Unit 3 Micro: Amazon launches the Kindle Fire

In the increasingly competitive and contestable market for tablet devices, leading online retailer Amazon has launched the Kindle Fire.

The device is expected to be priced at £130 in the UK and the seven-inch display will run a modified version of Google’s Android operating system. Amazon claims that it gives access to 100 million TV and movie shows, millions of books, full-colour magazines together with free storage using Amazon’s cloud. Watching the launch video with Amazon CEO Jeff Bezos one is struck by the emphasis given on leading-edge innovation especially wireless, invisible synchronisation of files and (from a useability point) the ability for the device to pick up immediately from where you might have stopped reading a book or watching a show.

This fast-moving technology sector provides a rich vein of concepts to apply for unit 3 economists:

1/ Different pricing strategies - especially for devices entering a crowded market space - penetration pricing in action perhaps? - the Kindle Fire is launched with a retail price less than half that of Apple’s best-selling device

2/ Product differentiation - entry-level, premium products, non-touchscreen Kindle at a basic price

3/ The benefits from economies of scale as production is ramped up

4/ The ongoing battle between bricks and mortar and online businesses and the impact of electronic devices on traditional publishing sectors (not always negative!)

5/ The crucial importance of innovation as a driver of dynamic efficiency

6/ The significance of brand value and brand reputation - Amazon is seeking to leverage the success of three generations of Kindle devices

7/ Product bundling - Kindle Fire comes with a 30-day free trial of Amazon Prime

The pace of developments in the tablet and e-reader markets is breath-taking. Apple is said to have an 80 per cent share of tablet devices sold in North America and Amazon dominates the e-reader market with around a 50% share. Here is an industry almost guaranteed as a fruitful prompt for discussion when looking at Schumpeter’s concept of “creative destruction”!