Monday, May 7, 2012

Blue Ocean Strategy – Amazon Kindle Fire creating its own market


Kindle Fire is multi-touch screen tablet version of Amazon’s most famous e-book reader Kindle. Kindle Fire is also a classic example of Blue Ocean Strategy adoption by Amazon and Blue Ocean Strategy is creating uncontested market space and defining own set of boundaries to avoid competing with others. Kindle Fire is a 7-inch multi-touch display with IPS technology, runs on Google's Android operating system, with a price tag of US$199 and have access to the Amazon Appstore and digital content like streaming movies, TV shows, and e-books. Compared to the market leader Apple iPad, Kindle Fire is a sort of low end device as it lacks camera, GPS, storage capability, high end graphical display, powerful chip, etc. Amazon’s Blue Ocean Strategy is that it tries to define its own market by targeting the non-iPad users, users who cannot afford iPad, users looking for other Android based tablets and making the competition irrelevant by making the device as a media consumption device empowered by Amazon’s media platform that has huge content like music, movies, videos, books, etc. Kindle Fire differentiates itself from iPad and other tablet devices by focusing not on high end features but with simple and focused features that offers its users a unique experience and affordability. Also Kindle Fire is light weight, durable, good battery life and easy to use.

Amazon.com offers Kindle Fire at a lower price as it eliminated many costly feature like the camera, 3G, GPS, Bluetooth, etc but it offered its customers other features like its own developed web browser Silk that serves the web pages quickly using the network speed and computing power of the Amazon Elastic Compute Cloud (Amazon EC2) and the datacenters that host Amazon EC2 are run by Amazon. Low storage is compensated as the users can store their data on the Amazon EC2 Cloud, and Amazon has huge content like books, music, movies, videos, TV Shows, etc that users can easily download and play it on the device. Kindle Fire is being sold by Amazon at close to its cost and at a slight loss but it is hoping to make money through selling the content that includes 19 million songs, books, movies, applications, etc. Since Kindle fire is closely tied to the Amazon Ecosystem like Amazon.com store, cloud, content and it will be hugely beneficial to the marketers and content providers to sell their offerings easily, target customers with specific offerings, to interact and understand the consumer behavior through this. Kindle Fire also helps in increasing its core business which is e-retailing as the device provides an easy access to the store where customers can buy and sell anything and everything.

According to IDC, Amazon sold about 4.7 million units of Kindle Fire during the fourth quarter of 2011 and the device was shipped to customers from November 15, 2011.  The device has boosted Amazon revenues in the first quarter of 2012 and also helped the company to double its market share of the Android based tablets market and capture more than half of the US market for Android based tablets. Kindle Fire is equipped with Web surfing, e-reading and video streaming activities that most consumers want and Amazon hopes that the device sales will help to increase digital media sales to eventually contribute a larger percentage of revenues of Amazon total revenues and the device will also helps in connecting and transacting with consumers on various other fronts. According to a study conducted by RBC Capital analyst Ross Sandler of 216 Kindle Owners, Amazon can expect to make $136 per Kindle through the life of the tablet and e-book sales will contribute most of the part. Study also found that 80% of Kindle Fire owners bought an e-book, and 58% bought three or more e-books and Sandler believes that the average Kindle Fire owner will spend $15 per quarter on e-book. Over 60% of Kindle Fire owners bought an app, and almost 50% bought three or more and Sandler believes that Kindle Fire owners will spend $9 per quarter on apps for the life of the device.

Kindle Fire has boosted Amazon revenues in first quarter 2012 and according to the company it remains the best selling, most gifted, and most wished for product on the site. Amazon also announced that in the first quarter 2012, 9 out of 10 of the top sellers on Amazon.com were digital products – Kindle, Kindle books, movies, music and apps and it highlight the importance of Kindle Fire, as it provides Amazon with a device to handle the shift from physical media products, like books, DVDs, video games and CDs, to digital versions of such content. The rise in North America sales of digital content where Kindle Fire is exclusively sold is another testimony of how Kindle Fire is going to drive sales of digital content and ultimately revenues in future. With such positive response Amazon is looking to add more digital content to its inventory and also looking to expand the sale of Kindle Fire in other countries. With more and more tablets being sold in future, Amazon can through its Kindle Fire and huge digital content inventory expects to increase the sales of both the device and content and significantly increase its revenues.

Amazon Kindle Fire - Blue Ocean Strategy – Four Actions Frame Work – ERRC Grid


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