Executive Summary
Amazon offers a variety of services and products, and it can be considered a company with extensive resources and capabilities. One of the areas that it is interested in is the tablet market. Currently, Amazon sells six models of tablets, three of which are sold as child-friendly devices. An analysis of the target consumer groups reveals that children and media consumers are the two main categories that Amazon considers as potential customers. Moreover, Amazon differentiates its tablets from those of competitors by building a relationship with its customers that lasts beyond the purchase of a tablet. The devices’ original operational system, original applications, and access to Amazon goods and services create a framework in which Amazon customers are encouraged to remain. Combined with low prices, Amazon Fire tablets occupy a niche that is different from expensive Apple and Samsung products. However, as the tablet market’s size continues to fluctuate, Amazon’s tablets are losing their appeal. The primary recommendation for Amazon is to update the software and hardware of its Fire tablets, which should help retain the attention of its target audience and open new possibilities for market growth.
Introduction
Amazon is a company that currently operates in multiple industries, delivering both physical products and services to its customers. The CEO of the organisation, Jeff Bezos, continues to support innovations that have allowed Amazon to compete with major firms in the areas of retail, music and video streaming, and others (Gershgorn et al. 2017). Moreover, the business continues to focus on areas whose future remains unclear to many analysts (Detachable tablets return 2018). In particular, one can look at the tablet market and the public’s continuously changing interests in the range of tablet devices.
Historically, most technology manufacturing companies have not started their businesses with tablets or e-book readers as the basis of their product lines. Amazon, a company that gained popularity as a seller of books, saw an opportunity to advance its services with the help of book digitisation, thus leading to the creation of a new sector – e-books (Sawhney, Owens & Goodman 2014). Later, the competition with other book stores and an investigation into customers’ needs encouraged Bezos to introduce another type of device – the Kindle Fire, later renamed as the Amazon Fire tablet. In contrast to the previous concept of an e-book reader, Amazon Fire tablets have a broader range of capabilities, allowing their owner to browse and access the vast selection of books, movies, television shows, and games provided by Amazon.
Currently, Amazon offers six main versions of its tablet, with three of the models targeting children. The most basic product is the Fire 7, and its price usually remains under $50 (Fire tablets 2019). Other options are not much more expensive, as all are priced under $200 (Fire tablets 2019). The company’s vision for the market seems apparent and Bezos’s strategy for selling tablets is quite clear. This report aims to analyse the state of the tablet market and Amazon’s place in it in order to make recommendations for the future of the Amazon Fire.
Analysis
External Environment
To understand how the popularity of the Amazon Fire can stay so high, one has to consider who is purchasing these tablets and what functions tablets as a whole, and the Fire, in particular, have. Tablets fall into a niche between phones and personal computers (both stationary types and laptops) in their dimensions, functionality, and portability. Therefore, the users of these devices have to have a desire to purchase a tablet apart from or instead of a computer and a phone. A customer profile map can be useful here to discuss what characteristics potential target groups have. As Sawhney, Owens and Goodman (2014) find, three main categories can be considered in the case of the Amazon Fire – media consumers, children, and students. One can see that the demographics of the clients vary significantly. The Amazon Fire is appealing to people of different ages and genders, with a variety of occupations, hobbies, and likes. However, their unifying factor is an interest not in hardware, but in various forms of media.
First of all, people who read books and comics or watch shows, cartoons and movies are asking a company to provide them with a mobile device that is also functional and powerful. They also expect a long battery life, access to all resources for media consumption, and considerable storage capacity. Furthermore, the tablet itself has to have graphics capabilities and a screen that makes movie watching an enjoyable experience. These people may be young or old, but their average time in front of the screen is usually high. Moreover, because these consumers need to have access to many types of media, they expect the tablet to have a library with a large selection of options. Finally, they likely want an affordable product that also has exclusive deals in the form of sales, low prices, and subscription services. It should be noted that this demographic category is currently one of the largest consumers of tablets and similar devices since video and music streaming are continuing to grow in popularity (Tsukayama 2018). The majority of competitors in the market prioritise this group’s interests.
The next type of consumers is comprised of children, although all purchasing decisions are made by their parents. In this case, the primary requirement is the low price since parents are hesitant to buy expensive technology for children who may damage the device easily (Tsukayama 2018). The next qualification which is based on the same explanation is durability. Finally, the media access that the tablet provides is also essential. A simple interface, a variety of games, and potential for educational materials are valued by these clients.
The last group of customers that tablets may appeal to are students of higher education. According to a case study, academic books are heavy and expensive, thus making the idea of e-books and other digital educational materials seem beneficial for learners (Sawhney, Owens & Goodman 2014). Nonetheless, this community seems to be less targeted by tablet sellers in comparison to the previous two categories. It is possible that students’ needs are not being addressed by companies because their use of tablets often overlaps with that of media consumers.
