CASE STUDY 2
1) Do you think Amazon Fire Home Hub as described in Nidhi’s proposal is the right strategy for

Amazon to pursue and why?

After carefully analyzing Nidhi’s proposal we came to conclusion that Nidhi’s proposal have certain limitations: 1. According to Nidhi’s proposal, Amazon will allow the users to choose from a list of ISPs and DTH providers. But as we know in existing model, DTH provider use their own set top box (hardware). So it is very less likely that they will allow their services to be used using Amazon fire hub.(What will they do with their hardware in case they decide to go with Amazon fire hub) 2. Major players who have the capability to provide both DTH and Internet services have potential to provide a product like Amazon fire hub by investing in R&D. So it is very less likely that there will be any alliance with them either in short term or long term. 3. In fact, concept of providing a list seems to be unfeasible. For example: say I am company A providing DTH services to customer X using Amazon fire hub. Now customer X wants to move to company B who also provide DTH service. Now in this case company A is losing its customer to company B. Same thing can happen to company B as well. So in this model as there is more flexibility for the customer to move, higher is the risk for company to lose its customer. This is something which is undesirable by any company.

Business Plan for Amazon Fire Home Hub
1 COMPANY SUMMARY
Amazon.com which is the largest internet company is extending its hands outside of the electronic commerce industry. Its headquarter is in Seattle , Washington, U.S. Amazon.com started as an online bookstore, but soon diversified, selling DVDs, VHSs, CDs, video and MP3 downloads/streaming, software, video games, electronics, apparel, furniture, food, toys, and jewelry. The company also produces consumer electronics—notably, Amazon Kindle e-book readers, Kindle Fire tablets, Fire TV and Fire Phone — and is a major provider of cloud computing services Amazon has separate retail websites for United States, United Kingdom, France, Canada, Germany, Italy, Spain, Australia, Brazil, Japan, China, India and Mexico, with sites for Sri Lanka and South East Asian countries coming soon. Amazon also offers international shipping to certain other countries for some of its products. In 2011, it had professed an intention to launch its websites in Poland, Netherlands, and Sweden, as well. The interesting feature of Amazon lies within the logo of Amazon which says A to Z. It signifies that everything could be bought over Amazon and now it is meaning everything can be done by Amazon. In India Amazon started their services with the name of jungle.com. Recently in US Amazon launched Amazon Fire TV giving a tight competition to Apple TV, ROKU and Chromecast. In Asia Amazon want to launch similar kind of product with the local concept. Hence it is with the name of “Amazon Fire Home Hub”

2 PRODUCT AND SERVICES
After achieving a great success in the electronic commerce industry, Amazon is trying itself in other fields too. It has already become second biggest cloud computing service provider, next to Salesforce.com. Amazon put life to its brand by reinventing itself in the form of Amazon Kindle e-book readers and Kindle Fire tablets. Recently Amazon has also entered the households in the form of television DTH in the name of FIRE TV. It will basically a combination of Apple TV and XBOX. The interesting feature of the FIRE TV is its price which is $99 only. In India Amazon is targeting the niche market which will be willing to pay for the new device. This device will be a combination of Set Top Box and Internet Service Provider. Through Set Top Box it will be working as a normal television with a DTH service provider plugged in. With the help of Internet Service provider a user can subscribe for the movies, games and also play games as a XBOX. It can be marketed in India as Set Top Box and XBOX in the same device.

3 MARKET ANALYSIS SUMMARY
Over the last three years, the direct-to-home (DTH) satellite industry has come on strongly worldwide. It has grown from a niche delivery mechanism into a mainstream business. The spread of subscriptionbased DTH satellite TV promises to enhance choices for many households in developing countries. With the Government throwing open the DTH sector in the country, a handful of players have come up with grandiose plans to enter the market. Given the stiff level of competition this premium services will face from the existing multi-channel cable network, possible entrants need to clearly grasp a few of the winning rules of the game. If the first focus is on the DTH industry there are six to seven key players in the market. The market share of each of the player is depicted in the graph below.

