Business Perspective: Should Amazon Enter Smartphone Space Again?

Amazon is known to be a global giant with a presence across America and Asia and focuses on e-commerce, digital streaming, cloud computing, and artificial intelligence. Now, the question comes if an already diversified company needs to think about entering the smartphone industry? But, let me bring your attention to the infamous Amazon Fire Phone launched in 2014 by Amazon which was quite unsuccessful.

To decide upon the big question of launching a smartphone, let’s divide the problem statement into 3 sections which are important for the launch of a new product. The first pillar would be a company’s competencies/capabilities that could provide a competitive edge among customers. The analysis would lead to the decision of diversification or no diversification. The second pillar will determine the competitive environment in which Amazon would be entering. Higher barriers to entry would make the industry unattractive and low barriers to entry will make it attractive. The third pillar determines whether Amazon will be vertically integrating to launch a smartphone, or it should partner with existing suppliers.

We will start the discussion with the first pillar of decision making that is the core competencies of the company which will enable Amazon to have a competitive edge.

  1. VRIN Framework — The transformation of Amazon from bookseller to largest e-commerce player to leading cloud player has helped in creating a lot of valuable resources. VRIN framework talks about resources that Amazon has but that can’t be easily accessible or achievable for other companies in the same space. V stands for a valuable resource that creates value for the company, R stands for rare resources which are not very common with other competitors, I stands for inimitable which could be causal like work culture or unique like patents, or path-dependent or requires a lot of economic capacity, N stands for non-substitutability. Now evaluating Amazon on its resources using the VRIN framework we could come up with core competencies that could decide whether the diversification could be done or not.
    As we all know, the brand name of Amazon is considered among the top 10 companies in the world with a market capitalization of $ 1.73 Trillion, which makes it a VRIN resource. Secondly, the R&D capabilities with huge investments like $ 42 Billion recently make its R&D capabilities a VRIN resource and enables Amazon to enhance their product range. Due to its e-commerce presence in different countries across America and Asia, it has developed valuable relationships with distributors and suppliers and has gained a plethora of customer information. Whereas competencies like customer experience and IT infra are the competencies that could be easily duplicated as they are imitable.
    Based on the competencies which could provide long-term advantages like brand name, R&D, distribution network, customer knowledge, and relationship with suppliers we could come to the conclusion that Amazon should diversify into smartphones. Since Amazon’s previous devices like Kindle, Firestick, Echo, etc. all are related diversification products because of overall economies and synergy benefits, therefore smartphones should also be included in related diversification.

Conclusion — Based on the above analyses using different frameworks and evaluation of options, we can have the following conclusions.

  • Even though Amazon has a lot of competencies where it could have a competitive edge over other players but those are spread over a huge range of products that might not be combined for a single industry.

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Jotsimran Bains

An aspiring product manager who is interested in finding out really cool things in the field of product management.