Amazon competitive strategy
Amazon operates in the e-commerce industry and it focuses on retailing, in the highly competitive
world in which Amazon plays, it has the role of the giant.
Analysing Porter’s Five Forces, we can shape the overall extent of competition in the industry.1
In spite of many brands having entered the e-retail segment, to take on a major force such as
Amazon it would require extensive investment in warehousing, distribution, logistics, marketing and
other factors2 . The key to surviving in the market for new entrants it is to base their competitive
advantage on innovation and creativity without mentioning that the absence of switching costs for
consumers further increases the threat of new entrants.3
Amazon marketplace’s customers have a considerably high bargaining power since they have the
possibility to switch to competitors or to substitute products easily depending on the nature of
services and products.
At the moment, Amazon is without any doubt an established company in the industry, for this
reasons it has an upper hand over suppliers in the supply chain4.
Supplier bargaining power is low as a consequence of the great numbers of suppliers that are
willing to work with Amazon and the ease with the e-commerce giant is able to substitute between
them.
The threat of substitute products for Amazon is high. Other than traditional physical stores,
websites that focus on selling a specific set of product categories can be identified as substitutes.
For instance, it is important to mention newegg.com for the retail of electronic devices, Barnes and
Noble for literature as well as emusic.com for music. As a result, it is not difficult for customers to
switch from one brand to another.
Rivalry among existing competitions is intense. Rapid growth rates in the industry and the
presence of exit barriers belong to the list of factors that increase the intensity of competition in the
e-commerce and online retail industry.5
Amazon’s main competitors are Alibaba, eBay, Flipkart and other traditional brands that started
operating in the online retailing industry in addition to their physical presence such as Walmart.
What really is considered innovative about Amazon is its coopetition strategy. This term is an
interesting combination of the two words cooperation and competition. Through its competitor
cooperation-driven business model, Amazon.com utilizes the existent resources most effectively,
because it involves competitors in distributing the expenses incurred by business operations.6
Amazon involved its competitors in three business models: Amazon Marketplace, Amazon
Services and Amazon Web Services, and Amazon Kindle.7
Amazon Marketplace allows competitors to offer their product in the given space, as a result, if a
customer purchases the product of a competitor via the Amazon.com website, Amazon can keep
part of the sale proceeds.8
Meanwhile, Amazon Services and Amazon Web Services offer the online shopping platform and
server capacity to their competitors. More specifically if companies require massive technology
1
Dudovskiy, J. (2018). Amazon.com Inc. Report, Retrieved from https://research-methodology.net/amazon-report/
[accessed November 24,2019]
2
Chang, B., 2014. “Porter’s 5 Forces on Amazon”. [Online] Available at: https://prezi.com/u84qlspzynt8/porters-5forces-on-amazon/
3
Ibid., 1
4
“Porter’s Five Forces Analysis of Amazon”. Porter Analysis, 20 June 2017, www.porteranalysis.com/porters-fiveforces-analysis-of-amazon/
5
Ibid., 1
6
Ritala, Paavo. “Amazon.com Benefits from Coopetition.” LUT, 29 Jan. 2015, www.lut.fi/web/en/news//asset_publisher/lGh4SAywhcPu/content/amazon-com-benefits-from-coopetition
7
Ibid., 5
8
Ibid., 5
resources they can outsource it by using the massive infrastructure resources that Amazon
provides. An example of coopetition, in this case, is Netflix. 9
In the case of Amazon Kindle, the famous electronic reading device, coopetition is visible in the
fact that that it distributes its content to various competing platforms. To simplify we can say that
for instance, an Apple iPad consumer has access to Kindle application content without owning an
Amazon.com reading. Is evident how Amazon sells its content also on competitors' platforms.10
---------------------------By describing Amazon’s cooperation with his competitors, it has been outlined the company’s
horizontal collaboration with other firms that it is translated into a wide network of collaboration
between firms. On the contrary Amazon’s vertical collaboration is little to absent since geographical
dispersion and a large number of different activities and organizations may interfere with the
creation of a successful linkage within a supply network. 11
------------------Amazon’s competitive advantage has allowed the company to grow its influence in the industry and
acquire a leadership status. This happened thanks to the brand image and its continuous effort in
ensuring only good quality products. In addition, Amazon established an efficient review system as
well as an extraordinary customer service and a customer-friendly 30-day return policy.
