MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 1
vsıPad vs KindleBusiness StrategyKoç University Graduate School of BusinessGroup 7Akın GarzanlıHasan Basri AkırmakSemin BalBora BuyrukDağhan Güçlü
MARKET, INDUSTRY AND SUPPLY CHAIN DYNAMICS
STRATEGY, POSITION AND PERFORMANCE
STRATEGIC ISSUES
OPTIONS
RECOMMENDATIONS
AGENDA
MARKET, INDUSTRY AND SUPPLY CHAIN DYNAMICSSTRATEGY, POSITION AND PERFORMANCE
STRATEGIC ISSUES
OPTIONS
RECOMMENDATIONS
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 5
Overview› Founder and CEO Jeff Bezos› Opened the virtual doors in 1995. › Vision is to build a place where people can come to find and
discover anything they might want to buy online. › Products, Enterprises services, market place› Shipments to 200 countries.
› eBook Sales: Market leader with 48 % (iTunes: 12%) in 2010› Devices used for eBooks: Amazon, no 2 with 29% after PC
(46%).› Source: Book Industry Study Group, 2010 and annual reports
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 6
EVOLUTION OF EBOOKSHISTORY & TIMELINE
Xerox Rocket eBook Gemstar Sony iRex Kindle Kindle 2 DX Kindle 2 Intl B&N iPad1997 1998 2000 2006 2006 2007 2009 2009 2009 2010 2010Pros
+modem +easy to use +e-ink +pen Tablet +Surf internet+Text 2 Speech +Big screen
+international download
+touch screen
+long battery life +WiFi + 3G
+Purchase & download +PDF +WiFi + 3G
+preview+1hr free reading
Cons
-heavy
-more expensive
content-only 30 % of bestsellers
-long refresh times 6 inch 6 inch
-heavier-no modem
Price600$ 499$ 269-699$ 349$ 599-699$ 399$ 359$ 489$ 279$ 299$ 499-829$
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 7
INDUSTRY STRUCTURE(eBook) PUBLISHING VALUE CHAIN
Author Agent Publisher Device Manuf. Retailer
Authoring the Content
Book Proposals /
Submitting to Publishers
Publishing, printing
eBook Reader HW
Book Store, Electronic
Store
• Industry consolidation
• Mega authors
• Royalties $5k-$10k in advance + 10%-15% per hardcover
• Usually free to read
• Commission if printed, filmed etc.
• Industry consolidation
• Top 10 address 94 % of the market
• Oligopolistic market, high concentration
Consumer
Stephen King, … Andrew Wylie
Macmillan, Random House,
Amazon
Amazon,Barnes&Noble
Sony, Apple
Amazon, Walmart,Target,Best Buy
• 10% of US population as eBook reader potential
Val
ueP
laye
rs
Hig
hlig
hts
• Highly competitive with many product substitutes
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 8
DYNAMICS IN THE SUPPLY CHAINAMAZON PERSPECTIVE
Content producer
Com
p.
Adv
anta
geC
omp.
D
isad
vant
age
Com
pete
vs.
C
oope
rate
Pot
entia
l Cooperate: Increase commission
Owns content rights
Produces B2B
Bargaining powerWholesaler
Doesn’t own the customer
Co-petition:
Cooperate:
•Increase commission
•Broaden sales channel
•Sell data mining
•Offer enriched books
Compete:
•Bypass them for long tail
Author Publisher Device Manuf. Retailer
Non mega authors not in publishers focus
Big brands
1 device may not fit all consumers
Cooperate: Additional channels for device sales
Cooperate:
Use other devices as additional channels
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 9
INDUSTRY DYNAMICSCAT SCANNER: AMAZON PERSPECTIVE
Entrants
Substitutes
OnlineRetailer
•Tablets
•Smart phones
•PC
•Netbook
•Traditional retail
•Bookstores
•Libraries
Note: Low entry barrier, but not an issue due to network effect.