Market Share in the DTH industry
Dish TV

8%2% 12% 13% 15% 20% 30%

Tata Sky Airtel Videocon Sun Direct Big TV DD

Hence penetrating in the market which is already occupied by the big players will be challenging. If more thought is given there are only two players which provide DTH and internet service which are Airtel and Tata. Hence there are good chances that Amazon will face strong competition from these two players. DTH industry is expected to grow by around 12%. Hence there is a good chance to capture the market. Similar market share of companies which provide internet connection in India

1% 1%

Market Share in ISP Industry
1%
2% 1% 5% 6% 9% 60%
BSNL
Reliance MTNL Airtel Hathway YOU Beam Tikona Quadrant Tata Others

2%

12%

Here is the catch. We could see though Tata and Airtel are the major players in DTH connection, they are not strong contender of Internet Service Providers. The ISP industry is expected to grow by 5.75% Says Mihir Shah, vice-president of MPA India: "The larger part of the industry is yet to generate cash flows and there is a need for capitalization to fund the next phase of growth. With the slump in the economy, it is becoming difficult to raise funds at the desired valuations." What makes it UNIQUE?    User can switch the DTH anytime. The device is a combination of set top box and internet router. Can replace XBOX to a certain extent.

DTH Companies in India have widely utilized festive seasons & sporting events as an opportunity to sell their product on the basis of inherent product benefits or because of the sports special features that they have to offer to sports enthusiasts around major sporting events. Competitively placing their products & specially war of words started in industry after 2009, when Dish TV, Tata Sky & Sun Direct were fiercely fighting out each other. Sun Direct brought the service price down to which all had to react by corrective pricing. When Tata Sky tried to down place itself with the help of “Poochne mein kya jata hai” campaign, Dish TV took a dig at their attempts by saying “Poochte ke dekh lo” kind of campaigns.

4 STRATEGY AND IMPLEMENTATION SUMMARY
Target Niche segment who give more importance to quality. Company could tie up with DTH Company to use its hardware component and then configure the box which works with all the DTH companies and internet service providers. Since Dish TV is facing the saturation, it is a better idea to use DTH services of Dish TV and an internet connection of BSNL with a box provided by Amazon. If possible tie up with an existing ISP in India. This reduces the burden to the company. Similar approach could be followed what Telenor followed in the form of Uninor(though not successful) In India most of these activities are at the back seat because of the government laws. The laws will not favour the private ISPs.

5 MANAGEMENT PLAN
Requirement for Amazon Home Hub: Smart TV with HDMI port and USB port.

SCHEMATIC DIAGRAM FOR THE BUSINESS STRATEGY

People who cannot afford smart TV.

It’s not the target customer

People who can afford and already have bought

This customer may have already installed set top box. But we are going to attract this customer by providing them the flexibility of choosing their ISP and DTH provider.

People who are planning to buy smart TV

Ensure that this customer buys Amazon Fire Home Hub with the TV.

This customer are our primary target. We will offer them the flexibility of choosing their ISP and DTH provider. Advantage over here is that these customer have not bought the set top box .So they will happily buy Amazon fire home.

Long term plan will be to collaborate with major television manufacturing companies to place the chip of Amazon Fire Home hub inside the TV only.

6 PRICING STRATEGY
The Industry players are all incurring heavy losses in this fierce race for the subscribers. But they expect the numbers to swell before the revenues come up & comfort them. In present spate of things the subscribers seem to be highly subsidized by the service providers. Service providers are first interested in customer acquisition & market creation than profits at this stage. Early players in the industry know it better & have seen how the industry has changed in the span of six years. Initial prices stood around 5000 Rs in 2006 for STB & service activation, from there it came down to 3500 Rs, 2000 Rs, 1000 Rs & went even below this when the number of players increased in 2010. The Festive prices offer in 2009 & in 2010 brought down the prices at Rs 999for this service with Dish TV & Tata Sky both. All the companies had their price offers between Rs 890 to Rs 1200. Dish TV for example in 2010 was giving STB for Rs 990 + Rs 200 for installation extra, but giving recharge vouchers worth Rs 990 absolutely free, thus

