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Title page

Light my Fire: Amazon ignites tablet war

Prepared for Mr Andrew Joubert

Prepared by Andrew Reeves 304092 Chi Zhang 0705567F

2. Contents
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1 Title page........................................................................................................................................1 2 Contents page................................................................................................................................2 3 Question 1 .....................................................................................................................................3 4.Question 2......................................................................................................................................4 5. Question 3......................................... ...........................................................................................9 6. Reference List..............................................................................................................................12

3. Question 1
Numerous companies define themselves through their product and service offerings. At the outset, this could be considered a reasonable approach (Van Rensburg; Venter, 2011) In reality, however, taking a product-based approach may narrow your focus and limit your organization's ability to be competitive (Van Rensburg; Venter, 2011) Thus if the market definition is too narrow it may limit opportunities. Theodore Levitt, a former Harvard Business School professor, wrote that companies that took a product approach suffered from marketing myopia. Although his classic article titled Marketing Myopia was written in 1960, it is still relevant today (Levitt, 1975). To avoid marketing myopia Levitt stated businesses should answer the question "What business are we in?" from the perspective of customers needs and wants, taking their opinions and input into consideration. Companies that are product focused often look to build the better mousetrap. They reason that if they can come up with the best product or service, then people will beat a path to their door. Unfortunately, that is not always true as many companies have come up with offerings no one wants at prices that are unattractive (Levitt, 1975). A better strategy is to use a marketing orientated-approach (Levitt, 1975). Begin by looking outside the company and analyzing your customers' needs and wants. If the focus of marketing were based primarily on products, it would be called "producting," however this is not the case. Adopting a marketing approach depends on focusing on the customers and prospects that make up the marketplace. Only after you understand them should you try to design goods and services to satisfy their needs (Levitt, 1975). One of the industries Levitt lambasted in his article as myopic was the petroleum industry. For years gas stations took a product-based approach, defining themselves as being in the business of selling gasoline (Levitt, 1975). More recently, with profit margins razor thin, they have had to ask what business they were really in. Although they still use the sale of gasoline to draw customers into their stations, today it is the sale of convenience and food items that helps them to stay profitable (Levitt, 1975).
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This change has been critical to the survival of gas stations (Levitt, 1975). Retailers that continued to focus only on gas, such as Sunys and Pay Rite, have either gone bankrupt or exited the market (Levitt, 1975).Without new sources of revenue, they were unable to carry on as gross revenue margins slipped to one cent a litre from seven cents a decade earlier (Levitt, 1975). Today, successful retailers no longer define themselves as being in the gasoline business, but ask what else customers need and want that they can provide (Van Rensburg; Venter, 2011) From the explanation and appropriate example of Levitts marketing myopia it can be concluded that Amazon is not in the book business, nor is it in the neither DVD nor electronics business. Amazon began as a channel of distribution of physical products but Amazon laser focused their expertise as data collectors of what people buy (Aiken, 2010) and consequently added recommendations of new purchases based on individual patterns of historic purchases (Aiken, 2010) Therefore Amazon can be said to be in the ecommerce business with special focus on data collection.

4. Question 2
Social factors focus attention on forces within society such as family, friends, colleagues, neighbours and the media. Social forces affect attitudes, interests and opinions. These forces shape who people are, the way people behave and ultimately what people purchase (Van Rensburg; Venter, 2011). With regard to the computer tablet market social changes have shifted positively towards technological adoption. As the world progresses in technological literacy this forms a positive relationship with technological adoption and thus promotes the computer tablet industry (Braiden, 2010). Trends have shown an increase in total purchases in computer tablets as a whole i.e. over the range of the whole industry since 2005 up to 2011 (Aiken, 2010). There is an ever growing demand for electronic media such as online streaming and music and movie downloads (Braiden, 2010). The tablet market caters for these needs as individuals are able to use computer tablets to acquire this media whether it is for business or for pleasure. Therefore the computer tablet market is growing in linear fashion to consumers ever changing lifestyles (Braiden, 2010).

