Amazon Company Porter’s Five Forces Analysis

Subject: Company Analysis
Pages: 3
Words: 846
Reading time:
4 min
Study level: Bachelor

Introduction

Amazon is a multinational company which activities include e-commerce, logistics, entertainment (streaming media), and web services. According to the company’s statements, its goal is to be the major customer-oriented company globally (‘Who We Are’, n.d.). Amazon has gained fame among its clients and has become a recognizable brand and influential economic force in the world. The current report presents Amazon’s analysis using Porter’s Five Forces, and Osterwalder’s Business Model Canvas approaches to identify areas for improvement.

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Porter’s Five Forces Model

Analysis of external forces affecting the company, particularly the competitive environment, is possible using Porter’s Five Forces model. The most influential forces for Amazon are competition and the bargaining power of customers. The newest available annual report of the company argues for high risks due to significant competition in the field. Amazon identifies nine categories of companies, creators, publishers, vendors, and distributors of similar products and services (‘Amazon Annual’, 2020). More precisely, companies such as Alibaba, eBay, Walmart, Apple, and other competitors can be distinguished (Molenaar, 2021). The threat of competitors is supported by the similarity and availability of the services, which provides an easy opportunity for users to choose one company instead of another.

The described force is also related to one more – the power of buyers. The Amazon’s report notes that the company receives the highest revenue by selling services and products to its customers (‘Amazon Annual,’ 2020). At the same time, people dissatisfied with the services can easily choose alternative companies since there are enough competitors. For this reason, the focus of Amazon’s activities is client orientation. The company has significantly transformed customers’ experience, making them the driving force of its innovations, providing affordable services in many regions, and constantly improving communication with them (Ward, 2021). It is crucial to continue efforts to enhance buyers’ experience to maintain the organization’s popularity.

Osterwalder’s Business Model

The report focuses on three of the nine aspects of Osterwalder’s Business Model Canvas analysis:

  • Value Proposal includes the services and products that the company provides to its customers, what problems it solves and what needs it addresses. Amazon provides an e-commerce platform where entrepreneurs can sell goods at the most affordable price for buyers. These services are closely related to logistics and delivery activities, which the company seeks to improve and accelerate constantly. The company also develops devices and services, such as Alexa, to facilitate customers’ everyday life (‘What we do’, n.d.). Amazon offers web services on cloud platforms and develops in the entertainment sphere through streaming platforms, creating games and applications. The main advantages of the services are speed, convenience, user orientation, and low prices. Therefore, Amazon solves the problems of availability of services and products, the convenience and speed of providing services, and opportunities for various businesses to develop.
  • Customer Segment describes the target audience for the company’s activities (‘Business model’, n.d.). Given that the value proposal of Amazon covers various areas, its customers also include several groups. In particular, they are represented by buyers, entrepreneurs, such as sellers, content creators, multiple organizations, and developers (Chaffey, 2022). The Amazon audience actively uses modern technologies and seeks to save their own time, and therefore the company’s services are relevant for them.
  • Key Activities describe what the company is doing to deliver its value proposal. To provide services, the company is developing its platforms – for sales, streaming, and web services (Palumbo, 2021). Amazon also provides warehouses for sellers’ products, develops its products, and is engaged in research in artificial intelligence. Since the company is focused on consumers, its activities are also aimed at research to improve clients’ experience.

Areas for Improvement

The analysis shows that Amazon operates in a highly competitive environment, depends on its consumers, and its activities are significantly based on the use of technology. As a result, one can highlight several areas that require company attention. A critical aspect for continuous improvement is relations with customers. The company understands their importance and makes many efforts to maintain a high level of work with the clients. Brand image and recognition also play a crucial role and require work to keep pace with competitors and stay leaders. Working on online platforms and the increased number of cybercrimes worldwide emphasize the need to work towards cyber defense. It is important to note that any activity is based on employees’ work, and therefore the company should devote much time and effort to the job satisfaction of its workers. Now Amazon is a solid and influential organization, and to maintain its position, the company needs to develop and improve constantly.

Conclusion

Amazon is large and well-known e-commerce, cloud computing, streaming, and technology development company. A short analysis using Porter’s Five Forces and Osterwalder’s Business Model Canvas demonstrates several areas of the company’s activity that are important to improve and maintain at a high level. The fundamental forces affecting the company are the competitive environment and the bargaining power of customers. The business model covers many areas of activity and, consequently, several groups of clients. Areas that require continuous improvement are user relationships, image, employee satisfaction, and cybersecurity.

Reference List

Amazon annual report 2020. Web.

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Business model canvas (no date) Web.

Chaffey, D. (2022) Amazon.com marketing strategy 2022: E-commerce retail giant business case study. Web.

Molenaar, K. (2021) The top eCommerce competitors for Amazon. Web.

Palumbo, D. (2021) Amazon: The unstoppable rise of the internet giant. Web.

Ward, C. (2021) 5 ways Jeff Bezos transformed customer experience. Web.

What we do (no date) Web.

Who we are (no date) Web.

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