As an e-retailer, the brand continuously invests in modern and digital technology to provide the
best possible service furthermore Amazon has used several benefits programs that help retain
customers for the long term. Undeniably, another source of competitive advantage is Amazon’s
financial strength that enables the brand to invest in technology and HR and allows the company to
grow fast.12
As previously mentioned, Amazon has one of the largest supply chain and an international
distribution network that since is skilfully managed is a major source of competitive advantage.
At the base of Amazon’s competitive advantage, there is a highly developed logistic that permit to
the company to enter into new niches and segments engaging in a successful business
diversification consequently it is necessary so start small in a niche market, learn how to dominate
customer’s needs and then enter larger markets. 13
9
Butler, Brandon. “Amazon and Netflix: Competitors Who Need Each Other.” Network World, Network World, 24 July
2013, www.networkworld.com/article/2168433/amazon-and-netflix--competitors-who-need-each-other.html.
10
Ibid., 5
11
Renko, Sanda.”Vertical Collaboration in the Supply Chain.” IntechOpen, IntechOpen, 20 August 2011,
www.intechopen.com/books/supply-chain-management-new-perspectives/vertical-collaboration-in-the-supply-chain
12
Pratap, Abhijeet. “Amazon Sources of Competitive Advantage”. Notesmatic, Notesmatic, 8 October 2018,
www.notesmatic.com/Amazon-Sources-of-Competitive-Advantage
13
Shah, Mohammed. “How Did Amazon Build Its ‘Sustainable Competitive Advantage’?- The Key Success Factors”.
Medium, Medium, 28 May 2018, www. medium.com/@shahmm/how-did-amazon-build-its-sustainable-competitiveadvantage-88cfee7fe2c8
References:
Dudovskiy, J. (2018). Amazon.com Inc. Report, https://research-methodology.net/amazon-report/
Chang, B., 2014. Porter’s 5 Forces on Amazon. [Online] Available at:
https://prezi.com/u84qlspzynt8/porters-5-forces-on-amazon/
“Porter’s Five Forces Analysis of Amazon”. Porter Analysis, 20 June 2017,
www.porteranalysis.com/porters-five-forces-analysis-of-amazon/
Ritala, Paavo. “Amazon.com Benefits from Coopetition.” LUT, 29 Jan. 2015,
www.lut.fi/web/en/news/-/asset_publisher/lGh4SAywhcPu/content/amazon-com-benefits-fromcoopetition
Butler, Brandon. “Amazon and Netflix: Competitors Who Need Each Other.” Network World,
Network World, 24 July 2013, www.networkworld.com/article/2168433/amazon-and-netflix-competitors-who-need-each-other.html.
Renko, Sanda.”Vertical Collaboration in the Supply Chain.” IntechOpen, IntechOpen, 20 August
2011, www.intechopen.com/books/supply-chain-management-new-perspectives/verticalcollaboration-in-the-supply-chain
Pratap, Abhijeet. “Amazon Sources of Competitive Advantage”. Notesmatic, Notesmatic, 8 October
2018, www.notesmatic.com/Amazon-Sources-of-Competitive-Advantage
Shah, Mohammed. “How Did Amazon Build Its ‘Sustainable Competitive Advantage’?- The Key
Success Factors”. Medium, Medium, 28 May 2018, www. medium.com/@shahmm/how-didamazon-build-its-sustainable-competitive-advantage-88cfee7fe2c8
Amazon industry
Amazon operates in the e-commerce industry and it focuses on retailing, in the highly competitive
world in which Amazon plays, it has the role of the giant. It operates in a fast paced and big
international market which is highly competitive
By describing Amazon’s cooperation with his competitors, it has been outlined the company’s
horizontal collaboration with competitors and partners that is translated into a wide network of
collaboration not only between firms but also websites and blog owners thanks to Amazon’s affiliate
program. The latter is a smart way to monetize a website and gaining money through commissions.
Amazon is prioritizing sustainability issues and to enhance them “it established some partnerships
and collaborative initiatives with knowledgeable, and innovative industry partners”.14Vertically, all
starts from Amazon’s storehouses which are located near large population hubs, doing so every
product is accessible at any time and in any place15. The delivery is famously fast with the incredible
Prime’s benefits or 24-hours shipping opportunities and entrusted to couriers such as UPS, FedEx
14
“Sustainability partnerships”. Sustainability.www.sustainability.aboutamazon.com/governance/sustainabilitypartnerships
15
“Amazon Supply Chain Strategy”. Sellernexus, sellernexus, 16 January 2019, www. sellernexus.com/amazon-supplychain
and USPS. Of course, technology plays a primary role in completing the operations in the smallest
amount of time and save costs.