Blue Ocean Strategy - Amazon Prime Delivery, Air & Content

Amazon Prime, or One Hour Delivery are all examples of Amazon creating uncontested space (ie. Blue Oceans) in which to compete far away from anything their competitors can do. Amazon was able to reduce the delivery time and now you can purchase a product and get it delivered to your house in 2 days with no additional cost. This was achieved by Amazon Prime, which is a premium subscription service, it started in 2005 and charges U$119 of yearly subscription from its members. According to Jeff Bezos, on the yearly investor letter of 2018, they had more than 100 million members. This is almost 12 billion dollars of inflows that Amazon can invest in the supply chain. Amazon rose customer satisfaction to a new standard, pioneered with one-click shopping, customer reviews, and fast receipt verification on email.

Prime Day is about leveraging a flywheel of subscribers and recurring revenue. Prime Day is a designed as a massive sale exercise to  attract consumers who aren't Prime subscribers to experience what prime is all about and become members.  Amazon primarily looks ate Prime days as a weapon to penetrate the amazon customer households to convert them as prime subscribers. Amazon intends to have more  Prime subscribers because they buy more stuff, consume more content, provide more data, and have more lifetime value. Cowen & Co. estimates that Amazon had 63 million Prime subscribers and 44% of them planned to buy something on Prime Day with another 42% undecided. Cowen & Co. estimates that about 10% of non-Prime households will sign up on Prime Day.

Prime Day also advertises the Amazon logistics capabilities of fast and free delivery. Free one-day Prime delivery is now available on more than 10 million products, and many of them will be on sale on Prime Day. Many of the amazon customers jump on to this bandwagon and make that delivery speed an expectation for Black Friday and the holiday season. Amazon's competitive advantage in terms of logistics vs. other retailers is classically evident on prime day delivery. According to estimates from Consumer Intelligence Research, the number of Prime subscribers recently topped 100 million, and on average those customers spend about $1,400 per year, compared with about $600 per year for shoppers who aren’t members.

Through Prime Video Amazon is playing in red ocean media where competitors like Netflix, Apple and other content providers dominate. For example, Prime users can add Showtime or Starz for $8.99 a month. Amazon takes a cut of the revenue, typically about 25 percent for the largest companies, when a customer signs up. Amazon’s strategy is  Create the world’s largest online shopping mall and then invite smaller businesses to pay a toll in exchange for using the site to reach many millions of new customers and also provide media content.

Amazon has one other weapon that gives it a distinct advantage over Netflix and its other media peers: the Echo. As more of the Alexa-powered devices populate consumers’ homes, it’s not hard to imagine tighter integrations with smart TVs. That opens Amazon up to all sorts of untapped opportunities with advertising and cross-selling products.

Blue Ocean Strategy – Amazon blue oceans - Drone Delivery Prime Air

Blue Ocean strategy delivers unique products or assortment of services which a customer cannot acquire anywhere else that may due to the unique design & functionality, leveraging digital and physical store footprints in some fashion, leveraging the Internet of Things (IoT), or having some creative systems capability. Amazon has shifted from an online retailer to a digital platform that sells practically anything. It started as a book store but built an digital enterprise that not only radicalised the way books are sold or accessed and also was able to add many unrelated products and services to their core books. Amazon has been successful in most of the businesses it ventured but also saw failures such as fire phone, Zappos, etc. 

Amazon continually looks to create and implement Blue Ocean Strategies.  Strategies such as their Kindle E-Reading solution that eliminated the need to buy books physically, carry multiple hard copy books, raised the quality of reading experience on a hand held device which is very light and comfortable for reading in various environments, reduced to pay heavy prices for the books as eversions are cheap, reduced the need to buy storage furniture for books and created an unique experience that not only equips reading books but also do host of digital activities on the go.

