Five Forces Model for Industry Analysis Essay Example for Free

Five Forces Model for Industry Analysis EssayNew EntrantsThe online bookstore industry that amazon.com has pioneered in was, at first, very unspoken to penetrate. There were varied barriers much(prenominal) as distributing capabilities and the variety of the plectrum offered that be supposed to be hurdled. Amazon successfully solved the tricky parameters as universe the first one to get into the whole idea 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 the ability to go to an actual bookstore to diversify or return books or other products. This network 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 emergence of book retail giants Barnes and majestic and Borders in the online shopping industry.Industry CompetitorsThe major 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-commerce sites today. centre 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 create to become the second largest, and one of the straightaway 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 likewise stir 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 expand into one of the fi nest bookstores. In 1992,Borders was bought by the Kmart group which further flourished the company into a Multi Media Giant with a wide selection of Audio, Video and Books found throughout the United States.The Online Bookstore industry nurture become a fierce business 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 macrocosm. These are mostly people who have had some form of higher education and have access to the Internet and computers. The segment of online shoppers has change magnitude dramatically in upstart long time 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 pass oners such that buyers are able to buy products with very big discou nts compared to ones bought in actual retail outlets. The bargaining origin 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 will 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 Time 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 bookretailers and music stores such as Barnes and Nobles, Virgin Megastore, Tower Records, Sam discretion and other small mom-and-pop outlets. With the rise of online retail, there will be little impact from these substitutes. One impact would be some consumers who would like to hold o r 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 Model layer of oppositionDue 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% market 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 market.Life CycleAmazon, in its first years, had negative income but the rise of e-commerce sites and being the pioneer made the succeeding years led to boom time 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 terms of disseminations to customers. Still with a negative income, Amazon went public in 1997 and had one of the biggest IPOs of the time. With investors banking on future positive cash flow for this company, Amazons market value soared. Many people caught on with the idea 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 par ticipated in the Dr. Seuss shops, story telling sessions and Dr. Seuss days.Degree of GlobalizationAmazons strength internationally lies within its networks in major ports and cities around the Globe. Amazon first started out in Seattle but as soon as they 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.Extent of Government ControlThere has not been many government regulations regarding online retailing. A group of CEOs whose firms that are engaged in such practices have formed an organization called Global Business Dialogue. This GBD group supports the development of a seamless global organization that delivers the broadest align 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 uproot discriminations against, or other non-tariff barriers to global trade in, electronic commerce. This working group will also provide an avenue for the GBDs to consider and promote the growth of the electronic marketplace in an environment unencumbered by detrimental 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 Network 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 Biggest Bookstore will be easily accessed through Netscape Netcenter (home.netscape.com). In addition, Amazon.com has multi-year exclusive 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 widen Amazons mien 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 profess in this type 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 sensitive to business cycles due to the speed of te chnology involved in the services they offer. kinetics of New Knowledge GenerationOnline retailing relies on the work of an excellent distribution system. Amazon has invested their money into expanding their network of distribution centers around the globe. They also have investments in creating bettertechnology for tracking orders and giving efficient delivery systems for their customers.Amazon.com has remained on top of the online retailing business 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 thrust 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 keep that lead. foodstuffing, 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 easy and income generating, they must invest a lot of time and money into research and development of more efficient operations and distributions systems. This proved to be key for the Market Leader in online retailing, Amazon.Com.