Team Project: Strategic Product Review for Kindle Fire HDX
GB580: Strategic Management
Dr. Ray Kalinski
July 15, 2014

Table of Contents

Abstract……………………………………………………………………………………. 3
Introduction………………………………………………………………………… …….. 4
Strategy Canvas …….……………………………………………….................................. 5
Buyer Utility Map………….……………………………………………………………… 6
Blocks to Utility…………………………………………………………………………… 7
Removal of Utility…………………………………………………………………………. 9
Three Tiers of Non-Customers for Kindle ………………………………………………... 11
References…………………………………………………………………………………. 14
Appendix A…………………………………………………………………………………17
Appendix B…………………………………………………………………………………18

Abstract

In 2004, Amazon decided to enter the market for the e-reader tablet devices with the creation of the Kindle Fire HDX. The initial Kindle Fire HDX proved to be successful as it became the gateway to gaining access to books, articles, and newspapers without having to carry them around. Eventually, the Kindle Fire HDX electronic access started outselling the printed versions of novels, which lead to a revolution of technology. More customers started to become comfortable with online reading and reviewing of their daily newspaper rather than waiting on the delivery person. Other companies such as Apple with the (iPad) and Samsung with the (Galaxy) entered into the tablet competition in 2009. This strategic analysis will be conducted by reviewing the strategy canvas for each of the three companies, the buyer utility map, blocks to utility, removing blocks of utility, and three tiers of non-customers for the Kindle Fire HDX.

Keywords: Kindle Fire, Strategic Management, Utility Map, Tiers of Non-Customers

Introduction

Amazon.com was incorporated in 1996 by Jeff Bezos, the current Chief Executive Officer. Amazon.com has become well known as a company that enables sellers to sell their products on its website as well as their own branded websites and to fulfill orders through them. Amazon.com also has programs that allow authors, musicians, filmmakers, application developers, and others to publish and sell content (Amazon, 2013). Amazon introduced the Kindle Fire HDX in 2007 with an Android operating system, access to their own media and e-commerce services and low pricing for the Kindle device. Features such as the 7 inch screen helped the demand of the product. Customers of the Kindle Fire HDX are using their product daily for other functions such as surfing the web, taking pictures, and checking email. This sparked a demand for the Kindle Fire HDX tablet and started a war between themselves, Apple, and Samsung.
Amazon is currently one of the leading online retailers in the world as they continue to offer the Kindle Fire HDX at affordable prices. Bezos believes that the Kindle Fire HDX customers would be more inclined to buy an affordably priced tablet rather than the more expensive competition (Amazon, 2013). Kindle Fire HDX has improved its connectivity, battery life and operating system over the years and this has appealed to new customers. Most of its competition comes from Apple and Samsung with their versions of electronic devices. However, Amazon still remains a global icon as they deliver products and services worldwide to customers looking to get a device that has good functionality and price. Amazon continues to service consumers through its retail website, and focus on selection, price, and convenience as they have one of the least expensive products on the market.

