International business strategy of amazon

This report examines the strategy adopted by Amazon in expanding internationally, providing important insights into the current nature and future direction of this global ecommerce and technology giant in the online retailing industry. The objective is to analyze the key elements of Amazons international expansion and identify the strategy it has implemented to establish a strong global presence. The report explores the companys entry into international markets, its global strategy, analyzes the effectiveness of the strategy implementation and thus identifies achievements and failures of that business strategy. Additionally, the report delves into Amazons application of international business strategy in several countries to visualize the differences related to national aspects. By evaluating Amazons international business strategy, this report provides valuable insights into the companys successful global expansion and its position as a leader in the ecommerce industry. Overall, Amazons international business strategy is centered around aggressive expansion into new markets, leveraging its core competencies in ecommerce, technology, and logistics. The companys approach combines strategic market entry, localization efforts, and a customercentric focus to establish a strong global presence.

FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS - MIDTERM ASSIGNMENT Subject: International Business Topic: International Business Strategy of Amazon Group - KDOE307 Lecturer: PhD Nguyen Hong Hanh Hanoi, June 2023 TABLE OF CONTENTS ABSTRACT CHAPTER 1: COMPANY OVERVIEW Company profile .4 Vision and Mission Core value .4 Products and Services 5 Internalization path .5 CHAPTER 2: AMAZON AND GLOBAL STRATEGY ANALYSIS Identify Amazon’s Strategy through Value Chain analysis .7 1.1 Primary Activities in Amazon Value Chain analysis 1.2 Support Activities in Amazon Value Chain analysis 10 1.3 A Global Strategy of Amazon 14 Appropriateness of the strategy 15 2.1 Internal factors (VRIO) 15 2.2 External factors (Porter’s Forces) 18 2.3 Achievements and Failures 20 CHAPTER 3: CASE STUDIES OF AMAZON'S INTERNATIONAL BUSINESS STRATEGY IMPLEMENTATION 22 Amazon's Strategy Implementation in India .22 Amazon's Strategy Implementation in China 23 CONCLUSION 25 REFERENCES 26 ABSTRACT This report examines the strategy adopted by Amazon in expanding internationally, providing important insights into the current nature and future direction of this global e-commerce and technology giant in the online retailing industry The objective is to analyze the key elements of Amazon's international expansion and identify the strategy it has implemented to establish a strong global presence The report explores the company's entry into international markets, its global strategy, analyzes the effectiveness of the strategy implementation and thus identifies achievements and failures of that business strategy Additionally, the report delves into Amazon's application of international business strategy in several countries to visualize the differences related to national aspects By evaluating Amazon's international business strategy, this report provides valuable insights into the company's successful global expansion and its position as a leader in the ecommerce industry Overall, Amazon's international business strategy is centered around aggressive expansion into new markets, leveraging its core competencies in e-commerce, technology, and logistics The company's approach combines strategic market entry, localization efforts, and a customer-centric focus to establish a strong global presence CHAPTER 1: COMPANY OVERVIEW Company profile Amazon is a multinational technology company founded by Jeff Bezos in 1994 Initially established as an online bookstore, it rapidly expanded its offerings to become a leading ecommerce platform worldwide Amazon boasts an extensive product catalog, encompassing books, electronics, clothing, household goods, and more Beyond retail, Amazon has successfully diversified its operations through services such as Amazon Prime, which grants customers expedited shipping and access to streaming content Renowned for its customercentric approach, innovative technologies, and unwavering commitment to convenience and value, Amazon has become synonymous with exceptional shopping experiences The iconic "smile" A to Z logo embodies Amazon's dedication to providing an all-encompassing range of products and services, reflecting their mission to serve as a comprehensive platform for customers from A to Z Vision and Mission Amazon’s vision and mission statement on the official website, “to be Earth’s most customer-centric company,” is a commitment to providing attractive e-commerce services to its customers and emphasizes the importance of customer satisfaction This drives Amazon’s focus on four major factors: the lowest prices, the best selection of goods and services, convenience in e-commerce, and global industry leadership: Lowest Prices: Amazon aims to offer competitive prices by leveraging scale, efficiency, automation, and technology to minimize operating costs and provide value to customers They regularly run promotions like Prime Day and employ dynamic pricing strategies to maintain lower prices