Demography is the statistical study of certain characteristics of a population. The demographic environment refers to the size, structure and trends of a population. These factors exert the greatest influence on demand because of the strong relationship between population and economic growth (Van Rensburg; Venter, 2011). Population changes also have a direct impact on organisations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers fall (Van Rensburg; Venter, 2011). With regard to the computer tablet market population demographics is a very important factor as only a certain percent of the population will be able to afford these products as they are luxury items (Braiden, 2010) and depending on which countries the products are distributed will have different target audiences in the appropriate LSM group (Braiden, 2010). Computer tablets are primarily purchased in LSM 8-10 category (Braiden, 2010) and therefore income distributions are relevant. Age and gender falls under demographics and are considered in the computer tablet market as for age only certain generations would purchase these products (Aiken, 2010). Research has shown they are mainly purchased by people in the age-bracket of 16 45. These include generation Y and X and some baby boomers who fall out of the bracket Research has shown that these tablets are purchased more by males than females but not by a large percentage which can therefore imply that gender is irrelevant (Braiden, 2010). Technological advances have greatly changed the manner in which businesses operate. Technology has created a society which expects instant results. This technological revolution has increased the rate at which information is exchanged between stakeholders. A faster exchange of information can benefit businesses as they are able to react quickly to changes within their operating environment (Van Rensburg; Venter, 2011). With regard to the computer tablet market, new devices that incorporate new technology or enhanced features are consistently being produced (Braiden, 2010). Companies need to keep up with the times and consistently develop better technology to keep ahead of competitors. If companies fail to stay ahead of the market then they will ultimately meet their end. In order for these firms to develop new enhanced and advanced tablets they need to invest in

technology within their own firm to produce these products effectively and efficiently which will enable them to use the advantage of economies-of-scale (Braiden, 2010). Computer tablet companies are always looking to develop and improve their technical facilities. This is to improve scalability and performance which will give these companies the tools they need to profile and target customers, analyse site data, and deliver new features to the market in the shortest time possible (Braiden, 2010). Companies in the computer tablet market are consistently undergoing Software upgrades which improves supply-chain management and database management which increases the speed and quality of the service provided (Braiden, 2010).

All businesses are affected by national and global economic factors. National and global interest rate and fiscal policy will be set around economic conditions. The climate of the economy dictates how consumers, suppliers and other organisational stakeholders such as suppliers and creditors behave within society (Van Rensburg; Venter, 2011). An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. Conversely a growing economy will have low unemployment, high spending power and high stakeholder confidence. A successful organisation will respond to economic conditions and stakeholder behaviour (Aiken, 2010). Furthermore organisations will need to review the impact economic conditions are having on their competitors and respond accordingly. In this global business world organisations are affected by economies throughout the world and not just the countries in which they are based or operate from. For example: a global credit crunch originating in the USA contributed towards the credit crunch in the UK in 2007/08 (Van Rensburg; Venter, 2011). With regard to the computer tablet market and considering these products are luxury items; sales will be dependent on the state of the business cycle (Van Rensburg; Venter, 2011). When the economy is in recession sales of computer tablets will be low as consumers have lower disposable incomes to spend, conversely when the economy is in a boom, sales will rise greatly. Exchange rates also play a role in international sales of computer tablets. When a currency is weak against the home country which exports computer tablets then the home countrys exports of these products to the country of the weakened currency will decrease as these goods have become more expensive to the country whose currency has weakened. Taxation also plays a role on sales as if importing these goods imposes high taxes then
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international sales will also decrease as high taxes increase the price of the product. If people borrow money to buy these products then as interest rates increase sales could decrease because the cost of borrowing money has increased and therefore results in higher interest payments (Braiden, 2010). Environmental factors affect computer tablet producers. Companies are increasingly realising they do not function in isolation but are part of a wider community and must therefore act in an environmentally-responsible manner. Profit-related objectives should be fulfilled in conjunction with environment-related objectives (Braiden, 2010). The triple bottom line incorporating economy, society, and the environment should be the focus instead of focusing solely on the bottom line of profit (Van Rensburg; Venter, 2011). With regard to the computer tablet market, tablet producers must abide by environmental regulations and rules. If they do not they could be subject to fines among other things. There brand equity could be compromised if they do not abide by these regulations. Environmental factors can also affect input prices in producing these tablets. Companies need to risk manage maybe by using derivatives in order to hedge against changes in input prices (Van Rensburg; Venter, 2011). Political factors influence organisations in many ways. Political factors can create advantages and opportunities for organisations. Conversely they can place obligations and duties on organisations. Political factors include the following types of instrument (Van Rensburg; Venter, 2011): - Legislation such as the minimum wage or anti discrimination laws. - Voluntary codes and practices - Market regulations - Trade agreements, tariffs or restrictions - Tax levies and tax breaks

