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Kindle Fire

Table of Content

I. Mission Statement and Company Overview……………………… 3

II. Internal Analysis & Marketing………………………………….4&5

III. Kindle Fire vs The Market………………………………………….6

IV. External Analysis…………………………………………………6-10

V. SWOT Analysis………………………………………………….10-12

VI. Success and Failures………………………………………………...13

VII. Financial Analysis……………………………………………….15-18

VIII. Recommendation……………………………………………………20

Mission Statement

Amazon.com mission statement is "our vision on earth is to be the most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online." The statement clearly depicts that Amazon values their customers and seek to provide the best customer experience in the best way possible.

Company Overview

Jeff Bezos founded Amazon in 1994, as an online based commerce and cloud computing company. Initially, Amazon started out as an online bookstore but later diversified its product offering that ranged from electronic goods to all sorts of consumer products. Amazon established its online presence in United States, which is where their main focus lied, during their earlier year. Amazon gradually expanded to create a version of their online website for many countries by the help of their advanced logistic system, which helped modify each of the websites for a particular country that satisfied their needs. Amazon mostly operated in countries that had good economics, and could sustain their business model. Amazon operates in countries like United States, France, Germany, Canada, Mexico, the United Kingdom, China, Japan, Netherlands, Italy, India, and Brazil. The websites for all of the different markets are uniquely customized to the needs of the customers in that region. According to some reports, Amazon surpasses all of its rival e-commerce companies in-terms of its revenue generation. In 2015, Amazon was declared as the most valuable retailer in the United States based on market capitalization.

Internal Analysis

Bezos’s core belief of constant innovation to satisfy the needs of the customers, and his long term oriented strategies, although controversial, have conspicuously placed Amazon as one of the biggest company in the world. CEO Bezos points out what distinguishes Amazon from other companies is the emphasis that has been put on the cultural issue of customer focus. Amazon’s focus on shaping their company as per the demands of the customer can be highlighted by their evolution from a book retailer to a juggernaut of e-commerce company. Their constant push for innovation to be the industry leaders in upcoming technologies, and their focus on customer relation rather than short-term profitability and revenues has helped them create a strong brand image. The corporate strategy of Amazon helps them distinguish from other competitors, because they strive to introduce new technologies to the customers rather than being better than their competitors. Amazon is vision of Jeff Bezos, and they rely heavily on his leadership to achieve the goals of the company. CEO Bezos’s business strategy primarily focuses on satisfying the needs of their customers, and constant focus on innovation aimed towards customers. It is evident that at Amazon, they take their customers seriously thus, this principle of customer satisfaction that has been cultivated has eventually led to growth, expansion and better returns in the long run.

Marketing

Amazon is one of the biggest retailer in the world, their product portfolio covers wide spectrum of consumer goods, and numerous third-party vendors on their website has established one of the prominent e-commerce conglomerate. Amazon Web Services (AWS) also provides various cloud computing services to their customers. In addition to their core business, the battle to establish dominance in portable devices with devices such as Kindle readers and Amazon fire tablets presents a unique marketing dilemma. Amazon operates in many parts of the world, and being an internet based retailer hands them a unique advantage over its competitor. A customer can virtually purchase anything from their websites from the comforts of their home. The advanced logistics within their website makes it possible for a smooth user interface, and advanced search option help customers get exactly what they require. Amazon was one of the pioneers to include customer reviews for the products, which gave potential customers genuine review of the products. The very nature of their business makes it a very desirable proposition to the customers, it is literally a one stop shop for most consumer wants.

The approach to market their Kindle devices aligned with the objectives of Amazon, the devices were envisioned to be a digital platform for Amazon goods and services. Amazon heavily subsidized their devices to attract customers and get them heavily involved in the Amazon eco-system. The decision came under heavy scrutiny from shareholders that wanted short-term revenues and profits, but Amazon’s long-term vision was to position the devices with various revenue sources. They had been a pioneered Amazon Kindle, which revolutionized the e-reader industry with top notch specifications and features which were priority to the customers. The goal of Amazon Kindle Fire tablet is to have the similar impact on the tablet industry like that of Amazon Kindle on the e-reader industry. Amazon Kindle devices were aggressively priced well below the market, with comparable specification to its competitors’ devices. The introduction Apple IPad, and subsequent influx of various devices running on android platform, created a saturation in market, and the positioning of new Kindle Fire tablet became even more important. The goal of Amazon was to heavily subsidize the price of Kindle Fire tablet, and create various revenue stream from the devices through its mobile eco-system.

