Amazon's SWOT Analysis, the Porter Five Forces Model, and the Future Trends - Case Study Example

Table of Contents Introduction 2 Purpose of the report 2 About Amazon 2 SWOT Analysis 2 Porter Five Force Analysis 5 Future Trends 8 Recommendations 9 Conclusion 9 References 10 Introduction Amazon has been in existence and has become a leader in online shopping. The company has been able to develop their product line and launch different segment of goods by growing their business line. The analysis of future projections looks sound with the growth in technology and rising consumer income. The report thereby tries to establish on factors which will help Amazon in the long run. Purpose of the report To identify the SWOT analysis for Amazon To identify the Porter Five Forc model for Amazon To identify the future trends and provide recommendations based on it About Amazon Amazon is a US based company which provides online shopping to people all around the world. The company since its operation in 1994 has grown and is one of the most sought online dealing companies. The company deal in a lot of products like Dvd’s, Cd’s, books, videogames, computer softwares to name a few (Amazon Website, 2011). The company emplpoyes around 33,700 employees and their sheer presence to dominate the online market has made Amazon one of the largest brand. SWOT Analysis The SWOT analysis will help to identify areas where Amazon can work on and also demonstrates the opportunities they have. Strengths Amazon has a strong brand name due to the number of years the company has been operating. (SWOT, 2011) Amazon have many products aiming at different customers according to their wants (Ferell, 2002) Amazon has a strong distribution network which has reduced its reliance on any way and ensured that the products are readily available. (Ferrell, 2002) Large market and increasing customer base due to population growth (Amazon SWOT, 2011) The company acting as a global brand” (SWOT, 2011) has empowered the company to be able to market its product widely. The company with a customer base of around 30 million has been able to create themselves as a global brand. “The flexibility nature” (SWOT Analysis, 2009) adopted in the business pattern has allowed them to grow. The ability of the company to mould itself according to the local requirements of the country has provided the ample space Amazon was looking to grow. This has paved the path for the company to be able to market itself. The sound financial result signifies the corporate policies and soundness in policies. Also the ability to meet its debt and obligation highlights the growing popularity of Amazon among investors and creditors (SWOT, 2011) Weakness Rising shipping cost for the company as they provide free shipping (SWOT, 2011) is an area of concern Brand power require to market the product pushing the cost to rise (SWOT, 2011) Addiding new categories to their business has diluted the working culture for Amazon (SWOT, 2011) Increased dependence on external to agency to provide the goods as well as sourcing the goods to the customers (Amazon SWOT, 2011) Selling products like clothes which has few takers affecting the brand (SWOT Analysis, 2009) Opportunities Merging and acquiring the small business working with the same model. (Ferrell, 2002) Developing strategy and design which increases interface (Ferrell, 2002) and gives them a scope to grow Innovating and coming with new supplies techniques and moving into new markets Develp special relationship centers which helps to improve the customer satisfaction by solving their quesries (Amazon SWOT, 2011) Threats Increasing transportation cost and storage cost (Ferrell, 2002) is a worry and steps needs to be taken to reduce those Threats from other players(Ferrell, 2002) Huge dependance on technology to sell their products might making it difficult to capture the markets of developing countries (SWOT, 2011) Porter Five Force Analysis This analysis will help to provide insights into Amazon and the way it brought about changes in vital decision taken by the company. This will improve our understanding as to why Amazon expanded into other countries and launched its products. “It will also help to find the factors which were critical” (Wylick, 2010) for Amazon. This will “provide a proper understanding and help in the formulation of further strategies”. (Wylick, 2010) Rivalry within an industry The competition level is high. Amazon being a online shopping company provider faces stiff competitions from small stores who are family owned and are located on the residential areas (SCRIBD, 2010). The characteristics of this shop are that they provide goods according to the wants of the customer (SCRIBD, 2010). There are other manufacturers who work on similar lines thereby intensifying competition (SCRIBD, 2010). This makes it tough for Amazon as it faces both the local and global competitors. Amazon thereby has been successful as it has entered the low cost country like China and using its experience working on the model to ensure growth. Bargaining Power of Suppliers The suppliers have a high bargaining power because this forms a major part of the input cost and the concentration of supplier is giving a headache. (Porter 5 Forces, 2010) To reduce this Amazon has worked on backward integration of the supplier. (SCRIBD, 2010) This will ensure that they have a relative supply and don’t