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Table of Contents Contents Introduction Overview of Amazon.com, Inc List of Amazons Product Categories Business process of Amazon.

com Application of Porter's Five Forces analysis to Amazon.com, Inc The Business Value Chain and Amazon.com Application of Business Value Chain Analysis to Amazon.com Suitability of Cloud Computing: Amazon.com Conclusion Bibliography Page No. 2 2 3 4 5 7 10 12 15 16

Introduction This paper contains the analysis of an IT firm using porter five forces and Business Value Chain model. For this purpose Amazon.com. Inc has been selected. Applying Porters five forces, the competitive forces of Amazon.com have been identified and analyzed. Furthermore, applying Business Value Chain model how Amazon faces theses competitive forces has been analyzed. The renowned organization like the Amazon was using the cloud computing at the earlier time of the cloud computing. It was a gigantic organization who invested more in cloud computing. The suitability of Cloud Computing for Amazon.com has also been analyzed in the last segment of this paper. Overview of Amazon.com, Inc Amazon.com, Inc is a huge trafficked Internet retail destination across the world. It was established in 1994. Its corporate office is at Seattle, Washington. Its operational scope is very wide. Its operational area is covering Canada, Japan, France, United States, Germany and United Kingdom. It is an earliest concern which is selling its products to the very remote clients. It is being possible for them because of the huge number of warehouses which are located into those remote areas of their clients. Abreast it they have many partner companies. Amazon is also distributing the products of its partners. So it is selling its products and working as a stage of sale for its partners. Video, music, consumer electronics, household products, clothing and books are being sold by them. Its web services store expansion was geared up from 2004. They have some very successful products likeAmazon S3 (simple storage system) Amazon 53 Amazon EC2 (elastic compute cloud) Near about 137 million active clients are being covered by Amazon- Q1, 2011. In respect of merchants selling one third of total listing is being made by Amazon. 55.4% of is being represented by North America, with other 44.6% in the global market.

List of Amazons Product Categories Amazon US

Amazon UK

Business process of Amazon.com In each of the organizations a sequence of activities are performed by people to accomplish a certain goal. This logical sequence of timely activities is called a process. When the set goal is driven by the objectives of a company, the process is often called a business process. Since all activities within an organization are part of some business process, business processes are really the backbone of every organization.

The highest level business process describes the ultimate business goal of Amazon which is: Distribute books via electronic store. This process can be decomposed into three other sub business processes: Buy books to stock and order, Sell books via online store and Manage solely internet distribution. These, in turn, can be broken down into several sub processes: for example, the process Sell books via online store consists of six components. Application of Porter's Five Forces analysis to Amazon.com, Inc Threat of new entrant: Since the establishment of a new physical bookstore is very costly so, threat will be high for the

new entrant. Actually it indicates that it easy to establish for anyone who has enough wealth and knowledge. Anyone who already has physical book store will enjoy some advantages in respect of expanding their business based on internet because of having recourses in their existing business. Here are some examples of internet bookstores that had physical bookstore earlier, as follows: BookSense.com, BookSite.com, BarnesandNoble.com and Borders.com Threat of new entrant is low when it is expensive to establish same types of business because of rapid change in respect of information technology. In case of Amazon.com, their one-click shopping technology can be an important example. Since they patented it, they were able to save that mechanism form being copied. It is a very well known brand. So it will be tough for others to start these types of online retailing. Even has also making cautious the clients who are involved with them. Bargaining power of buyer: Since books are available from various sources users possess a high bargaining power. A users or reader has option to avoid Amazon.com and buy that book from others. In case of other products like music CD they are facing competition because there are many similar kinds of online market. It forces Amazon.com to make a competitive price of their products. For an example- they priced Michael Jackson collectors album 20-30 USD, which was lower than the prevailing market to pick the attention of more clients.

Bargaining power of supplier: In the field of electronic business suppliers bargaining power always remains high as Amazon.com is unable to purchase these types of products from their root supplier like Panasonic, Pioneer and Sony. Because of pricing lower than the market price these suppliers banned to sell their items on Amazon.com. As it will have a great affect on these their clients. But in respect of book sector bargaining power of suppliers is relatively low. Because they reduced their dependency on prime distributors by opening many automated distribution points in the USA; Threat from substitute products: In Amazon.com product substitution threat is very high. Because same types of online business competitor may offer more services and lower price than Amazon.com. Clients may not feel comfortable to buy their books online. However their one-click shopping may incur some expense to their clients at the time of switching. Industry rivalry: Industry rivalry is very high for Amazon.com because of presence of many competitors on physical base and online base bookstores. Physical bookstores will enjoy more facilities because of having a well established clients platform, brand identity, capability of providing selection facilities of books. And regular entrance of these types of online business of bookstores is increasingly raising the threat of industrial rivalry. It is also in a great competition of industrial rivalry in respect of Music selling section. Because of entrance of Amazon.com CDNow taken some steps to lagged it behind and get them obstacle to establish it. And CDNow has done it suitably because of having better establishment and brand identity in relation to Amazon.com In case of auction business there was the same result. They faced a huge rivalry from eBay.com. eBay.com tried to them to stop and continue their business successfully. There are some reports these are collected to show that they were not so successful in this ground.