Analysis of Amazon’s Strategy, Resources and Capabilities in the Tablet Market
An evaluation of the potential customers in the tablet market illustrates the first part of the Value Proposition Canvas. Clients’ jobs, pains, and gains are explored for two main sectors, media consumers and children. Thus, one can investigate how Amazon’s current strategy adheres to these descriptions. Considering the range of products that Amazon currently offers, one can see a strong focus on the second group discussed, children. Three of the six Fire models are produced for younger customers, and their hardware and software are designed with a child user in mind. For example, these tablets have a special plastic case that makes the device easy to hold, responding to the first pain – the risk of breakage – and fulfilling the need for durability (Fire tablets 2019). Moreover, Amazon supplies these models with a two-year guarantee that is twice as long as the longest extended warranty for other tablets.
The contents to which the children using these tablets have access are limited as well. Young users are prevented from seeing potentially harmful, explicit, or otherwise inappropriate materials. It should be noted separately that these services are offered for free for one year after the purchase of a tablet. It is a feature that separates Amazon’s approach to the market from all others. Here, the critical specification is the fact that Amazon has the resources to provide its customers with this possibility. Amazon is attempting to gain a share of multiple markets, including not only tablets but also services and storage provision. When children use an Amazon Fire, they also utilise a selection of Amazon-provided books, games, movies and applications. After the FreeTime Unlimited offer comes to an end, customers can pay for these features to stay unlocked or purchase a new device, thus prolonging the customer-company relationship (Fire tablets 2019). As a result, Amazon retains clients by engaging them in a network of services and simplifying access to products through a single unified source.
The analysis of the second customer group reveals a similar strategy for Amazon. Tablets that are not targeted at children are equipped in a similar manner, with a number of small changes. These models come with the same specifications, including storage capacity, screen resolution, and display size. However, each of these tablets is $50 cheaper than its child-friendly analogue (Fire tablets 2019). Moreover, these standard models come equipped with Alexa, Amazon’s voice-activated assistant. The addition of Alexa to Amazon Fire tablets is significant since it differentiates these devices from those of competitors. By including the assistant and simplifying its voice activation, Amazon has created a portable variant of its other products, such as the Echo (Tsukayama 2018). While Echo, Echo Dot, and other products with Alexa have to be placed in one room, a tablet can be carried everywhere, potentially allowing the customer to never lose contact with Amazon.
Apart from watching movies or listening to music, people can use Fire tablets to shop at Amazon quickly and easily. In this case, both Alexa and other installed applications contribute to increased purchasing. It can be observed that Amazon is aiming to build a network that customers will not want to leave. Fire tablets expand this possibility by offering instant access to the media shop as well as the rest of Amazon’s wares.
Access to a media library fully monitored by Amazon also ensures that the tablet owner will consume other products from the company. Here, one can see how Amazon’s strategy was designed. Fire tablets are much cheaper than those offered by other manufacturers. For comparison, the most expensive standard Fire HD 10 model is $149.99, while Apple’s cheapest tablets start at $329 in the US (iPad 2019). This price difference is substantial for many customers, and Amazon uses this tactic to target groups that Apple cannot. Apple and Amazon place their tablets in separate niches, and Bezos’ aim is not to compete with Apple on the same turf but to support market segmentation and assume control of a single area. Thus, apart from offering a unified Amazon-based experience with a library and unlimited access to media, Amazon Fire tablets also use their pricing as leverage to attract clients with lower incomes.
Overall, Amazon’s strategy strongly relies on continuous interaction with its customer base. The tablets are inexpensive because their purchase is only one of the steps that Amazon hopes its customer will take. This represents both a strategy for Amazon and a point of appeal for customers. People who already pay for Amazon Prime, purchase goods from the store, or read e-books on the Kindle app may choose to pay for a Fire tablet because they are well acquainted with the company’s other offerings. Moreover, parents are more likely to choose Amazon’s tablets over other models since these tablets are specifically designed to be durable and functional while retaining their low price. Using the VRIN framework, one can see that Fire tablets are valuable since their price is much lower than competitors’ models, although the specifications and abilities are similar or not substantially worse (Lin & Wu 2014). While they are not rare or non-substitutable, Fire models can be considered inimitable in their integration with other Amazon services. The competitive advantage of Fire tablets is not the highest, but Amazon has an opportunity to preserve its place in a declining market.
