Strategic research of Amazon.com Essay

This strategic research paper is dedicated to Amazon.com. At first, Amazon was an online bookstore, started by its founder Jeff Bezos in 1995, but later the company diversified.
Nowadays among the Amazon ‘s product lines are: books, music CDs, videotapes and DVDs, software, consumer electronics, kitchen items, tools, lawn and garden items, toys & games, baby products, apparel, sporting goods, gourmet food, jewelry, watches, health and personal-care items, beauty products, musical instruments, clothing, industrial & scientific supplies, and groceries.
Amazon’s 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. By giving customers more of what they want: low prices, vast selection, and convenience; Amazon.com continues to grow and evolve as a world-class e-commerce platform.
In my opinion, the company is following its mission. It’s positioned as global customer-centric company where virtually anything that people are looking for can be successfully found and ordered.
It should be emphasized that despite the high level of diversity, the company has kept its strong brand name. (Amazon’s Growth to Continue, 2010, Oct. 22)
External assessment of Amazon.com, with a usage of Porters model
According to Michael Porter five forces influence the industry. In order to understand the context of the industry, organization leaders should use Porter’s model.
The first force is rivalry. The rivalry is usually measured by competitors’ concentration. (Porter M., 1998). I can make a conclusion that in Amazon’s case this force has an average influence. A large market shares are held by only a few big companies, such as Barnes & Noble and Borders (if we are talking about the US market).
Talking about Amazon’s competitors, I would note that the company a very strong and aggressive leadership in its category. Despite it, other companies, like Barnes and Noble or Borders, can use its experience and extend their markets in the same way that Amazon.com did.
Let’s begin the analysis of Amazon’s competitors with the largest US book retailer Barnes & Noble. It mainly operates through Barnes & Noble bookstores chain with Headquarters in NY; although it’s also has a web presence (http://www.barnesandnoble.com/), which offers books, eBooks, magazines, toys & games, music, DVD and Blu-ray, video games, and related products.
It is know that Barnes & Noble was named a leader in eBooks industry in 2009. The company has a competitive advantage of vast chain of warehouses across the US, therefore there is a stock of over 1 million titles that are available for immediate delivery to the customer. The company says that it’s actually more titles than any other online bookseller has in stocks.
Barnes & Noble is a quite strong competitor for Amazon. For example, it’s music store has been named the best online music store according to Forbes.com.
The company also has added new product lines, such as items for the office, electronics; toys & games, magazine store, etc. (About Barnes & Noble.com, n.d.)
As for the other potential competitor of Amazon, Borders company, an international book and music retailer based in Michigan, it doesn’t influence the competitive situation much, I’m afraid.
In 2010 the company operated 511 superstores in US and web commerce was offered through borders.com. But, unfortunately, it was announced that Borders had filed for Chapter 11 bankruptcy protection in February 2011 and the company faces the liquidation and closing of 226 stores nowadays.
So we can conclude that there is no substantial risk for Amazon from Borders side , because the company’s attention will be concentrated on its financial problems and the strategy will not be aggressive (at least within the next few years). The major competitor for Amazon is Barnes & Noble for sure. Barnes & Noble’s main competitive advantage is the strong presence both brick and mortar and on the internet.
The second force is the threat of substitutes. Threat of Substitute is actually the influence of the products outside the industry. (Porter M., 1998). In Amazon’s case a traditional trade can be considered as the main substitute for the web commerce and its impact can be made through price competition. As far as brick and mortar in the most cases suggest the higher prices, therefore I consider that the risk of substitutes for Amazon’s commerce is quite low.
The third Porter’s force is the buyer power. I presume buyers have a great impact on the web commerce in general, so this force is strong.
The supplier power, the fourth force is average, because Amazon has good buyer-supplier relationships and also because there are many suppliers in web commerce market.
Finally, the last force is barriers and threat of entry. It’s also average for web commerce industry. In general, it’s not complicated to establish the web business, but we should take into account one of competitive advantages of Amazon company which is its infrastructure. Amazon has unique web platform which provides high inventory turnover and fast shipments that company’s competitors just can’t replicate.
Market penetration, market development and product development
Amazon has a strong market penetration and development in the US, Europe and Asia region.
Some analysts insist that Amazon should focus on improving it performance and market penetration in China, as it has one of the largest consumer markets in the world and has the potential to grow even larger.
SWOT analysis
Among the strengths of Amazon Company following elements can be defined:
Profitability;
Recognizable brand image;
Customer’s loyalty to the brand;
Constant innovation (it’s hard for giant companies to launch and sell new products, but Amazon is doing great);
Smart product diversification;
Infrastructure;
Leading position in on-line retailing of media products ;
Strong customer relationship management system (CRM), which helps customer offering specific range of items, based on his/her previous Amazon buying experience.
In regards to Amazon’s weaknesses, next elements can be named:
New product categories/businesses development risks;
Free shipping can cause a financial losses in some cases;
Dependence on external delivery companies may cause problems with customer services
Among the opportunities for the Amazon I can indicate the following:
Amazon’s growth story. According to the web commerce analysts, the increase of web commerce in US by 2015 will be huge and the raise will be approx. 43%. The other forecast is that three-quarters of the web users will purchase the products online. And we have to mention prognoses of enormous growth in global markets; therefore, company invests in European and Asian regions; (Taulli T., Mar. 30, 2011)
Joint ventures development, successful cooperation with partnering companies (for example, Marks and Spencer);
New collaborations with the public sector (libraries, etc.);
Exclusive author rights purchasing, thanks to specialist relationships with publishing houses
And finally, the threats for the Amazon are:

Managing company’s growth. It’s rather a potential risk that may be caused by problems with new businesses, acquisitions and investments into foreign markets. So far everything is good for Amazon, but the situation may change;
Secondly, despite of Amazon’s strong innovation culture, it faces challenges in keeping up with new markets and approaches;
The next potential risk is a sales tax. Sales tax is not collected by Amazon, that is one of the major competitive advantages; therefore it helps the company to maintain its lower prices (it’s an important factor, because Amazon’s margins are at the very low level now). There is chance of legislation change (charge might be imposed on online affiliates, Amazon’s partners); (Taulli T., Mar. 30, 2011)
Potential competitors entry and difficulties in differentiating the brand from its competitors are risks as well;
Developing on-line facilities of traditional trade companies;
Increasing transportation costs
Conclusion
Taking into account the mentioned above information, I would recommend Amazon using the following corporate strategies for next five years of operations: concentrated growth, markets and product’s development and innovation. (Lowson, R. 2002)