Kindle Fire Tablet vs The Market

The lower barrier to enter the tablet market has created a saturation in the tablet market, and few devices have been able to separate them from other products. Apple Ipads revolutionized the tablet market with high end processor, smooth interface, and enhanced graphics, but their prices were considerably higher than other competitors. Amazon Kindle Fire tablet were priced well below Apple Ipads, but they lacked the processing speed of the Ipads as well. The product did not provide any distinction in terms of hardware, and also had a tweaked version of android similar to many devices on the market. The distinction for their tablet comes from the vast network of services in Amazon’s portfolio. Unlike other manufacturers that target to directly profit from the sale of devices, Amazon visions the Fire tablet to serve as a platform to consume their offerings. Since, the target of Amazon was to generate profit from the sale of digital content and incremental commerce, they need to heavily focus on content creation.

External Environment

The external environment of an entity comprises of various aspects that are supposed to either affect it positively or negatively. The aspects include technology, legal factors, political factors, social factors and economic factors.

Political Factors

For Amazon to thrive, there must be political stability for the situation creates opportunities in which Amazon can diversify and expand. For instance, the company hired the former press secretary of the president in February 2015 to take on the post of senior vice president of worldwide corporate affairs to deal with political issues that revolve the business. The action of increasing its lobbying budget throughout is clear indicator that politics have an impact. A technology company such as Amazon prospers when the government provides a fair competitive market, and the country has a stable governmental structure. There have been many instances where companies such as Facebook, Google have entered a market like China, which has a lot of growth potential, but the existing government imposes many restrictions on business operation. The tax structure of a country is equally important for business operation of the company.

Economic Factors

There are various economic factors that can affect business. Such factors include; taxation, inflation and deflation of currency rates, unemployment levels and specific economic growth of the industry. For instance, large number of sales made by Amazon came from international location, and the business was susceptible to the economics of foreign currency fluctuations. This implies that the business has higher risks of currency exchange rates. For instance, if the dollar weakens against other international currency where Amazon operates, then the business will be subjected to higher operating expenses than when the currencies were constant. Amazon has a strong belief in providing consumer goods at the lowest price possible, and the wide assortment of products means they have a large revenue stream. They are less vulnerable during economic downturn compared to its competitors such as Samsung, Apple, LG as they only offer electronic good; which are discretionary expenses to large consumer base.

Social Factors

This aspect tries to isolate the impact social and cultural trends to the firm's performance. Some of the social, cultural factors likely to affect Amazon include, growing online purchasing habits, increased consumption of online products in developing countries and increasing wealth inequality among people. The difference in wealth, for instance, is likely to affect Amazon in that only the few rich are likely to make purchases while the majority poor are left behind thus affecting the business entity negatively. Nevertheless, increasing online buying habits and consumption of online products in developing countries come as a stepping stone for Amazon as revenue are bound to increase thus translating to more profit.

Technological Factors

The growth of technology is guaranteed to affect Amazon as the business is an online platform with its dependency on technology. Some technological aspects likely to affect the company include; increased technology obsolescence, increasing cybercrime and increasing IT efficiency. The constant technological advancement makes it critical for Amazon to adapt to the changing environment, and evolve through the times. Amazon has proven their caliber to adapt to the changing business environment as well as be an industry leader. The struggles of other brick & mortar retailer to transition to a virtual retail shop, shows the vision of Amazon to capitalize on new opportunities. The constant investment in newer technologies and their commitment to improve their existing technology to meet the expectation of their customers have made popular among a large consumer base. The changing perception of people towards portable devices has compelled Amazon to evolve into electronic consumer manufacturer. The importance of flexibility and adaptability in a competitive market cannot be stated enough, and the demise of electronic giants such as Blackberry, Nokia illustrates this aspect of business strategy. Nokia and Blackberry were victims of managements tunnel vision, because they failed to adapt the new android operating system which were far superior to their own mobile operating system. Amazon realizes the importance of android eco-system, and has adapted them to their devices, which basically run a modified version of stock android. The operating system for the Kindle fire tablet resembles the familiar android interface modified to fit into the Amazon eco-system.

