Overview

Who is Amazon?
History Global Expansion Company Mission & Principles The e-commerce Industry Porters 5 Forces Threats and Opportunities Application of Technology Competitive Strategies

Who is Amazon?
An American e-commerce (Internet) company who is a market

leader in Internet retail.

Founded in 1994 by Jeff Bezos in Seattle, Washington It operates in many countries (United States, Canada, Germany,

France, Japan, United Kingdom, China, Japan, India, Singapore, South Africa, Cost Rica, )
It has fulfillment centers in 9 US States
Customer services centers in three States

When it Began
1994

Incorporated in Washington
1995

Began service by selling books online

1996

Reincorpor ated in Delaware

1997

Issued initial public stock

Amazons Global Expansion

1998:
Acquired bookpages.co.uk (Amazon UK)

2004
Acquired joyo.com, a Chinese e-commerce website

2006 Amazon installed its European Headquarters in Luxembourg

2007
Acquired dpreview.com, a London based digital photography

review website
2008
Acquired AbeBooks (based in Victoria, British Columbia )

Amazons Mission Statement

To be earth's most customer centric
company; to build a place where people can come to find and discover anything

they might want to buy online.

Amazons 3 Main Principles

Customer obsession: start with the customer and work

backwards
Ownership: think long term and dont sacrifice long-term

value for short-term results

Invent and Simplify: look for new ideas from everywhere,

and are not limited by not invented here.

The e-commerce Industry

Encompasses the buying and selling of

products or services over the Internet and other computer networks

Employs innovations such as electronic fund

transfer, Internet marketing, supply chain management, online transaction processing, electronic data interchange.

The e-commerce Industry (Continued)

1979: Michael Aldrich invented online shopping

1990: Tim Berners-Lee writes the first web browser, Worldwide Web,

using a NeXT computer.

1995: Amazon.com was launched

eBay is founded by Pierre Omidyar as AuctionWeb

2002: eBay acquired PayPal for $1.5 billion 2003: Amazon.com posts first yearly profit 2009: Amazon.com acquired Zappos.com for $928 million 2011: US e-commerce and Online Retail sales projected to reach $197

billion, an increase of 12 percent over 2010

The e-commerce Industry

According to J.P. Morgan, Global E-Commerce Revenue To

Grow By 19 Percent In 2011 To $680B

According to the U.S. Department of Commerce:
The U.S. retail e-commerce sales for the second quarter

of 2011 was $47.5 billion, an increase of 3% from the 1st quarter

The retail sales of the 2nd quarter is estimated at $1,041.7

billion

The e-commerce Industry (Continued)

Total retail sales for the second quarter of 2011 were estimated at $1,041.7 billion, an increase of 1.2 percent (0.5%) from the first quarter of 2011. The second quarter 2011 e-commerce estimate increased 17.6 percent (2.5%) from the second quarter of 2010 while total retail sales increased 8.1 percent (0.2%) in the same period. E-commerce sales in the second quarter of 2011 accounted for 4.6 percent of total sales

The e-commerce Industry (Continued)

Top 5 Internet Retailers in the US, by Online Revenue in USD billion, 2010 (by Rank Order)

Amazon.com
Staples Inc.

Apple Inc.
Dell Inc. Office Depot Inc.

Ranking of U.S e-commerce

$40.00 $30.00
$20.00 $34.20

by Net Sales

$10.00 $0.00

$10.20 $5.23$4.80 $4.10

$4.10 $3.11

$3.04 $2.86

$2.72 $2.50 2009 Net Sales

2009 Net Sales

2010 Net Sales

What is happening?

Why Porters 5?
Understand the Market and the forces in play and in relation to own strength and weakness

Develop Competitive Strategy strengthening weak areas and leveraging strengths

Porters 5 Forces Model

Buyer Power

Threat of New Entrants

Rivalry

Supplier Power

Threat of Substitutes

Rivalry
The e-c0mmerce industry is in its

Low to Medium (2/3)

infant stage.

Buyer Power

Huge product diversification Rivals have strong brand names

(Staples, Apple, Dell, Sears, WalMart, CDW, and counting). new technological advancements the industry becomes more competitive.

