Summary of presentation
Amazon.com is the worlds largest ecommerce retailer founded by Jeff Bezos. The site formally opened to the world in 1995(Quittner). It has separated retail websites for countries like United States, United Kingdom, Germany, Canada, Spain, Italy, France, Japan and China; and its product lines include books, music, DVD, MP3 downloads, electronics and computing, software, home and garden, toys and games, baby, DIY and tools, health and beauty, shoes and accessories, etc., (Amazon.com).
In 2010, Amazon.com made more than 10% of online retail sales in North America (Watson, 2011); and in 2012 in the UK, it received top customer satisfaction marks (Deatsch, 2012). PESTEL framework is used to analyze external environment and the issues facing Amazon. Firstly, politics highlights the role of governments. Actually, government policies could be considered as a double-edged sword. For Amazon, it has been benefitted from the UK governments e-commerce promoting policy on one hand (BBC News, 1999), and its prices and span were affected by Massachusetts State governments online sales tax policy on the other hand (Cohan, 2012).
Secondly, economic reasons mainly refer to macro-economic factors such as GDP rates. In a high GDP environment, people work hard and spend hard; on the contrary, people spend less in low GDP environment. In a high GDP environment, people want books they will buy; in a low GDP environment, people check books out of libraries (Gertner, 2010). Although it is not a particular rule for Amazon, undoubtedly, GDP rates do affect Amazons sales. Thirdly, social influences usually indicate changing culture and demographics. However, in my opinion, social environment must be considered as a vital factor as well. For instance the local strikes may influence the shipping and even reputation of Amazon (Roberts, 2009). Next, technological factors stand for innovations such as the internet.
Since the core aspects for Amazons consumer business are remained as technology (Stockport), Amazon always face challenges to find innovative ways to improve its services under the fast changing technological environment. Next, environmental influences refer to green issues such as pollution and waste. There is a growing trend towards protecting trees that affects the productions and services provided by Amazon. In order to reduce the consumption of traditional paperback books, Amazon has brought out it original wireless reading device: Kindle (Anon., 2010). Finally, legal influences include legislations and trade regulations. For Amazon, since it is operating world wide, legal factors are mainly about different trade laws in different countries that Amazon must abide by.
Porters five forces are used to analyze competitive threats of Amazon. The threat of entry is considered as low because it is hard to establish another company like Amazon; and Amazon has a high satisfaction with customers loyalty (Deatsch, 2012). The threat of substitutes for Amazon is very high. It is not surprising that some people may feel more comfortable to buy books in physical bookstores or to borrow books from libraries. Besides, most of the companies have on-line stores, and those stores can replace Amazon to some extent. The power of buyer for Amazon is extremely high since people can buy things (not only books) in different ways and from different stores, and the switching cost is zero.
The power of buyer forces Amazon to provide goods and services in low enough prices. The power of supplier is medium high. Since Amazon has numerous suppliers, no individual supplier can monopolize Amazons inventory. However, suppliers at the same time have a higher power. If the suppliers want to compete with Amazon, they can provide lower prices and refuse to supply. The extent of rivalry between competitors is high, as a result of Amazons numerous direct and indirect competitors.
To sum up, I attempted to explain why the threat of entry was considered as low in the presentation. I argued that Amazons superiority can be recognized as its differentiation, which could reduce the threat of entry as well, and it is one of the key point of Amazons successes.