compared to competitors Best Selection of Goods and Services: Amazon provides a wide range of products from various vendors, including physical and digital items, streaming content, and services They strive to offer a comprehensive selection that caters to diverse customer needs, making it convenient to find everything in one place Subscription-based options also expand customer choices and convenience Convenience in E-commerce: Amazon prioritizes customer convenience by simplifying the shopping experience Features like one-click ordering and saved payment methods streamline the purchase process They provide product reviews, recommendations, and detailed information to assist customers in decision-making Convenience is a key factor in building customer loyalty Global Industry Leadership: Amazon aspires to be a global leader in customer satisfaction and extends its reach into international markets Through investments in R&D, innovative solutions, strategic acquisitions, and partnerships, Amazon aims to develop products and services provided for customers worldwide They prioritize customer service and expand their logistics infrastructure to ensure efficient delivery globally Core value According to their statements on the official website, Amazon is guided by four core principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking: Customer Obsession: Amazon prioritizes the needs and satisfaction of its customers above all else Instead of focusing solely on competitors, Amazon directs its efforts toward understanding and exceeding customer expectations, providing excellent service, and delivering products and experiences that delight and engage customers Passion for Invention: Amazon fosters a culture of innovation and embraces a passion for invention The company encourages its employees to think creatively, challenge the status quo, and continuously seek out new and better ways to serve customers Amazon values the power of original ideas and invests in research and development to drive innovation across its wide range of products and services Commitment to Operational Excellence: Amazon places great importance on operational excellence and efficiency The company strives to optimize its processes, systems, and infrastructure to deliver superior customer experiences From logistics and supply chain management to customer service and fulfillment, Amazon is committed to continuously improving its operations to provide reliable, fast, and seamless services Long-Term Thinking: Amazon embraces a long-term perspective in its decision-making and strategy Rather than focusing on short-term gains, the company takes a patient and strategic approach, investing in areas that may take time to yield results This long-term thinking enables Amazon to make bold and innovative bets that can reshape industries and deliver sustainable growth over time Products and Services Amazon states that they offer a wide range of products and services across various industries but they can be categorized into five main areas: Amazon Store: Amazon is primarily known for its online retail platform, where customers can purchase a vast selection of products This includes categories such as electronics, books, clothing, home goods, beauty products, and much more One way Amazon guarantees a wide selection of products is through the 1.7 million small and medium businesses around the world selling on Amazon.com and offering more options for customers Devices and Services: From Alexa and Echo, Fire TV, Fire Tablets, and more, customers are using devices and services to make their daily lives easier and more enjoyable Amazon Web Services: AWS is the world’s most comprehensive and broadly adopted cloud, offering over 200 fully featured services from data centers globally Delivery and Logistics: Amazon Logistics is a well-known shipping & delivery service, which complements existing providers such as USPS, FedEx, and UPS In simple words, Amazon Logistics is more of a “last mile” shipping & delivery service, which gets packages delivered to their customers Entertainment: Amazon creates and provides access to world-class entertainment through Amazon Originals, Prime Video, Audible, Twitch, Amazon Music, and more for customers to enjoy Internalization path According to an article on Office Timeline summarizing the evolution and growth of Amazon over time, Amazon's journey of international expansion has a rich history that began with its roots as an online bookstore:  July 5, 1994: Amazon Founded After a cross-country move from New York City to Seattle, Washington, Jeff Bezos opened Amazon.com on July 5, 1994, in the garage of a rented house Originally called Cadabra.com (as in "abracadabra"), Amazon is only the second online bookstore, born of Bezos' brilliant idea to capitalize on the Internet's 2,300% annual growth  December 1998: Entry into the United Kingdom and Germany After establishing a strong presence in the United States, Amazon expanded its reach to the United Kingdom in 1998 by acquiring Bookpages.co.uk The following year, it entered the German market by acquiring Telebook  January 2000: Amazon Unveils a New Logo Amazon makes the official transition from "bookstore" to "everything store." To acknowledge the company's change in focus, Amazon