Strategy Canvas A strategy canvas helps the firm by outlining where its competition may be investing while giving insight into consumer preferences (Kim & Mauborgne, 2005). With a changing landscape within the e-Reader and tablet consumer market, producers must look to how competitors are positioning themselves within this industry and look for competitive advantages to enhance their sales. In 2013, a recent study of tablet sales were expected to reach $53.6 billion globally (PR, 2013). The market for tablets is expanding yearly and each of the products will continue to improve features and benefits in order to increase opportunities to appeal to the non-customer base. This will allow the strategy canvas analysis to review how each company’s customers view their product offering, customer service and overall satisfaction from product delivery.
Using the Kindle Fire HDX as the primary focus of the tablet market research, we will be analyzing two competitors, Apple’s iPad and the Samsung Galaxy Tab S, in order to gauge the Kindle Fire HDX success and possible direction for the future of Amazon. The main points of Kindle Fire HDX that will be used to compare the products during the analysis includes customer productivity, simplicity, convenience, risk, fun and image, environmental friendliness and price. In the case of the Kindle Fire HDX, the six principal factors that will be considered within this analysis are price, Gigs/RAM, screen resolution, weight, battery life and compatibility with other applications. While these factors can be customer based preferences, such as which operating system or screen size, we can make a true strategy canvas in the respect of the Kindle in comparison to the iPad and Samsung Galaxy. Therefore, for the sake of the presentation we will consider the base models for all products in the strategy canvas overview of each product and give ratings based on their features and benefits. Figure 1 shown in Appendix A shows the Strategy Canvas.
Buyer Utility Map A buyer utility map is a tool designed help companies focus on delivering a great product to customers. The buyer utility map outlines all the levers companies can pull to deliver exceptional utility to buyers as well as the various experiences buyers can have with a product or service (Kim & Mauborgne, 2005, p. 121). In order to accomplish this feat, the buyer’s utility map is broken into different stages throughout the product’s lifecycle to identify the full range of utility space available. There are six stages within the buyer experience cycle to include purchase, delivery, use, supplements, maintenance, and disposal. Across the stages of the buyer experience are the utility levers. The six utility levers which are customer productivity, simplicity, convenience, risk, fun and image, and environmental friendliness. To test for exceptional utility, companies will check whether their product or service has removed the greatest blocks of utility across the entire buyer experience for customers and noncustomers (Kim & Mauborgne, 2005, p. 122). If successful, the product offering will be considered a Blue Ocean offering as if would have removed all blocks of utility. The Kindle Fire HDX is the newest product added to the Kindle line of tablets. As with most products consumers make tablet purchases for several different reasons ranging from reading their favorite novels to connecting to an online class and beyond. When completing research on which tablet or e-reader to purchase factors that are generally important to the consumer include cost, battery life, weight, software, screen-size and resolution, storage capacity, operating system, and included features such as camera, video recording capabilities, and additional accessories. Figure 2 shown in Appendix B shows the Buyer Utility Map for the Kindle Fire HDX and how these factors relate to the utility levers and buyer experience cycle.
Blocks of Utility
Blocks to utility are the obstacles that a company will face which stand in the way of the company maintaining its current customers, or converting noncustomers into customers. Amazon was able to determine that the reason customers decided to return their Kindle tablets were similar and they fell into specific categories. The most common reasons for return included privacy issues, browser speed, user customization, and lack of memory (Greenburg, 2011). If Amazon can successfully remove these blocks to utility, the company will be able to regain its share in the market. Most importantly, removal of these blocks of utility will allow the Kindle Fire HDX to continue to grow its customer base and increase sales.
The tablet computer market is currently saturated with a number of players with options to serve customers in every walk of life. Manufacturers such as Apple and Samsung are able to build tablets that have better reliability and are more user-friendly to meet customers’ needs starting at around $50.00 in overhead. Players in this market need to be very efficient in the area of environmental friendliness if they want to survive and compete. Kindle Fire HDX has been an environmentally friendly product that continues to offer their e-reader abilities to customers and create tablets that allows the customer to control features such as font, background lighting, and volume. Kindle Fire HDX product has been simplistic as each customers has the ability to choose from optional product packages that include larger screen size, better resolution, memory space and other options that can provide the customer a more personalize feel after the purchase.
Worldwide tablet plus 2-in-1 shipments fell to 50.4 million units in the first calendar quarter of 2014 (1Q14) according to preliminary data from the International Data Corporation (IDC) Worldwide Quarterly Tablet Tracker (Businesswire.com, 2014). The total represents a progressive decline of -35.7% from the high-volume holiday quarter and just 3.9% growth over the same period a year ago (Businesswire.com, 2014). The decline has impacted the Kindle Fire HDX and other products in the industry convenience and risk factors, regardless of operating systems and screen sizes. The Kindle Fire HDX is depending on the additional offerings on display, operating system, and memory options to provide customers with the convenience factors. Warranties and additional battery life will offer the convenience of using the device for longer periods of time. These developments suggest an even more perplexing year ahead for the market as each company works to establish a demand for their products.
With tablet sales down, many of the top manufactures are looking for ways to hold on to their current share of the market, as the risk of the Kindle Fire HDX increases. In 1Q14, amazon shipped 1 million tablets (Hodgkins, 2014). This total represents 1.9% of the 50 plus million tablets that were shipped during this time period. Amazon held a 3.7% market share in 1Q13. That figure represents a decrease of -47.1% in Year-over-Year Growth (Hodgkins, 2014). The offering of the Kindle Fire HDX gives Amazon a model that can offer a faster processor, increased screen resolution and better operating system to decrease the risk associated with the purchase.
Amazon has made an effort and conducted an investigation to see how to recapture their share of the market and decrease the risk of purchasing there products. The features of the Kindle Fire HDX helps with the fun and image of the product. Features such as weight of the device, options of color choices and screen sizes gives the tablet better personality and appeal. Keeping up with the needs and wants of the market helps with the environmental friendliness of the product. Amazon keeps customers from leaving the company and going to their competitors by offering good service. Services include online purchasing and shipping/receiving options. Kindle Fire HDX also has a solar powered option called the Gomadic Sun Volt High Output Solar Station (Amazon, 2013). The Gomadic Sun Volt High Output Solar Station allows the Kindle Fire HDX to be charged by the sunlight, which can be useful when looking for environmentally friendly products.
Removal Blocks of Utility
The Kindle Fire HDX has great competition within the e-reader market. Understanding the blocks of utility will help overcome some of the factors that affect the decisions of customers and noncustomers. Correct actions from the results of research and decision making will help mitigate their completion and form some competitive advantages within the industry. Any factor that drives consumers away from Amazon’s Kindle Fire HDX are considered to be blocks to utility. Removal of the blocks of utility will help the Kindle Fire HDX with increasing their opportunities for a greater market share in the future.
