Amazon

The analysis shows that threat of new entrants relatively low, considering previous high entry cost, required investments and equipment. At the same time, internet facilitates market entry easier and allows customers to compare prices of new e-retailers. But ultimately, e-commerce giants like Amazon.com possess advantage over potential competitors in terms of experience, resources, more customers, greater brand recognition and usually react aggressively towards new entrants. In particular, Amazon.com demonstrated very strong ability in detecting potential rivals, which might pose threat to its business and for instance Amazon in 2009 acquired an online shoe store Zappos.com for $ 1.2 bln and rare book seller Shelfari for undisclosed amount. (3)

In contrast, the power of buyers is considered to be relatively high, since customers are able to choose from different e-commerce services, which they can use even from their mobile devices. However, since Amazon does not have physical store and hence offers low prices coupled with good customer service, it manages to use power of buyers to its own advantage.

In the meantime, the power of suppliers is also significant since they can influence the profitability and conditions of ongoing servicing. Amazon.com Inc 2011 Annual report acknowledges the impact the supplier possess, since the company “does not have long-term arrangements with most of its suppliers to guarantee availability of merchandise or services”. This implies that in case of current suppliers “were to stop selling or licensing merchandise, components or services to on acceptable terms, or delay delivery” Amazon “may be unable to procure alternatives from other suppliers in a timely and efficient manner and on acceptable terms”.

Threat of substitute products or services is high, since there are many competitors of Amazon.com in online retailing. But thanks to its continuous innovation in its services and customer-centric organization, Amazon does not...