The Amazon Kindle Fire has entered the tablet PC market with promising prospects. It is based upon the highly successful Kindle e-book reader. Amazon seeks to differentiate itself from competitors in the tablet PC market but is this enough to displace the current market leader, Apple?
The tablet PC is a relatively young industry. The tablet PC itself can be seen as a disruptive innovation since consumers found it to be better than using laptops. The market is highly competitive and mainly targets three segments – private consumers, professionals and enterprises. The rate of growth of sales for the tablet PC is higher and more dynamic in comparison to the sales recorded at the time of the launch of the iPod, Apples’ MP3 player.
Since the tablet PC market has such promising rate of growth, it presents itself as an opportunity many companies want to explore. For established players in the market, this means that the threat of new competition entering the tablet PC market is high. Well established computer equipment manufacturers possess the technology and complementary assets necessary for the development of their own version of tablets. Unlike most laptop and desktop computers, the tablets are not locked in the Microsoft computer operating system. Tablets are relatively new to the market and therefore, the standard design has not yet been established. The competition is driven by the speed in which the new tablets are brought to the market and how they are priced.
The tablet PC is acting as a substitute for laptops and desktop computers – is there a possibility of something replacing the tablet PC? It is difficult to predict if there will be a substitute to the tablet PC in the near future. It can be argued that substitutes may emerge considering the dynamics of the consumers market and the rate at which new products are being developed and delivered to the market. However, unlike the standard PCs, the tablet PC is unique and can be characterised by its user friendliness, greater mobility, optimised suitably for consumption of digital content and comfort of using the device anywhere. Such product attributes may be difficult to replace or improve with another design using the same technology. In regards to the consumption of digital content, the entry of a substitute to the tablet PC is unlikely in the near future increasing the chances for Amazon Kindle Fire to become a standard design and successfully compete against its main rival, the Apple iPad.
In the era of the Internet, searching for information about products and services has never been easier. Consumers are able to access consumer reviews and other relevant product information prior to purchase. Quality of information is not guaranteed even though it is easy to access. Product reviews and comparisons may be influenced by the companies; therefore the consumers’ true bargaining power is distorted. It is also worth mentioning that the tablet PC market is segmented according to the price elasticity of the product and the ability of the consumer to pay, meaning that the consumers’ real choice is limited to what they can afford. The highly segmented market for the tablet PCs makes the consumer purchase decision making process more complex and therefore giving the producers greater leeway on the market. Nevertheless, consumers are savvy and there is a great variety of different products in the tablet PC market, which makes bargaining power of customers high. Considering that Kindle Fire is priced relatively lower than its main competitor Apple iPad, and that Amazon.com is a well known website used by many for price comparisons and consumer reviews, Amazon Kindle Fire is in a good position to compete and challenge iPads’ place in the market.
The tablet PCs are manufactured with processors, web-cams and other parts produced by third party specialist mass producers. Some of these suppliers such as Intel enjoy high brand equity and loyalty from its end users. The bargaining power held Intel is relatively high while other electronic parts supplier’s bargaining power is low due to the highly competitive nature of the electronic parts market.
Companies competing in the tablet PC market are: Apple, Samsung, Motorola, HTC, B&N, ASUS, BlackBerry, Amazon and HP. Apple, with its iPad and iTunes (the digital content online store) is the first market entrant and the leading brand in the tablet market sector, while other brands entered the market on a “me too” basis. Unlike most of Apple competitors, the Amazon Kindle Fire entered the market as a brand extension to Amazon’s nucleus brand. It differentiated itself from its competitors on basis of being a complementary service to Amazon’s core business. The rivalry in the market is intense but leading brands are those supported by their well established digital content online shops.
Amazon’s key strength lies in the field of online retailing and digital content supply. The company’s high brand equity, success of the Kindle book reader and the globally established distribution network places Amazon in an advantageous position.On the other hand, Amazon’s main weakness lies in its lack of expertise in design, technology and manufacturing of electronic devices. Some experts expressed their dissatisfaction with Amazon’s choice of the 7 inch touch screen rather than the standard 10 inch one used in other tablet PCs. The smaller screen size might impel the undesired perception that the Kindle is a product of an inferior quality.
The Amazon Kindle Fire is part of a well-developed Amazon value chain and global distribution network. Amazon’s USP lies within this system, where the Kindle Fire is developed, marketed and delivered to the end user. Its well developed business infrastructure is a great asset for the Kindle brand extension and if managed properly, this new extension can improve its own equity as well as that of Amazons’. Additional benefits can be derived from the sales driven by the supply of the digital content for Kindle Fire. The main threat to Amazon’s tablet on the other hand is Apple’s new iPad2. Apple holds expertise in design of computer equipment and has a large number of loyal customers. It was the first to enter the tablet PC market, thereby establishing itself firmly. The iTunes store also gives Apple a competitive advantage over other players in the market.
In order to compete in this highly competitive market, Amazon should establish Kindle Fire, not as a direct competitor to the iPad, rather as a differentiated product available at a relatively low price. Not only should Amazon pay attention to established competitors, it should also keep a keen eye on new entrants, like the new ‘Aakash’ tablet which is cheaper and offers similar features to the Kindle.
Amazon can leverage on its experience in e-tailing by integrating the Amazon.com marketing communication strategy with the Kindle Fire product positioning strategy. By associating its well established e-tailing business division with its new electronic device, Amazon can effectively differentiate itself from its competitors and complement its core business. The Amazon Kindle Fire will enhance the consumers’ perception about Amazon as an innovative company which does not hesitate to address the latest market trends. This can increase the customer value from using the brand, making it harder for new entrants to catch up.
The two key tablet PC brands are Apple’s iPad and Amazon’s Kindle Fire. The shift in market position between the two is unlikely. This is due to differences in product positioning strategies. Apple’s iPad is charged at $499 targeting the high end of the market spectrum, whereas Amazon Kindle Fire is available to a wider audience with its $199 price tag. The two companies may not necessarily compete against each other directly; rather try to develop their own consumer market. The Amazon Kindle Fire is capable of becoming a standard design and of overtaking Apple in terms of initial volume of sales. Apple and its iPad are going to remain dominant on the tablet market as a multifunctional tablet PC and keep setting high product quality standards for the market.
NB: This article is based on a case study titled: Amazon’s Kindle Fire – Setting Ablaze the Tablet Market written by Punithavathi Srikant at Amity Research Centres Headquarters in Bangalore
Bibliography:
Srikant, P., 2011 Amazon’s Kindle Fire – Setting Ablaze the Tablet Market. Amity Research Centres Headquarters[e-journal]Available through: Digital and Interactive Marketing course webpage [Accessed 21 January 2012]
Written by Michael Pawlicki
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