Amazon is a conglomerate that offers e-commerce, digital streaming, cloud computing, and artificial intelligence services. The company started as an online retailer, and until today this direction is the main one for its business. It is noteworthy that the number of subscribers to the company’s delivery service exceeds 100 million people, and the number of buyers probably covers at least half of the world’s population. This paper aims to critically analyze Porter’s five forces’ impact on the Amazon business.
It’s no understatement to say that Amazon is virtually immune to the threat of new entrants. Even though online trading is open to everyone and there are no significant barriers to entry into this market Amazon’s incredible size and sales volumes make it difficult to compare the company with other smaller players (Francini-Filho et al. 142). The company may be threatened by other conglomerates such as Google and Apple or new players funded by investors who could create an analog of the marketplace. However, even if such an analog appears, Amazon is unlikely to lose its position, given the extremely high level of loyalty among its consumers and the number of potential buyers globally.
The bargaining power of buyers may have a moderate level of threat to the company. It is noteworthy that today many companies are as flexible as possible to satisfy the interests and needs of consumers. Many businesses fulfill customer requirements based on market research and taking action, such as launching advertising campaigns to convey information about the features of a product or service or reforming certain services. Companies are also trying to reduce prices for their services as much as possible to attract customers. Notably, Amazon provides such an opportunity for buyers, giving them the best price for the product. In other words, Amazon responds adequately to the tasks associated with the bargaining power of buyers.
The bargaining power of suppliers concept describes how dependent a company is on the business decisions of the suppliers. For example, if a company does not manufacture its products but sells goods from suppliers, a change in the price of bulk purchases will inevitably affect the final price and harm the intermediary’s business. At the same time, suppliers, understanding the dependence of distributors on their business, can dictate their terms, for example, regarding the choice of specific locations for sale and other factors. In the case of Amazon, its dependence on vendors is fully offset by the number of suppliers and the size of the platform. As the world’s first online marketplace, Amazon has successfully turned the tide in its favor so that vendors are now envious of the company, not the other way around.
The threat of substitute products and services is low since Amazon is a monopolist in the marketplace market in the United States and globally, except for another major player – Aliexpress, which is focused on the markets of China, Russia, and Europe. The intensity of rivalry among competitors in an industry is also low when considering online trading. At the same time, Amazon has many significant competitors in the technology space. However, the primary importance of online commerce for the conglomerate’s business should be considered. Various ramifications, such as cloud computing and artificial intelligence, are likely implemented rather as part of the diversification of services to reduce competition by reducing market rigidity.
Thus, Porter’s five forces’ impact on the Amazon business was critically analyzed. Four out of five threats pose no problems to a company that has been successfully addressing its business challenges in the US and global markets for a long time. The only threat may come from buyers’ bargaining power, so Amazon must constantly conduct market research to respond to buyers’ demands promptly. This makes the company somewhat dependent on current trends and leads to a situation where one of the main areas of its activities is to satisfy the whims of customers.
Francini-Filho, Ronaldo B., et al. “Perspectives on the Great Amazon Reef: extension, biodiversity, and threats.” Frontiers in Marine Science 5 (2018): 142.