The Kindle Fire: Amazon's Go To Market Strategy (2011)

Kikuyu Daniels
MGSM 830 – Technology Strategy
October 25, 2011
THE KINDLE FIRE: AMAZON’S GO TO MARKET STRATEGY
On September 28, 2011, Amazon.com, Inc., the world’s biggest online retailer, officially
announced its latest introduction to the tablet computer market – the Amazon Kindle Fire. 1 2
Despite careful marketing to position the Kindle Fire as a Kindle e-reader and not a tablet,
Amazon’s ploy to take market share from Apple and other tablet providers with the Kindle Fire
is apparent; however, are they well positioned to do so? The purpose of this paper is to use
several predominant technology strategy frameworks to determine whether Amazon’s market
strategy will allow the Kindle Fire to break into the tablet market or just become a higher priced
version of its e-reader predecessors. In other words, what is Amazon’s go to market strategy
and can it work?
Background and History
Amazon is not known for producing hardware and software. It is best known for selling
media products such as books, CDs, apparel, and household items. Since its founding in 1994, it
has expanded to offer a whole host of other services such as storage and digital media.3
Amazon introduced its first Kindle, an e-reader, in 2007.4 The Kindle was followed by the Kindle
Touch, Kindle Keyboard, and 3G versions (others including Kindle Fire are WI-FI only.) Now,

1

“Amazon's 4Q Validates Sales Growth Estimates, but Also Margin Concerns; Shares Look Overvalued,” Morning
Star Equity Analyst, January 28, 2011.
2
“Introducing the All-New Kindle Family: Four New Kindles, Four Amazing Price Points”, September 28, 2011.
Business Wire. http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=1610968&highlight=
(accessed October 1, 2011).
3
www.Hoovers.com (accessed October 1, 2011).
4
http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=1079388 (accessed October 1,
2011).

1

Amazon has introduced the Kindle Fire for “web, movies, apps, games, reading and more”. 5 It
provides access to Amazon content which includes: 18 million movies, TV shows, songs,
magazines, and books. Its features include such innovations as: Amazon’s App store for
Android games, Amazon Silk web browser (newly developed for mobile devices), and free cloud
storage for Amazon content.
Analysis
In all of Amazon’s commercials and advertisements for the Kindle Fire, the word “tablet”
is conspicuously absent. The only place one can find the word “tablet” is embedded in the html
code for the title of the Kindle Fire page on Amazon’s web site. Even Barnes & Noble advertises
its latest e-reader, the Color Nook, as “the Reader’s Tablet.” 6 Part one of this analysis will
discuss the positioning of the Kindle Fire using frameworks such as the Ansoff Matrix,
Architectural Innovation, and Technology Lifecycles. It will answer the question of whether the
Kindle Fire is a tablet. Part two of this analysis will discuss the entry of Amazon into the table
market using frameworks popularized by Michael Porter, D.J. Teece, and Michael Cusumano
among others. It will answer whether Amazon can effectively compete in the tablet market.
PART ONE
Ansoff Matrix
Amazon is introducing the Kindle Fire as a new product into an existing market.
Following the Ansoff Matrix, Amazon should be focused on product development in order to
successfully launch the new product in its existing market of e-readers. Indeed, its careful
attention to product development is captured in the many new and different features of the
5
6

See note 2.
http://www.barnesandnoble.com/nook/index.asp (accessed October 25, 2011).