unveils a new logo The iconic “smile” logo, designed by Turner Duckworth, replaces the abstract rendering of the Amazon River (which inspired the company's name)  2002: Entry into Canada and European markets Amazon expanded into Canada in 2002, followed by entering additional European markets like Italy, Spain, and the Netherlands during the 2000s These expansions allowed Amazon to tap into new opportunities and serve a wider customer base  August 2004: Entry into China through Acquisition In a pricey landmark deal, Amazon bought Chinese retail giant Joyo.com in August 2004 The $75 million investment gives the company access to a major market, and Amazon begins selling books, music, and videos through the platform  June 2013: Amazon launches in India Amazon initially entered the Indian market by acquiring Junglee.com, an online shopping comparison website, in 1998 Junglee.com served as a precursor to Amazon's direct entry into the Indian market However, in June 2013, Amazon officially launched its marketplace platform, Amazon.in, in India Initially, the platform offered books, movies, and TV shows  June 2017: Amazon Acquires Whole Foods While Amazon dominates almost all of the markets it enters, the company has long struggled to gain a foothold in the highly competitive grocery business In 2017, Amazon bought all of Whole Foods' 471 stores for $13.4 billion Amazon has since integrated the two companies' distribution systems, and combined discounts to loyalty members of both stores  Until now: Amazon continued expanding its global presence On the world scale, they now operate across continents with around 20 countries having dedicated websites for shoppers and sellers These include the United States, France, Italy, the United Kingdom, Turkey, India, Saudi Arabia, Japan, Singapore, Mexico, and Brazil to name some They also have built over 150 fulfillment centers globally with a majority of them residing in the U.S (Gourmet Ads) Although they don’t have operations in every country, they still deliver to over 100 countries in the rest of the world CHAPTER 2: AMAZON AND GLOBAL STRATEGY ANALYSIS Identify Amazon’s Strategy through Value Chain analysis 1.1 Primary Activities in Amazon Value Chain analysis 1.1.1 Inbound Logistics Inbound logistics plays a critical role in the success of any organization, and for a global giant like Amazon, it is a key component of its value chain Amazon's ability to obtain, store, and distribute goods and inputs efficiently is instrumental in ensuring smooth operations and meeting customer demands Supplier Management: At the core of Amazon's inbound logistics is its robust supplier management system With a vast network of vendors worldwide, Amazon focuses on establishing cost-effective deals, ensuring prompt shipments, and maintaining successful relationships with suppliers By strategically managing these relationships, Amazon secures a reliable supply of goods and materials necessary for its operations (EdrawMax) Warehouse Operations: Amazon's extensive system of fulfillment and warehouse facilities around the world plays a crucial role in its inbound logistics These facilities act as hubs for receiving, storing, and managing incoming deliveries Warehouse operations encompass various tasks, including unloading shipments, controlling stock levels, ensuring quality assurance, and optimizing storage practices Efficient management of these operations ensures that products are readily available for distribution, minimizing delays and improving customer satisfaction worldwide (Profit Whales Online) Inventory Management: The company uses a centralized inventory management system that allows it to monitor inventory levels and movements in real-time across its network of warehouses and fulfillment centers worldwide To maintain a streamlined supply chain, Amazon employs advanced tools and analytics for effective inventory management Through accurate demand forecasting, the company determines optimal stock quantities and develops restocking plans By avoiding stockouts and optimizing stock levels, Amazon reduces the risk of lost sales and minimizes the costs associated with excess inventory This strategic approach to inventory management is crucial in meeting customer demands while maintaining cost efficiency in any country (Sell Amazon Online) Transportation and Freight: Once goods are received at Amazon's fulfillment centers, the challenge lies in efficiently transporting them to the appropriate shipping facilities or directly to consumers Amazon employs a range of transportation methods in all of its different markets, including trucks, air freight, and its own delivery systems like Amazon Prime and Amazon Flex, for final-mile shipping By carefully selecting transportation options and optimizing freight strategies, Amazon ensures timely and cost-effective delivery, further enhancing its customer experience Technology and Automation: Amazon leverages modern technology and automation to streamline its inbound logistics activities Robotics, automated sorting systems, and predictive algorithms are employed to optimize processes, increase productivity, and reduce expenses From machinery for categorizing and selecting products to advanced stock control and shipping consolidation strategies, technology