The first block to utility that Amazon faces with the Kindle Fire tablet is user customization. Currently, Amazon offers the least amount of user applications available to download, compared to similar tablets in the market. Android is currently the leader in the industry, followed by Apple’s App Store. It is believed that users, who want to download a number of apps to their tablet, would choose a different tablet option other than the Kindle Fire HDX. Most of the Kindle Fire HDX users purchase their tablet because of the reading application. Amazon believes that this is their best option because it makes their devices less vulnerable to malware and other software so customers will be willing to download on the Kindle Fire HDX. Consumers are looking for convenience and portability on their tablets. Using the facts that customers have to “Jail-braking”, or unlocking these devices so that they can customize their iPad for their own experiences as a competitive advantage. Allowing customers to choose their own content on their tablets will remove this block to utility.
The next block to utility that Amazon faces with the Kindle Fire tablet is browser speed. Amazon is currently using the Silk Browser. The Silk browser is slow compared to the competitors in the market. This browser was not designed for heavy internet users, but is adequate for the occasional user that needs to do a quick search on the web. Amazon can address this issue by concentrating more on the web browser to make in an integral part of user experience opposed to making it seem like an afterthought. This will change consumer’s perception of the Kindle Fire and remove this block to utility.
Another block of utility is how the Kindle Fire compares to other tablets in the area of security. Amazon’s Silk browser leaves customers with the feeling that they are being monitored. Customers need to feel that their information, regardless of what it is, will be protected at all times. There is also a risk of performance with issues such as memory (Smith, 2012). In order to operate the device users have to enter their personal credit or debit card information via their Amazon.com account. This can cause a security issue if a Kindle user leaves their tablet unattended. Identity theft occurs more and more everyday so it is up to consumers to make the right choices based off of the knowledge that they have to make the proper decision. Having the ability to lock the Kindle with password protection is smart and reliable option for customers. Customers also have the ability to delete cookies through the browsing history and set up a new password if they feel the need to do so. The terms and conditions for the use of Amazon's Silk browser make it clear that the company is entitled to retain your tablet's unique ID, plus the URLs of pages you have visited, for up to 30 days (Waugh, 2011). Recommendations would be to have an added security feature that allows for every application, website, personal pages etc. could bring some customers back to the Fire, thus removing the block to utility.
The last block to utility that Amazon faced with the Kindle Fire tablet was a lack of memory. Many tablet owners use their devices to store movies, music, books and other content pertinent to their everyday lives. This requires a ton of storage space so that these items can be held and easily accessed at the customer’s discretion. Previously, the Kindle Fire was only available in an 8 gigabyte option. This was not large enough for customers to hold the amount of data that they would want to carry on their tablet. Amazon limited themselves to the customers that could feasibly purchase their tablet due to that constraint. Amazon has addressed this issue by offering the Fire with a 16, 32 and 64 gigabyte option. These new options give consumers the flexibility that they need to hold any amount of data that they want to customize their own experience. Amazon has also introduced cloud storage to allow consumers to “store” their data on Amazon servers instead of having to store in on their tablet’s hard drive. These efforts have removed this block to utility.
Three Tiers of Non-Customers
Companies are constantly trying to build their customer base to compete for a share of the market but rarely do companies acknowledge the non-customer, which is untapped territory for many businesses. By looking outside a company and its intended market, they will be able to create a larger overall market share and increased revenue due to the increased demand. The Kindle Fire HDX competes with both the iPad and Samsung Galaxy Tab S in the tablet market. The market for these devises is extremely large but analyzing the non-customer may help uncover undeveloped areas within the market. The non-customer may be broken down into three different groups including: First-Tier Noncustomers, Second-Tier Noncustomers, and Third-Tier Noncustomers. The three-tiers of non-customers all have the ability to be changed into future customers.
The first-tier noncustomer is usually the easiest of the three to spot. As the text book states, “they sit on the edge of the market. These are buyers who minimally purchase an industry’s offerings out of necessity but are mentally noncustomers of the industry” (Kim & Mauborgne, p. 103). When dealing with technology in general or in this case the Kindle Fire HDX, the first-tier customer would be a customer that is price conscious. These first-tier customers are looking for a tablet but one that has all the functions they need at the best price possible. The cost of a Kindle ranges from $200-230, while the iPad costs $699-899 and the Samsung Galaxy ranges between $299-599. These first-tier noncustomers are perfect targets for Amazon and the Kindle Fire HDX. Amazon should actively pursue this large first-tier non customer base through aggressive advertising and marketing techniques. This will help Amazon differentiate their product from the iPad and Samsung Galaxy Tab.
The second-tier noncustomers completely reject the industry and product a company is looking to market. In the textbook it says, “they are refusing noncustomers, people who either do not use or cannot afford to use the current market offerings because they find the offerings unacceptable or beyond their means” (Kim & Mauborgne, p. 107). Individuals may look at the purchase of a tablet as a waste of money considering they already have a desktop or laptop for their IT needs. The noncustomer this may affect may be someone that has never traditionally used a tablet before and thinks the technology is unnecessary. Tablets are somewhat newer technologies that many people view as luxuries. To uncover this market of noncustomers Amazon and the Kindle Fire HDX need to create a technology that sets it apart from just a regular computer. These customers need a distinct feature that makes a purchase absolutely necessary. An example of this would be the iPod by Apple, which created a product that stood alone from others and offered customers the ability to listen to music on the go. Amazon needs to find a software or hardware feature that sets the Kindle Fire HDX apart from desktops and laptops in order to uncover this noncustomer market.
The third-tier of noncustomers are those that companies and industries feel have no relation to their product and have never explored the possibility of pursuing these customers. As Kim & Mauborgne states, “that’s because their needs and the business opportunities associated with them have somehow always been assumed to belong to other markets” (Kim & Mauborgne). An example of this may be senior citizens and individuals who are not educated in technology. Amazon may reach out to this noncustomer base through marketing campaigns geared towards educating senior citizens and technology illiterate individuals. In an article by Caroline Winter she points out that 41% of senior citizens do not use the internet (Winters, 2014). This untapped market could be blue ocean territory for a company like Amazon and the Kindle Fire HDX if they are able to find a way to market and develop their technology to adapt to the needs of senior citizens.
If customers focus on the three-tiers of noncustomers they may be able to open a market in their industry that has never been developed. The use of blue ocean strategies, to uncover an untapped customer base, is extremely important for companies like Amazon and the Kindle Fire HDX who are competing in a very saturated IT market. Companies need to continually differentiate themselves in the tablet and technology field in order to stay competitive in a constantly evolving marketplace. Those companies that are able to stand out from the rest will succeed in identifying not only their core market but, more importantly, their noncustomers.

