You need to say something rather than just launching into it.
Option 1: Cost Leadership

With a long term strategy based on the ability to be cost leaders in the online retail market, Amazon Inc. strives to ensure all corporate level decisions adhere to this goal. REFERENCE Prices on Amazon.com are around the lowest in terms of products sold and the background services that make it possible for third party traders to make use of the marketplace. This strategy employed has made it possible for Amazon to recognise significant increases in revenue; however they have recently begun to notice changes in their profit margin. A loss of $0.1 billion was recorded last year, REFERENCE which was attributed to modification made to their distribution centres and the underwriting of costs of production for the Kindle Fire.

There is a need to for Amazon to increase their profit while striving to maintain the balance between low costs in order to not lose their customers. In order to achieve this they should look to increasing the costs associated with Third Party traders. REFERENCE These fees include: * Subscription Fees * Transaction Fees * Advertising Fees * Affiliate Fees
There are risks attached to pursuing this proposed strategy as it involves increasing prices which always serves as a deterrent to customers. Some of which include government regulations, new entrants and pre-existing customers confidence. * Government Regulation: any unfair increases in subscription fees may bring forth the unwarranted attention of regulatory bodies who seek to ensure that fair trade occurs. This could result in changes to regulatory rules which may restrict trade. See Appendix 5 for PESTLE analysis. * New Entrantssee appendix?? 5 forces any shift in prices may result in Amazon’s customer (Third Party) “jumping ship” to existing organisations like EBay; however, there are threats of new entrants such as Tesco & Wal-Mart who are seeking to launch their own online marketplace. These potential threats already have a reputation for cost leaders in their respective countries and as such may prove a credible threat to the organisation. This loss of customers (Third-party) who both act as suppliers to public consumers and revenue generators can cause severe ramifications to future revenue earnings.
In order to combat these mitigate these risks, we propose a slight increase in the associated fees. Currently your fees are below those of your nearest competitor; STATE THE NUMBERS also you have your own payment resolution system unlike EBay who are signed up with PayPal. As part of the terms of their agreement with PayPal they are required to pay a portion of their fees to PayPal. As such, a slight increase in your fees may not cease as much of a problem with your Third-party traders.

Option 2: App Store

As one of the fastest growing industries ever known to man, the App Market is revolutionising the way in which mobile phone and tablets producing companies are generating income. There are millions of users worldwide on daily basis purchase and use Apps; therefore it is economically viable for Amazon Inc. to follow in the footsteps of Apple Inc. and Google Inc. to invest in the App market and develop their very own marketplace. This makes it easy for publishers to distribute the apps developed to the users of the Amazon family of tabs. With minimal overheads necessary, the app market is predicted to generate up $25 billion in 2013. This is 200% increase in revenue generated, up from $8 billion earned in 2012. Growth of this magnitude is still expected as more and more devices capable of supporting app are being generated.

The Amazon App store is one of the newest marketplaces for publishers to release Apps and for customers to buy Apps, coming years after Apple’s pioneering App Store. Currently the Kindle Fire is the only Amazon device capable of utilising this marketplace. However, as the device is still in the early stages of its release and has yet to reach it market potential in terms of sales and general use, there is still room available for this venture to grow. According to Distimo, App downloads have generated in the first quarter of 2013, revenues of $2.2 billion, which accounts for 13.4billion downloads worldwide. As such it is imperative Amazon Inc. takes further advantage of this fast growing industry.

In order to maximize the upside potential of the App industry, Amazon Inc. needs to put in place the following initiatives which can be advantageous: * Free App of the Day: amazon on a daily basis provides to the pubic an app for free. This is a tactic currently not used by the major competitor and could serve to draw more customers to the Kindle Family of devices * Publishing Fees: As more than 80% of all Android powered tablets are of the Kindle Family, especially the Kindle Fire, it will be easy for Amazon to gain competitive advantage over Kindle. By changing the fee percentage split between publishers and Amazon from 30:70 to 45:55, it may increase the likelihood of publisher releasing apps on the Kindle. Especially considering Amazon right now is one of the cheapest market place available, with the average prices being half the listings on Google Play and a third on Apple App store. * Global Exposure: Amazon has recently increased the number of countries the App Store is currently available to 200, which is more than the countries that Apple Store and Google Play are accessible from.