Non conformance with legislative obligations can lead to sanctions such as fines, adverse publicity and imprisonment. Ineffective voluntary codes and practices will often lead to governments introducing legislation to regulate the activities covered by the codes and practices (Van Rensburg; Venter, 2011).

With regard to the computer tablet market political factors can have a significant effect on sales (Braiden, 2010). Taxation policy where high taxation imposed on tablet producers in those countries producing the tablets will usually mean consumers pay a higher price for the tablet. Deregulation of the tablet industry is not relevant as there are no barriers to trade and therefore anyone can enter the market. International trade regulations/tariffs will affect tablet producers and ultimately the consumer (Braiden, 2010). When another country's government imposes a tariff on imported tablets, this raises their prices affects the consumer. Government stability tablet producers should thoroughly investigate the political stability of any country they plan to expand to. Changes in government can lead to changes in taxation and legislation. American elections may have an effect on tablet producers as new legislation or new or existing government may bring in taxes. The international economy must be brought into consideration as it can affect tablet producers sales and markets (Braiden, 2010). The political and legal environments should be considered together as they are closely linked i.e. one will affect the other. Government regulations have direct implications for companies and factors such as regulatory bodies and processes, employment laws, competition regulations and consumer protection should be closely monitored in order to identify changes (Van Rensburg; Venter, 2011). With regard to the computer tablet market, producers need to be aware of the trade laws in the various countries they occupy and do business with. They need to ensure they are not in violation of e.g., religious laws (Braiden, 2010). Also, certain countries impose a tariff that has to be paid when goods are imported/exported so this must be taken into account. Each country has varying employment laws. Some may have a Sabbath day, some may have a limit on the number of hours an employee may work per week, and all will have varying levels of minimum wage. Companies should consider these factors when deciding on relocation (Braiden, 2010). Ethical factors affect the computer tablet market. Marketing ethics and green marketing have seen rapid developments since they emerged in the 1980s. The ethical responsibility of marketing cannot be ignored since unethical behavior will not only influence the individual consumer involved in the exchange but will ultimately affect society as a whole (Van Rensburg; Venter, 2011). With regard to the computer tablet market, regulations are in place to protect consumers such as the use of false advertising is prohibited. Companies are also

required to provide appropriate labeling of equipment such as where it was made (Braiden, 2010).

5. Question 3
Porter's five forces analysis is an important tool for analyzing an organizations industry structure in strategic processes. It helps the marketer to contrast a competitive environment (Van Rensburg; Venter, 2011). Porter has identified five competitive forces that shape every industry and every market. These are: The threat of entry, The power of buyers, The power of suppliers, The threat of substitutes and Competitive rivalry (Van Rensburg; Venter, 2011). The threat of entry: Economies of scale, the high or low cost of entry, Ease of access to distribution channels, Cost advantages not related to the size of the company, whether competitors will retaliate, Government action and how important differentiation is (Van Rensburg; Venter, 2011). There will always be a continuous pressure for Amazon to effectively differentiate itself from competition by entering this new market. The easier it is for new entrants to enter the market the more competition there is within the market (Barnard, 2010) and in this market there are no barriers to trade and therefore it is highly competitive which means Amazon will have to offer high quality products at lower prices in order to capture market share (Aiken, 2010). Amazon will have to invest a large amount in advertising in order to effectively differentiate itself from competitors with its own unique value proposition Amazon does not have years of experience in the tablet market and this may hinder their efforts however they do have sufficient resources in order to employ the right people to do the right job. In the short-run Amazon may not experience economies of scale as they have not learned enough about how to economize on these certain products but as they learn more on how to be profitable, economies of scale will serve in favor for them (Aiken, 2010)

