Business Model of Amazon Essay Example for Free

Business case of virago Essayvirago.com is the pi onenessering entertainstore on the Internet that first open up in July 1995 by Jeff Bezos. The solid offers online shopping services and partnership opportunities much(prenominal) as online search for books, music and video items. The products that they sell embarrass an array of audio, video and book titles. amazon has one of the widest picks and employs external shipping to virtually every ceding back of the globe in just a few days. Amazons guidance is having the biggest selection of free-electronic greeting cards, online auction bridge and millions of books, CDs, videos, DVDs, toys and electronics. They accept expand to different areas of the world, such as Amazon.co.uk and Amazon.de, to service consumers outside of the United States. They mystify to be a Cost leader in which their firm has lower costs than the competitors. They have employed different Amazon branches in different parts of the world to lower c osts. This allows Amazon to ship their products at a lower price from each point of shipment to the consumer.In new-make years, Amazon.com has expanded from be just an online bookstore to an all around online shopping experience. They have coined the tag line Earths biggest selection. Amazon has diversified into different websites. These are the Internet Movie Database (www.imdb.com), LiveBid.com, amazon.livebid.com, drugstore.com (an online retail and in stratumation about health and wellness), gear.com (online sporting goods political party), homegrocer.com (online grocery shopping and auction pitch), pets.com (largest pet supply online shopping site), ashford.com (online luxury and premium shopping) and eZiba.com (online retailer of handcrafted products). quint Forces Model for Industry AnalysisNew EntrantsThe online bookstore industry that Amazon.com has pioneered in was, at first, very ruffianly to penetrate. There were different barriers such as distributing capabilitie s and the variety of the selection offered that are supposed to be hurdled. Amazon successfully solved the tricky parameters as being the first one to get into the whole root of online retail. With being the first, they had the luxury to set what were the norms for the industry. Factors that may lower these barrier tactics would be a wider selection and theability to go to an actual bookstore to exchange or return books or other products. This earnings of actual retail spaces makes it easier for the consumer to return or exchange the products they were not satisfied with. These handicaps of Amazon were the basis for the exit of book retail giants Barnes and impressive and Borders in the online shopping industry. Industry CompetitorsThe study competitors of Amazon are Barnes and Noble and Borders. Barnes and Noble is a retail giant offering books and CDs both in their outlets all over the country. It opened their online industry in 1997 and has become the fourth largest e-commer ce sites today. Focused largely on the sale of books, music, software, magazines, prints, posters, and related products, the company has capitalized on the recognized brand value of the Barnes Noble name to become the second largest, and one of the sudden growing, online distributors of books. Their advantage to Amazon is the brand name and the availability of actual retail outlets in which consumers could go in to exchange or return products easily. They also have an established book selection based in their retail operations.Borders is another multi-media retail store found in major cities around the country. Started out as a small bookshop in the college town of Ann Arbor, Michigan, it has since expanded into one of the finest bookstores. In 1992, Borders was bought by the Kmart multitude which further flourished the company into a Multi Media Giant with a wide selection of Audio, Video and Books found end-to-end the United States. The Online Bookstore industry have become a fierce credit line which involves discounts, varied selections and fast delivery in which all three companies are challenging each other. BuyersThe consumers of this industry can be found in every corner of the population. These are aboutly people who have had some form of higher education and have entry to the Internet and computers. The segment of online shoppers has increased dramatically in recent years due to the convenience of shopping in the comforts of the home and the accessibility of the Internet. These developments have made it easier for consumers to log on and buy on the Internet.Consumers also tend to compare prices among the retail leaders such that buyers are able to buy products with very bigdiscounts compared to ones bought in actual retail outlets. The bargaining advocator of the consumer is based on the competitive strategies of each active firm in the industry. Thus, consumers can challenge one firm for charging more than the other one such that the firm go forth beat the price of the competing firm. SuppliersAmazons suppliers range from the publishing and media houses to electronics manufacturers. Amazon buys all their books, videos and audio CDs from the multi media houses and publishing giants such as m Warner, Doubleday etc. Amazon also has alliances with other bookstores to cover orders that they cannot serve. SubstitutesThe substitutes for Amazon and other online bookstores are the actual book retailers and music stores such as Barnes and Nobles, Virgin Megastore, Tower Records, Sam Goody and other small mom-and-pop outlets. With the rising of online retail, there will be little impact from these substitutes. One impact would be some consumers who would deal to hold or listen to their purchases prior to buying and those who are into the whole shopping experience. Barnes and Nobles have jumped into online retail and have succeeded into diversifying into the new e-commerce industry. Industrial Organization ModelDegree of chall engerDue to the shift of focus for Amazon, it has become the Earths biggest anything store. Its competitors have expanded from just online book retailers