It is a example :
Ethical Ombudsman-Job D.
Amazon was formed by Jeff Bezos in 1996 where he operated out of his 400 square foot garage. However, after accomplishing the mission of becoming the worlds largest online bookstore in 1999 the company started to turn its first profit in 2001. This growth lead to Amazon adopting 25 million square feet of warehouse by 2011. Amazon also reported 50 billion in revenues and controlled 10 percent of the e commerce market in North America. Although Amazons initial mission was to become the worlds largest online bookstore, in 2010 Bezos announced that “Invention is in Amazons DNA” and that the long term interest of its shareholders were in line with the needs and wants of its customers (Hitt). This interest in innovations into new markets, however, created tension for short-term investors. Investors were skeptical about rather or not Amazons new innovations would create the revenue they hoped to obtain with these new innovations.
Along with there being tension among investors another issue Amazon has to deal with is competitor products. Amazon first created the Kindle in 2007 to compete with the Sony reader, the first form of e-book, and Barnes and Noble followed Amazon and released its e-readers in 2009. The Barnes and Noble e-readers were similar to the kindle and wanted to capitalize off the same customers Amazon was. However, in 2010, Apple created the IPad to appeal to the high end customer. They took the software from the original IPod touch and modified it into a tablet form. Along with Apple, Google came out with tablets that offered the same functions on the android market. This impacted Amazons kindle greatly because the IPad and Google tablets offered more then just the ability to read books. In response to these new tablets, Amazon released the Kindle fire in 2011. The kindle fire is different form the Kindle in that it offers web services and other functions that Apple and Google products have along with the core focus of being the worlds largest online bookstore.
Although the emergence of competitor products is a huge issue Amazon must deal with, several other important issues arise from the innovations put into place to combat competitor products. The first issue Amazon must tackle is determining a target segment for their product. Do they want to target media junkies, children and gamers, or the higher education segment? The difference in these segments is the media junkies will gorge for the free month of Amazon prime and they wont buy anything else from amazon. Where as children and gamers are focused on competition. The competition factor brings for the issues of the kindle fire having a slow processor and graphics card and it will be difficult for amazon to get third-party developers to create special versions of games for the Kindle. In the higher education segment itextbooks are preferred, but the Kindle Fire’s smaller screen and Barnes and Noble already being on the path creates problems. After evaluating the market segments Amazon must then decide what segment looks the most promising and how should they place their products in this segment in relation to other products already in the segment such as the IPad and e-readers. The main concern with positioning the product in the segment is to not create a price war between products rather it be with another company or between two of Amazons products, Kindle and Kindle Fire. The last issue Amazon faces is will the Kindle Fire produce a revenue. Will the revenue stream from the Kindle Fire cover the large cost of providing the content that users desire? Amazon must determine a price that covers the cost of components and content on the Kindle while also offering a competitive price to attract customers away from competition products. They must determine if the revenue will mostly come from the sale of kindles or come from advertisement and content purchases once the Kindle has been purchased. In other words will they make most of their money on the sale of the physical Kindle or from purchases of content made on the Kindle.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2017). Strategic management:
Competitiveness and globalization: Concepts and cases. Boston, MA: Cengage Learning
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