plays a pivotal role in enhancing efficiency throughout Amazon's inbound logistics operations (Profit Whales Online) Data Analytics: A key factor in Amazon's success lies in its ability to harness the power of data analytics By gathering and evaluating data on various aspects, such as vendor efficiency, transport routes, inventory levels, and consumer interest, the company can make informed decisions to enhance productivity and reduce costs Data analytics enables Amazon to identify trends, optimize supply chain operations, and continuously improve its inbound logistics processes from country to country (EdrawMax) By effectively managing supplier relationships, optimizing warehouse operations, implementing robust inventory management practices, utilizing efficient transportation and freight strategies, leveraging technology and automation, and harnessing the power of data analytics, Amazon has built a formidable inbound logistics system that operates on a global scale These elements collectively contribute to Amazon's ability to provide customers with a seamless experience, while driving efficiency, cost savings, and maintaining its position as a leader in the e-commerce industry 1.1.2 Operations A value-chain evaluation offers valuable insights into how a business generates value at each stage of its operations Examining Amazon's value chain reveals key elements that shed light on the company's approach to creating value Customer-centric Focus: Amazon's business plan centers around providing exceptional interactions with customers across all regions of the world The company's commitment to this customer-centric approach is evident in its emphasis on efficient order processing, dependable shipment, and attentive customer care By focusing on these aspects, Amazon aims to create remarkable experiences that build customer loyalty and satisfaction, serving as the foundation for its success (Visualise Solutions) Operational Efficiency: Amazon leverages state-of-the-art technologies, robotics, and data insights to drive operational efficiency across its value chain worldwide Through the application of cutting-edge solutions, the company streamlines operations, reduces costs, and boosts productivity This focus on operational efficiency extends to various areas such as shipping, warehouse services, fulfillment, and stock control By harnessing technology, Amazon ensures its operations are optimized to meet customer demands effectively (Business Strategy Insights) Supply Chain Management: Effective supply chain management is a critical component of Amazon's logistics strategy The company actively collaborates with suppliers to establish strong relationships, negotiate reasonable terms, ensure prompt delivery, and uphold high standards of product quality Through efficient management of vendors, inventories, and shipping, Amazon maintains a reliable supply chain This commitment to seamless integration and collaboration with suppliers enhances the overall efficiency and effectiveness of its operations (Visualise Solutions) Ecosystem Development: Amazon's ecosystem development is exemplified by the Amazon Marketplace, which enables independent sellers around the world to connect with buyers online This platform broadens Amazon's product offering, improves consumer value, and creates new sources of income By nurturing a thriving ecosystem, Amazon fosters competition, innovation, and choice, thereby enriching the overall customer experience The Amazon Marketplace has become a significant driver of growth, enabling the company to continually expand its reach and meet evolving customer needs By prioritizing exceptional customer experiences, leveraging advanced technologies, collaborating effectively with suppliers, and nurturing a vibrant ecosystem, Amazon has solidified its position as a dominant force in the industry As the company continues to evolve and innovate, its commitment to generating value along the value chain remains unwavering, ensuring its continued success in meeting customer demands and shaping the e-commerce landscape 1.1.3 Outbound Logistics A value chain analysis of Amazon's outbound logistics strategy reveals a comprehensive and well-executed approach to delivering goods to customers worldwide Global Supply Chain Integration: Amazon's outbound logistics strategy involves the seamless integration of supply chains on a global scale Through strategic agreements with international airlines, logistics vendors, and regional shipping facilities, the company ensures efficient and effective order fulfillment in various locations This integration enables Amazon to expand its reach and deliver products to customers across the globe, regardless of geographical boundaries Customization: While Amazon keeps the overall goals and core values of the company, it also recognizes the diverse preferences and requirements of different markets and employs a localization approach in its outbound logistics operations This involves adapting appropriate logistical procedures, such as inventory management, packaging, and shipping options, to meet the specific needs of local markets By customizing its processes, Amazon lowers trade barriers and enhances customer satisfaction by providing tailored experiences to different regions (Visualise Solutions) Cross-Border Logistics Expertise: Operating in multiple countries presents unique challenges, including navigating complex customs processes, import/export laws, and transportation regulations Amazon has developed expertise in handling these obstacles, ensuring smooth cross-border logistics operations By efficiently managing international deliveries and minimizing delays, Amazon maintains its ability to provide timely and reliable delivery services to customers worldwide Global Fulfillment Network: Amazon strategically establishes a global network of fulfillment centers, strategically located to optimize storage and reduce transportation distances By placing warehouses in different geographic areas, the company ensures that products are stored closer to customers, resulting in faster delivery times and reduced shipping costs This global fulfillment network enables Amazon to fulfill orders efficiently, enhancing the overall customer experience (Profit Whales Online) Multi-Channel Distribution: In addition to its dominant online platform, Amazon embraces a multi-channel distribution approach This includes partnering with physical stores, independent sellers, and regional resellers to expand its customer base By leveraging this diverse distribution network, Amazon taps into different customer demographics and caters to local purchasing preferences This strategy allows the company to reach a broader audience and extend its market presence worldwide 1.1.4 Marketing and Sales Assessing Amazon's marketing and sales efforts along the value chain demonstrates an extensive worldwide strategy that includes several important components Appropriateness of the strategy 2.1 Internal factors (VRIO) Core Competency Valuable Rare Brand Name ✓ ✓ Customer Experience ✓ ✓ Research and Development ✓ ✓ Distribution Network ✓ Product Range Inimitable Organized ✓ Competitive Advantage ✓ Temporary Advantage ✓ ✓ Competitive Advantage ✓ ✓ ✓ Competitive Advantage ✓ ✓ ✓ ✓ Competitive Advantage Customer Base ✓ ✓ ✓ ✓ Competitive Advantage HRM ✓ ✓ ✓ ✓ Competitive Advantage Marketing ✓ ✓ ✓ Temporary Advantage Customer Loyalty ✓ ✓ ✓ Temporary Advantage  ✓ Implication VRIO analysis of Amazon: Amazon VRIO analysis is the process of identifying the core competencies of the e-retail giant and the resources and capabilities from which its core competencies arise Apart from that, which core competencies give rise to sustainable competitive advantage, or temporary advantage will also be concluded from the analysis (Abhijeet Pratap, 2020)  Amazon’s Core Competencies: Brand Name Amazon, the largest global e-commerce company (Amazon annual report 2017), owes its growth to various factors, one of which is the trust it has successfully established Besides that, Amazon is also renowned for its customer-centric approach Amazon has strengthened its brand image through technological innovations, international expansion, marketing strategies and a talented workforce Hence, Amazon is recognized worldwide as a prominent brand This core competency is both valuable and rare However, other e-commerce platforms have not been able to match Amazon’s degree of customer trust and appeal There are few competitors with a similar brand image, but they are only present in a few markets For example, Alibaba, including physical retailers with online sales in their local markets, to challenge Amazon's dominance in e-commerce would require sizable time and financial investments As a result, this fundamental expertise gives Amazon a source of long- term competitive advantage (Abhijeet Pratap, 2020) Customer Experience Customer experience (Abhijeet Pratap, 2017) is a crucial distinction and a key factor in the popularity and demand for digital retail companies To be more specific, Amazon has seen substantial market expansion in recent years Although their technology might not be as cutting-edge as Amazon's, other digital retail businesses are also placing a high priority on the consumer experience, and some have created comparable alternatives that increase customer convenience The physical retail companies, such as Walmart, Costco, and Target, are also placing a lot of emphasis on customer experience and providing omnichannel shopping for their consumers as a result of the fierce rivalry in the retail sector In this sense, even if Amazon appears to be generally ahead of its rivals right now, this competition would heat up over time as the other retail businesses continued to increase their investment in the customer experience Overall, customer satisfaction results in a brief competitive advantage for Amazon Research and Development Research and Development (R&D) plays a crucial role in driving demand, sales and popularity for Amazon As the biggest industry spender on R&D, Amazon now occupies the top spot In addition to its online marketplace, Amazon devotes a large number of R&D funds to its web services, which have seen recent fast development Amazon spent the most on R&D and has created significant capabilities by keeping a constant focus on R&D, including cutting-edge algorithms that improve the ease of its online marketplace for both customers and sellers Especially in the e-commerce industry, no other company can match Amazon's R&D capabilities This