Legal Factors

Amazon or any other business are legally required to abide by any laws in existence concerning them, and their operation. It needs to answer to different bodies of the government not only in the U.S., but anywhere it operates. There are severe consequences if a business is found to be breaking laws, which might not just confine to financial penalty. It is equally important for Amazon to maintain its image as a responsible component of a society. Laws and regulations that are likely to bring about a lot of impact include; environmental protection laws and regulations, import and export regulations and product regulation. Product regulation comes as an advantage to the company as it also fights to eliminate counterfeit and inferior products. The barrier to entry in most foreign markets are comparably smaller than few decades ago, due to various trade agreements. This is especially critical for Amazon, because they want to dominate the consumer retail segment. The easing of import and export regulations is a big opportunity as the company can expand without incurring a lot of costs. Adherence to environmental regulations can bolster the image of the company as in the modern consumers are looking for environmentally sustainable products.

Environmental Factors

The constant growing emphasis on environmentally sustainable product and consumer awareness have made companies willingly or unwillingly invest heavily and focus on environmentally friendlier products. These changes present businesses with regulatory as well as financial dilemmas, but there might be greater reward if they can successfully implement their strategy. Adherence to environmental regulations can bolster the image of the company as in the modern consumers are looking for environmentally sustainable products.

SWOT Analysis

This approach seeks to elaborate on the strengths, weaknesses, opportunities, and threats of Amazon as a company that is out to conduct business.

Strengths

Amazon is a very successful company with an efficient business operation, and their revenues are comparable to any other successful business. They have enough cash reserves to venture into new industry, and carry on their efforts to innovate for customers. Their existing business operation that consist of advanced logistic system give them an advantage over other rival companies, and their business strategy focused on customer satisfaction distinguishes them from rest of their competitors. They have a vast experience in collecting data from customers, which can be used to manufacture the products based on the information. Their online presence couples with their customer relation expertise can help them take control of majority of consumer base. The ability to heavily subsidize their products to lure customers to their business is a huge competitive advantage. The various revenue stream for Amazon enables them to weather economic downturns better than its rivals in electronic tablet industry. The new line of Kindle tablets can be directly sold in their websites, and they do not rely on other retailers to showcase their products. The vast array of apps available in their Amazon app store in addition to the wide assortment of e-books make their devices a good proposition to most consumers. Amazon can bundle their web services, amazon prime service with their devices. They have cornered a vast majority of consumer base with their eye -catching offers, such as expedite shipping to prime customers, and lower subscription fee to students. Being an online giant translates to huge revenues and profits thus the company can sustain its operations efficiently. The dominance on e-commerce sector helps Amazon be in the forefront of innovative technologies. These steps add value to the customers and create a favorable image among their customers.

Amazon has a deep network of distribution channel and operational experience, which will be beneficial for the distribution of their Kindle devices. Additionally, the company has collaborated with several companies and thus is in a position of offering a better customer service. Amazon through its years of retail experiences is equipped with analytical data of customer purchasing behavior and trends. The acquisition of companies such as Zappos, IMBD, Woot, and Jungle has been vital in increasing the revenue as well as adding to the chain of operation.

Weaknesses

The stock price of Amazon has seen a drop of almost $45 dollars, because trade analysts were skeptical of Amazons long term vision as well as stockholders wanting short term profits. The Kindle devices are perfect devices for anyone that uses the amazon eco-system, but they are restrictive in content sharing. Kindle Fire tablet primarily runs on an android operating system heavily customized for amazon ecosystem, which comes pre-installed with their media apps. The Kindle Fire tablets also might struggle to create a separation from other tablets in market, and even compete with Kindle e-readers. One of the glaring issues with Amazon’s business model, was they were selling their products at cost or even loss, hoping that the revenues from content would offset the costs. Amazon lacks the manufacturing strength to create affordable products and achieve profit from their hardware, and still operate as a low-cost business. The success of Fire tablets depends on the operating software provided by Google, because they do not have their own mobile operating system. Unlike Apple, many services and apps from amazon webstore are easily available on various other tablets.

