amazon.com. It

generated around $108 Billion in revenue in 2017. This ROI with the high
growth rate of the market shows that this section is a Star in the BCG matrix
of Amazon.

Amazon's AWS and cloud segment is also showing growth potential and the
market is also becoming attractive. But AWS is kind of swinging between
stars and question marks because of many new stakeholders in the market.

3.3. Cash Cows

Cash cows are the products that bring in handsome revenue for the
company. In this case the market is very mature and it can support high sales
and high demand from the consumers. Sometimes, the prospects of growth
in the respective market is low because of an already mature market but the
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current standing of the products sustains its ROI and cash cow status.
Amazon's e-books division is a lucrative cash cow for the company. Amazon
has its native e book reader called kindle and it has supported the
company's ROI a great deal. Audio books and movies on demand are other
additions to cash cows in the BCG matrix of Amazon. , Question Marks

3.4. Question Marks

The fourth quadrant in the BCG Matrix is question mark products. The
products falling in this quadrant are still in the development stage, and the
market's response to these products is still not very well established. These
products can grow into a profitable business but the limited market share
means the ROI is very low so these products do not have the potential of
becoming cash cows.

Since, the industry in this case still shows promising growth potential, The
industry is still in the growth phase, therefore, if the company works on the
question marks, they can become Stars of the company. In the Amazon BCG
matrix, video on demand can become a question mark because of limited
growth in this segment.

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Source: unsplash.com

4. Limitations of BCG Matrix

Though the BCG matrix is a popular business planning and analysis tool, it
has some limitations that affect its potential benefits. The first and the
foremost limitation is the scop of this matrix. As we can see in the BCG
matrix of Amazon, we are using this tool for analyzing different products of
one company based on market share and growth rate. However, it was
actually devised to study the business units owned by one group. So, the
dynamics of production units or factories are very different from the
products.

Secondly, BCG is a very simple matrix which is an attractive feature but

then , this over simplicity is a cause of reservation because many other
factors also determine the market dynamic and growth in the market, e.g.,
geographical demographics, brand power, competition, etc. So, a decision
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based solely on the BCG matrix has a weak foundation. Also, this matrix does
not take the gray areas into account. So, the market share can be either high
or low but not medium and you can also not consider many relative
measures.

So, we can conclude that BCG is an important matrix but cannot be used
individually to make critical decisions.

5. Key Takeaways

BCG matrix helps business analysts and management to assess the

investment options and the growth potential of their products based on
market share and growth predictions. In the BCG matrix of Amazon, we can
see that Alexa started off as a cash cow and is rapidly turning into a dog
because of tough competition from Google. However, video on demand is
still a question mark and we have to see if it becomes a star or a dog for the
company.

A dedicated drawing software such as EdrawMax is the best option to draw

BCG matrices because with the support of the exclusive symbols, clipart, and
great tools and layout options, you can make an aesthetically pleasing and
functionally sound BCG matrix within minutes. It is even better to use the
professionally designed samples in the templates library to get a quick start
for business planning and analysis diagrams.

Porter 5 forces analysis

Porter's five forces model is an analysis tool that explains the competition
and profit margin in the industry using five forces. These five forces
determine the level of competition in that industry using factors like barriers
to enter, buyers' and suppliers' bargaining power, substitute products, and
so on. Amazon is a leading eCommerce business so let us analyze Amazon
Porter's five forces to see how it is doing in the industry.

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2. Background of amazon

Amazon was founded in 1994, it was initially a bookstore, but later it

diversified itself into a complete eCommerce and cloud computing business.
Amazon deals with a very large range of products, including books,
electronics, computers, garments, food, toys, furniture, etc. It also produces
personal electronics like Kindle, smartphones, and tablets. The services
section of Amazon's business deals with cloud services. With this
background, let us review Amazon porter's five forces to analyze the forces
acting upon them.

3. Amazon Porter's Five Forces

Amazon is the giant and a market leader in the e-commerce industry. But its
position is always in danger because of the intense competition; hence,
Amazon works hard to maintain its brand image. It especially focuses on the
customer experience and making its products and services more user-
friendly. So, let us analyze Amazon Porter's five forces model to see how the
industry affects Amazon and how it deals with it.