makes these skills a precious and uncommon resource that is challenging to duplicate Other e-commerce or physical retail companies would need to make significant effort and financial commitments to try to duplicate or replace these capabilities As a result, Amazon's R&D abilities and innovative strategy give the brand a long-term competitive advantage Amazon has maintained its lead over rival online and offline retail brands while also acquiring skills that are unmatched by other digital firms by continually placing an emphasis on innovation Distribution Network Amazon possesses one of the largest distribution networks globally (Abhijeet Pratap, 2020), setting it apart in the retail industry, encompassing both physical and online retail No other company's distribution capabilities and huge resources can compete with those of Amazon One of the main sources of Amazon's competitive advantage is this key expertise Most of the company's sales and profits are produced by its strong distribution network, which operates both domestically and abroad None of the retail or e-commerce brands have resources and capabilities that are comparable, and even if they tried to build those capabilities, it would take a lot of time and money In the medium and long run, it is improbable that any other company will be able to match Amazon's distribution capabilities In conclusion, Amazon's core skill is a significant source of long-term competitive advantage for the company Product Range The extensive range of products available on Amazon's e-commerce platform (Abhijeet Pratap, 2023) contributes significantly to its competitive advantage This priceless asset fuels a brand's sustainable competitive edge when combined with the company's distribution capabilities No other e-commerce or retail company offers a product selection as extensive as Amazon Because of the company's support for thousands of small and medium-sized businesses worldwide, over 1.6 million new jobs have been created in recent years, demonstrating the company's influence as an online marketplace These elements have significantly increased Amazon's influence as a global and domestic online marketplace Any other online or offline retail brand would find it difficult to readily match this sustainable competitive edge Customer Base A competitive edge for Amazon is provided by its sizable client base, which consists of millions of consumers from the US and other international markets Among other things, Amazon's pricing policy is a major contributor to both its popularity and the growth of its client base By hosting multiple sellers offering similar products on its marketplace, Amazon fosters competition and provides customers with the lowest prices This pricing strategy has attracted a significant number of customers from all over the world Additionally, Amazon's low shipping costs have further contributed to its customer attraction The company's focus on customer convenience has resulted in higher overall customer engagement Amazon's client base has grown significantly as a result of the growing usage of smartphones and the internet Last year, Amazon's mobile app saw more than 150 million downloads in a single month, far outpacing its nearest rival, Walmart Despite the continued popularity of desktop usage for shopping and paying for items, Amazon continues to have a significant lead over its rivals in terms of customer base expansion Human Resource Management For internet firms like Amazon, managing human resources is essential for maintaining a competitive edge To boost overall performance and boost staff productivity, these businesses carefully manage their workforce Growth is achieved at Amazon through investments in research and development, which employ a large number of highly talented computer engineers and programmers who continuously improve the online marketplace In the e-retail sector, Amazon dominates rival tech companies like Apple, Google, and Microsoft (Abhijeet Pratap, 2023) with about 840,000 people in 2020 This demonstrates how Amazon's HR processes are superior to those of its retail rivals, turning its human capital into a source of competitive advantage that, when paired with other core capabilities, maintains its competitive edge Marketing Leading brands, particularly those in technology and retail, use marketing to their advantage Amazon promotes its items via a variety of marketing strategies, including paid advertising, affiliate marketing, and digital media, despite its well-known brand Customer engagement and loyalty are greatly influenced by the platform itself Increased sales and earnings are the result of Amazon's large annual investment in marketing and promotions Although Amazon may not have a durable competitive edge over other shops like Walmart due to its great marketing capabilities, other retailers like Walmart Instead, it gives you a shortterm competitive advantage Customer Loyalty Customer loyalty is a key element driving sales and profitability in the cutthroat retail sector, acting as a considerable competitive advantage (Abhijeet Pratap, 2020) Due to its competitive positioning, favorable brand perception, pricing, and distribution capabilities, Amazon enjoys great consumer loyalty as an online retail brand Amazon Prime, which