The paper “ Challenges Faced by Amazon, SWOT Analysis, Porter’ s Five Forces, and BCG Matrix” is a breathtaking example of a case study on e-commerce. Amazom. com is a perfect example of the impact of the internet revolution and how such developments have changed the business scene. As a virtual company, it marks the influence of the internet on conventional business strategies mode and theories (Reading 2004). This report will analyze the Amazon business model and macro factors affecting the company’ s future. The report addresses Amazon through its two recognized SBU’ s North America (domestic) and international markets.
The SWOT analysis will evaluate Amazon's strengths, weaknesses, opportunities, and threats. The porter’ s five forces analysis will give insight into the online retailing industry and Amazon's competitive advantage over its rivals. This report will look at Amazon’ s product portfolio and its market share in each category. The report has given a recommendation to improve Amazon’ s performance in the future. Industry overviewInternet access has been growing steadily over the past 15 years and continues to grow in the future as well (Heinemann & Schwarzl 2010). This is a booming industry.
There are few barriers to entry therefore fiercely competitive industry. The industry provides an alternative to the physical retailing industry which gives customers more choice because they can look for more suppliers supplying the same service. The online companies do not have to pay huge rent for the prime location but they have another technology cost. Amazon overviewAmazon. com is an American based online retail company. Founded by Jeff Bezos in 1994, the company was established as an online bookstore in July 1995 in Washington (Mennen 2006; Annual report 2009).
The company was reincorporated again in 1996 in the state of Delaware. The company got listed on May 15, 1997, on NASDAQ stock exchange under the symbol ‘ AMZN’ (Amazon Annual Report 2009). Amazon. com is the market leader in the e-commerce business. In a span of five years after the listing, the company’ s revenue had grown from “ $147.8 million to over $ 3.93 billion with sales registering a 26% growth in the fiscal year 2001” (Mennen 5; Cummings & Worley, 332). However, investors did not gain a lot as the firm plowed back the profits in developing a number of warehouses and distribution centers across the country (McGrath & MacMillan 2009).
Today the company has become a multinational company successfully operating in many countries such as Japan, UK, and Germany (Annual report 2009). The company measures its success on the basis of the value it creates for its shareholders. The company believes in investing in its employees and benefiting from its talent. The company rewards its employees through shares rather than cash to motivate them to work in the best interest of shareholders.
Amazon offers the world the largest selection of products making it the leading online shopping site throughout the world (Regan 2008). Amazon is one of the top brands in the online retailing industry. The company had an early mover advantage in the industry as one of the pioneer online retailers (Mennen 2006). Originally, the firm was a simple online low price bookstore before expanding to include CDs and DVDs in 1998. The company’ s business model is to generate a large number of sales with a low margin profit which necessitated a change in strategy (Annual report 2009).
In 1999, the firm engaged in networking as a growth strategy. Non-Amazon products such as used books and individual auctions of different products were placed under tabs on the company’ s website and were not allowed to mix with the firm’ s products. Such tabs were the ‘ auctions’ tab and the ‘ shop’ tab (Cummings & Worley 2009). This strategy was later reviewed to allow small businesses placed under tabs to place their products in Amazon’ s most visited sites at a fee. Another program, merchants@amazon. com, allowed larger partner retailers such as Office Depot, Circuit City and Borders Books to access Amazon’ s customers for a service fee and commission while Amazon retained inventory ownership and controlled prices.
Another business arrangement with firms such as Drugstore allowed Amazon users to be transferred to other websites with Amazon receiving a commission based on the number of visitors transferred (Cummings & Worley 2009). In the recent past, the firm has entered the manufacturing industry through its Kindle brand an electronic reading device (Kaye & Quinn 2010).