Amazon business model and competitive environment - Essay Example

Business Model Amazon started its business in 1995 and was incorporated firstly in of Washington during 1994 and later on re-incorporated itself in 1996 in the State of Delaware. Amazon is an online shopping place offering many products most notably books. There are four primary customers to which Amazon offers its services i.e. consumer customers, sellers and enterprises and content creators. (Amazon.com). Amazon also earns its revenue through co-branding of credit card agreements as well as on-line marketing and advertising services.

The business is potentially divided into two geographical areas i.e. North America and rest of the world Consumers Consumer customers are served through the retail website with the name of Amazon.com where consumers are offered a range of products at relatively lower prices with free delivery services. Amazon.com aims to offer easy to use functionality to allow customers to buy large number of products at relatively affordable prices. Sellers Amazon also offers an opportunity to sellers to sell their products by using Amazon platform or use their own websites.

Amazon therefore does not act as a direct seller in this situation but rather provides platform to others and earn through fixed fees and other indirect fees charged to sellers. Enterprises Developer customers are served through offering them web-based services by offering Amazon’s IT infrastructure. Content Creators Amazon also offers authors and independent publishers an opportunity to self-publish. This business segment therefore solely focuses upon offering a platform, based upon fee sharing, to authors and publishers to publish and sell their books through Amazon.

Competition Though the overall competition may be high considering the presence of physical stores and multi-dimensional nature of the industry, however, in the virtual market place, there are very few competitors of Amazon. The overall range of competitors therefore include content producers, publishers, web-portals like E-Bay, firms offering I.T infrastructure services etc. The overall pace of growth in the e-commerce and online shopping industry has remained approximately 20% during recent past however, due to recession in major markets; it has slowed down to almost 11% per year.

It is critical to understand that the overall market is expanding with Amazon even entering into e-book readers and tablet pc market thus increasing its competition and matching with firms like Apple in different business segments. Amazon considers price, convenience as well as fast and reliable fulfillment as the key drivers of competition in the industry. 1 Year Amazon Beta 0.28 Ke 4% Best Buy Beta 1.16 Ke 17.91% Barnes & Nobel Bet 0.98 Ke -6.99% Amazon’s beta is less than 1 suggesting low correlation between the stock and market returns however; its returns are lower than Best Buy but higher than B&N.

Considering the evolving nature of business model of the firm, it may be possible that the overall growth rates may suffer. Amazon’s lack of international expansion may also further result into its declining performance in future as compared to its competitors. Limited market space as well as restricted business model may force Amazon to look for opening physical stores to compete in a better manner with the competitors. Works Cited Amazon.com. 10-K Annual Report,.

10-K filing. New York: Amazon, 2012. Print