Five Forces Model of Amazon

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Ebusiness Individual Assignment Chong Lok Yee 53082125 T12 Method 1 only Porter’s Five Forces Model for Amazon The threat of new entrants: The threat of new entrants to Amazon is moderate. 1. Many firms, like Amazon, Ebay, and Argos are currently enjoying the economies of scale as they have expanded a large scale production, having limitless quantity and parameters of goods online and acquiring large customer base due to network effect. So, they can sell products at a lower price than the new entrants without influencing the profit margin. 2. Many existing firms are differentiated. Like Amazon has established the most “customer-oriented” retail services, providing personalized recommendation, and product reviews. As for Ebay, it has a great variety of products; claiming to have a category variety not matched by any competitors with over 27000 and it also enjoys a competitive advantage as an online auction pioneer. Taobao is also differentiated by its familiarity in Chinese culture, offering no transaction fee and Chinese-style web interface that makes it to be outstanding in China. With the respective differentiation and built up customer loyalty, new entrants have to acquire very extraordinary feature to compete. 3. Although the capital requirements for a start-up firm are medium due to the mature stage of web technology, to compete with key competitors, a start-up company has to have high investment in property(, like building many distribution centres), technology( information management in customer data,etc.) and the high level of inventory. 4. Many existing firms have access to distribution channels, which adds barriers to new entrants. Like Amazon, it has developed an extensive global distribution network with 89 fulfillment centers around the world for shipping and warehousing. Ebay has acquired GSI Commerce to improve its

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