However there are some disadvantages that create a competitive disadvantage for Amazon, these include: * Loss of Publisher Confidence: in offering daily free app, Amazon could find itself in a position where publishers are reluctant to release app on their App Store as they are likely to lose out on potential earnings. See Appendix 4 for Amazon’s weaknesses * Security: for consumers to be able to download the Amazon app store on their android devices, they are required to turn off a security feature which protects the device from malware on unknown sources. This compromises the user and as such creates a position where users are deterred from using the app store for fear of corrupting their devices.
This was a better section than the first but still no use of appendices??
Option 3: Kindle Fire

Under the tutelage of Jeff Bezos, REFERENCE Amazon felt a need to revolutionise the way in which books were being read with the release of the initial Kindle. He envisioned that with the current trend in consumer behaviour, always on the go, that there was need to make a “500 year old technology”, books fit in with the consumer behaviour. As such Amazon set about creating the eBook reader, known as the Kindle. Within a year of it release, the figures showed that the Kindle had become the “No. 1 bestselling product. It's the No. 1 most-wished-for product”; amongst customers. This success has resulted in the release of follow up editions to the Kindle, with Kindle XD, Kindle 3G and the Kindle Fire. The Kindle Fire was released to compete with the other tablets by increasing the functionality of the product, moving on from just an e-Reader, to being able to watch movies and also allow access to amazon.com, through the 1-Click button.

Currently, the Kindle Family accounts for 89% of all Android tablets in the US, outside the US, no one country outside of the UK has more than 5% of total market share. Of which the Kindle Fire is responsible for 33%, this however is expected to grow as the Kindle Fire’s capability is increased to function fully in other regions.

In order to maximise the Kindle potential for global domination of the eBook industry, Amazon will need to ensure that they maximise their competitive advantage in the industry. In order to do this, it is imperative that they go along the path set by Apple with iTunes revolutionary domination of the music industry. There was a concerted effort by Apple to dictate the way in which music media was consumed by users, as such the created a distribution centre where they sold music to the public. They were able to dictate to the music industry companies the average price per songs that consumers will be willing to pay for. They decided on an average of 99p per song, with new premium song releases selling for a maximum of£1.29. As such ensuring that customers were able to state what they felt was a valid price for songs.

This method is what Amazon aims to achieve, Amazon believes that as the Kindle grows in popularity and as more books are made available on the Kindle, customers will be able to dictate a fair price for books. A price of £9.99 is said to be the average customers will be willing to pay for each book. By changing the mind-set of customers, this forces publishing companies and houses to lower their release prices. This takes the power away from publishers and empowers the customer.

Also, a strategy that can be employed by Amazon could be the exclusive release of books form established authors on the Kindle. This has already been tested with the release of a Stephen King novella solely on the Kindle. Currently, authors are offered a book deal by publishing houses that splits earnings from book sales 80:20 in favour of the publishers. We propose that you target established authors akin to J.K Rowling, John Grisham etc. who already have an audience, offering them the opportunity to release their books exclusively on the Kindle. In order to ensure their patronage, we suggest Amazon offers a split of profits in the ratio 70:30 in favour of the author. Amazon’s 30% stake will be to cover the distribution cost involved in the adaptation of the novels on to eBook format and also the cost of translation. As there are no costs deriving from printing and shipping, amazon should be willing to offer up deal that is beneficial to authors

Recommendation

Looking at all the strategies proposed we feel that all are necessary in order to ensure Amazon’s continued growth as one of the foremost organisations globally. The strategy involving Cost Leadership is synonymous with their long term goals and as such, should be reviewed so as to further tie in with their goals.

The other two options proposed, however we feel requires serious consideration as they are necessary to ensure Amazon is at the forefront of the eReader/Tablet industry and the App Market. The two strategies with a successful implementation are interlinked, as increased sales of the Kindle will increase the number of customer’s looking to download more Apps from Amazon’s App Store. This market can be termed as a Red Ocean, where the organisations involved are well established with intense rivalry, to release newer products (tablets) and further investments in the App market sector is being made in order to maximise profitability and crease market share through increased downloads and physical sales of the Kindle. See Appendix 7 for Red Ocean Explanation. Even in these two options you can see elements of Amazon employing Cost Leadership, with the relatively low prices of their tablets and Apps. Figure 3 below shows the price of the Kindle in comparison with its nearest competitors.

