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Amazon Foray and Smartphone Market

Question:

 Should Amazon develop a Kindle phone? Why or why not?

Answer:

Amazon’s foray into the smartphone market makes business sense. According to reports from credible sources, Amazon is planning to launch an Android-based smartphone.  It is estimated that by the end of 2016, the global mobile device sales is poised to hit 2.4 billion units. Smartphones are expected register double digit growth up to the year 2020. Indeed there is a clear market opportunity for the manufacturers (Toole, 2016). 

Amazon boasts of a strong customer base who are already using their Kindle e-book reader tablet, and these customers are likely to be receptive of another Amazon branded device. With Amazon’s loyal customer segment, the company is likely to form strategic alliances with service providers such as Sprint, Verizon, and AT & T, because intense business competition gives the service providers with more bargaining power with other original equipment device manufacturers. Besides, considering how Amazon prices its products, Amazon’s smartphone is rumored to launch with an end-user retail price of $200 to $250 without any binding contractual agreements (Coolpan et al., 2012). 

Competitors have countered Amazon’s move by launching a similar branded smartphone and bundling it with an array of services available through the prime premium membership. Tech players such as Apple, Google, and Microsoft have also expanded their services with an ultimate goal of powering everything from the television systems to automobiles (Bloomberg, 2016). 

Amazon’s main competitors are already taking advantage of the smartphone boom and locking in customers through carrier deals and rebates. Some of these contracts go for up to 3 years and clients are provided with an opportunity to upgrade to the latest products free of charge provided that they maintain their subscription plans (Mangalindan, 2014). Such a “lock in” strategy will make it inherently difficult for Amazon to acquire new customers with high average revenue per user (ARPU). 

Works Cited

Amazon Said to Plan Smartphone to Vie With Apple IPhone [online], 2016. [online]. Bloomberg.com. Available from: http://www.bloomberg.com/news/articles/2012-07-06/amazon-said-to-plan-smartphone-to-vie-with-apple [Accessed 24 May 2016]. 

Amazon's smartphone: The time is right [online], 2016. [online]. CNET. Available from: http://www.cnet.com/news/amazons-smartphone-the-time-is-right/#! [Accessed 24 May 2016]. 

In the tradition of breathless tech-industry hype, 2016. Amazon's 3D smartphone may finally be set for release [online]. CNNMoney. Available from: http://money.cnn.com/2014/06/04/technology/mobile/amazon-smartphone/index.html [Accessed 24 May 2016]. 

Mangalindan, J.P., 2014. Why Amazon's Fire phone failed [online]. Fortune Why Amazons Fire phone failed Comments. Available from: http://fortune.com/2014/09/29/why-amazons-fire-phone-failed/ [Accessed 24 May 2016].

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