2

Kindle Fire. For example, the Kindle Fire has a full color, multi-touch display and dual processor
for speed in web browsing using Amazon’s newly developed Amazon Silk browser. 7 The
company is using vertical stretching, rather than horizontal stretching, and has positioned the
Kindle Fire as its premium e-reader. Kindle Fire’s premium status is reflected in its $199.00
price tag which is at least $50.00 more than any of the other Kindle models.
Architectural Innovation
Kindle Fire is significantly different from Amazon’s other kindle models in that it, unlike
the others, was not built by E Ink, Corporation (now E Ink Holdings) a startup founded on
Massachusetts Institute of Technology’s Media Lab technology. 8 9 Instead, it was developed by
Amazon’s own R&D organization called Lab126. 10 Its innovation is best classified as an
architectural innovation since it builds on components of the earlier Kindle models such as its
display, but does so in a whole, new architecture designed by Amazon including its own
modified version of the Android mobile operating system (OS). While it is possible that despite
investing heavily in developing the Kindle Fire, Amazon mistook the product for an incremental
advance on the existing Kindle technology, this is highly unlikely. Given that the company is
rolling out Kindle Fire with its new Amazon silk web browsing (promoted exclusively on the
Kindle Fire) and is bundling it with a free 1 year subscription to Amazon Prime, its content
services platform, Amazon appears to have put quite a bit of thought into its marketing and
positioning.
Technology Life Cycle and S-curves
7

www.amazon.com (accessed October 1, 2011).
http://www.zdnet.com/news/e-ink-writes-its-future-on-e-paper/104934
9
Email, dated September 30, 2011, from Ana Lopes, E Ink Business Development Strategist confirms E Ink’s
involvement in the Kindle Fire.
10
See note 9.
8

3

Amazon must realize Kindle Fire’s disruptive potential and is quietly planning to leverage it to
gain entry into the tablet market. According to an article on Geekwire dated August 21, 2011, a
U.S. trademark application was filed by Amazon for the name and logo of its Lab126 under the
classification “design and development of computer hardware and software.” The article, went
on to say that shortly thereafter Amazon began advertising jobs for Android developers in
Cupertino, California where both Lab126 and Apple are located. Given the Kindle Fire’s web
browsing capabilities and free, unlimited capacity for storage of Amazon media content
including movies and TV shows in the cloud, it is much, more than a higher priced, color ereader. The Amazon Kindle Fire is clearly a tablet and likely was developed as such. As a tablet,
Kindle Fire represents a leap off the e-reader S-curve into a new S-curve of its own. Amazon
has very likely disrupted itself with the introduction of Kindle Fire. The device is remarkable. A
quick search on any social media site (like Facebook or Twitter for example) will reveal
conversations occurring about the Kindle Fire. Media and tech bloggers, especially, cannot
seem to get enough of it. There is pronounced sentiment that the Kindle Fire is a tablet that
was developed to challenge Apple’s iPad2.
PART TWO
Porter’s Five Forces
To understand whether the Kindle Fire can effectively compete in the tablet market, it is
important to analyze Amazon’s fit within the tablet market as a whole using Michael Porter’s
Five Forces framework. The key players in the tablet market are: Competitors such as: Apple,
Barnes & Noble, Rim Blackberry, Samsung, HP, Sony, Acer, Dell, HTC, Motorola, LG, Lenovo,

4

NEC; 11 New entrants which include: Barnes & Noble’s Color Nook, ViewSonic, Kobo Vox; 12 13
Makers of substitutes or other products that potential buyers might use instead of tablet such
as: Laptops (Apple, IBM & Lenovo, Dell, Sony, Acer, etc.), Notebooks (HP and Lenovo – these
devices are laptops with touch screens and styluses), Netbooks (Acer, Toshiba, HP – these
devices are ultraportable laptops with flash memory and no hard disk storage which provides a
smaller footprint), Smart phones (Apple, HTC, Dell, Samsung, Nokia, Motorola, Blackberry,
Palm, etc. ); 14 Suppliers include: CPU and chip manufacturers such (Intel, Micron, and AMD),
display manufacturers (such as Samsung and LG), and operating systems (like Google Android,
Apple OS, and Nokia Symbian); Buyers include mostly Individual consumers and some retailers

