In theory, the bidding system has a secret reservation price to limit abuses by putting a ceiling on the acceptable bid price. Two facts stand out about the reservation price. First, it is set very high, allowing excessive charges to the public. Second, the winning bids come in extraordinarily close to the reservation price; one survey found that the average winning bid was 99.2 percent of the cap. One can infer that the dango consistently knows the “secret” cap and had no concern about making this obvious through their bids. How does the dango learn what the reservation price is? Senior bureaucrats in Japan generally take early retirement and are provided with a sinecure in private industry or Japan's large quasi-nongovernmental organization (QUANGO) sector. This is known as amakudari (“descent from heaven”)-a revealing phrase that shows the great respect once felt for the bureaucrats. Their primary responsibility once they “descend” is to maintain close ties with their successors. A bureaucrat who refused to leak the reservation price would put his career in jeopardy. Bureaucrats are, effectively, immune from prosecution for leaking the reservation price. The “systems capacity” limitations are not resources, but the unwillingness to prosecute senior bureaucrats (who are far more powerful than their American counterparts). The dango is a cartel, and although the conventional economic wisdom is that cartels cannot exercise effective discipline, the dango has been able to maintain nearly complete discipline for over a half century. Corruption is part of the explanation. Japan's dominant party, the Liberal Democratic Party (LDP), comprises factions are known as zoku (“tribes”). The “construction tribe” is composed of LDP leaders who get a percentage kickback from the winning construction bidders. Faction leaders gain followers by providing campaign funds. The dango kickback ensures that the government does not interfere with the cartel. The faction leaders provide the “voice of heaven” (tan no koe) when necessary to resolve disputes that might threaten the dango's discipline. In addition to entrenching the LDP in power, the dango has major indirect effects. It serves as an informal trade barrier. Foreign construction firms cannot join the dango-and if they did, they could be prosecuted in their home nations for bribery. The dango directly makes construction far more expensive and indirectly creates an inefficient and bloated industry. The kickback creates strong incentives to spend far too much in public works construction. This, in turn, has done great damage to Japan's environment.

While the dango raises prices, it does not necessarily produce excessive industry profits. Domestic entry into construction is fairly easy. Easy entry and bid rigging have led to an industry that is at least twice as large as it needs to be. Many construction firms are insolvent because of their imprudent investments during the twin bubbles.

Japan's overall economic development has been harmed by the indirect consequences of the dango in three major ways. Productivity fell for many years in the construction industry, which is so large that it, in turn, materially lowered the nation's overall productivity. Japan's “main” banks are vital to growth because of the dominant role they play in capital allocation. The collapse of the twin bubbles left the main banks crippled, and Japan covered up their condition rather than “bailing them out.” This means that the banks generally do not collect loans from financially troubled borrowers, for if they demanded payment and were not repaid, they would have to recognize the losses. But Japanese banks cannot fund growth unless their loans are repaid. Many of their worst loans are to construction firms. The political support that the dango enjoys makes it extremely difficult for the banks to demand repayment from troubled construction firms.

Finally, the dango encouraged public works that would make no sense even if the bids were not rigged. As this is written, Americans are deriding the “bridge to nowhere” in Alaska that a Senator was able to demand as part of “pork barrel” politics. Japan is the champion of high-speed rail lines to nowhere and many other “white elephants.” The public works budget became so extreme that Japan's deficit became a barrier to growth. The dango allocates capital to the least productive uses.

Moreover, it has expanded from its existing business of selling books to selling a wide variety of products such as DVDs, music CDs, computer software, video games, electronics, apparel, furniture, food and more (Wikipedia 2006). Similarly, Amazon aside from its domestically shared market also set up four other separate online stores in the United Kingdom, Germany, France and Japan, thus shipping globally on selected products (cited in Haddad & Sheth 2001).

Overview of the Online Industry

The population of the Internet and World Wide Web has raised fast since 1990s with the development and advancement of computer technologies. Many firms have launched their business through the Internet because of this technology innovation. This resulted in various and widely sales of products in the Internet business. Online buying grows at an amazing rate. Therefore, companies that carry out Internet based business have great opportunities to succeed. Conversely, there is a greater competition and threats are all around considering that many companies had entered the online business (cited in University of Texas at Dallas.com n.d.).

