Shifting strategies and adapting to changing demand is an attribute of an organization prepared for an increasingly globalized market of the 21st century. In facing the challenges described in McKinsey’s “What Happens Next?” article, Amazon.com has demonstrated a flexibility that so far has yielded enviable success. Amazon.com began as an online retailer of varied discount goods. In November 2007, it introduced the mobile electronic book reader, Kindle, along with an extensive electronic book library.
Apple worked to capture a large share of the market for its new iPod using a similar strategy. The new MP3 player was dolled out along with the user-friendly iTunes music player software through which individuals could purchase songs for $0.99. Predictably, iTunes took off, $1 became the standard price for songs and the sale of iPods skyrocketed, much to the chagrin of record labels accustomed to large returns on CD sales.
Amazon.com set the price of the first electronic books it sold at $9.99 and sustained a loss on each book in order to position itself as the dominant supplier in that market. Similar to Apple’s strategy of packaging low-priced songs and the new iTunes software together to encourage the purchase of its iPods, Amazon.com used its e-book library and reduced prices to increase its share of the market and encourage consumers to purchase Kindles, the company’s first venture into the sale of hardware.
Publishers have not taken well to the threat of lower price books. In the sale of books, publishers are essentially the middlemen; Amazon.com is seeking to negotiate with writers to sell their products directly to consumers. Amazon is now in the process of courting top writers and contracting them away from publishing companies. It is a strategy that publishing houses have aggressively fought back against, at times threatening to sue writers under contract.
What Would Happen if Amzaon Ruled Publishing? Rosen, Rebecca J. The Atlantic Magazine. http://www.theatlantic.com/technology/archive/2011/10/what-would-happen-if-amazon-ruled-publishing/246854/
Fear the Kindle. Manjoo, Farhad. Slate.com http://www.slate.com/articles/technology/technology/2009/02/fear_the_kindle.html