such as Amazon and Best Buy.
Given the sheer number of companies that are now starting to produce tablets, threat
of new entry at first glance appears high. 15 This is demonstrated in the ease at which
companies such as HP, Lenovo, Sony and Acer developed tablets to compete with Apple’s iPad
(although none of the others have been as successful.) Counter to initial appearances, threat to
entry for a company that is just starting with a tablet as its first product is extremely low given
that Apple already has over half of the tablet market share and enjoys both economies of scale
and very high brand recognition. 16 Thus, a true analysis of barriers to entry to the tablet market
requires a careful definition of the term “new entrant.” Consider that none of the recent
11

http://phandroid.com/tablets/ (accessed: October 25, 2011).
http://www.zdnet.com/blog/gadgetreviews/viewsonic-announces-200-viewpad-7e-androidtablet/28042?tag=content;search-results-river (accessed: October 25, 2011).
13
http://www.zdnet.com/blog/gadgetreviews/kobo-to-take-on-amazon-with-the-7-inch-200-voxtablet/27977?tag=content;search-results-river (accessed: October 25, 2011).
14
http://reviews.cnet.com/cell-phone-reviews/?sa=1000036&tag=topPanelArea.0 (accessed: October 25, 2011).
15
See note 11.
16
http://www.forbes.com/sites/greatspeculations/2011/09/19/apple-takes-bigger-bite-of-tablet-market-androidslips/ (accessed October 25, 2011).
12

5

entrants to the tablet market produced a tablet as a first product and all are companies that
have been around for some time. The vast majority of recent entrants were already producing
substitute products such as a laptops, e-readers, netbooks, or smart phones. For example,
ViewSonic produced LCD displays and consumer electronics and Kobo was first an open source
licensor of e-books and e-reader retailer. 17 Because such “new entrants” have already
established themselves in a similar market, they can utilize the same component suppliers and
infrastructure as used for the substitute product. Their outlay of capital for producing a tablet
then likely resides in producing a hardware design that is compatible with a licensed mobile
operating system (such as the open source mobile OS Android) and in getting users to adopt
the product through marketing. Because the barrier to truly new entrants (those without
substitute products) is extremely high and the barrier is significantly lower for entrants who
already make substitute products, characterization of the threat of new entrants is likely to fall
between the two and can best be described as moderate.
Buyer power is low because tablets for the most part are sold directly to end-user
consumers18 and there too many of them with diverse preferences to have a great deal of
collective influence on the market. End-user consumers could experience cost associated with
switching from and iPad to a Kindle Fire such as loss in compatibility of music files since Apple
products, by default, use a proprietary mp4 format rather than standard mp3 formats.
Conversion from one file format to another could cause some users enough pain not to switch,
but this is likely to have little effect on overall buyer power. Moreover, If only Android based
tablets are considered, there is little differentiation among these tablets and buyers have many
17
18

http://www.viewsonic.com/company/index.htm (accessed October 25, 2011).
Worldwide and U.S. Media Tablet 2011-2015 Forecast Update. (IDC# 230896, October 2011).

6

choices. Consequently, demand is elastic and the prices of the Android devices have fallen as
more Android based tablets are introduced. Apple is the outlier here, but it too has
demonstrated that through product differentiation it can demand a higher price. Buyers are
willing to pay more for an Apple tablet. There is some demand for tablets by other members in
the value chain such as businesses for commercial use, but probably not enough to shift power
to commercial buyers. IDC market research forecasts that the primary commercial use of
tablets will be for education purposes and that sales of tablets to commercial users overall will
grow modestly from 4.2% of the overall tablet market in 2010 to 14.3% in 2015. 19 Finally,
tablets are sold through certain retailers. For example, both Amazon and Best Buy sell the
Apple iPad2, but no retailer is selling the device at price that is different from that of Apple in its
stores or online. This suggests limited buyer power even on the part of retailers.
If we assume that suppliers to the PC industry, such as chip and CPU manufacturers, will
also supply to the tablet market, then supplier power should be similar to the PC industry.
There are few CPU suppliers, but the PC industry is a large buyer of CPUs reducing these
suppliers’ power of the industry. Similarly there are few mobile operating systems such as
Windows Mobile, Symbian, and Android, but the manufactures of these few are still in the
process of trying to get their OS adopted by mobile devices makers. Once adopted, the OS does
have a powerful affect on the tablet manufacturers’ final products. Weighing these factors,
supplier power is likely best described as medium to low.
Finally, threat of substitution is high as consumers can very easily switch to laptop or
smart phone usage instead of using a tablet – they have choices and switching costs are