References
Amazon (2013) Gomadic Sun Volt High Output Port. Retrieved from http://www.gomadic.com/amazon-kindle---dx---touch---keyboard---wifi---3g-sunvolt.html
Businesswire.com. (2014, May 1). Worldwide Tablet Shipments Miss Targets as First Quarter Experiences Single-Digit Growth, According to IDC. Worldwide Tablet Shipments Miss Targets as First Quarter Experiences Single-Digit Growth, According to IDC. Retrieved July 13, 2014, from http://www.businesswire.com/news/home/20140501005352/en/Worldwide-Tablet-Shipments-Targets-Quarter-Experiences-Single-Digit#.U8Lp-fldX0p
Cipriani, J. (2014). Review: Samsung Galaxy S5. Fortune.Com, 1.
Greenburg, J. (2011, December 14). Kindle Fire Complaints: Top 11 Problems With Amazon's Tablet. International Business Times. Retrieved July 13, 2014, from http://www.ibtimes.com/kindle-fire-complaints-top-11-problems-amazons-tablet-383182
Hodgkins, K. (2014, May 1). Apple Maintains Narrowing Lead in Tablet Market Share. - Mac Rumors. Retrieved July 13, 2014, from http://www.macrumors.com/2014/05/01/apple-tablet-market-share-1q14/
Ion, F. (2014). 7-inch tablet showdown: Kindle Fire HDX vs. Nexus 7. PC World, 32(1), 84.
International Business, T. (2013) iPad 5 likely to run on 64-Bit. International Business Times. Q4 2013
Kim, W., & Mauborgne, R. (2005). Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant. Harvard Business School Publishing. Boston, Massachusetts.
"Kindle Fire." Amazon.com. (Nov. 14, 2011) http://www.amazon.com/dp/B0051VVOB2/?tag=googhydr-20&hvadid=14069380075&ref=pd_sl_9f3d4b8qyl_b
PR, N. (2014, May 15). Global Tablet Market Report 2013-2018. PR Newswire US.
Maisto, M. (2014). Samsung Unveils Galaxy S5, Gear Fit, Galaxy Gear 2, Gear 2 Neo at MWC. Eweek, 11.
McCarthy, Caroline. "Amazon debuts Kindle e-book reader." CNet News. Nov. 19, 2007. (Nov. 14, 2011) http://news.cnet.com/8301-10784_3-9819942-7.html
"Nook." Barnes & Noble.com. (Nov. 14, 2011) http://www.barnesandnoble.com/p/nook- color-barnes-noble/1100437663
Smith, M. (2012). The Kindle Fires Big Security Problem. USA today. Retrieved on July 10, 2014 from Harvard Business Course Pack.
Topolsky, Joshua. "Kindle Fire review: Changing the landscape of the tablet game." Washington Post. Nov. 14, 2011. (Nov. 15, 2011) http://www.washingtonpost.com/business/technology/kindle-fire-review-changing-the-landscape-of-the-tablet-game/2011/11/11/gIQAp4W7JN_story.html
Winters, K. (April 10th, 2014). America's Offline Seniors: 41% Don't Use the Internet. Retrieved from http://www.businessweek.com/articles/2014-04-10/americas-offline-seniors-41-percent-dont-use-the-internet

