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making_the_amazon_kindle.docxMaking the Amazon Kindle
The days of buying paperbacks from bookstores came to an end a decade ago. The world of Internet has changed how people read books. Today everything is electronic and there are several reading devices, which make life a lot easier and cheaper than buying a paper back. The leader in the world of ebooks is Amazon (Shaw, 2014). It produced the first kindle ten years ago but since then has updated the software so that not only does it have more memory but it comes with more functionality.
The chief reason why kindle has succeeded is because Amazon has made it very affordable, reliable, easy to use and functional. Further, Amazon also offers a large selection of ebooks, emagazines, videos, music and other apps. Amazon has always been aware of its competitors like Barnes and Noble with its Nook, and Sony with several readers. But its closet competitor is in fact Apple, which offers a multipurpose iPad that also offers many functions besides being a reader. The one area where the Amazon kindle has a lead over Apple is the price- the kindle is a lot cheaper and just as versatile.
The Amazon kindle was designed in California where it incorporated the crucial components such as the tiny microcapsule beads. These beads were made by a company in Cambridge Massachusetts. The rest of the components are outsourced to enterprises in Asia. Market research reveals that in 2009, the kindle 2 costs $185 to manufacture and the single most expensive component is the display, which cost about $60. This bistable electrophoretic display that shows an image when it is not drawing on the battery power and allow a long shelf life is made in Taiwan. The company Prime View in Taiwan has had enormous experience with the manufacture of LCDs and estimates indicate that about 50% of the value of the display is captured by the American company E ink and the rest going to Prime View. The next most expensive equipment on the kindle is the wifi card that allows connection to amazon's digital books and costs $40. This card is made in South Korea. The card also includes a $13 chip designed by Qualcomm of San Diego but manufactured in Asia. All the rest of the components are made in China. In sum out of a total cost of $185 dollars, perhaps only $50-$60 is accounted by activities undertaken in the USA.
While America reigns supreme in innovating the world of electronics, there is no doubt that other countries have caught up. It isn’t that Americans can’t make the kindle in the USA- it is just the fact that we have a capitalist society where everyone wants to be rich. Thus, workers want to be paid large sums of money, have bonuses, benefits, and huge pensions. Further unions want jobs for life and demand that no one can be fired. It is this demand for large salaries that has driven the manufacturing industry in the field of electronics to Asia. The innovation and creativity is still in the US and most initial discoveries are made in America. But when it comes to the actual manufacture of goods, the labor costs are just way too high. If the product is made in the USA, the average American simply will not be able to afford the kindle. On the other hand, the customer will gravitate to cheaper devices that are made in Asia. This is now applicable to almost everything product in the USA.
Amazon has followed this strategy from companies that manufacture gaming consoles, which they offer for practically nothing but then sell games, which are somewhat expensive. While Amazon kindle breaks even with the sale of the reader, it more than make up with its ebooks, streaming videos, apps and MP3s. and finally there is advertising.
Amazon has always functioned in an environment where profits on devices and items are thin but because of its ability to offer low prices on goods it has the ability to attract customers; in the end this is a winning solution (Vries, 2005). It is more of a long-term investment as the customer is always looking for something cheap- something that Apple never offers because its products are prohibitively expensive.
Parker, G. (2012). How Amazon's Unconventional Business Model Changed Me From Hater To Customer For Life. http://www.businessinsider.com/why-amazon-is-so-hugely-successful-2012-12. Accessed on Aug 3, 2016
Shaw, B. (2014). 4 Basic Reasons for Amazon.com's Ongoing Success. http://www.fool.com/investing/high-growth/2014/01/26/4-basic-reasons-behind-amazoncoms-ongoing-success.aspx. Accessed on Aug 3, 2016
Vries, L. (2005). Amazon: Ecommerce Success Story. http://www.cbsnews.com/news/amazon-e-commerce-success-story/. Accessed on Aug 3, 2016
