MIS Midterm Exam Yihan Wang
1. Using Porter’s Five Forces Model as a base, discuss how the computer application ‘Amazon’ can be used to help insure business success and maintain a competitive advantages.
Porter’s Five Forces analysis is a framework for industry analysis and business strategy development. The porter’s five forces contain established industry rivals, customers, suppliers, potential entrants, and substitute products.
For Amazon, the rivalries of the Amazon are Barnes & Noble, E-bay, Walmart. For Barnes & Noble and Walmart, they adopt “Brick and click” mode. While Amazon and E-bay adopt “completely online” mode. Especially Amazon has the “one click” patent to attack and retain customers. However, Amazon still face high industry rivalry established bookstores have well customer base, great brand recognition, brand awareness and so forth. Moreover, the established bookstores extend business to the Internet make industry rivalry greater. Also, for the completely online companies like Amazon, E-bay themselves, they have intense rivalry between each other.
The threat of new entrants is high since it is inexpensive to set up an online store compared to set up a physical bookstore. Also, the bookstores can easily expend their business to the Internet since they have resources that obtain their physical store business. However, because the Amazon has “one click” shopping technology and brand recognition make competitors difficult to compete with Amazon.
The bargaining power of customers is high because customers have a lot of choices. For example, if you want to buy a book, you can go to Barnes & Noble, E-bay or other websites, even many physical bookstores. This kind of intense competition makes Amazon price their p...
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...ly. They are willing to put their ads to Google.
The advertising by Google generates about $22 billion a year. These advertising money that Google can offer all various products and services at no charge to users. with the rapid growth in the number of users on the Internet and the advent of mobile telecommunications, google is increasing develop. In addition, Google’s ad targeting is sufficiently robust-many of advertisers will pay a premium to get their ads on Google, and the premium id s substantial. Ads are very targeted to specific interested users. That is clearly made the advertising more relevant to the users. That is a very powerful combination.
In addition to advertising, Google also runs YouTube, Motorola, Android operating system and so forth. They are the other sources of revenue for Google. But Google still, at its core, an online advertising business.
Starting out as solely an online bookstore, Amazon has become the largest online retailer in the world.
Is Amazon a bubble waiting to burst? The following discussions in this research paper will explore several key issues from its birth to its debatable future. Amazon is not a stranger to arguments revolving around questions of its longevity and success. When the systemic bubble of 1999 arrived Amazon’s corporate goal was to get big, to do it fast, and to establish a hold of new markets before any other competitor. During this time frame Amazon began branching out and selling anything and everything. With the burst of the internet bubble in 2000 and 2001, Amazon changed its goal from growth to aggressively making profits in all areas of their business. In 2001, Amazon’s founder and CEO stated in a Wall Street Journal article “We’ll ferociously manage the products we carry so that we sell only products that are profitable. The thirty-pound box of nails isn’t long for our world” (Elmer-DeWitt, 2001).
Amazon.com operates in the Online Retail Industry. The sector is one of the fastest growing globally and is outperforming the ordinary retail marketplace. It was created after 1995 and it was only the Internet that made it possible for such an industry not only to be established but to become one of the most flourishing sectors in the business environment. What is interesting is that Amazon.com, together with eBay is the pioneer in the field. Both companies were launched in 1995 and are still extremely successful. The creation of e-mail in 1996 had a huge impact on the development of online retail by introducing a fast and easy way to communicate with customers. For this two-year period Internet usage doubled annually, thus, allowing for the expansion of the industry. Google is launched a year later, in 1998, only to become the most used search engine in the world and an essential partner for the online retailers by helping them tailor their websites to customer’s personal preferences and by advertising. After that, more and more people see the opportunity in the growing industry and enter it. By 2001 there are more than 513 million Internet users globally, which calls for action in terms of creating regulations and laws to protect the users and personal property. In 2003, Apple launches iTunes, and provides a platform for low-cost digital downloads. Another major change is the appearance of social media from 2004, which is one of the biggest influencer on the state of the industry. With the launch of iPhone in 2007, this trend strengthens as people get to enjoy the Internet anywhere they want to. From then on, technological advancements have made it extremely easy and fun to shop online, making it ...
Amazon has more warehouses than any other online retail sites. They also have them spread out all over the world in more countries than any other online retailor. This gives them a competitive advantage because they are able to get the product to the customer quicker and most of the time overnight even. This is certainly a sustainable competitive advantage for Amazon because it is not a resource that will go away or that fluctuates on price or availability.
The objective of this case study is to outline and provide a brief overview of Amazon.com’s (Amazon) mission, strategic direction, core competencies, relied technologies and their future impact of new technologies, and how management and use of consumer data will impact future business.