Growth Options and Recommendations
Analysis of Amazon’s Growth Options in the Tablet Market
At the present time, the tablet market is undergoing significant changes. The number of people who purchase new tablets is declining since most customers are choosing large smartphones or laptops (Tsukayama 2018). However, several companies continue to divide market share in this segment among themselves, with Apple holding an undisputable leading position and Samsung, Huawei, Lenovo, and Amazon competing with each other (Strategy Analytics 2018). According to the latest results, the share of Amazon’s tablets has dropped significantly, which means that its current strategy needs improvement. In order to expand its influence in the market, Amazon can consider multiple approaches for the next five years. First of all, Amazon can try to address new customer segments. Students and employees whose workplaces are following the ‘Bring Your Own Device’ (BYOD) trend may influence the way Amazon interacts with its customers.
In the case of students, the nature of this demographic segment implies that tablets will be used not only for entertainment purposes, but also to access school books, articles, documents, and other necessary files. The Amazon Fire already has an assortment of books, but its functionality and interactivity for professionals are lacking. By introducing software that helps students learn, Amazon can expand its reach. Similarly, many companies are now allowing their workers to bring their own devices to work and use them for presentations, note-taking, and other purposes. Tablets may be more suitable for these tasks than other devices. Phones are strongly connected to personal communication, and their small screens and lack of ports may present an obstacle to convenience for professional work. Laptops and stationary computers are bulky and too unwieldy to hold in one hand. Tablets with their long battery life can be helpful for medical and office workers, and Amazon can use its Alexa integration for providing project planning and group work.
A second option is to offer a new value proposition without changing the price range. Consumers of media, who comprise Amazon’s current focus, want to have a tablet that is functional enough to provide the best entertainment quality. However, both the hardware and software of Fire tablets are less advanced than those of the iOS and Android counterparts. For example, two of the models do not have an HD screen which may be essential for people who use Fire tablets for watching films and television shows. Only the most expensive options have full HD resolution, which is becoming a standard for most video-watching experiences. Furthermore, the sound quality can be upgraded for similar reasons. In order to attract gamers or expand the library of children’s games, Amazon should improve the graphics capabilities of its tablets. A long-lasting battery is another function that is always positively viewed by customers. Overall, the hardware specifications are the main value that can attract more people to choose Amazon tablets over its competitors.
In regards to software, Amazon’s focus on its own products has resulted in a tablet with limited capabilities. In contrast to tablets designed for iOS and Android, Fire tablets do not have the same variety of applications, which may be a negative feature for people who search for books and films not featured on Amazon. Moreover, people who use their devices for social media, communication, work, or education may also choose other tablets since Amazon’s store does not receive the latest updates as soon as other platforms.
The disadvantages discussed above can also be resolved with new partnerships. Amazon can work with other hardware and software companies to update the technical contents of its tablets. Other companies are moving towards better screens, faster response times, and larger media libraries. Amazon does not need to disregard its existing models, but it does need to offer some variations that have better specifications, especially if other developers provide the components. Collaboration with a firm that produces software for medical workers, businesspeople, or engineers, for example, can lead to an expansion of the target audience and raise the sales of tablets with new features. Each of these partnerships represents the potential for growth, and Amazon can choose to pursue one of them in order to occupy a particular place in the market.
The BYOD trend requires device manufacturers to review their offerings and provide new solutions that are focused not just on entertainment, but on business purposes as well. Apple already uses this approach by marketing its tablets as perfect for working professionals. Amazon can capitalise on its price strategy and cover the segments where Apple is thought to be too expensive. A partnership with app developers is a step towards overcoming the problem of limited capabilities.
Recommendation for a Strategic Approach
In order to decide which of the growth options is the most promising, one can use a framework referred to as the three horizons of growth. This is a system based on the belief that companies should be able to maintain three levels of projects in order to innovate sustainably (Baghai, Coley &White 1999). The first level focuses on existing core ideas and features, the second one considers new developments and the final horizon centres on bold new ideas (Baghai, Coley &White 1999). According to this approach, the company should focus on improving its current products and devote less time and effort to drastic changes, while not ignoring them completely, however. The second solution, offering new value propositions, seems to align with this framework the most. By updating its hardware and software, Amazon may meet multiple goals which then may be complemented by other growth options in the future.
Thus, the first step that Amazon should take is to review its current range of tablets and see which of their specifications can be improved. These may include the devices’ design, screen resolution, viewing quality, response speed, or battery capacity. Then, the company should work to adjust these characteristics and analyse how any changes may affect the final price range of its tablets. As a result, these improvements may attract new customers and allow Amazon to start working on expanding its customer reach and potentially collaborating with other developers to deliver new tablet versions for professionals.
Conclusion
This case study of Amazon Fire tablets shows that the market for these devices is competitive and unstable. The purpose of these devices is changing as the ways in which media is consumed evolve, and companies are struggling to find a balance between improved capabilities and low prices. Amazon’s share in the market has decreased, but its pricing still attracts many customers. The main recommendation that follows the analysis of Amazon’s current strategy and resources is to update its software and hardware to appeal to its main client segments, media consumers and children.
Reference List
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