The power of buyers: Buyer power is likely to be high if a number of conditions are in place which are namely: if There is a concentration of buyers, particularly if the volumes of purchases of the buyers are high; the supplying industry comprises a large number of small operators, there are alternative sources of supply, the component or material cost is a high percentage of total cost, the cost of switching a supplier is low or involves little risk, there is a threat of backward integration by the buyer (Barnard, 2010). Therefore the bargaining power of buyers in the tablet market is low as they cant influence prices to any great extent. Prices for specific tablets are set and there no negotiations for big discounts. This is due to the fact that consumers purchase low volumes of these products and these amounts to no grounds for price discounts (Barnard, 2010). Tablet companies are also large and normally charge prices tie closely to competition (Barnard, 2010). The power of suppliers: If the market is dominated by few large suppliers rather than numerous fragmented sources, a suppliers bargaining power is likely to be high. Although suppliers do have certain amounts of power, it is limited (Van Rensburg; Venter, 2011). Tablet companies are unlikely to have high bargaining power as there are many competitors in the industry and buyers can easily switch suppliers. Therefore Amazon should keep track of competitor pricing strategies and develop more appealing ones to attract customers and win market share. The threat of substitutes: Substitutes are products from one company that can be replaced by products from another company i.e. buyers can easily switch if products or services are undifferentiated. Numerous factors contribute to intense rivalry between existing competitors in an industry. This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control (Barnard, 2010). The extent to which competitors are in balance is where competitors are of an equal size which creates intense competition as one of the competitors tries to gain dominance over the other. High fixed costs in an industry may result in price wars (Barnard, 2010). Therefore in the computer tablet industry there is threats of substitutes and Amazon thus needs to assure they satisfy consumer needs and wants in their chosen market segments. .

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Competitor Analysis: Rivalry among competitors is one of the strongest of the five competitive forces, depending on the industry. In industries where competitive forces are weak, prices may be raised and more profits can be earned. Where intense competition exists, however, prices may be below break-even levels, and offerings must be enhanced to retain customers ( Van Rensburg; Venter, 2011). Competition is steadily growing in the computer tablet market each year. As the industry grows, competitors look to gain a competitive advantage by providing appealing pricing strategies, launching a rival product, aggressive expansion of production to increase market share or inclusion of significant modifications to a product that other competitors must also undertake to keep up (Barnard, 2010). Amazon has to compete against a number of competitors namely: Apple, Samsung, Motorola and HP. It is imperative that they differentiate themselves and use their existing infrastructure such as their digital online store that can be used to sell products online through their new computer tablet. Therefore in conclusion it can be said that Amazon has a good chance to succeed in this computer tablet market by offering tablets of lower prices but good quality. They also need to differentiate themselves effectively from their competition and leverage their new tablet through their existing infrastructure. They need to keep up with technology and observe the competition movements in the market. They need to develop appropriate strategies for each segment crated

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6. Reference List

Aiken, Robert (2010), Amazons marketing strategy.(Accessed October 16, 2011), [Available from: http://www.marketingplan.net/amazon-com-marketing-strategies/]

Barnard, Neil (2010), Porters Five forces and the Macro-environment, (Accessed October 17, 2011), [Available from: www.businesssourcecomplete.com]

Braiden, Hemler (2010), STEEPLE analysis, another strategy tool for the technological market, (Accessed October 16, 2011), [Available from: www.businesssourcecomplete.com]

Levitt, Theadore (1975), Marketing Myopia, Harvard Business Review. Available from Business Source Complete, Accessed October 14, 2011.

Van Rensburg M. J, Venter P (2011), STRATEGIC MARKETING, Theory and applications for competitive advantage, Accessed October 14, 2011.

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