19

See note 18.
7

minimal. Research shows that consumers do not hold tablets out to be laptop replacements
and because of the personal nature of tablets and consumers would be unlikely to use a work
issued tablet for personal content consumption. 20 Apple recognizes this and touts its iPad as
“new way of computing.” 21 Tablets will likely primarily be used as media consumption devices.
Further, because the same media can be enjoyed on substitute devices such as laptops, tablet
users will switch and use substitutes whenever and as much as they want.
The foregoing factors all contribute to a very high competitive rivalry in the tablet
market and extreme price wars. For example, Samsung dropped the price of its table to
$299.00 where it was previously closer to the iPad’s $499.00 price tag. Furthermore, HP left
the tablet market altogether and sold off its inventory at the clearance price of $99.00. The
Kindle Fire’s $199.00 sale price places it well below the cost of Apple’s iPad2, which sells for
$499.00 and is the current best seller in the tablet space.22 23 The Amazon Kindle Fire is well
positioned push out the other Android tablets from the market at this price. It is even
positioned to put some pressure on the sales of Apple iPad2 which at $499.00 is a luxury
product that many tablet seekers cannot afford.
Teece: Appropriability, Dominant Design, and Complementary Assets
Appropriability in the tablet market is likely moderate to weak. The difficulty in
protecting the design of the tablet hardware from imitators is a big factor in this. This is
apparent in recent law suits between Apple and Samsung where Apple has accused Samsung of
copying its iPad design. As for the dominant design, it is clearly the Apple iPad family. The shift
20

See note 18.
http://www.apple.com/ipad/videos/#guided-tours-ads (accessed October 25, 2011).
22
http://www.amazon.com (accessed: October 1, 2011).
23
http://www.appleinsider.com/articles/11/09/22/gartner_projects_apples_ipad_to_maintain_50_market_share_
through_2014.html (accessed: October 1, 2011).
21

8

of focus from design to price among tablets was apparent as tablet makers reduced prices in
order to keep up with Apple even before Amazon introduced the Kindle Fire. Given Apple’s
brand, first mover advantage, operating system and continued focus on innovative design,
Amazon’s Kindle Fire is unlikely to disrupt the iPad as the dominant design. It very well may
become the dominant design among Android-based tablets, given its modified Android
operating system, newly designed browser (Silk) and ease of access to Amazon content in the
cloud. Moreover, Amazon’s strength lies in its complementary assets such as Amazon Prime
(free shipping on merchandise and subscription based access to 10,000 movies and TV),
Amazon Apps including Android Apps, and free, unlimited storage of Amazon media content in
Amazon’s cloud. 24 These assets are tightly linked and integrated into the Kindle Fire. Each
Kindle Fire ships with a year free subscription to Amazon Prime and users will pay to continue
to access the content with their Kindle Fire. Thus, even if Amazon sells the Kindle Fire device at
a loss, it can recoup its costs by selling its content. This is very likely the crux of Amazon’s
market strategy. Amazon can easily leverage these complementary assets and use its low price
content delivering device, the Kindle Fire, to compete with Apple and gain market share in the
tablet space.
Platform Strategy
There is some potential for Amazon to create a platform especially given the strength of
its complimentary assets. In his book Staying Power, Michael Cusumano describes a platform
strategy as one that encourages innovators external to the company to adopt the company’s

24

www.amazon.com (accessed September 30, 2011).