Amazon Drone Delivery radicalised the last mile delivery of the goods to customer door step that eliminated the need for delivery trucks, drivers that have negative impact on environment, raised the efficiency of the delivery process and reduced the traffic congestion and other associated problems and created an unique experience that entices the consumers. plans to launch its drone delivery service, Prime Air, "in a matter of months." Amazon plans to deliver customers' orders within 30 minutes through its Prime Air delivery program, which would blow away its two-day Prime shipping and two-hour Prime Now deliveries. The Prime Air delivery program uses autonomous drones guided by GPS systems. With last mile delivery being the most expensive and time consuming part of the shipping process, drone delivery has the potential to give Amazon a leg up on other logistics companies. 

Amazon's cloud service is its most profitable unit. By tapping into the power of these cloud computing systems, companies can serve many more customers for much less expense with much less downtime and much greater performance than they could through their own data centres. And as an additional benefit, they don't have to worry about maintaining their own servers. "AWS invented this market," said Dave Bartoletti, a principal analyst at Forrester Research. "They had a five-year head start before anyone else got their act together." When AWS first launched, it only offered a basic set of infrastructure services. Customers could get access to virtual servers through a service Amazon called the Elastic Compute Cloud, or EC2. They could also use AWS for file storage, through Amazon Simple Storage Service or S3.

Amazon India Strategy: Three Pillars, Vast selection, Low prices & Fast delivery to customers

Amazon.in gives users access to sellers of books, movies and TV shows. The company will be increasing the range available, with cameras and mobile phones due next. This is the 10th country-specific site that Amazon has globally, apart from the main US one. For now, owing to foreign direct investment (FDI) regulations, the company has to follow the marketplace model, where they are not directly selling any of the products on the site, but are handling logistics for the sellers, with their “Fulfilled by Amazon” model. The marketplace makes about 40 per cent of Amazon's revenues globally and, on Wednesday, Amazon said it is starting with a modest 100 retailers in India. Amazon has three pillars it is basing its strategy on, according to Amit Agarwal, Vice President and Country Manager, Amazon India: a vast selection, low prices, and fast delivery to customers. The other part of the strategy is to build a highly customer centric model. A buyer can come and chose the seller, and chose the best deal.

For sellers, Amazon is offering two options right now. One is selling on Amazon; there, the listing and payment is on Amazon, but logistics are handled by the seller. The second is fulfilment by Amazon, where Amazon also handles the deliveries. Sellers pay a monthly subscription fee for the merchant, along with a referral fee for successful transactions. However, for the first year, the company is offering a free subscription, and a discounted referral fee of 5%, instead of the normal 12% fee. Fulfilment by Amazon is optional, but a quick look at the site shows that a majority of sellers are using the service. But finally, to sell on the Amazon Marketplace: the seller will have to bear a monthly subscription fee of Rs 499, currently set free for a year's promotion; a transaction fee of 12 per cent of the item value (set at a promotional 5 per cent); and a closing fee of Rs 10 on every sale. Amazon is a platform, where retailers, shop owners or publishers can sell their titles - at times with help from an Amazon warehouse and logistics managed by Amazon.

For buyers, too, there is a launch window where there are no delivery charges, and no cash on delivery charges. Amit Agarwal, vice-president and country manager, Amazon India said that the timeline for this decision isn’t fixed, and added, “We’re watching the consumer feedback. We’ve made the whole thing very transparent, and we won’t charge for things overnight. It’s going to be something we do base on what the customers are saying.” Agarwal also confirmed that the sellers can’t add their offerings directly yet, and said, “We look at the selection, scale and speed that the companies can offer, and help them to make the most of the system.”

Some believe that the entry of Amazon is going to have a negative impact on companies such as Flipkart, which, on 4 June, reached a milestone of selling 100,000 books in a single day. Flipkart also follows a marketplace model, but Agarwal points out that sellers don’t need to be exclusive to one platform, and will only use a platform that gives them a competitive advantage. The marketplace model, which was pioneered by eBay, and is used by sites such as Flipkart, SnapDeal and Infibeam today, is quickly gaining ground in Indian e-commerce—the move gives them access to much more inventory than before, without significant investment.

