Amazon and the Consumer Electronics MarketBusiness Strategy

Problematic

“Can Amazon become a bigger

competitor in the Consumer Electronics market?”

What are The Consumer Electronics?

Consumer electronics are equipment intended for everyday use Most often in entertainment, communication and office

productivity Concern products as smartphones, tablets, laptops, GPS devices,

Game console and so on. Big actual manufacturers on this market : Samsung, Apple, HP,

Western Digital, Sony, etc.

The Consumer Electronics Market

Strengths- Big companies with large portfolio of

products- High innovation rate

- High growth rate in various segment

Weaknesses- Some devices being rapidly

replaced by others- Strong competition between actors that leads to oligopoly

Opportunities- More and more digitalized world- Computers are less centralized

which leave spaces for other devices

- Growing middle class in developing countries

Threats- Governments put regulations on

environmental issues - High competition between big

companies - Price fluctuations

SWOT Analysis

Amazon’s Global Strategy

Strengths- Strong brand image

- Product lines with low price- Strategic partnerships

Weaknesses- Low profit margins- Little know-how

Opportunities- Digital transition

consumption- Attractive market- Growth in cloud

computing

Threats- Law’s governments- High competition

-Volatility in exchange rate

SWOT Analysis

Concentric diversification strategy !

Amazon CE market’ Strategy

According to Bowman : Low price Low added value

Amazon CE market’ Strategy

Generic strategy of Porter (overall cost leadership): Scope: total market Competitive advantage on cost

Blue Ocean’s approach Design and functional efforts => low Price => cheap

Amazon’s CE Products

Fire Phone

The 5 forces of PORTER on the smartphone segment

Intensity of rivalry-Fast industry growth rate

- High margins- Brand identity

- Low product differentiation

Bargaining power of suppliers- Large number of substitutes

- High competition- Volume is critical

Threat of substitute products

- Low buyer incitation

- High switching costs

- High performance

Bargaining power of customers- Increasing buyer volume

- Increased price sensitivity- Low dependency on distributors

Threat of new competitors- Strong distribution network

required- Strong brand name is important

- High entry barriers

Smartphone Sector

• 1300 million units

• $400 billion

Smartphones Comparison

Fire Tablet

Tablets Porter Analysis

Intensity of rivalry- Growth rate is

decreasing- Aggressive competition

Bargaining power of suppliers- Owner of their manufacturing

companies- Low price

- Exclusive contracts

Threat of substitute products

Strong competition due to constant innovation

Bargaining power of customers

- Regular customers- Large number of customer

- Market dominated by 2 companies

Threat of new competitors- Economy of scales

- Cooperation needed to enter the market

Tablet Market

• 229,8 millions units sold in 2014

• $90 Billions

The decline of the tablet market

• Expected growth : - 9%

Reasons : • A lack of innovation• An increased competition• Renewal cycle is longer than

expected

Products Comparison

Kindle E-book Reader

E-book Readers Porter Analysis

Intensity of rivalry-Prices are quite the same

- The regular tablets are taking market shares

Bargaining power of suppliers

Switching cost is insignificant : a company could change easily of

supplier

Threat of substitute products

E-book can be read on almost every electronic device

Bargaining power of customers

The buyer choose wich e-book reader he wants to purchase

Threat of new competitors

- Difficult is to obtain deal with publishers.

- Market is unatractive

E-book readers Market Shares

E-book Reader Market

Expected growth?

Products Comparison

Fire TV

Streaming Media Devices Porter Analysis

Intensity of rivalryFast industry growth rate (37.5%).

In growth phase --> not much competition

Bargaining power of suppliers

Suppliers can decide to give novel content

Threat of substitute products

The product is still in the growth phase

Bargaining power of customers

More and more customers

Threat of new competitors

A good distribution network is needed

Streaming TV Devices Sector

The set-top box sector:

Expected growth : 37,5%

Product comparison

Developing a flagship product?

Concentrate all the efforts on one product Try to dominate the market and create a notoriety for this type of

product Expand the notoriety to the other products

McKinsey Matrix

Fire TV

Kindle Fire

Fire Phone

High

Medium

Low

High Medium Low

Mar

ket

attr

acti

vene

ss

Strength of Products

Fire TV’s advantages :

Amazon owns content (streaming service works best on Amazon’s own hardware)

Exclusive deals with several content providers (HBO) High degree of investment (more than $100M) Low cost of the Amazon TV device

Amazon’s Funds

Using existing distribution networks

Pros :✓ Distributors support the cost✓ Better “transformation in purchase” rate in stores

Cons :✘ Low Margins✘ Non exclusivity of products in store (our products are beside the

concurrents)

Online Sales

Pros :✓ Good experience ✓ Touch more people✓ Easier to retain clients

Cons :✘ Don’t test the product✘ Complicated customer service and service after purchase✘ Expensive advertisement

Amazon’ stores

Pros :✓ Closer to customers (Reduce the delivery time)✓ Experience for customers (client service ,touch the  product,

possibility of exchange)✓ Transportation cost for customers

Cons :✘ Costly (rents, salaries for sellers) ✘ Less visibility

Which Location?

Cities Number of residents

GDP CPI (Consumer Price Index)

Rent per m² per year

Penetration rate* (8%)

New York 8.4 million 1000 Billion 100 13796€ 224 000

Tokyo 13 million 1479 Billion 76.34 8520€ 346 670

Paris 10 million 564 Billion 84.50 7264€ 266 670

Beijing 19 million 166 Billion 51.19 1789€ 506 670

Mumbai 18 million 209 Billion 30.27 6485€ 480 000

Sao Paulo 11 million 388 Billion 54.60 1300€ 293 330

Online stores Physical stores

PricePrice offered on the website (original price)

Original price plus margin (the objective is to sell it online)

Place

On every place, the platform is active.

NYC, Beijing, Tokyo, Mumbai, Paris

PromotionFocused on baby boomers (39-59 years old)

Focused on baby boomers

Recommandations

Amazon’s flagship product on the CE segment should … Be sold in an amazon’s store in Asia and South America (Beijing, Tokyo,

Sao Paulo) and USA (NYC) and France in complementation of the online store.

Generate sufficiently profits to invest on other hardware products Which products to follow ?

Kindle and Fire phone through investment A product to drop out?

The Kindle fire can be deleted to free up some cash or to stop to invest on it

Thank You for reading!Contact:

- Mail: malik.selmani@hotmail.com- Twitter: @MalSelmani- Linkedin: Malik Selmani