Case Discussion
Amazon.com is a leading multinational technology company that is based in Seattle, America. It
was founded by Jeff Bezos on July 5, 1994 (Sadq et al., 2018). Amazon's main focus is on the e-
commerce industry, cloud computing, and online retail market. But the company has now
expanded into live streaming and artificial intelligence. Amazon has surpassed its competitor
Walmart to become the most valuable retailer in the United States (Greenspan, 2019).
How has it responded to pressures from its competitive environment? How does it provide
value to its customers?
Amazon.com started as an online bookstore market but quickly expanded into other markets as
well. It has expanded into selling music online and currently it sells a variety of products.
Amazon provided value to its customers in many ways. First, it provides accessibility and
convenience to customers. Currently, there are over 48 million books on amazon available for
customers with broad price ranges (Haines, 2022). Secondly, Amazon has focused on providing
customer-centric service from its beginning.
Customer-centric according to Amazon means, providing a product those customers need but
don't even know they want. This is based on the data collected on their customers and analysis to
identify their needs and patterns. Amazon focuses on delivering services by understanding its
customer's individuality and catering to that feature.
We can analyze Amazon using Porter's five forces. The first is the threat of new entrants to
Amazon and their impact. When we analyze this we should consider three factors. The first is
low switching costs which are encouraging other firms to compete with Amazon. The second
factor is the cost of brand development (Marketing10, 2020).
Amazon has put billions of dollars to create the brand image it has now and it would be very
difficult for a new company to build this type of image easily. The third factor is economies of
scale or its reach. Amazon has high economies of scale making it strong against strong entrants
(Marketing10, 2020). Consequently, we can say that Amazon doesn't have a threat of new
entrants soon.
, The second is the bargaining power of buyers or customers. Amazon's customers have a large
number of substitutes like Walmart with a low switching cost. Additionally, the customers have
sufficient information available to them about these alternatives and the opportunity cost of using
Amazon. Consequently, the bargaining power of buyers could be seen as a real threat to
Amazon.
The third force is the threat of substitutes which is increasing as time goes on. Many businesses
are entering the online retail market and Amazon is facing stiffer competition (Greenspan, 2019).
As mentioned before, there is a low switching cost but even more, threatening is the low cost of
substitutes. The competitors could provide similar products with low prices enticing Amazon's
customers. Hence, this is also a serious issue for Amazon.
Another major force on Amazon is the bargaining power of suppliers. There are small numbers
of suppliers giving them more power to influence or impose their will on Amazon (Greenspan,
2019). However, since they lack forward integration and they are relatively small in size hence
their effect would not be too significant. The final part focuses on the rivalry between Amazon
and its competitors. Amazon has strong competitors like Walmart and moderate competitors like
small brick-and-mortar bookstores that pose a serious challenge (Greenspan, 2019). With low
switching costs and large number of substitutes, Amazon should create strategies to stay ahead of
the competition.
Describe Amazon’s evolving business strategy from the readings above and your own
research. Why did the company change its strategy?
Amazon's business strategy has evolved and continues to evolve. Initially, it focused on
strengthening its brand name, attracting more customers, and building customer loyalty.
However, currently, Amazon's business strategy has widened its focus to include investing in
technology, enhancing logistics, Research and development, and securing its inventions using
patents.
Amazon has realized that by broadening its products and services it can easily expand into other
markets. This is because Amazon has become a trusted name in the industry and built loyal
customers. A survey conducted in the US has shown that 89% of its buyers prefer to buy from
Amazon than other eCommerce sites (Mohsin, 2021). Additionally, Amazon has increased filling
Amazon.com is a leading multinational technology company that is based in Seattle, America. It
was founded by Jeff Bezos on July 5, 1994 (Sadq et al., 2018). Amazon's main focus is on the e-
commerce industry, cloud computing, and online retail market. But the company has now
expanded into live streaming and artificial intelligence. Amazon has surpassed its competitor
Walmart to become the most valuable retailer in the United States (Greenspan, 2019).
How has it responded to pressures from its competitive environment? How does it provide
value to its customers?
Amazon.com started as an online bookstore market but quickly expanded into other markets as
well. It has expanded into selling music online and currently it sells a variety of products.
Amazon provided value to its customers in many ways. First, it provides accessibility and
convenience to customers. Currently, there are over 48 million books on amazon available for
customers with broad price ranges (Haines, 2022). Secondly, Amazon has focused on providing
customer-centric service from its beginning.
Customer-centric according to Amazon means, providing a product those customers need but
don't even know they want. This is based on the data collected on their customers and analysis to
identify their needs and patterns. Amazon focuses on delivering services by understanding its
customer's individuality and catering to that feature.
We can analyze Amazon using Porter's five forces. The first is the threat of new entrants to
Amazon and their impact. When we analyze this we should consider three factors. The first is
low switching costs which are encouraging other firms to compete with Amazon. The second
factor is the cost of brand development (Marketing10, 2020).
Amazon has put billions of dollars to create the brand image it has now and it would be very
difficult for a new company to build this type of image easily. The third factor is economies of
scale or its reach. Amazon has high economies of scale making it strong against strong entrants
(Marketing10, 2020). Consequently, we can say that Amazon doesn't have a threat of new
entrants soon.
, The second is the bargaining power of buyers or customers. Amazon's customers have a large
number of substitutes like Walmart with a low switching cost. Additionally, the customers have
sufficient information available to them about these alternatives and the opportunity cost of using
Amazon. Consequently, the bargaining power of buyers could be seen as a real threat to
Amazon.
The third force is the threat of substitutes which is increasing as time goes on. Many businesses
are entering the online retail market and Amazon is facing stiffer competition (Greenspan, 2019).
As mentioned before, there is a low switching cost but even more, threatening is the low cost of
substitutes. The competitors could provide similar products with low prices enticing Amazon's
customers. Hence, this is also a serious issue for Amazon.
Another major force on Amazon is the bargaining power of suppliers. There are small numbers
of suppliers giving them more power to influence or impose their will on Amazon (Greenspan,
2019). However, since they lack forward integration and they are relatively small in size hence
their effect would not be too significant. The final part focuses on the rivalry between Amazon
and its competitors. Amazon has strong competitors like Walmart and moderate competitors like
small brick-and-mortar bookstores that pose a serious challenge (Greenspan, 2019). With low
switching costs and large number of substitutes, Amazon should create strategies to stay ahead of
the competition.
Describe Amazon’s evolving business strategy from the readings above and your own
research. Why did the company change its strategy?
Amazon's business strategy has evolved and continues to evolve. Initially, it focused on
strengthening its brand name, attracting more customers, and building customer loyalty.
However, currently, Amazon's business strategy has widened its focus to include investing in
technology, enhancing logistics, Research and development, and securing its inventions using
patents.
Amazon has realized that by broadening its products and services it can easily expand into other
markets. This is because Amazon has become a trusted name in the industry and built loyal
customers. A survey conducted in the US has shown that 89% of its buyers prefer to buy from
Amazon than other eCommerce sites (Mohsin, 2021). Additionally, Amazon has increased filling