Porter’s competitive forces model includes five forces that need to be analysed. These forces include the intensity of rivalry from traditional competitors, threat of new market entrants, threat of substitute products and services, bargaining power of customers and bargaining power of suppliers (Laudon & Laudon, 2007). See diagram below;
One of the greatest opportunities for Amazon is an Online Payment System. The online system allows the company to reduce transaction fees and increase ease of use for their customers. Internet sales are increasing at a fast pace. This is a product of increased fuel prices, which make driving to a store less likely, and foreign purchases. This development allows foreign purchases to buy clothing as it becomes more popular abroad. Amazon’s biggest competitors can include retail stores that online stores such as Target, Best Buy, and Walmart among others, these can be considered the most dangerous for them since they have strong market share and can be a direct competitor since they attack the same market. Amazon wish to compete in prices, offering
The Porter five forces model (see Appendix 1) as an external analysis tool was established by Michael E. Porter and firstly announced in his book “Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980 . The main idea of the Porter five forces concept is that the attractiveness of a market depends on the characteristic of the five competitive forces that have an impact on a company (see Appendix 2).
When Amazon.com first began in 1995, as strictly a book retailer, Bezos knew he had discovered an excellent company. After all, a physical bookstore cannot stock anywhere close to the number of books Amazon can offer online. Within a year, the company had a customer base of approximately 340,000 consumers and daily site visits were huge as well. But Bezos wanted to expand the company to offer music and DVDs, because he realized there was little or no barrier of entry. In the next years Amazon would emerge as a marketplace, expanding the company globally offering products from toys to kitchenware. Because of the relatively cheap prices Amazon was offering and also the growing number of online shoppers, the company was doing tremendous amounts of sales and creating profits.
Amazon.com was a venture into an emerging market of internet and had to face hidden and unexpected hurdles in order to survive and excel in the market. Therefore, Amazon.com kept modifying its strategies with their focus on enhancing customer experience of online shopping and to delivery exceptional services with complete convenience to their customers. One of the major strategic decisions was to compromise on cost saving stragegy when Amazon.com started to maintain its own warehouses in different countries in order to ensure timely and accurate delivery to their customers
Google Inc. is a company that started in 2002 and has gradually grown to become an international technology company. Google’s business is mainly focused around vital areas, like advertising, search, operating platforms and systems and platforms, hardware products and enterprise. The company produces its revenue mainly by distributing online advertising. Google also produces revenues from Motorola through selling products. The company offers its services and products in over 100 languages and in over 50 regions, territories and countries. The company assimilates various features in its search service and gives dedicated search services to aid users modify their search. Google also gives product-listing advertisements, which comprise of product information, like price, merchant information and product image without needing ad text or extra keywords.
Amazon is a growing and trending brand, giving consumers the unique shopping experience they have always wanted. The company that was started by 1999 man of the year, Jeff Bezos, has taken 44 percent market share in online sales and purchases. (http://bloomreach.com/2015/10/survey-amazon-is-burying-the-competiton-in-search/) That makes consumers more inclined to search for products through Amazon, before the well-known search engine powerhouse, Google. The Seattle, Washington based company was started in 1995. During the well-anticipated start-up, the company’s focus was on book sales online. Over time, Amazon has set many trends in Consumer Behavior, expanding products across every product pool imaginable. "Amazon.com puts the customer
Amazon’s customer philosophy can be traced from a letter extracted to the 1997 Annual Report that stated their focal points by offering customers products that they think is worth buying. Amazon tries to set apart their operations by suggesting extraordinary way in doing transaction and start by offering online books whereby they can get access to it anytime they want. Other value-added offers include 1-ClickSM shopping, customer’s gift certificates and immensely reviews, browsing options, content and suggested features. Amazon strategy focuses on reducing the price. Thus, increase the customer value. Amazon became the market online bookselling leader by encouraging customers repeating purchases through the advertising strategy that is proven effective which was word of mouth approach.
Amazon has recorded a magnificent success in its business throughout the years that it has been in operation. It has attracted almost all people to use it when necessary. Amazon has built its success in business methodically and slowly. Amazon has made much success because of its ability to read market trends and diversify its operations. It started as an online book selling company. However, it changed its operations and started selling other products. Currently, many large retail shops use Amazon to host and power their websites, for instance, sears and virgin megastores. Amazon now attracts over fifty million visitors in a period of one month. Amazon has tried to make their services fit each individual user. It has based its services on the end user. It has shipping discounts, customer product reviews and a credit card with bonuses. It also has prime membership, product forums and 1-click ordering system among other services. The company has tried to make a remarkable experience for customers and visitors (Thomas, 2006).
Porter’s five forces is a framework for analyzing an industry and business strategy development. It looks at forces that determine the competitive intensity of an industry and hence the overall attractiveness of that industry. The configuration of the five forces differs by industry. Understanding the competitive forces and their underlying causes reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition over time.