lack. Amazon to reduce the bargaining power also has its own methods of producing which has helped it to improve its relationship marketing with the suppliers ensuring timely availability of goods. (SCRIBD, 2010) This has enabled Amazon to reduce the bargaining but still when we look at the global level it’s strong. The presence of certain regulation is making it tough for Amazon. Bargaining power of Customers The customers have a mixed bargaining power. Due to less differentiation and backward integration possible customers switch easily (Porter 5 Forces, 2010). Amazon on this front to reduce their power and retain customers has worked heavily. Amazon provides loyalty programs to its customer by ensuring that people have a positive experience while shopping (SCRIBD, 2010). Amazon to reduce and enhance customer satisfaction has given them 100 days return program, a hotline where people can solve their queries and designing the shops in such a way that people get a real feel of it. (SCRIBD, 2010) This all has ensured that Amazon has been able to win customers and retain them. This has helped them to move in different countries. Threat of Substitutes The threat of substitutes is high. This has made it tough for Amazon to launch in other countries. This also ensures that proper marketing and quality will help to ensure customers as they have little choice. Amazon still on the substitute front has a advantage with goods being sold online as there are many takers and customers unlike clothes don’t have to try and can order by visualizing on their screens (SCRIBD, 2010). With little or no substitute available is creating ample opportunities for Amazon which will help it to move to other countries as well. Threat of Potential Entrants There is competition here. There are many businesses working on similar models (SCRIBD, 2010). Still the new entrants are few. The high cost involved is a reason. Amazon on this front has used it by entering countries and slowly others are trying to replicate it. The cost involved in setting a store and stores get economics of scale only after certain percent of the market has been captured in making few entrants follow (SCRIBD, 2010) this path. This is a good sign for Amazon. The company due to its size and nature can risk by entering other countries and their business model will support them to grow. Future Trends The growth in technology has brought about a change in which business was conducted. The growth in internet usage has increased the reach of customers and strengthened the demand for consumer goods. This projects a bright future for Amazon. Internet has also evolved the consumer market as it has “made the market a global place where the customer can look for products all around and ensure that they get the best one at the correct price”. (Chaffey, Fiona, Johnston & Mayer, 2008) This has increased the bargaining power as people from different background, culture and religion can convulse together and ensure that their satisfaction and bargaining power increases. A research conducted also shows that “internet marketing of the consumer product has ensured that consumers pay 2% more than the normal customers who purchase offline as customer uses the search options to find about the product”. (Morton, Florian & Jorge, 2004) This ensures that companies get a better bargain as consumers using the internet finds various options and then choosing on the basis of that helps the company get a better price as the price is charged according to the other competitors. This thereby forecast a sound opportunity of growth for Amazon as the company has been using a similar model which will help the company become one of the most sought online product company. Recommendation Amazon needs to develop on a similar business model and needs to reduce the dependence on external sources by integration Amazon needs to evaluate the cost of shipping and look towards a mechanism which reduces it Amazon needs to enter other developing countires to ensure steady growth Amazon needs to improve the interface by making online shopping a pleasure Conclusion Amazon has been successful as they have evaluated all the factors carefully. Their ability to procure goods cheaply and of high quality has earned a brand name. The SWOT has highlighted the various opportunities Amazon still has. The five forces have ensured that Amazon has a solid foundation and ground to cover. Their business model is their strength. This has helped them face the worst of times. Amazon due to its strategy will be able to launch itself in different countries and ensure that their growth trajectory continues as they pose a huge potential for growth. References Amazon Website. 2011. Amazon. Retrieved April 6, 2011 from http://www.amazon.com/ Amazon SWOT. 2011. Amazon SWOT Analysis. Retrieved April 6, 2011 from http://www.businessteacher.org.uk/business-resources/swot-analysis-database/amazon-swot-analysis/ Chaffey, D., Fiona, C., Johnston, K. & Mayer, P. 2008. Internet Marketing, 4th Edition, page 237-239, Pearson Education, India Ferrell, G. 2002. SWOT Analysis for Amazon. Orland, Dryden Press Morton, F., Florian, Z. & Jorge, S. 2004. Consumer Information and Discrimination: does internet effects the pricing. Journal of Quantitative Marketing & economics, Volume 1, Number 1, page 65-92 Porter 5 Forces. 2010. “Porter 5 Forces”, retrieved on April 6, 2010 from Read More