Opportunities

Amazon Web Services (AWS) has a huge potential for revenue generation, as many industries are moving towards a cloud computing infrastructure. Amazon can tap into the smartphone market, and bring their expertise and innovation to the industry. They can corner the low-end tablet market, either by providing the Fire tablet at cost or even more heavily subsidized in-order to lure the customers to amazon eco-system. Fire tablets primarily focused for price conscious customers, and aligns with their goal to provide customers with low cost products. However, they can venture out to manufacture high-end products to compete with Apple Ipads.

Threats

Amazon heavily invested in new technologies to be a leader in consumer market, introduced to us their amazon e-retail store and Amazon Kindle e-readers. Amazon was unable to lock the customers specially in their portable device eco-system, and the rapid pace of technology and various entry on the segment presents a huge threat. The NOOK devices from their fiercest competitor Barnes & Noble compelled them to significantly lower their prices. Their inability to make their propriety softwares exclusive to Amazon eco-system mainly due to buyer power of various OEMs.

Successes and Failures of Amazon

Amazon has been success in starting a business based on the vision of their CEO Jeff Bezos, which was a revolutionary idea that changed the landscape of the retail industry. The incompetence of many other large retailers to transition from Brick & Mortar store to establish a significance online presence highlights the success of Amazon. Amazon has not always been successful as it had witnessed a fair share of both success and failures since when it was founded. Some of Amazon's successes include;

Amazon was able to invest large capital to create a wide network of data network, and improve on machine learning to analyze the data to understand customer’s purchase trend.

Amazon opened their website to third party vendors, which increased their product portfolio, and let them focus on products they desired. It helped them amass a large customer base.

Amazon Kindle E-readers were far and away better than any e-readers in the market at the time, this can be attributed to the focus on innovation by the company. The subsidizing model for their devices helped them garner a lot of customers to their eco-system, and opened many revenue streams.

Although Amazon has encountered a lot of success over the years, it has also had failures which include:

Amazon’s failure to make their apps and services exclusive to Amazon customers and on their devices, make their products easily substitutable.

The lack of profit generated from the Amazon mobile devices, and the necessity for heavy subsidization to sell their products can be seen as a failure.

The inability to align the goals of the company to the goals of the shareholders creates an unwanted tension between the two stakeholder groups.

Financial and Statistical Data

Amazon for being a fairly new company compared to Apple and Samsung has significant cash reserve available to invest in new projects, and this financial strength helps them to follow their core business strategy of innovation for the satisfaction of customers. Amazon’s subsidization of their devices requires huge capital, to lure the customers to Amazon eco-system. They have the services such as Amazon videos, Kindle book store, and Amazon appstore, which can generate revenue for the Company.

Amazon have had conflicts with their shareholders because their goals are primarily long-term growth rather than short-term profits, and their business strategy of subsidizing their devices had made the analysts skeptical about the future of the company. It is evident that CEO Bezos’s vision have paid off, and their stock prices have constantly gone up baring some periods.

Amazon introduced their Kindle tablet during the 4th quarter of 2011, in a market which was predominantly Apple tablets, and vast numbers of android tablets. Amazon’s Fire tablets were able to garner customers due to eye catching prices and the benefits of being in an Amazon eco-system. The Nook tablets were a direct competitor to the Amazon Fire tablets as both of the products has similar price point, but on paper Nook tablets had better specification.

The graph above shows the sharp decline on the price of Kindle E-readers, a product which opened the door for Amazon to establish themselves as a device manufacturer. The relatively low barrier of entry and the subsequent advancement in technology saturated the E-book market. Amazon’s goal was to capture a large number of customer base before other manufacturers could corner the market, thus, they heavily subsidized their products.

It is vital for a platform to have sufficient applications for the users, and the lack of popular apps on a platform can ultimately lead to the demise of a business, case in point, Nokia was unable to attract app developers to their windows platform, therefore could not break the stronghold of Google and Apple. The one benefit for Fire tablets would be that with minor adjustment, they could run any apps from Google play store.