9

platform as their own and to design complementary innovations. 25 For example, Microsoft,
Google, and more recently Facebook have each opened their application programming
interfaces (APIs) to allow others to develop applications that interact with their products. 26
Apple did this too most notably with the iPod, iPhone, and iPad by leveraging iTunes. Each
hardware product is made much more valuable with the external media content offered
through iTunes. Moreover, Apple shares revenues with the content owners. Given declining
prices of hardware and software products due to commoditization, Cusumano predicts that
“the most valuable part of the Apple franchise might end up being iTunes.” He further predicts
that “hardware products may simply become platforms to sell high-margin automated digital
serves, including music and video content.” Amazon may not be able share its revenues with
content providers to the same extent as Apple especially if, as some industry experts suggest, it
loses money in manufacturing the KindleFire. 27 Amazon can and has, however, amassed a good
amount of external content to offer on the device. A May 2010 NPD market research report
indicates that while Apple’s iTunes led music retailers in 2009 with 28% of all U.S. music
purchases, Amazon grew in both CD and digital music sales during the same period and tied
with Walmart in second position with 12% of U.S. purchases. 28 Moreover, Apple’s iBook App
which carries over 200,000 digital books already trails Amazon’s Kindle Fire at over one million
books. 29 30 Given Cusumano’s predictions, Amazon’s ability to turn Amazon Prime and the

25

Cusumano, M.A. (2010). Staying Power: Six Enduring Principles for Managing Strategy & Innovation in an
Uncertain World. (Oxford: Oxford University Press). Ch. 1.
26
See note 25.
27
http://blogs.wsj.com/digits/2011/09/30/two-views-on-the-cost-of-amazons-kindle-fire/ (accessed October 25,
2011).
28
https://www.npd.com/press/releases/press_100526.html (accessed October 25, 2011).
29
http://www.apple.com/ipad/built-in-apps/ibooks.html (accessed October 25, 2011).
30
http://www.amazon.com/Kindle-Fire-Amazon-Tablet/dp/B0051VVOB2 (accessed October 25, 2011).

10

Kindle Fire into platforms to deliver its vast array of digital media content could be a major
advantage for it in the tablet market. The next few subsections will discuss some additional
steps Amazon could take to become a platform.
Scope and Relationship with Complementors
Cusumano introduced four strategies called “levers” 31 for pursuing platform leadership,
two of which are discussed here. These are scope of the firm (or what it makes in-house) and
its relationships with external complementors. Amazon has defined its scope to enhance the
performance and user experience with Kindle Fire. Instead of using the Android browser, it
created its own browser for the Kindle Fire called Silk to allow delivery of flash content, higher
speeds, and smoother integration with the device. Amazon Silk is one example of a
complement that Amazon produced for its own platform. It also produces an app called
Amazon Kindle for virtually every operating system of mobile device including Apple OS. The
app allows users of other devices to purchase digital books available only on the Kindle. Apple
allows the Amazon Kindle app because it increases the amount of books to which iPad and
iPhone users have access. By becoming a platform for the delivery of its own creations and for
others and by maintaining beneficial win-win relationships with complementors, Amazon is
potentially one-step closer to creatng a platform. To become a platform leader, it will have to
continue to create economic incentives for companies to add their complements to the
ecosystem that it is building.
Open v. Closed

31

See note 25.

11

The openness of the platform’s API is also important in a platform strategy. 32 The Kindle
Fire smartly uses a modified version of the Android OS and controlled gateway to the Android
App market. The former allows Amazon to control the distinctiveness of user interface look
and feel and to keep it more tightly integrated with the hardware (namely memory and
processing speed) features of the device. The latter allows Amazon to 1) vet Android Apps for
smooth operability with its device, 2) readily offer the better Apps as a main feature in the UI,
and 3) still provide users with a way to access any Android App through the Android market.
While it is too early to tell how well the modified OS and controlled gateway will work
technically and feel to a user, such a strategy is likely a smart one because it allows the Kindle
Fire to be both open and somewhat closed at the same time. Amazon may have taken clues
from Apple here as much of the iPad’s popularity can be attributed to tight integration of user
interface and hardware. For example, many users in the iPad forum on apple.com comment on
its smoothness and speed such as no lag time between typing and the letters appearing on
screen. In a rush to get a tablet to market to compete with the iPad, many early Android
tablets just ran with Android OS seemingly almost “out of the box” which offered little
differentiation between these early products. This combined with a poorly reasoned attempt to
match the market leader (Apple) in price is likely the reason for their often quick demise.
Coring and Tipping
Cusumano indicates that successful coring often requires resolution of “a major
technical problem affecting a system-like product with industry platform potential.” 33 Although
Amazon’s creation of its own mobile browser is excellent for its product strategy, it likely did
32
33

