Principal of Economic
This assignment will analyze what type of market structure that Amazon Inc. use for the company to enter the new market and manage the company. It is also about how they change the form of company from oligopoly to monopolistic competition. On the other hand, with the development of technology, Amazon Inc. has to create Kindle – Fire tablet (1st is electronic book) for entering new market. That is a big movement of Amazon Inc. and it makes other competitors have to go after Amazon Inc. and create the same product. 3 II. Introduction and Background of company. As you know Amazon. com is one of the best online stores in over the world.
When you access to the website of Amazon. com, you can find all thing that you intend to find and buy. Amazon. com, Inc. is an American multinational electronic commerce company and the headquarter is in Seattle, WA, United State. They were known as the largest online retailer. From the beginning, Jeff Bezos began to build Amazon. com with the main product was book and it was attracted many customers in US. With development, they was diversified their product to keep customer use Amazon. com. They continue with selling DVDs, CDs Mp3 download, video games, electronic, cell phone, apparel, furniture, food, and toy, etc.
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It means the customers can find all things that they want in Amazon. com. This makes them become popular rapidly and put more pressure on other retailer. Furthermore, in 2009, Amazon. com was published and present to customer Kindle e-book, it is a big achievement of Amazon, and they change the habit of many reader in around the world. Now it is one of the signatures of Amazon. com, and they feel proud about it because they can control all the book market and none competitors can beat with them. Now with more than 900,000 retailers supply their product by Amazon. om and they have more than 9000 employees around the world with more than 10. 7 billion US dollar revenue per year. In this report, I will analyze what kind of market structure that Amazon. com operate in, how it effect to the company and last but not least is some recent development of Amazon in sport apparel industry e. g. Nike and Adidas. (Schneider, 2013) III. Analyze 1. 1 Kind of market structure does Amazon operate in. The market structure that Amazon operates in is Oligopoly. This type of market mean there are only a few companies that can build and develop an industry.
This group of companies has the power to control the price and same a monopoly, an oligopoly has high barriers to entry the market. This can make many difficulties for all other companies that they want to enter the market because they cannot have the good product price and the system of the company in oligopoly are really strong, weak competitor cannot beat and make effect on them. Furthermore, the products that the oligopolistic firms produce are often nearly identical and, therefore, the companies, which are competing for market 4 share, are interdependent as a result of market forces. With Amazon. om, in the beginning they are operate in like Monopoly Company because they did not have much competitors in online book seller.
Consequently, Amazon. com has the right to control all the market as they want. They can decide the price of the book that they sell and the commissions that they want to share with the company want to sell book in their store. However, with the development and online selling is a huge field for other companies, so Amazon. com cannot be a Monopoly company; they have to compete with some other company such as Ebay. com or Barnes and Noble. (Heakal, 2013) On the other hand, when Amazon. om decide to develop and research for new online product to increase the type of product that they sell to customer. They know that they are entry to the new market and they have to change, because in the new business they cannot be exclusiveness. From that point they have to change from oligopoly to Monopolistic competition market structure. And in this field, they have to compete with many websites that also have the same product, best price and good service. Amazon. com has to create something different or do it better than those competitors to keep old customers and attract new customer.
This is the hardest thing that all companies have to dealing with. For example, the main competitor of Amazon. com now is eBay, 2 largest companies have the same business styles and product line. However, Amazon. com can be number one in this industry because they have the best services and they invest on inventory system and selling system, that make the product can go to the customers on time or in the fastest way. It is the main point that all companies concern. Besides that, Amazon. com also increases the market share by using M&A method.