Amazon’s research and development expense align with their mission statement, and for being primarily a retail giant, they have considerably high R&D expense. These expenses reflect the values of Amazon CEO Jeff Bezos, that they want to be a pioneer for newer technologies.

Recommendation for Amazon

Amazon needs to enter the tablet market as they entered the e-reader market, with technology that is better than any products in the existing market and at a considerable price. They can release different version of Kindle Fire tablet which targets the high-end market, which can offset the cost to sell the generic version at cost. Amazon needs to continue the company culture that made them a success, which is to innovate not to gain a competitive edge, but to satisfy the needs of the customers. The general consensus among tablet users are that they prefer cheaper devices, but the basic performance of the devices cannot be compromised. Amazon can use their services to distinguish themselves from other OEMs, and lure customers through various bundle offers. The Fire tablet and many of the tablets in the market run on android operating system, which is owned by Google, therefore Amazon can invest to create their own mobile operating software.

References

Perez, S. (2015, January 13). Report: Google Play’s App Store And Developer Community Grew Faster Than Apple’s In 2014. Retrieved November 07, 2017, from https://techcrunch.com/2015/01/13/google-plays-app-store-and-developer-community-grew-faster-than-apples-in-2014/

Farfan, B. (n.d.). What is Amazon.com's Mission Statement? Retrieved November 07, 2017, from https://www.thebalance.com/amazon-mission-statement-4068548

Sustainability Report │ Financial Information │ Investor Relations │ Samsung Global. (2017, September 26). Retrieved November 07, 2017, from http://www.samsung.com/global/ir/reports-disclosures/sustainability-reports/

Inc., A. (n.d.). Apple. Retrieved November 07, 2017, from http://investor.apple.com/

Investors. (n.d.). Retrieved November 07, 2017, from http://forinvestors.barnesandnobleinc.com/

R&D expense

Apple 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 2014.0 1.09 1.333 1.783 2.429 3.381 4.475 6.041 Amazon 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 2014.0 1.033 1.24 1.73 2.909 4.563999999999996 6.564999999999995 9.27 Samsung 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 2014.0 6.89 5.81 7.841 8.978 10.21 13.05 13.65

Year

R&D Expense (In $ billions)

CashFlow Comparison

Samsung 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 1.93 10.12 11.14 13.25 16.64 14.84 Apple 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 11.88 5.2 11.2 9.81 10.75 14.2 Barnes & Noble 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 0.361 0.281 0.0697 0.0594 0.0542 0.164 Amazon 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 2.8 3.44 3.77 5.2 8.08 8.65

Year

Ending Cash ( In $billions)

Stock Price

Samsung 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 626.4 657.0 660.0 835.0 1350.0 1323.0 Apple 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 12.91 30.23 46.17 57.52 72.8 80.150 00000000001 Barnes & Noble 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 9.82 12.49 9.26 9.48 9.884 9.729999999999998 Amazon 2008.0 2009.0 2010.0 2011.0 2012.0 2013.0 51.28 136.49 183.37 173.89 245.18 398.79

Year

Stock Price (in $)

Tablet Unit Shipment

Q3, 2011 Samsung Apple Barnes & Noble Amazon 1850.0 11123.0 750.0 0.0 Q4, 2011 Samsung Apple Barnes & Noble Amazon 2140.0 15430.0 1920.0 3885.0 2011 Samsung Apple Barnes & Noble Amazon 6110.0 40493.0 3250.0 3885.0

Tablet Manufacturer

Units Shipped

Kindle E-Reader 39173.0 39387.0 39600.0 39783.0 39995.0 40179.0 40391.0 40575.0 40787.0 41000.0 399.0 299.0 359.0 299.0 259.0 189.0 139.0 119.0 79.0

Different Platform App Count

Amazon Appstore 2010.0 2011.0 2012.0 2013.0 2014.0 0.0 25000.0 60000.0 150000.0 270000.0 iOS App Store 2010.0 2011.0 2012.0 2013.0 2014.0 125000.0 260000.0 480000.0 760000.0 1.18E6 Google Play 2010.0 2011.0 2012.0 2013.0 2014.0 20000.0 75000.0 320000.0 680000.0 1.42E6

Year

Number of Apps

- 19 -