an offer that puts STB for free. Companies have gone even below this to acquire a customer. Videocon was offering STB at Rs 888. Sun Direct came with the most lucrative offer with STB at Rs 890 &offered the lowest base pack at Rs 99 which was most economical pack across board. When they did so, the companies were virtually subsidizing the subscriber for about 2500 Rs, the basic cost of STB & Antennae doled almost for free, in hope of future earnings & revenues. Giving this subsidy is not everyone’s forte. So the stiffness in which industry works; the urge & drive to bring DVR & Value Added Services (VAS) at the same time with subsidies, to make good the losses in serving acquired customer can be understood. A 2010 report entitled-“Asia Pacific Pay TV & Broadband Markets by 2010‟ from Hong Kong based media research agency Media Partners Asia says Indian DTH companies will start earning profits by 2013, when the DTH subscriber’s number will stand around 45 mn. Knowing the industry trends & the financials of these companies, attrition of subscribers can be a big problem. To those who have done so, the ownership of hardware they use has come out as the biggest issue of contention, as obviously the company owns all hardware when they provide it to subscribers at this subsidized price. About 5 to 8 % of DTH subscribers keep looking for cheaper variants of DTH or even switch back to cable & satellite service providers (LCO) in search for cheaper deals, putting DTH players in trouble. LCO‟s had an advantage of under reporting the subscriber numbers by which they comforted themselves to a large extent. With the level playing field introduced between LCO & DTH operators by digital broadcast eventually negating underreporting, the things are expected to improve in favor of DTH operators. Transparency by way of regulation was needed for a long time in this industry & things have started moving in right direction. The pricing of bouquets also heats up the competition. Sun Direct has been an aggressive player on that. It differentiates by offering the best value for money economical pack, while all other shad to struggle hard to come down. Dish TV in this competition brought down its initial bouquet at little above Rs 100, giving a tough fight to LCO‟s. Tata Sky on the other hand had a tough time shedding its prestige & premium image. It came out with a special campaign in answer to this bouquet price war of competitors, where it had to set aside Amir Khan as brand endorser &had to make use of two young boys in Laurel & Hardy attire asking the vendor for the lowest price bouquet in a campaign aptly called “Poochne Mein Kya Jata Hai?”

7 FINANCIAL PLAN
Financial plan will basically be using the revenues that the company is generating into this business. Moreover the main cost will be in manufacturing the hardware component. As it is stated above the cost for the hardware component will be around Rs 5000. Since every year 2 million new people are adding towards DTH service. Targeting a 30% consumer base of these 2 million. Revenue expected first year = .3*5000*2000000 = Rs 3 billion As the research details shows the manufacturing cost of this hardware including the research and details is 55% of the selling price. Since this will be initial year hence Amazon need to spend heavily on marketing and advertisement. Keeping a target of 30% of the revenue as the marketing cost. 5 to 8% is reserved for tie-ups if required and Indian law fees as it will be new concept. Hardware manufacturing cost = 55% of 3 billion = Rs 1.65 billion

Marketing expense = 30% of 3 billion = Rs 0.9 billion Miscellaneous expenses = 8% of 3 billion = Rs 0.24 billion Expected profit = Rs 210 million This profit will definitely increase as there are many one-time costs which will be removed after two to three years. The expected profit figure could reach a figure a billion once it penetrates into local market and people start trusting the brand and technology.

8 APPENDIX http://en.wikipedia.org/wiki/Amazon.com http://readwrite.com/2014/04/02/amazon-fire-tv-meet-amazons-plan-to-take-over-your-television http://mashable.com/2014/04/03/amazon-fire-tv-competitors/ http://www.businessinsider.com/amazon-fire-tv-competition-chart-2014-4?IR=T http://timesofindia.indiatimes.com/tech/more-gadgets/First-impressions-Amazon-FireTV/articleshow/33223210.cms http://data.gov.in/catalog/internet-subscriber-base-market-share-top-10isps#web_catalog_tabs_block_10 http://www.nextbigwhat.com/india-broadband-connections-may-2013-297/ http://www.business-standard.com/article/companies/10-years-of-dth-in-india-the-other-electronicsrevolution-114010100022_1.html http://www.thehindubusinessline.com/industry-and-economy/info-tech/indian-dth-market-revenue-tocross-5-bn-by-2020-study/article4620219.ece http://www.academia.edu/4158522/Competitive_Strategies_in_Indian_DTH_Industry