At the same time, Amazon’s other business in India, the price comparison website Junglee.com will also continue to function. Agarwal says, “In a way, Junglee is a map of the e-commerce space, and our goal is to have Amazon.in show up on that map in a good position. Junglee served to confirm and validate our views about India, about what the customer is looking for. It’s also helped us to see a lot of sellers, who aren’t well known, but are offering a great catalogue. They would make great candidates for Fulfilment by Amazon, so in that way, we see Junglee as very complementary to what we’re doing with Amazon.in.”

For Amazon India is a crucial market as it is expected to grow at a good pace in the coming three to five years. Forrester estimates that the Indian market will grow at a compounded growth rate faster than any other country in the Asia-Pacific region to reach $8.8 billion in 2016 from the 2012 levels of US $1.6 billion. Amazon has also entered a comparatively larger market created by Indian players like Flipkart, Jabong, Myntra and numerous others ( some of them already shutdown) who were able to increase market share through strategies like cash-on-delivery payments, liberal return policies, free or subsidized shipping and in-house logistics. Amazon understood the importance of these strategies and incorporated them in its business model along with its big strength the Market Place model. Amazon has perfectly timed its entry into the Indian market and this strategy has allowed it to use its strengths to maximum advantage. 

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

Cloud Computing: Positive Future Trends but Outages Concern

According to Forrester Research, the global cloud computing market will grow from a $40.7 billion in 2011 to $97 billion in 2015. IDC forecasts Cloud Computing Market will increase from $21.5 billion in 2010 to $72.9 billion in 2015, more than four times the rate of the worldwide IT market as whole. Gartner forecasts the cloud market to reach $149 billion in 2014 from $68 billion in 2010. Cost reductions and easy scalability are the prime drivers for cloud adoption but there are concerns regarding the security, privacy and internet connectivity issues and outages. CIOs are more attracted to cloud because of some key characteristics like Pay as you go/use, Turn on/turn off as you wish, Multi-tenant etc. Functions outsourced to cloud include: Enterprise social networks, Next generation mobile apps, Multi-enterprise collaborative services, and Social intelligence apps.

Initially dominated by very few players like Amazon (AWS), Salesforce.com and small startups the industry is seeing new entrants with many fortune 500 IT companies entering the market. Dell’s vStart, IBM’s SmartCloud, Apple’s iCloud and HP’s BladeSystem Matrix, Verizon’s acquisition of Terremark, Time Warner Cable’s acquisition of NaviSite, CenturyLink’s acquisition of Savvis are some of the big names. The entrance of big names highlights the fact that Cloud computing will be looked at by businesses as a tool to obtain organizational goals. According to Gartner's 'Executive Program Agenda Survey”, Cloud computing has emerged as the top technological focus for CIOs. Businesses are also looking at cloud computing as a way of business survival strategy as new business models and disruptive ideas are more evolving in the clouds.

Cloud Outages are major concerns for businesses. Recent outages are Amazon and Sony Playstation Network sufferred system outage, Google Blogger became inaccessible or slow, Microsoft experienced problems with its Business Productivity Online Suite (BPOS). Most of the major players have reported significant outages in the last three years and they have successfully recovered from such outages. Crucial lessons are learnt both by the cloud vendors and their customers. Outages are bound to happen and there is no escaping from the outages. Businesses have to have disaster recover plan and failover strategies. Strong SLA, experts for cloud maintenance and management and avoiding total dependency are some of the other steps businesses should take. Vendors and service providers also have to constantly innovate and upgrade their technologies so as to eliminate such outages. Vendors and businesses have to be transparent and work together to avoid outages.

Despite the recent outages CIOs are confident that Cloud Computing is a good strategy to adopt. Lessons are learnt from recent outages and businesses are looking at cloud computing as a larger transformation that will have significant impact on the business. Gartner survey suggests that CIOs expect adoption of cloud technologies will free up to 50 percent of infrastructure and operational resources, which can be utilized for other strategic priorities. Even Vendors are offering new services and products and are investing significant amount of resources in the Cloud computing technologies.