Publisher eBookManufacturer
Entrants
•Media device manufacturers
Entrants
•Traditional publishers
•eCommerce players
SubstitutesSubstitutes
•Apple, B&N, Sony
•Ebook.com, ebay, local e-commerce (idefix.com.tr)
•Macmillan, Random House, Libri
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 10
eBook Industry DynamicsPower & Profitability
70%15 % of LP 15% List Price30%
** 35 % printing & Paper, marketing 13%, editing 5%, G&A 9%, shipping 7%, depreciation 3: Total: 87%
15.95 $4.79$7.54 Total Rev0.98 $ Net Rev6.56 $ COGS**
2.39$ 0.36$
Author Agent Publisher Device Manuf. Retailer Consumer
Revenue Share among Players
Scenario 1: Traditional Publishing
% R
ev S
hare
Net
Rev
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 11
eBook Industry DynamicsPower & Profitability
** 35 % printing & Paper, marketing 13%, editing 5%, G&A 9%, shipping 7%, depreciation 3: Total: 87%
Author Agent Publisher Device Manuf. Retailer Consumer
Revenue Share among Players
Scenario 2: eBook Publishing
% R
ev S
hare
Net
Rev
25% of Pub Com
%70 of NS15 % of LP 15% List Price30%
7.99 $2.39$2.60 $ Total Rev1.90 $ Net Rev
0.70 COGS**
1.20$ 0.18$
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 12
eBook Industry DynamicsPower & Profitability
Author Agent Publisher Device Manuf. Retailer Consumer
Revenue Share among Players
Scenario 3: eBook Publishing. Amazon as Publisher
% R
ev S
hare
Net
Rev
87 % of Publisher revenues go for costs
70%* 30%
* Give T2S, price 2.99-9.99$, 20% lower than Paper** 35 % printing & Paper, marketing 13%, editing 5%, G&A 9%, shipping 7%, depreciation 3: Total: 87%
7.99 $
2.39 $5.60 $
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 13
Consumer Segmentation› Consumer Demographics
– eBooks bought: Female, over 40+– Devices most frequently used: PC 46%, Kindle 29%, Other 25 % – Most Popular Genres: Howtos/Manuals, General Fiction, Sci Fi,
Biography, Mystery, Detective– Drivers for eBook usage: Portability, carry multiple books, instant
access, large selection, lower cost.› Consumer Characteristics
– Very low customer turnover (high loyalty)(Can’t imagine living without it: 1 yr (7.1%), 2 yr (38.9%)
› Other Potential customers:– Non English natives– Library– Schools (K12, High education)– Professionals (sales force)
Source: See Case exhibits
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 14
CUSTOMER VALUE PROPOSITIONEBOOKS & AMAZON KINDLE
PortabilityCarry Multiple books
instant accesslarge selection
lower costWireless downloadEnlarged font size
DesignBrand nameNote takingHighlighting
Access to Online Newspapers
Lo Med Hi
iPad
KindleSource: Qualitative
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 15
CUSTOMER VALUE PROPOSITIONPUBLISHERS
› eBook Publishing Model increases publisher’s profit by 94%*› Increases exposure to a global market› Simplified Value chain:
› * See Profitability example
RawM Print DistributionWarehousingEditing Marketing
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 16
› The Long tail of the authors addressed› Approaching Amazon as publisher can increase author’s
revenues by up to 466 %*› Independence from Publisher Oligopoly
› * See profitability example
CUSTOMER VALUE PROPOSITIONAUTHORS
MARKET, INDUSTRY AND SUPPLY CHAIN DYNAMICS
STRATEGY, POSITION AND PERFORMANCESTRATEGIC ISSUES
OPTIONS
RECOMMENDATIONS
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 18
EBOOK CONTENT OUTLOOK 2010AMAZON VS APPLE• Amazon• 670.000 titles• 107 of 111 bestsellers• 550.000 titles less than 9.99 $• In general 15 % cheaper
compared to iBookstore and B&N
• iBookstore• 60.000 titles• 12 of 20 bestsellers
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 19
SUSTAINABILITY PROFILEAMAZON EBOOKS
AmazonResources & Skills
Size Time
Efficiency
+ Scale
+ Scope
+ Learning
Bargaining power
- Buyers/supplier
+ Network effect
+ Installed base + Complementary products
+ Experience effects + Trial cost / time + Durability
Absolutepreemption
Relative: Time / Cost penalties
(Legal, Physical, Mental)
+++
-
-
+ +
+
+
+
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 20
COMPETITIVE ADVANTAGEAMAZON VS APPLE› Amazon Strengths
› Number of Titles› Largest number of Publisher
Agreements› Price Maker: Lowest
Consumer Prices› Market dominance
› Network effect› Loyalty of traditional
customers› CRM assets
› Customer understanding› Recommendation engine
› Apple Strengths› B2B publishing captured by iPad› Enriched books› Very big addressable market (even
the smallest % makes a difference)› iPad more innovative, can set the
standard on eBook
MARKET, INDUSTRY AND SUPPLY CHAIN DYNAMICS
STRATEGY, POSITION AND PERFORMANCE
STRATEGIC ISSUESOPTIONS
RECOMMENDATIONS
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 22
Key Strategic Issues1. Increasing Competition from Product Substitutes
› Sony, Barnes and Noble, Ipad entered with better products
› Number of iPad sales in 3 months, exceeded 3 years sales volume of Kindle (iPad competition as eBook reader device)
2. Diverse eBook Device landscape3. Consumers more empowered, have many options
MARKET, INDUSTRY AND SUPPLY CHAIN DYNAMICS
STRATEGY, POSITION AND PERFORMANCE
STRATEGIC ISSUES
OPTIONSRECOMMENDATIONS
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 24
Strategic Options
› New trend is 1 content available in multiple screens (Cloud computing, Tablets, Netbooks, Smart phones)
› Core business is not HW› Core business is CRM, customer info (Data mining, recommendation engine, Reviews)
Author Agent Publisher E Book Reader Man.rer Retailer Consumer
Author Agent Publisher E Book Reader Man.rer Retailer Consumer
Option 1: Further invest on Manufacturer roleLaunch different products focusing on eBook and internet
access to compete with iPad and other tablets such as Kindle Fire)
Option 2: Move focus away from Manufacturer RoleFocus on eBook strategy of 1 content, multiple devices
(Amazon Kindle SW for iPad, Android, PC etc.)
MARKET, INDUSTRY AND SUPPLY CHAIN DYNAMICS
STRATEGY, POSITION AND PERFORMANCE
STRATEGIC ISSUES
OPTIONS
RECOMMENDATIONS
MGMT 906 Business Strategy: iPad vs Kindle | 2012-05-05 | Page 26
Recommendations1. Do not compete in device domain. 2. Embrace substitutes
eBooks for all Screens approach (Kindle apps for PC, iPad etc.)3. Continue as retailer
Customer relationship is the major intangible asset4. Continue as alternative eBook publisher
Reach the long tail authors.5. Expand
With a Host / Complement model1. Create an international eBook market and business model with big local publishers.2. Utilize affordable kindle prices to expand emerging markets (BRICS-T)
Top Related