The Porter’s 5 Forces Model is a simple but powerful tool for

understanding where power lies in a business situation. It helps

understanding both the strength of the current competitive

position and factors affecting the strategy development.

AMAZON.COM HAS MARKED ADVANTAGES WITH MOST OF THEIR PROVIDERS (BOOKS, AUDIO, TECHNOLOGY) FOR THE REASON THAT THESE COMPANIES DO NOT CHARGE THEIR PRODUCTS UNTIL THE MOMENT THAT AMAZON.COM SELL THEM (FREQUENT STRATEGY FROM BIG COMPANIES)

AMAZON.COM PAYS SUPPLIERS FOR THOSE PRODUCTS ONLY 35 DAYS AFTER THE ITEM HAS BEEN SOLD, NEVERTHELESS COMPANIES ARE PREPARED AND READY TO PROVIDE SERVICES AND PRODUCTS TO AMAZON.COM

AMAZON.COM HAS SWITCED ITS PRIMARY OPERATIONAL SYSTEM , FROM WINDOWS-BASED TO LINUX-BASED, THIS MOVEMENT IS ESTIMATED TO SAVE MORE THAN 15 MILLIONS OF DOLLARS TO THE COMPANY

CONSUMERS THAT BUY GOODS IN AMAZON.COM TEND TO BECOME REGULAR CLIENTS DUE TO THE LOW PRICES THAT AMAZON.COM CAN OFFER, WHICH IS HARD TO REACH BY THE COMPETENCE

LOW PRICES IS THE PRINCIPLE ATTRACTION THAT AMAZON.COM OFFERS TO EACH INDIVIDUAL BUYER

THE LOW AVERAGE OF CLIENTS SWITCHING FROM AMAZON.COM PRODUCTS AND SERVICES TO THOSE OF THE COMPETENCE IS SATISFACTORY

AMAZON.COM IS ONE OF THE FIRST COMPANIES INTO THE E-COMMERCE FIELD

THIS GIVES TO AMAZON.COM A CERTAIN LEVEL OF TRANQUILITY INTO THE MARKET

AMAZON.COM HAS INNOVATED ALONG THE YEARS REACHING HIGHEST LEVELS OF CUSTOMER’S SATISFACTION WHICH CAN ASSURE THEIR POSITION INTO THE MARKET FOR FUTURE YEARS

THE NAME OF AMAZON.COM IS WELL RECOGNIZED AND TRUSTED INTO THE FIELD

THEREFORE, AMAZON.COM DOES NOT PRESENT THREATS OF SUBSTITUTION AT LEAST IN THE SHORT TIME

INTERNET HAS SHOWN THAT A SIMPLE IDEA WELL DEVELOPED CAN OFFER AN EXTRAORDINARY RESULTS, SUCH AS FACEBOOK.COM, YOUTUBE.COM, TWITTER.COM AND SO FOURTH, THESE COMPANIES HAVE DEVELOPED THEIR WEBSITES IN A SHORT PERIOD OF TIME WITH INCREDIBLE FINAL RESULTS

THIS CAN BE THE PROOF THAT A THREAT OF NEW ENTRIES INTO THE MARKET IS POSSIBLE

A Value Chain describes the sequence of primary activities

implied by a firm’s business model that add value to

shareholders. This sequence of value-adding activities converts

inputs into the products or services described in the firm’s

business model. Porter then continued to define business

strategy relative to the set of activities in a value chain.

Amazon.com has chosen to both perform similar activities to its rival but in different ways. Instead to be a virtual store, allowing Amazon in principle to offer customers anything they want.

Amazon.com wants to be the “world’s most customer-centric” company, and so their focus is on the “Customer Service” as a part of the Value Chain.

The emphasis on growing large, in terms of the range of products offered by Amazon.com itself and also growth in launching new companies and partnering with existing companies.

Amazon.com offers the lowest prices possible to their customer through low everyday product pricing and free shipping offers, including through membership in Amazon Prime. They also provide easy-to-use functionality, fast and reliable fulfilment and timely customer services.

INBOUND LOGISTICS

OPERATIONSOUTBOUND LOGISTICS

SALES AND MARKETING

SERVICE

PROCUREMENT TECHNOLOGYHUMAN

RESOURCESFIRM

INFRASTRUCTURE

• The goods are received from the Amazon’s suppliers. They are stored until there are needed to sale online

INBOUND LOGISTICS

• Individual operations could include room packing of books/video/goods by an online retailer or customerOPERATIONS

• The goods are now finished and they need to be sent along the supply chain to wholesalers, retailers or the final consumer

OUTBOUND LOGISTICS

• At this stage, the Amazon prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotion mix

SALES AND MARKETING

• This includes all areas of service such as installation, web training, complaints handling and aftersales serviceSERVICE

• It responsible for all purchasing of services, goods and material

• The aim is to secure the lowest possible price of purchases of the highest possible quality

• They will be responsible for outsourcing and e-purchasing

PROCUREMENT

• It is an important source of Amazon’s competitive advantage

• Amazon.com has innovated to reduce costs and to protect and sustain competitive advantage

• This could include the customer relationship management, lean manufacturing, Internet marketing activities and production technology

TECHNOLOGY

• Employees are an expensive and vital resource

• Amazon.com manages recruitment and selection, training and development and rewards and remuneration

• The objectives and mission of the Amazon.com would be driving force behind the human resource management strategy

HUMAN RESOURCE

• This activity is driven by Amazon’s corporate or strategic planning

• It includes the Management Information System (MIS) and other mechanisms for planning and control such as the finance department

FIRM INFRASTRUCTURE

(Amazon.com, Feb 2012)

Inbound Logistics (20%)

Operations (20%)

Outbound Logistics (80%)

Sales and Marketing (60%)

Customer Centric (100%)

Procurement (60%)

Human Resource Management(10%)

Infrastructure (10%)

Technology Management (100%)

In term of the value chain, most of the focus by Amazon.com is on Sales andMarketing and Customer Service including Outbound Logistics and TechnologyManagement. Their customer-centric focus still implies most weight provided to thecustomer. Meanwhile, Amazon.com placed very little weight on Inbound Logistics,Operations, Human Resource Management and Infrastructure.