Wednesday, April 13, 2016

Amazon and its Blue Ocean Strategy

‘Kindle’, of the House Amazon.com, the first of Its Name, King of the e-readers and the First modern e-books, Lord of the Blue Oceans and Protector of the Bookworms


Has aptly put the Blue Oceans Strategy at work. The article Blue Oceans Strategy by Kim and Mauborgne talks about the important characteristics of companies that opt for the blue oceans strategy as:
  1. Create uncontested market space.
  2. Make the competition irrelevant.
  3. Create and capture new demand.
  4. Break the value/cost trade-off.
  5. Align the whole system of a company’s activities in pursuit of differentiation and low cost.

Kindle was first launched in 2007 for USD$399. The existent players in the market for e-readers then were Iliad (USD$699), Hanlin (USD$349) and Sony PRS500 (USD$350). While these companies competed for the e-readers, Kindle launched with a differentiated policy. Kindle was launched by Amazon which was an existing online bookstore. It was launched with a strategy of to add value to the device in the form of available e-books. Amazon offered a wide range of lower quality and price, and a better range of titles. While the cost of all the devices was almost similar, kindle targeted on reducing the overhead costs of e-books. It competed in the uncontested market space for e-books and thereby spiked the sale of Kindle as well.

Iliad faced FCC regulation non-compliance and drew out of the market. It was also priced at USD$699 which was very expensive as compared to Amazon’s Kindle. Sony PRS series eventually fell due to unavailability of enough e-books. Amazon’s e-bookstore made Sony’s bookstore seems lackluster. And Kindle won over Hanlin in terms of specifications and ease of use. Also, Amazon being already an existing well-known company in the market, it overtook Hanlin e-readers with ease. Kindle survived all these competitors due to the low cost as well as added value.
Amazon continuously innovated Kindle to keep it differentiated in the market. It launched 8 generations of E Ink versions of Kindle before switching to LCD screens, Kindle Fire. This was based on the most upcoming operating system, Android and the LCD screen provided additional benefits. Being an incumbent in the market with differentiated strategy, Kindle has remained the undisputed leader of the market since 2010 when Sony PRS drew out.

To conclude,
  1. Amazon created a market for e-books and launched the e-book store with a big bang due to its existing capabilities as an incumbent.
  2. It made the competition for e-readers irrelevant by providing a value addition in the form of enormous book-stores.
  3. Created and captured the e-readers market demand
  4. Provided value addition despite keeping the costs of e-readers consistent and low.
  5. Continuously innovated to keep the product differentiated and maintain its market share.

Thus, Amazon puts up a great example for a company following Blue Ocean Strategy given its success with Kindle!  

References:
Sparkes, M. (n.d.). Sony admits defeat in e-reader battle with Amazon. Retrieved April 13, 2016, from http://www.telegraph.co.uk/technology/sony/11013820/Sony-admits-defeat-in-e-reader-battle-with-Amazon.html  

Amazon Kindle. (n.d.). Retrieved April 13, 2016, from https://en.wikipedia.org/wiki/Amazon_Kindle#First_generation  

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