Amazon.com vs. Other Online Bookstores

Book retailing is one of the flourishing industries. Barriers to entry into this industry are quite high and suppliers have modest influence over booksellers. The introduction of the internet has brought about many changes to this industry because it has increased rivalry, buyer power and substitutes (American Booksellers Association 2002).

The largest market for books is the United States. Before, book publishing is still fragment, thus high percentage of publisher's sales occurs through the wholesalers. However, with the emergence of superstores like Barnes & Noble and Borders.com which are directly supplied with more than 95 percent of books from the publishers such percentage decreased (American Booksellers Association 2002).

Since these stores can reduce intermediates like wholesalers, they can sell their products at a discounted price. Because of this strategy, their sales growth rate raised to 71 percent compare to 4 percent sales of non-superstores. In addition, according to their self-report, they are growing almost 25 to 35 percent a month. Many independent stores have gone out of business because of this happening. Such scenarios are the threat to the success of Amazon.com (American Booksellers Association 2002).

It is necessary to understand the book industry as a whole and the competitors in order to remain competitive in the market. Two of the Amazon.com largest competitors are Barnes & Noble and Borders.com.

Book Retail Industry Analysis

The book retail industry was expanding at a phenomenal rate during 1970's and 1980's. New stores were opening and growing into markets previously not served by any bookstore. The number of new books published each year grew because new authors increasingly found their way into print. Similarly, the profit for publishers rose in robust percentages. The book retail industry began evolving into the maturity stage of the industry life cycle in the mid of 1990s. Mark Domnitz, ceo of American Bookseller Association, predicts that Internet book purchases will grow exponentially over the next few years (cited in University of Texas at Dallas.com n.d.).

Porter's Five Forces of Competition framework such as competition from substitutes, entrants, rivals, supplier power, and buyer power is a valuable tool in analyzing the industry (cited in University of Texas at Dallas.com n.d.).

Substitutes

Substitutes for reading include watching television, going to movies, renting movies, listening to CD's, tapes or the radio, playing computer or video games, talking on the telephone, surfing the Internet, playing sports, exercising, etc. Booksellers are conscious of their prices since some of these substitutes leisure activities do not directly cost the consumer like watching television and making local phone calls (cited in University of Texas at Dallas.com n.d.).

Entry

The book retail industry has very high barriers to entry. The capital requirements necessary to establish a bricks and mortar bookstore would be virtually impossible for a newcomer. Consumers know the big name players. High product awareness and large marketing budgets make it very difficult for new entrants to enter into this industry (cited in University of Texas at Dallas.com n.d.).

Rivalry

Looking at the entire book retail industry, competition is quite diverse. A consumer could purchase books from a bricks and mortar store, which could be a large chain, a non-book retail store, or a small independent store. A consumer could also choose to buy their books on-line. With the onset of Internet bookstores, price is even more of a factor in consumer book purchasing (cited in University of Texas at Dallas.com n.d.).

Buyer Power

Buyer power in the book retail industry is very high. This fact can be directly associated with the significant amount of substitutes and intense rivalry in the industry. As mentioned earlier, if a consumer is looking to purchase a book he/she has many options. The amount of buyer power ultimately depends on the need or desire for the book (cited in University of Texas at Dallas.com n.d.).

Supplier Power

Supplier power in the book retail industry would be considered moderate. Book retailers can purchase books from over 1,700 publishers as well as wholesale distributors. Publishers have control over the distribution of titles (through copyright protection), the list price and the retailers' cost price. These limitations do afford the publishers some supplier power over the book retailers (cited in University of Texas at Dallas.com n.d.).

Amazon.com Competitors' Analysis

Two of Amazon's largest competitors are the Barnes & Noble and the Borders Group, Inc.