Threat of New Entrants

Rivalry

Supplier Power

With maturity of the industry and

Early enter and product

Threat of Substitutes

diversification huge advantage for Amazon.com.

Opportunities: product diversification, partnership and market leadership affords huge advantage for Amazon.com

Threat of New Entrants (Medium High 4

Mature e-commerce software

available at reasonable cost

Advantage gained from the

Buyer Power

experience of the pioneering firms

Minimum cost of entry

Threat of New Entrants

Rivalry

Supplier Power

especially when partnership are forged with many suppliers

Threat of Substitutes

Opportunities: Amazon enjoys economies of scale, cumulative maturity and experience due to early entry, and product diversification

Supplier Bargaining Power

Amazon has diverse suppliers

LOW (2)

who are eager to work with it due to its industry standing

Amazon owns many suppliers Due to economies of scale
Threat of New Entrants

Buyer Power

Rivalry

Supplier Power

Amazon enjoys bargaining power

Threat of Substitutes

Threats: Amazons entry/possible entry into some industry such as the content publishing arena may result with its suppliers

Buyer Bargaining Power

Buyers have many options many

Medium to High (4/5)

retailers
There is no or minimum switching

Buyer Power

costs
Minimum rival brand loyalty as each
Threat of New Entrants

Rivalry

Supplier Power

retailer carries almost all brands.

The industry is retail and thus no bulk

buy

Threat of Substitutes

Opportunities: Lower cost and excellent customer service helps customer retention

Threat of Substitutes (LOW 1)

Substitutes are retail

departments including many of

the rivals that have stores in many locations worldwide
More convenient than
Threat of New Entrants

Buyer Power

Rivalry

Supplier Power

substitutes (e-commerces

appeal is being a convenient

substitute ).

Threat of Substitutes

Threat of Substitutes (continued)

Substitutes are more costly due to overhead costs

passed onto customers.

e-commerce makes competition beyond

national boundaries possible

The younger generation is more geared towards

e-commerce
Opportunities: e-commerce is a growing industryindustry of the future

Threats
Amazons biggest threat is from new

entrants to the e-commerce industry

Opportunities

Early Entry Advantage

Product Diversification

Supplier Partnerships

Acquisition of more suppliers

Application of Technology
Technology is the backbone of the e-commerce

industry
The application of cutting edge technology to

court, track, personalize and deliver services has enabled Amazon to keep its industry leading role.
Amazons user personalized sites The one-click purchase Amazons fulfillment Scalability of Amazon processing infrastructure

Competitive Strategies for Amazon

Close adherence to its core values: Customer obsession,

Ownership and Invent and Simplify

More product diversification through acquisitions and

partnership with suppliers

Keep growth and development with information

technology as a formidable backbone of its industry

Benefits: Facilitates innovation. Continues to provide quality products at reasonable costs.

Amazons 3 Main Principles

Customer obsession: start with the customer and work

backwards
Ownership: think long term and dont sacrifice long-term

value for short-term results

Invent and Simplify: look for new ideas from everywhere,

and are not limited by not invented here.

References
http://www.abebooks.com/careers/ http://www.paperjam.lu/archives/2006/01/13723/index.html

http://askville.amazon.com/amazon's-mission-statement-organizationalstructure/AnswerViewer.do?requestId=71036503
http://www.amazon.com/Values-Careers-Homepage/b?ie=UTF8&node=239365011 http://en.wikipedia.org/wiki/Electronic_commerce Source: Tkacz, Ewaryst; Kapczynski, Adrian (2009). Internet - Technical Development and Applications. Springer. p. 255. ISBN 978-3642050183. http://books.google.com/books?id=a9_NJIBC87gC&dq.

http://investor.ebay.com/releasedetail.cfm?ReleaseID=84142 http://techcrunch.com/2009/07/22/amazon-buys-zappos/ http://www.fortune3.com/blog/2011/01/ecommerce-sales-2011/ http://techcrunch.com/2011/01/03/j-p-morgan-global-e-commerce-revenue-to-grow-by-19percent-in-2011-to-680b/ http://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf http://www.internetretailer.com/top500/list/ http://www.retail-merchandiser.com/current/1009-internet-retailers-top-10-retailers.html