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Call below appendices and refer to them in the main report
APPENDICES: Evaluation Techniques & Group Reflective Assessment
Appendix 1: Group Reflective Assessment

Appendix 2: Porter’s Generic Strategies
This model can be used to evaluate each of the proposed strategic options, as each option can be said to fall under each of the strategies in the model * Cost Leadership: products and services offered by Amazon are at low costs, and the leadership mantra put forward by Jeff Bezos involves reducing costs across the value chain. This strategy has been employed by Amazon in low cost tablets and Apps, which has resulted in increasing market share which in turn leads to increased profitability. Cost leadership in this case will also include Amazon investing its profits in future product to facilitate the need to reduce cost of production for their new ventures. * Differentiation Leadership: by offering a product geared to the specific market, books, Amazon are able to offer a product that separates them from their competitors. They have achieved Differentiation Leadership continuously seeking to improve the Kindle through increased investments in R&D to come up with trend setting features and functionality. Also, effective marketing and promotion of the Kindle has resulted in increased market share. * Focus Leadership: here Amazon should seek to target the publishing industry, with expertise already in the sale of books and as the leading player in the eBook industry; they could veer their focus to encapsulate the publishing of book on the Kindle. Akin to Stephen King’s Kindle release, they should emphasise targeting established authors to convince them of the benefits of releasing books on the Kindle. As the readers begin to switch away from purchasing physical editions of books and are moving to eReader, it could prove to be extremely profitable for Amazon if they were able to side line publishing houses.

Appendix 3: SAF Evaluation Approach * Suitability: further development of the Kindle Fire and the Appstore, fits into the general state of play of Amazon long term strategy. This option focuses on product development and market development, as increased knowledge of customer needs and seeking new opportunities in existing market segments ensures that Amazon exploits and improves on its core competencies, while builds on market strengths * Acceptability: the risk attached to this, is limited as Amazon is market leader. The attached risks are limited as increased sales of the Kindle and increase in the global function capability ensures that there will be an increase in the sale of Apps. Also with the proposed strategy of signing up authors, by targeting established authors you are convincing the authors to take control of their own work. The proposed split in earning is a significant increase in their current earning. By recruiting established authors the element of control is wrestled away from the publishing houses and transferred to the authors and also Amazon as a result of the ever increasing number of books being made available and sold on the Kinds. * Feasibility: with Amazon reinvesting profits derived from other facets of the organisation into product and market development, the feasibility is not brought in to question. This is a part of the differentiation leadership employed by Amazon. The relevant level of expertise already exists in the kindle and app development; however, they will need to understand the full nature of the publishing industry if they are to fully put that strategic option into play.

Appendix 4: SWOT Analysis

STRENGTHS * Established reputation as a cost leader * Market leader in e-tail industry * Encourages return shoppers * Bestselling e-reader in the market * Bespoke electronic payment system * Efficiency in your distribution chains and logistics | WEAKNESSES * Late entry into multifunctional tablets market * Small market share in the app markets * Sale at zero margins * Only an online presence | OPPORTUNITIES * Move into the publishing industry * Improvements on Kindle Fire to compete with iPad and Samsung Note hardware upgrade * Creating a Kindle program that can be used on other devices – PC, MacBook, iPad * Open more online store in other countries * Possible physical presence | THREATS * Established reputation and size of publishing houses * Online security leading to loss of consumer confidence * Regional low cost online retailers * Low cost e-readers- Kobo, Archos |

Appendix 5: PESTLE Analysis

POLITICAL * tighter regulations in recent years to reign in unfair trading practices

SOCIAL * changes in lifestyle patterns leading to an increase use of e-tail platforms * consumer confidence in security on online platforms such as App Market places
TECHNOLOGY
* development of the Kindle and the further innovation to make improvement to create the Kindle Fire and the Amazon Phone (Currently in the developmental phase) * building of the Amazon App Store to compete with Apple Appstore, Google Play

ENVIRONMENTAL * by attempting to phase out the use of books in their current physical paper form and switching to electronic books, they are indirectly impacting on the environment with a potential large decrease in number of trees cut down to make paper.

Appendix 6: Ansoff’s Matrix

Market Penetration: * Pricing strategy to increase existing Market share * Increasing and expanding the Amazon App Store capabilities & presence in existing and new countriesRisk = Small | Market Development * Implementing the Kindle in other devicesRisk = Medium | Product Development * Next generation development of the Kindle famil of tablets; Kindle Fire 3, Amazon phoneRisk = Medium | Diversification * Foray in to the world of publishing * Amazon phone, no experience however capable of penetrating market due to success of Kindle and Kindle FireRisk = High |

Appendix 7: Red Ocean Strategy

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