Borders Group, Inc. is the second largest operator of book and music superstores based on sales and number of stores. It offers customers over 650,000 titles and 10 million book, music and video items in stock and ready for immediate shipping from Border's distribution center (Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

Barnes & Noble is the largest bookstore chain in the world. . From its fledgling beginning of one store in 1971 Barnes & Noble acquired and ran several mall based bookstore chains including B. Dalton Bookseller, Doubleday Book Shops and Scribner's Bookstores. It carries a range of 60,000 to 175,000 titles. In 1997, Barnes & Noble once again expanded its operations to make books available to customers through the Internet (Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

Several aspects of these two largest competitors posed a threat to the company. Barnes & Noble launched its online store in 1997. If it succeed because of its unique operating channels such as the retail stores, the Internet, 1-800-THE BOOK and mail order, it would capture some of initial customers and develop some brand loyalty (Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

On one hand, Borders.com has offered books, music, CDs and videos. Such actions would be also a threat to Amazon.com because the company expanded its product line to include music. Thus, it is expected that the competition between Amazon.com and Borders.com will be increased sharply in the diversified products market (Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

Analysis of Amazon.com

Amazon.com identifies the key success factors in its business model such as a strong brand, providing customers with outstanding value and a superior shopping experience, massive sales volume and realizing economies of scale (Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

Amzon.com is the only bookseller in the world's top 500 websites, according to Media Metrix. Additionally, according to one analyst report, Amazon.com is estimated to have over 80 percent of the online bookstore market (cited in Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

However, Jeffrey P. Bezos' vision, founder of Amazon, has evolved much further than just being the earth's biggest bookstore. The vision is to be the world's biggest one place-shopping stop for online shoppers and to become a premier general online retailer by leveraging its existing brand and business model (cited in Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

Amazon.com has several core values which play a crucial part in the success of the company. The first one is excellent customer service based on extraordinary technology. The company provides various services such as book reviews from other customers and from staff. In addition, many featured books contained descriptions, snippets of reviews and interview posted by authors (Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

Convenience and price is the second core value of the company. It sells books through Internet and has its own distribution system. Similarly, Amazon does not have to spend too much money on real state and other operation because it is pursuing Internet-based business. Thus, it can reduce its inventory expenses (Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

On one hand, the company has several key resources and capabilities to meet the challenges presented by opportunities and threats. These resources and capabilities have thus far allowed the company to be the world leader in the special retail industry. Jeffrey P. Bezos, founder and chairman of Amazon since 1994, is the driving force behind the company. He is a valuable resource that gives the company the competitive advantage with above-average return (Haddad, N & Sheth, J 2001).

Amazon.com has also a very strong brand name presence in the online-retail market which is primarily due to their successful exploitation of their "first-mover" advantage. It would be able to leverage this brand name as it realizes its plans for expansion in the future (Haddad, N & Sheth, J 2001).

In addition, the technological infrastructure of the company also gives its competitive advantage against the other rivals. It can pen a new store which has different products very easily because its core shopping technologies are easily re-usable (Haddad, N & Sheth, J 2001).

On one hand, its website is elegantly designed, easy to navigate and quick to load. It also has numerous proprietary inventions like the click shopping, personalized recommendations and user rating which make shopping more pleasurable (Haddad, N & Sheth, J 2001).

The four strategies such as outsourcing strategies, strategic partnership, compelling value, and active advertising (see Exhibit 1) implemented by the company have contributed to its success in sales growth and cost efficiency (Haddad, N & Sheth, J 2001).

However, transitioning the company culture is one of the problems and weaknesses may face by Amazon.com. A lot of changes have to be made in order for Amazon to adjust to different situations especially since the rules of business keep changing rapidly. Amazon was only a start-up few years ago but it grew rapidly and successfully in the online retailing business. Thus, Amazon is no longer can be considered a start-up but a company moving from one culture to another because of its expansion and time in the industry (Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

Another is the financial difficulties brought about by its international exposure. The fluctuation of exchange rates from different currencies into U.S. dollars may affect Amazon's money market. The success of Amazon's international expansion also depends on local economic and political conditions (Durkin, MA, Kass, C, Modi, T & Ulin, M 2000).

