Since its inception as a small online bookseller, Amazon.com has grown significantly to become a giant superstore firm. The growth of the firm has been fueled by various factors including its strong brand, exceptional customer value, unique shopping experience, huge volume of sales, and through realization of economies of scale. However, Amazon's growth has also been coupled by some losses as the firm has become exposed to greater competition and threats. In this growth process, Amazon.com has expanded its current business from selling books to include a broad range of products like music CDs, DVDs, video games, electronics, computer software, apparel, furniture, and even food items. In addition to its domestic market share in the United States, Amazon established four other distinct online stores that allowed the firm to ship some selected products globally.
The book-selling industry consists of the traditional book selling, mail-order retailing, and online book selling business. The distribution model of traditional book-selling basically involves the publishing and printing of books by publishers and the sale of these books to wholesalers. The major advantage of this model is that the customers evaluate or browse the wares they are interested while at the bookstores (Anli, 2007).
The traditional book selling model was followed by the mail order book-selling model or business, whose distribution channel involves delivery to customers through the mail or postal system. Under this system, the end customer is permitted to order the books they are interested in from wherever they are through a catalogue that is provided by the bookseller. Upon the order of the books, the bookseller mails the selected books to the customer.
Amazon operates in the online book selling industry that offers more value and convenience to customers mainly because the Internet a widely used as a distribution channel by many customers. This firm is one of the several online book sellers that have exploited the Internet as a distribution channel and contributed to the development of online book selling. Unlike the traditional book selling method, online book selling model does not have a physical presence. Through this model, the company is able to interact with its customers who can offer reviews and recommendations. The reviews and recommendations of customers are then electronically forwarded to wholesalers or publishers. The need to have a physical inventory of books is eliminated by the shipping of the ordered books from wholesalers directly to customers.
Technological advancements have created enormous opportunity for Amazon.com and its various competitors to enhance the total customer satisfaction that contributes to higher revenue. The increase and developments in computer technologies have made several companies to launch into the online business. The growth of this model of business has contributed to the increase in online buying at an amazing rate. An analysis of the online book-selling industry of Amazon.com can be further understood through Porter's five forces model as follows & #8230;
Threat of New Entrants:
The threat of new entrants in the online bookselling industry remains high because the infrastructure to establish a new business is not expensive as compared to setting up a physical book store. Consequently, any individual can start a similar online business like Amazon provided that he/she has necessary resources and knowledge. On the contrary, an established bookstore can expand their online business easily as long as they have enough resources. However, the competitive force remains low in some areas where it's expensive to establish similar information systems due to the underlying technology. In addition, Amazon.com has an established a brand recognition in the industry that makes it difficult for new entrants and other competitors.
Buyer's Bargaining Power:
The bargaining power of buyers in this industry is high because there is a wide range of options for customers to buy particular books from various sources. The intense rivalry from several sections of the firm's business has forced Amazon.com to price its products competitively ("Analyzing Amazon.com," 2006).
Supplier's Bargaining Power:
As compared to other industries, the bargaining power of suppliers is relatively high in the online business industries just like other electronic business sectors. This is fueled by the fact that publishers normally service various physical stores and have other established customer bases.
Amazon.com experiences a relatively high industry rivalry in its online business because of the huge number of competitors from both physical and online bookstores. The established bookstores have resulted in…