See note 25.
See note 25.

12

not solve a major technical problem for the tablet industry. A search in the U.S. Patent and
Trademark database for patent applications filed since 2009 revealed two Amazon patents that
provide insight into the company’s R&D plans. The first patent solves a problem with electrical
grounding of micro USB receptacles caused by the slim profile of certain devices like portable
media players. 34 The second patent describes a method for annotating digital works such as
digital books and music and sharing the annotations with others.35 The patents' subject matter
indicates that Amazon is focused on creating better (perhaps slimmer) devices and new ways
that users can interact with its content. Such innovations still may not solve an industry-wide
problem, but if Amazon continues in this direction with R&D it could produce a “must-have”
feature or application that could effectively tip the market in its favor.
Network Externalities
Finally, Amazon may increase its potential to become a platform by creating and
leveraging indirect network effects like Apple did. Apple secured the largest digital music
library for iTunes and then leveraged it to get consumers to use its devices. Once its devices
had a critical mass of users, Apple could enjoy indirect network effects from app developers
who created content for Apple’s platform primarily to get access to its many users. Amazon
should position itself to do the same. It must first figure what type of content or must-have
feature will bring a critical mass of users to its platform, then it can enjoy the indirect network
effects of app developers, content providers, and advertisers bring as they develop for the
Amazon platform. Additionally, Amazon should leverage whatever social media aspects it can
build into the delivery of content on its platform since social media has proven itself as a vehicle
34
35

U.S. Patent No. 7901221. Filing date: Jan 9, 2009.
U.S. Patent Publication No. US 2011/0184828 A1

13

for direct network effects. The patent for annotating digital medium and sharing ones’
annotations may be a starting point for this. Other ideas would be to leverage its rating and
review system used on amazon.com and gathering of information on user purchases to deliver
unique user experiences.
Summary and Predictions
Kindle Fire is more than an e-reader. It is a tablet and tablets are for content
consumption. It is clear that Amazon developed a clever vehicle in the Kindle Fire to deliver its
content to the masses. While it may not be a dominant design, the Amazon Kindle Fire already
has a few good things going for it -- namely Amazon’s Silk browser and its modification of the
Android operating system to work seamlessly with delivering content to the Kindle Fire. It is
also clear that among other Android-based tablet makers, Amazon as the world’s biggest online
retailer is best positioned to compete with Apple in the U.S. tablet market. It is likely that the
Kindle Fire may rid the tablet market of many other Android based tablets given its price point
and massive amounts of content available to it through the Amazon Prime service. In this way
Amazon Kindle Fire could become a major player in the tablet market, as this would split the
U.S. tablet market between Apple iPad on the high price end and Amazon Kindle Fire as its
affordable alternative. To effectively compete with Apple in this market, Amazon must pursue
a platform strategy. Amazon must aggressively pursue collaborative relationships with
complementors, maintain an open API and retain enough control over it to produce innovative
must have features in its devices. By becoming a platform for the delivery of its own content
and that of others, Amazon could compete with Apple and Google platforms. It is a lot and
Amazon likely realizes that it is a lot. Perhaps this is the reason behind Amazon’s marketing the
14

Kindle Fire as an e-reader and not a tablet? We may never know. But if anyone can effectively
compete with Apple in the tablet market, Amazon can.

15

The Kindle Fire: Amazon's Go To Market Strategy (2011)

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