Barnes and Nobles and Borders to top audio retailers CDNOW.com and online auction house EBAY.com. Amazon has an overall lead of 40% mart share against the other online retail firms. Their international business has more than doubled over the past 2 years and this growth increased Amazons share in the online business mart. Life CycleAmazon, in its first years, had invalidating income but the rise of e-commerce sites and being the pioneer made the succeeding years led to boom era for them. Their growth period was during 1994 to 1995 when they were the first of its kind in the world. They incurred very high costs in basis of scatterings to customers. Still with a negative income, Amazon went public in 1997 and had one of the biggest IPOs of the time. With targetors banking on future validatory cash flow for this company, Amazons market value soared. Many people caught on with the root of online shopping, thus, Amazons success. Amazons success as an online retailer prompted bricks-and-mortar rivals Barnes and Noble and Borders to join in. Competition decreased Amazons profitability so in the past couple of years, Amazon has expanded to more than books, audio and video to electronics and other retail concepts. Social RelevanceAmazons products are marketed for every consumer possible. Books, audio, video and electronics are appreciated by majority of the population especially those who have access to the Internet. Amazon is active in pursuing literacy programs for young children by collaborating with the makers of the Dr. Seuss books. They have actively participated in the Dr. Seuss shops, fib telling sessions and Dr. Seuss days. Degree of GlobalizationAmazons strength internationally lies within its net doings in major ports and cities around the Globe. Amazon first started out in Seattle but as soon as th ey have established a niche market, they have opened shop all over the nation and in cities such as London, Berlin, The Hague, Paris, Tokyo, Singapore and many more. These branches overseas improves their delivery service to a wide consumer base. consequence of Government ControlThere has not been many government regulations regarding online retailing. A group of CEOs whose firms that are prosecute in such practices have formed an organization called Global Business Dialogue. This GBD group supports the development of a seamless global system that delivers the broadest array of goods and services to the largest number of consumers at the most competitive prices. This work effort will offer recommendations to the WTO, including making the moratorium on online tariffs permanent and collaborate with governments to target and eliminate discriminations against, or other non-tariff barriers to global trade in, electronic commerce. This working group will also provide an bridle-path for the GBDs to consider and promote thegrowth of the electronic marketplace in an environment unencumbered by prejudicious taxation. Degree of Vertical IntegrationAmazons primary value chain includes purchasing/sourcing, marketing, distribution and after-sales services, which includes returns and exchanges from unsatisfied customers. Their main focus is in the purchasing/sourcing and in the distribution of the products to the consumers. Their investments are therefore, geared towards warehouses in key points of high consumer demand areas and an efficient delivery and distributing system to service all its consumers. Thus, Amazon controls most of its distributing system that spans across borders. Inter Organization of Ne dickensrk EconomicsAmazon in its efforts to sustain its market leadership in the online retailing industry has tied up with various online organizations. Netscape Navigator and Amazon will offer members of Netscape Netcenter a co-branded storefront where Earths Bigges t Bookstore will be easily accessed through Netscape Netcenter (home.netscape.com). In addition, Amazon.com has multi-year sole(a) and premier bookseller relationships with 5 of the top 6 sites on the World Wide Web AOL.com, Yahoo, Netscape, GeoCities, and Excite. These partnerships unwrap Amazons presence in the World Wide Web. Sensitivity to Business CyclesThe Online retailing business has a very quick cyclical growth. Amazon being one of the firsts to venture in this showcase of commerce are all ready in what seems to be in their decline stage where market share is declining. Therefore, Amazon is expanding to different industries within online retailing. Amazon and other online retailing firms are very slender to business cycles due to the speed of technology involved in the services they offer. Dynamics of New familiarity GenerationOnline retailing relies on the work of an excellent distribution system. Amazon has invested their money into expanding their network of distrib ution centers around the globe. They also have investments in creating better technology for tracking orders and giving efficient delivery systems for their customers. Amazon.com has remained on top of the online retailingbusiness despite the entrance of giants such as Barnes and Nobles and Borders. Their success is attributed to two factors timing and continuing to invest heavily into the inventory and distribution systems. Amazon, by being the first of its kind, has a big lead over the nearest competitors due to their experience and its reputation as the first movers.Their punch remains on improving efficient delivery systems across borders and to build name recognition as the number one retailing firm in the Internet. They have also ventured into different retail options to encumber that lead. Marketing, Innovative inventory and distribution systems, and name recall have helped Amazon build a sustainable competitive advantage. In order for any online retail company to remain pr osperous and income generating, they must invest a lot of time and money into research and development of more efficient operations and distributions systems. This turn up to be key for the Market Leader in online retailing, Amazon.Com. Mary Grace Velasco,College of Business Administration,Senior, Fordham University,Fall 2000