The Kindle Fire is a tablet recently announced by amazing intends to tap into the tablet market that Apple's iPad has dominated for over a year. The price is an incredibly cheap $199, compared to the cheapest model of the iPad, which is $499. You might assume that for less than half the price, the Kindle Fire must have less features and be less technically sophisticated. This assumption could not be more false. The Kindle Fire is arguably more technically impressive than even the most expensive model of iPad. Amazon has admitted that with each sale of the Fire, they will actually be losing money. How appealing must this tablet industry be for Amazon to be willing to try to undercut Apple by so much? We will figure this out in the five forces model.
Barriers To Entry
The obvious barriers to entry are just as you'd expect: research and development, production, marketing, etc. However, the biggest barrier to entry is a little more subtle: Apple's brand. If you decide to enter into this market, you have to try to steal market share from the marketing king itself. This is not an impossible task as we have seen with Android and Google, but it is not an easy feat.
Supplier Power
Suppliers don't really have much power in the tablet industry. There are so many makers of processors, touchscreens, flash memory, and other components that the suppliers don't have too much power.
Rivalry
Because there is really only one main tablet with any sort of market share right now, there are many opportunities for newcomers to come up with competitive advantages. Amazon chose to market their tablet at an extremely low price to try to undercut the iPad. I feel like this could be a sustainable advantage for Amazon. In the short run, Amazon will be able to cover its losses with their massive amounts of capital from their core business. In the long run, cost of the tablet will drop with technological advances, and if the tablet succeeds in creating a large user base, Amazon can make up some of the loss with premiums from selling apps in its app store.
Buyer Power
Buyers don't have much power in the tablet industry because tablets are mostly a consumer good. This means that there are many buyers and they are disorganized. While the price of a tablet is not extremely high, switching costs for buyers are high because tablets are considered a luxury item. When someone purchases a tablet they probably won't be looking into buying a replacement for at least a couple years.
Substitutes
There are many substitutes for tablets. The obvious substitutes are smartphones, desktop PCs, laptops, and netbooks. However, other less-obvious substitutes exist as well: newspapers, cable TV, and portable gaming devices. Laptops and netbooks are the most common substitutes. Many people don't even buy a tablet until they already own all of the obvious substitutes (myself included). Despite the many substitutes, the industry is still growing with no end in sight.
All in all, the tablet industry seems to be a pretty good industry to get into right now. Even though there is currently only one main competitor, Apple is just about the most fierce competitor you can imagine. Amazon seems to know the industry well, and hopes to make a grand entrance to the tablet market as soon as the Fire is released. My guess is that Amazon will be successful in this endeavor, due mostly to the fact that Amazon already has a great reputation. The low price will jump start the sales of the Fire, and I believe it will cut into the iPad's market share significantly.
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