Conclusion

Amazon has grown admirably from its initial beginnings as a small online bookseller to a giant superstore company. During this process of rapid growth, it has incurred significant losses and it becomes more expose to a greater competition and threats. Cutting costs and achieving profitability remain Amazon's greatest challenges. However, there are key factors such as a strong brand, providing customers with outstanding value and a superior shopping experience, massive sales volume and realizing economies of scale which contribute a lot to the success of this company. These factors and the people around the company help Amazon.com to face the threats pose by other online bookstores. Essentially, the company should aim to maintain its gross margins in its existing business and in future product lines such as music CDs and videos. In order to do this, Amazon.com should develop strategic partnerships with all of its main suppliers.

Exhibit 1: Amazon.com Company Strategies

Step 1: Register With ebay

This step is pretty straight forward. ebay makes registration simple and easy. In order to register you must be at least at least 18 year old. When choosing a screen name on ebay consider that if you wish to specialize in a certain type of goods that it is a good idea to have a screen name that relates to the items you'll be selling.

Source: https://scgi.ebay.com/ws/

Step 2: Find Out What's Selling

Each month, ebay produces several reports regarding the most successful products one ebay. This report can be an beneficial tool in making sure you know what to sell. The report is located at http://pages.ebay.com/sellercentral/whatshot.html. It includes calendars about which items will be featured on their home page, and what has been selling the past month.

Source: http://pages.ebay.com/sellercentral/whatshot.html

Step 3: Find Your Product –At Your House

Everyone has things around that they don't need and will never use again. ebay is the perfect place to sell the things you aren't going to use. Your house is a great place to find items to sell on ebay. Make sure the items you are going to sell are in good condition however.

Step 4: Find Your Product –At The Store

Based on the report of what is selling on ebay. Go to your favorite store and bargain hunt. This is one of the most successful strategies on ebay. Look for items that will sell and find them at lower prices. When you find a super-deal, buy a few of the items and then try them on ebay. It may be tempting to sell the item before you buy it at the store, however, don't sell them before you buy them as they may be gone from the store and leave you in serious legal trouble with the buyer and ebay.

Step 5: Find Your Product –Drop Ship

Drop shipping is a great tool for ebay buyers and Sellers. The way drop shipping works is a company gets wholesale prices from distributors and you register for an account with them. They manage the inventory and you sell it. Once you have collected payment, you pay them the wholesale price for the good and then they handle shipping. A good website for this is www.doba.com. For around $30.00 a month they can give you access to 250,000 products and they take care of shipping.

Source: http://www.doba.com

Step 6: List The Product

Using ebay's listing service you can quickly and easily list your product on ebay. There are many features that you can add to your auctions but many of them may not be worth the value to your item. For instance, you may have a cheap item that would not be worth a $1.00 extra in fees to make the title of the item bold in the listings. Make sure you don't spend too much money on enhancing your item or it will lower profits. It is crucial to give an accurate item description. If the product is damaged, say so otherwise it may reflect badly on your feedback.

Step 7: Wait For Buyers

The next step is to wait for all the buyers to come to you. If after a few days there aren't many people that have looked at your item or are watching it, it may be a good idea to revise your item and place it in another category on ebay. If a buyer sends you a question, answer promptly as he/she is a potential customer.

Step 8: Wait For Payment

While it is the buyer's obligation to pay you can lessen the wait time by offering as many ways to pay as possible. PayPal is the ebay's most common method of payment. They offer free services with the charge of a fee per transaction. They are a great resource and can be found at http://www.PayPal.com.

Step 9: Shipping

Except in the case of drop shipping, you are responsible for shipping the item. It is important for your ebay feedback that you ship quickly after you have received purchase from the buyer. When listing your item you may wish to use the “Calculate Shipping” feature because it gives a more accurate cost breakdown. You can make a lot of money on shipping if when you list it you add a packaging and handling fee to shipping. The cost of shipping can make or break your profit margin so it is important to price the shipping enough to cover the costs. This is sometimes difficult; however, it is much easier if you have a good scale to use.

Step 10: Communication With Buyer

Communication with the buyer is crucial. Make sure you let him/her know that you have shipped the item. This can lessen any anxiety the buyer may have about shopping online. If possible, send the buyer the product tracking number via email so that he/she can view it's progress shipping whenever he/she wants.

Good luck and happy ebaying!