provides meaningful advantages at a reasonable price, is essential for fostering consumer loyalty Amazon's rivals, including Walmart and other physical retailers, who are spending money on cultivating customer loyalty, present it with strong competition Along with incentives and loyalty programs, these rivals use a variety of techniques, such as pricing strategies and improving the client experience Despite maintaining a solid competitive position, Amazon's advantage has considerably lessened, giving it a brief competitive edge due to its fundamental strength 2.2 External factors (Porter’s Forces) 2.2.1 Threat of New Entrants In the e-commerce industry, the threat of new entrants is high The market is relatively open and accessible, making it possible for new players to enter Companies like Amazon face ongoing challenges from new companies entering the market However, Amazon is a giant in the market, which is well-established and thus have significant advantages regarding the brand recognition, customer loyalty, economies of scale, technology and logistics investment Therefore, it might be challenging for new entrants to cross several barriers to compete with Amazon and other established players in the industry Economies of scale: Amazon has built a large and established logistics and fulfillment network of warehousing and delivery facilities These factors provide the company with significant economies of scale Brand recognition and customer loyalty: Amazon has a large and loyal customer base thanks to its reputation for customer service, convenience and low prices Capital requirements: Amazon has a massive investment in e-commerce solutions, logistics and marketing because of its expertise and resources This gives the company huge advantages over the new entrants as they have to invest significant resources to build up a similar network However, small-scale companies can grasp a limited segment of customers because of low switching costs Network effects: The customers are more likely to use an e-commerce platform which has large and established user bases The network effect makes it even more challenging for new entrants to attract customers Regulation: The industry is heavily regulated Amazon already has processes and resources in place to comply with the regulations while new entrants must navigate through a complex legal and regulatory environment to compete Summing up, the threat of new entrants is a weak force with no substantial setback for Amazon 2.2.2 Bargaining Power of Suppliers Amazon has a large and diverse supplier base due to its size and market dominance so the company has substantial leverage over its suppliers, it does not depend on any single supplier Additionally, Amazon invests significantly in technology and processes to streamline its supply chain and thus increase efficiency With its large networks, the company forms strategic partnerships with key suppliers A performance metric is set to regularly evaluate supplier performance and motivate suppliers to meet its expectations By leveraging technology to automate and streamline procurement processes, the company also reduces its need for intermediaries, lower procurement costs Therefore, Amazon can negotiate favorable terms and conditions with its suppliers regarding a lower price, better delivery times and flexible payment terms However, it relies on the equipment and hardware components for information systems in cloud services Overall, the bargaining power of suppliers is a moderate force 2.2.3 Bargaining Power of Buyers The bargaining power of buyers is medium to high Customer satisfaction and product quality are among reasons for Amazon’s success In many of its markets, Amazon provides seamless customer experience which helps it build customer loyalty in those looking for positive customer experience and builds a strong brand recognition and reputation With its large-scale business, the company can offer competitive prices and value-added services to its customers Although Amazon is a dominant player and has a diverse customer base, the company must also balance its bargaining power with expectations and needs of customers The customers can switch to competing products or platforms, they can also use substitute products or services In addition, the bargaining power of customers is affected by regulations and industry standards, as well as the overall state of the economy 2.2.4 Threat of Substitutes Although Amazon holds a dominant position in the e-commerce market, there are still other alternating products and services that can replace its offerings For example, traditional brick-and- mortar retailers and other online retailers also offer several similar products as Amazon platform It is also inevitable that the advanced technology may open new doors for customers to shop and purchase even more conveniently through virtual and augmented reality The price, quality, availability of substitutes and switching costs are all associated with the changes in buying decisions However, by continuously innovating existing products and services, diversifying its offerings, focusing on brand recognition and exceptional customer service, Amazon can provide its customers with superior shopping experiences while reducing its dependence on any single