The Business Value Chain and Amazon.com Activities of a business and the competitive strength of a certain business are focused by Value Chain Analysis. Profit margin can be focused in terms of the value created and captured by certain concern: Margin = Value Created and Captured Cost of Creating that value It is profitable, when more value is created by a business and a competitive advantages is build up only when more value to the customers is provided.


(1) Primary Activities: product producing and distribution relating activities are defined as primary activities and (2) Support Activities- supporting activities includes those types of activities which basically improve the efficiency and effectiveness of operation but not concerned with production of products. Best activities by a certain concern and the opposition is analyzed be Value Chain Analysis.

Business Value Chain Analysis to overcome competitors Every activities undertaken by an organization of involved with obtaining the facilities of competition. If any organization intends to overcome its competitors it has to deliver higher quality performance of value chain activities in relation to the competitors. On the other hand when there will be an approach of reducing cost the entity has to reduce the expenditure relating to the Value Chain Activities and it also has to obtain favorable variance in respect of uses of resources.

Primary Activities

The Primary activities of the Value Chain model are described in following ways:

Support Activities Support activities conclude:

Steps followed in the Value Chain Analysis The analysis of Business Value Chain is made on three consecutive steps: (1) Sorting out the primary functions of concern according to the framework of operational model (2) Analyzing the probabilities of adding value by means of cost reduction or making any other changes or recognizing demerits of any prevailing activities. (3) Establishing approaches focusing on the steps or act by which competitive facilities can be maintained. Breaking down

Application of Business Value Chain Analysis to Amazon.com We can get a comprehensive ideas about value chain by understanding the change in business

of Amazon from 10-K. The business strategy conducted by Amazon in March of 2001 can be summarized as follow: The world most customer-centric company is Amazon in which the needs of customers are fulfilled by online. Amazon is willing to expand its business operation by serving different types of products and services through online. The internet platforms of Amazon consist of innovative technology, sophisticated and extensive fulfillment of capabilities, expertise ecommerce services, global brand recognition etc. The authority of Amazon believes that the high quality of customer experience and frugality of cost management are the basis of the success of the company by facilitating to inaugurate new e-commerce business as soon as possible. The Amazon authority also believes that the internet platform will also facilitate them in expanding a range of products and services to the customers by the strategic partners relationships favorable to the customers. Along different dimensions and sales and marketing service effort the expansion of the company is carried out by the filing process. In this case there exist three points. At first Amazon is keen to conduct same activities it the rival of it but in a distinct ways. The competitors of Amazon include brick and mortar stores meaning the companies with stores in physical existence. The virtual store of Amazon provides the customers with the products and services as they want. Second, the major business objectives of the Amazon are to be the worlds most customer centric company and in this regard they focus on the customer service part of the value chain of it. Third, there exists a wide of products and services offered by Amazon to the customers by forming a strong partnership with the alliance companies. In the consideration of value chain the marketing and sales and customer service is considered as the most important. Under the results of operation in the same filing it is mentioned that the operating efficiency and the revenue growth are focused on the current year. The last tow was more emphasized than fist three parts of the value chain. The rebalancing of the moment was described but the significant role played by the part-1 of the 10-K filing was the operational efficiency. The strategy which reflects the information up to December 2002 in the 2003 10-K is illustrated below:

The Amazon believes that it is serving the customers with the Earths biggest selection and it is also the most customer centric internet based platform where the customers are provided with their demanded products and services. Amazon is committed to provide its customer with lowest possible price providing highest possible values. Different types of retailers business and individuals are allowed to promote and sell their products and services by using the Merchants@ and Amazon market place programs. The core strategy in this case include offering the customers with lowest possible price, highest convenience and a wide range of products to be selected by the customers. The Amazon is also contemplating to indulge in leveraging the efficiency and effectiveness with an eye to disbursing the cost saving from such efficiency in reduced or discounted prices to the customers. Amazon, along with providing its own business activities on its websites, allows third party to promote their products consistent with the customers needs and preferences. The low discounted price resulted from the operational efficiency are mentioned here. Anyone can access easily from Valuation Tutor because the remainder of the part 1 of the 10-K is similar to the previous years. Such type of vantage infers that the firm is mainly focused on the first part of the value chain, efforts and logistics & operation in 2000. Both the 2003 filing and 2001 are identical and it is expressed by the Amazon authority that Amazon is providing the customers the lowest possible price through the product low price and providing free offering of shopping which include the membership of the Amazon Prime, and emphasize on improving the operating efficiencies to maintain the lower price. Amazon also tries to provide the functionality of easy-touse, timely customer services, fast and reliable fulfillment etc. The competitive advantages of Amazon from a value chain perspective are as follow: Amazon possesses sophisticated technological infrastructure. It has invested a huge amount in technological development. It possesses a system of product forecasting.

Receipts are printed on demand. Customers are suggested on new products. It has fast and easy payment system. Conducts business through 24 hours. Provides facility of free returning within 1 month.

Suitability of Cloud Computing: Amazon.com Cloud computing is the sum of Software as a service (SaaS) and Utility Computing.Using cloud computing will result in a major shift of hard and software services. This causes a huge change in the current IT infrastructure. The giant pool containing the software, hardware and other services is referred to as the Cloud Computing other than merely considering the concept of cloud. When it becomes necessary all the resources can be accessed. The cloud provider conduct selling as based on the pay-per-use in most of the cases. As mentioned by Strickland (2011) as the extra resources become always available so it is meant that there is a high level of flexibility of these services. The renowned organization like the Amazon was using the cloud computing at the earlier time of the cloud computing. It was a gigantic organization who invested more in cloud computing. Elastic Compute Cloud (EC2) is a major part of Amazons platform of cloud computing AWS (Amazon Web Service). It facilitates the users to be connected with the virtual computer by creating server instances if needed. Users can control geographical location by using it. Instance types Xen virtualization is used by EC2. All the virtual machine named as instance acts as a private virtual server. The Elastic Computer Units is used by Amazon.com using to size the instances. However the performance of same multiple virtual machine may be varied. Cost To run the Linux or Windows respectively Amazon charges ($14.40 to $21.60)/month) and ($0.02 to $0.03)/ per hour for the smallest Micro Instance; It costs to Amazon about $2.48/hour to set up high CPU and memory. Free Tier Free resource credits were provided to the new account holders as of December 2010. The credits were formed to conduct storage (EBS), micro sized server and bandwidth for only one year period. The credit is not needed to be used in initial month as the charges are pertained on demand. Reserved Instances The EC2 service users are enabled by reserved instances against payment of certain fee. Amazon charges less in this regard than charged for the instances on demand. Features Operating systems The EC2 service, after launching in august, provided later Sun Microsystems Open Solaris and Solaris Express Community Edition and Linux. Within 2010 it has been reported to conduct Free BSD. Net BSD AMIs became available within March 2011. Persistent Storage

There are two types of storages in launching the EC2 (temporary storage) instance are instance store and EBS (persistent storage) root device. S3 (simple storage service) is a storage system used to access to EC2. Elastic IP Addresses The IP address of Amazon is identical to traditional address except slight difference. In this case the Elastic IP Address is mapped by a user without being helped by network administrator. Amazon Cloud Watch The EC2 customers resource like network, CPU and disks are provided a real-time monitoring by Amazon Cloud Watch. Automated Scaling Automated scaling facilitates Amazon to adapt capability of computing to the site traffic.

Conclusion After analyzing the business of Amazon.com using porter five forces and Business Value Chain model it could be concluded that Amazon has made a good position in the market. Amazon is providing the customers the lowest possible price through the product low price and providing free offering of shopping which include the membership of the Amazon Prime, and emphasize on improving the operating efficiencies to maintain the lower price. Amazon also tries to provide the functionality of easy-to-use, timely customer services, fast and reliable fulfillment etc. Cloud computing is the sum of Software as a service (SaaS) and Utility Computing. Amazon was using the cloud computing at the earlier time of the cloud computing. It was a gigantic organization who invested more in cloud computing. The companies also had large amount of data centers having only used about 12 or 8 percent of their power of computing. When the peak use was required to be necessary the rest of the part was reserved. With a view to saving the cost of huge datacenters the companies were using the cloud computing. As a provider of the cloud computing outside the world they became the first in providing the cloud computing over the world, according to Weekly (2009) this was happened in the year of 2006.

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