That mean they will buy other companies in the same business that can help them enter new product line easily and less investing money and time to develop. 5 (Amazon. com Inc AMZN, 2013) Base on the table above, we can see how good Amazon did. They have the market cap highest and almost double with eBay Inc. This can let we know how well Amazon. com operate in the market. Moreover, in the near future, maybe none companies can beat with Amazon. com in this industry. 1. 2 Characteristics of perfect competition. ? A monopolistically competitive industry contains a large number of small irms, each of which is relatively small compared to the overall size of the market. This ensures that all firms are relatively competitive market with very little management of the price or quantity. Specifically, each company has hundreds or even thousands of potential competitors. 6 ? Number-of-character company is a sliding scale. Industries with a smaller number of larger companies then tend more oligopolistic. There is no clear dividing line separating monopolistic competition from the more concentrated market structure oligopoly. A three firms industry is most definitely an oligopoly.
An industry of 3,000 companies competes with most assuredly as monopolistic competition. However, an industry with 30 firms can be oligopoly or exclusive monopoly. ? Every firm in a monopolistic competitive market structure may have the same of product line but in general they may sell it in other type, style, quality or price for best competition and attract more customer buy their product. The different type of product could be divide in 3 main type such as: ? ? ? ? Physical different Perceived different Different in support and service Monopolistic Competition Company have the a little same with perfectly ompetition because they are free to enter market and exit. The resource cannot be as “perfect” mobile as in perfect competition, but they are relatively unrestricted by government regulations and rules, startup costs, or barriers significant other to entry relatively limits them. While some businesses suffered high startup costs or need a license from the government to the industry, this is not the case for monopolistically competitive firms. Similarly, a monopolistically competitive firm do not prevent from leaving the industry as a case for public utilities by government regulations. (web. pedia, 2013) ?
Firms in monopolistic competition must bear a significant cost in terms of cost and selling advertising to win over customers. To promote the company sales-oriented methods of competition other than price. Advertising is a typical example of non-price competition. Advertising and other selling expenses of a company need to change its product. The company competitors with each other through their advertising changes consumers want their products and attract more customers. (varun, 2013) 2. Recent development of Amazon. 7 From the beginning, Amazon Inc. just has one main product line that is sell book online.
However, with the development of Internet, they have to invest and create more product line to satisfy customer and attract more new customer. As a result, they add many product line those are music CDs, DVD, Electronics, kitchen items, tools, lawn and garden, jewelry, beauty product, clothing, industrial & scientific supplies, etc. And they was success, they attract more customer access to Amazon website to buy and looking for the stuff that they want to buy. They get many customers from other competitors. They create a really good service for both seller and buyer that make them really happy and satisfied when use Amazon service. wikipedia, 2013) On the other hand, they did not forget to develop and invest for the main business that creates the main profit for Amazon, that is bookstore online. They try to make Amazon. com become the place customers that can find all type of book that they want. Further more, in 2009, Amazon Inc. make a big movement with other competitor because they create Kindle, this is the 1st electronic book that publish to customer with highest utilities. The reason is because it changes the way reader use book and buy book. Customer can buy book online and download it directly to Kindle-fire for reading everywhere and every time that they want.
Moreover, now that is not only the electronic book, it also work like tablet that customer can use to watch video, listen to music or play game. This make Amazon Inc. become more and more popular in this industry and let other competitor such as Banner and Noble have to make the same electronic book for competing. Nike and Adidas are 2 biggest companies that produce sport product in the world. Dealing with the development of Internet they also need to attract customer by using Internet and customer more likely use Internet to check product that they want to buy. So that they also focus on Amazon. om because they do not need to create their own website for selling their product and marketing their product. All thing that Amazon. com can do for them because of the popular of amazon website. However, to compete to each other, Nike and Adidas had created more price promotion base on each product line to attract customers.
However, those products just like old and slow selling product. They want new space in store so that they just keep it in warehouse or send it to Amazon warehouse for saving maintaining cost. This may both good for customer and seller. 8 IV. Conclusion All in all, Amazon Inc. s doing really excellent on the way that they chose for development. They know what are their strength and weakness for solving them to make the organization become stronger and more effective. One of the most important part is they chose the right market structure for the company to entry, consequently, they can have affect and influence to all their competitors. However, this does not mean Amazon Inc. is the winner in the market; they have to work to create more achievement and new product line for customer. From that point, they will have the best stand in the market and other competitor can beat with Amazon Inc.