 Competition in the industry (Strong force)

 The threat of new entrants (weak force)
 The bargaining power of suppliers(moderate force)
 The bargaining power of customers(Strong force)
 Threat of substitute products or services(Weak Force)

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Source: EdrawMax Online

3.1. Competition in the industry (Strong force)

Amazon operates in a very competitive market, and the Amazon

competitors' analysis shows that the rivalry in the online retail market is
increasing very rapidly. The number of players in the market is increasing,
and small-scale brands and startups are making their place because of low
switching costs. Amazon faces throat-cut competition from Walmart,
Flipkart, Alibaba, eBay, etc. However, Amazon enjoys economies of scale and
large investment options.

3.2. The threat of new entrants (weak force)

Amazon is a giant in the market, and it has a very strong brand image. Also,
it enjoys economies of scale and large warehousing and delivery facilities.
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Since it is a large-scale company, it has a massive investment in eCommerce

solutions, customer services, logistics, and marketing. So, it is rather
challenging for any company to beat this brand image and make its
prominent place in the market. However, small-scale companies can grab a
limited segment of customers because of low switching costs. So Amazon
Porter's five forces analysis shows that the threat of new entrants is a weak
force with no substantial setback for Amazon.

3.3. The bargaining power of suppliers(moderate force)

Suppliers control the availability of products for the eCommerce operations

of Amazon. Also, Amazon relies on the equipment and hardware
components for information systems in cloud services. In Amazon Porter's
five forces analysis, the bargaining power of suppliers is a moderate force.
The contributing factors to this force are small suppliers, moderate forward
integration, and the size of suppliers.

However, Amazon dictates the supply chain because of its large business and
ease of switching suppliers.

3.4. The bargaining power of customers(Strong force)

The bargaining power of buyers in Amazon Porter's five forces model is

medium to high. Amazon's success is based on customer satisfaction and
product quality. Though switching costs for the customers are very low,
substitutes have emerged in large numbers. Customers have access to
general information about products and services that different suppliers
offer, making it easy for them to find alternatives.

3.5. Threat of substitute products or services(Weak Force)

Amazon Porter's Five Forces Analysis shows some forces in the threat of
substitute products and services. These forces are low switching costs, high
availability of substitutes, and low cost of substitutes. The low switching
costs mean customers can easily choose a customer without any extra cost.
So, if they buy from Walmart or Amazon, they do not pay any extra cost.
Then many low-scale substitutes offer low-cost substitutes. So, Amazon is
continuously fighting against these substitutes to maintain its leadership
image. But Amazon's brand image is a successful shield against these
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threats. Also, its infrastructure, distribution, warehousing network, and

service quality are hard to beat.

Source: unsplash.com

4. Strategies for Success

After Amazon Porter's five forces analysis, we can now see the success
strategies that Amazon employees use to maximize its profits and maintain
its brand image. The strategies for success we have identified are cost
leadership, differentiation, and focus.

1. Cost leadership
2. Differentiation
3. Focus

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4.1. Cost leadership

Amazon's most successful business strategy is cost leadership, and it gains a

competitive advantage through price, convenience, and range. Since the
profit margins are very less, Amazon counts on its widespread distribution
network, warehousing, economies of scale, and a wide customer base. All
these factors help Amazon to procure products on higher profit margins.

In the future, Amazon can also increase its customers and sales using the
cost leadership strategy, and it can offer more deals and sales to attract
buyers.

4.2. Differentiation

Amazon has built its brand on the successful strategy of differentiation. It

differentiates itself using cutting-edge technology, human resources, easy-
to-use websites, and cloud services. Amazon has software support and
algorithms for swift delivery, warehousing, product listings, and so on.
Amazon's services business in itself is a pioneer in cloud storage products.
Also, electronics and gadgets production can benefit from more advanced
products and features.

4.3. Focus

Amazon has many business tracks, including a retail eCommerce store, a

cloud services business, and an electronics gadget production track. Focus
strategy means focusing on a narrow and specific segment in the market.
Amazon can reap the benefits of focus by developing products for
geographical locations, the elderly, children, etc.

5. Key Takeaways

Amazon Porter's five forces analysis shows that this company has a strong
force of competitors and bargaining power of customers because of low
switching costs and high availability of substitutes. The other weak to
moderate forces acting on Amazon are suppliers' bargaining power, the
threat of new entrants, and the threat of substitutes.
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