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Amazon Industrial analysis
The document discusses the e-commerce industry and Amazon. It notes that the global e-commerce transaction value in 2017 was $667 billion and the major players in India are Amazon, Flipkart, and Snapdeal. Amazon is highlighted as the largest online retailer in the US, with 2017 net revenue of $178 billion. Porter's 5 forces analysis finds competitive rivalry and bargaining power of customers/substitutes to be strong forces for Amazon. The document also outlines Amazon's strategies around cost leadership, customer differentiation, and focus areas.
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Amazon Industrial analysis
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- 2. Introduction E-COMMERCE INDUSTRY •Evolution during1991. •Ecommerce transaction in 2017 is 667 billion dollars •Major players are flipkart, amazon, Snapdeal, Paytm •Contributes 0.2% towards GDP in 2017 Segment Breakup •Travel agencies-71% •Retail and market place-20% •Financial services-5% •Classifieds-4% AMAZON Overview •Headquartered at Seattle, Washington •America’s largest online retailer •Products are electronics, clothing, accessories, books etc •Net revenue in 2017- 177866 million dollars •Net income-3.03 billion dollars •Return on assets-2.3% •Return on equity-28.37% •Competitive advantage- rapid delivery and diminished shipping costs, amazon prime, kindle, amazon drone
- 3. MARKET SHARE ININDIA FIRM 2015 2016 AMAZON 14% 22% FLIPKART 43% 37% SNAPDEAL 19% 15%
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- 5. Competitive rivalry orcompetition (strong force) •High aggressiveness of firms (strong force) •High availability of substitutes (strong force) •Low switching costs (strong force) •The competitors of Amazon are eBay, Alibaba, Flipkart
- 6. Bargaining Power ofAmazon’s Customers/Buyers (Strong Force) •High quality of information (strong force) •Low switching costs (strong force) •High availability of substitutes (strong force)
- 7. Bargaining Power ofAmazon’s Suppliers (Moderate Force) •Small population of suppliers (strong force) •Moderate forward integration (moderate force) •Moderate size of suppliers (moderate force) Some of the core areas that are Amazon’s focus in terms of supplier relationships are as follows: •Health and safety in production areas and any living quarters •The right to legal wages and benefits •Appropriate working hours and overtime pay •Prevention of child labor or forced labor •Fair and ethical treatment, including non-discrimination
- 8. Threat of Substitutesor Substitution (Strong Force) •Low switching costs (strong force) •High availability of substitutes (strong force) •Low cost of substitutes (strong force) The only major competitive advantage of Amazon is its excellent customer service apart from its brand name. The customers can easily switch from one brand to another.
- 9. Threat of NewEntrants or New Entry (Weak Force) •Low switching costs (strong force) •High cost of brand development (weak force) •High economies of scale (weak force)
- 10. Amazon Strategy andPositioning Strategic Position Cost leadership Customer differentiation Focus Strategies
- 11. Strategic Position Amazon hasbeen able to maintain sustainable competitive advantage based on three operational strategies. These are low cost-leadership, customer differentiation and focus strategies. Low cost-leadership is pursued by Amazon by differentiating itself primarily on the basis of price. We believe that offering low prices to our customers is fundamental to our future success. Customer differentiation strategy, Amazon provides current and prospective customers with differentiation through design, quality or convenience by selecting a strategy that is different among the competitors. The focus strategy takes one of the two other strategies and applies it to a niche within the market Based on this, Amazon focuses on outstanding customer service as a niche but not the whole market because each niche has its own demand and requirement.
- 12. Resources based view Amazonsuccessfully identified the right resources and developed its capabilities in key target areas. These investments resulted in: Sophisticated online retailing technologies Personalization features for customers on its websites Reliable and easily scalable IT systems all one platform New products (100 different products in seven major geographic markets) Top customer relationship system State of the art warehousing
- 13. Amazon’s investments arepaying off . Their net sales continue to grow, their cost of goods decreases as % of sales and their net income continues to increase. They continue to invest in initiatives that provide them a longer-term competitive advantage. Amazon’s supply chain management is their core competency which includes customer relationship , supplier relationship management , internal supply chain management and also technology.
- 14. Amazon’s Strategic Steps SCENARIOS •Increasedcompetition from major players like flipkart, eBay, jabong etc. •Amazon is relatively weak at what e- commerce types call discovery. E.g.-spring app •Amazon does not have the power to point customers towards purchases on mobile services like Apple and google. •eBooks startups like Oyster(Netflix service), BookLamp acquired by Apple became a competition for Amazon. •Companies like Square are a threat. STRATEGY •amazon’s biggest strength is its size and idiosyncratic structure; it’s a platform company. •Amazon is fighting the weakness with speed. •Amazon released a phone of its own called the Fire which is a success. •Amazon came up with Kindle which is reportedly account for 6 out of 10 e-book sales. •Amazon Local Register, a point of sale app that replaces cash registers and credit card processors for small businesses.
- 15. Future projects ofamazon Amazon will continue to improve the IT services related the e-commerce and supply chain management. The areas of future development include: •Amazon Elastic Compute Cloud Amazon Elastic Compute Cloud (Amazon EC2) is a web service that provides resizable compute capacity in the cloud. It is designed to make web-scale computing easier for developers. •Amazon S3 Storage Amazon S3 provides a simple web services interface that can be used to store and retrieve any amount of data, at any time, from anywhere on the web. It gives any developer access to the same highly scalable, reliable, fast, inexpensive data storage infrastructure that Amazon uses to run its own global network of web sites. The service aims to maximize benefits of scale and to pass those benefits on to developers.
- 16. •Amazon Cloud Front AmazonCloud Front is a web service for content delivery. It integrates with other Amazon Web Services to give developers and businesses an easy way to distribute content to end users with low latency, high data transfer speeds, and no commitments. •Amazon Fulfilment Web Service Amazon Fulfilment Web Service (Amazon FWS) allows merchants to access Amazon's world-class fulfilment capabilities through a simple web services interface. Merchants can programmatically send order information to Amazon with instructions to physically fulfil customer orders on their behalf. Amazon continues to develop the IT systems related to the support of the Kindle e-book reader. In particular the online Kindle Book Store and the related "Whisper net'" wireless distribution network.
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