Appendix A: Competitive Alternative Map

# | Competitive Alternative | Kindle Fire HDX | iPad | Samsung | 1 | Price | 9 | 2 | 7 | 2 | Gigs/RAM | 6 | 8 | 8 | 3 | Screen Resolution | 8 | 7 | 9 | 4 | Weight | 7 | 7 | 9 | 5 | Battery Life | 7 | 6 | 7 | 6 | Compatibility | 8 | 3 | 8 |

Appendix B: Buyer Utility Map | Buyer Experience | | | | | | Utilities | Purchase | Delivery | Use | Supplements | Maintenance | Disposal | Customer Productivity | Screen size options 7” or 8.9”
Wi-Fi only, WIFI plus 4G LTE on either the AT&T or Verizon network Bluetooth
Available in 16, 32, or 64GB | | Web-browsing, e-mail and calendar support
Over 100,000 apps and games
Social media site connections
1080p, with 323 ppi, preferred for movie watching
2.2GHz with quad-core Snapdragon 800
2GB of RAM
Over 8 hours of battery life | Guide book
Cases
Wireless keyboard
Micro USB cables
Replacement, travel, international chargers
Accelerated charging adaptors | On-device tech support
24/7 365 days access to Amazon expert | | Simplicity | | Cash-and-carry
Site-to-store
Site-to-home or other location | | | | Amazon covers all costs associated with shipping and recycling. | Convenience | Available at various locations such Best Buy, Staples, and Amazon.com | | | | | Recycling program specifically for Kindle devices and batteries in accordance with local laws and regulations. | Risk | Base price of under $200 before add-ons and upgrades | | | | 2 year Protection Plan
Accident Coverage | | Fun and Image | | | 7' weight 10.69 ounces 8.9' weight 13.19 to 13.55 ounces depending on connection type | HD photo app
One touch share options
Import and edit options
Front-facing HD camera
Second screen feature Android compatibility | Various skins and cases to change the appearance of and protect the tablet. | | Environ. friendliness | | | | | | Implementation of environmental and energy initiatives through the Kaizen Program. Usage of corrugated containers |