MKT340 - STRATEGIC MARKETING

MANAGEMENT

ASSIGNMENT 1

NAME: VO THI THAO NGUYEN

ID NUMBER: 114 06560
DUE DATE: 19/08/2010
LECTURER: MINH TRAN
 TABLE OF CONTENTS

1 Introduction.............................................................................................................................1

1.1 Industry background.........................................................................................................1

2 Industry analysis......................................................................................................................3

2.1 the Trends in the e-book market.......................................................................................3

2.2 Structure in the E-reader market......................................................................................5

2.3 Market attractiveness........................................................................................................6

2.4 social & technological drivers..........................................................................................8

3 Competitor analysis ..............................................................................................................10

3.1 Kogan Technology.........................................................................................................10

3.1.1 Strategic Choices...................................................................................................10

3.1.2 Market Segmentication.........................................................................................11

3.2 BeBook Mini/Neo..........................................................................................................11

3.2.1 Customer needs and product differentiation.........................................................11

3.2.2 Market Segmentation............................................................................................12

3.2.3 iPad as a Segment rival ........................................................................................12

3.2.4 Strategic Choices...................................................................................................12

3.2.5 Strategic Positioning............................................................................................13

3.2.6 Sources of Competitive Advantage ......................................................................13

4 Conclusion.............................................................................................................................14

5 Reference ..............................................................................................................................16

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EXECUTIVE SUMMARY

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 MKT340 - Strategic Marketing Management
ASSIGNMENT 1

1
1 INTRODUCTION

1.1 INDUSTRY BACKGROUND

In 1998 the world first e-book reader device was introduced to the public: dedicated readers or
hand-held devices and/or slates. The emergence of the e-book has resulted in many companies
manufacturing electronic reading devices used for displaying, reading and storing electronic
information. Palm Inc, NuvoMedia Inc., SoftBook Press Inc., EveryBook Inc. and Sony (Sanders,
2000) are examples of manufacturers of that.

O'Donnell (O’Donnell, 1998) stated that all these devices have one common function in that they
are dedicated to reading e-books only, and are not as sophisticated as handheld computers or
personal digital assistants (PDAs). This statement has no longer corrected, as since 2000 hybrid
devices (Wilson 2001) that contain address books, diary, calculator and PDA-associated functions
have also been used to read e-books. Additionally, these devices can be used for emailing, Internet
surfing, word processing and playing MP3s. An example is the Palm Pocket PC.

Another revolution on that industry was the introduced of all-in-one colour monitor handheld O2
xda few years ago, which allows users to access the Internet, make phone calls, send emails, use
Microsoft Word and Excel, read e-books, organise a diary, listen to music and play games. PDAs
and phone combined or smart phone are rapidly becoming a common technology at school
because they allow students and teachers to do essential tasks such as note taking, word
processing, graph drawing, emailing and browsing. Other examples are iphone, Sony Ericsson
P910 and X10, etc.

Other stream of development of dedicated readers was the introduction of tablet PC. The simple
definition of Tablet PC is a laptop PC equipped with a stylus or a touch screen. This form factor is
intended to offer a more mobile PC; Tablet PCs may be used where notebooks are impractical or
unwieldy, or do not provide the needed functionality. The term Tablet PC was made popular in a
product announced in 2001 by Microsoft, where it was defined as a pen-enabled computer
conforming to hardware specifications devised by Microsoft and running a licensed copy of
"Windows XP Tablet PC Edition" operating system or a derivative thereof.

After twelve years staying in the market, the electronic reading devices, Smart Phone and Tablet
PC are still going very well. Consumer survey made on 2001(Anon,2001) revealed 28% of

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
respondents were willing to engage in recreational reading on an e-book device and 66% would
read a reference work on a computer. Despite this in year 2001, Maack (Maack, 2001) noted that 2
e-book manufacturers and e-publishers remain confident and reports that one study predicts 2.8
million device users by 2005. Also, recently, after Amazon released it owned dedicate device,
Kindle in year 2008, and Apple released an iPad, the combination between a smart phone, tablet
PC and dedicate reader early this year, these devices has made a boom in the e-book market.
Kindle was sold 500,000 devices in Australia since 2008 (Techwiredau, 2009) and Stuart
(Stuart,2010) has predicted that Apple could sell 40,000 iPad in the first month of release. In the
US market, IPAD was sold 28 million units in first 28 days.

Current players in the Australian domestic market are BeBook Mini/Neo, Amazon Kindle, Kobo
eReader, Kogan, Apple Ipad, Toshiba's Libretto, and other smart phone company like Nokia N97,
N900, Sony Ericsson X10, and Apple iPhone 4, Samsung Galaxy S and so on.

This report will examine that the marketing strategy plan of Starlight Enterprises for E-book
reader devices including its trends; its structure; its market attractiveness; its Social &
technological drivers and some main things for Competitor analysis such as identify competitors;
analyse their competitive position; resources and capabilities; and critical success factors

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1

3
2 INDUSTRY ANALYSIS

2.1 THE TRENDS IN THE E-BOOK MARKET

According to Edwards; Magee and Bassetti (2007), the trend in the market is to exist of prices that
keep rising or falling over time. An uptrend emerges when bulls are stronger than bears and
buying forces the price up and a downtrend occurs when the bears are stronger than the bulls and
selling forces the price down. In the marketing, the trend is really important because it helps
determine the longer term direction and support and resistance. Furthermore, it is great entry or
exit points and helps identify breakout point and also it can be wrong with timing but not trend.

There are three kinds of trend in the market. First primary is known medium term which has broad
support the entire market and last into a year or more. For example, in 2007 Amazon .com
launched the e-reader Kindle in the US market. And now It does not works well because it does
not support enough satisfied customer such as almost people who is teenager and about from 20 to
45 want to use E-book devices so they need and want to use the devices which include anything
features such as camera, and mobile features especially E-reader, 3G, and Wi-Fi . Therefore,
Starlight Enterprises can try now to launch the devices which include anything features but E-
book feature is main feature in the e-reader market with offered than other vendors and also it
launched E-reader devices stores to customers who read and download electric book content
through these stores.

Secondary trend is short term that changes in price direction in medium trend such as Amazon, in
2007 the first generation Kindle launched in the market with the price about $400.00(USD) and
now next the price of generations of Amazon’s Kindle goes down such as Kindle 2 is $189.00
(USD) and Kindle 3 is $139.00 (USD) due to Kindle is not satisfy for almost customers. Thus,
Starlight Enterprises (SE) must meet customer for E-book products with full features. Beside, SE
have to make market research as getting survey, experiments or observation from the customers
to make the price of devices to fix with the price in the market. Also, SE research and develop
other model to fix the features which is mistake of first generation.

Finally, secular trend is known as long term trend last 5 to 25 years and contain of all series of
sequential primary trends. Amazon Kindle, in 2007, when first generation came, it sold out in five
hours and a haft with $400.00 USD and now it went down because in E-book market, other

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
vendors have appear with E-book readers models that are better than Kindle and cheaper. S E
does not go down, S E have to product E-book devices is better than other vendors for example for 4
SE’s devices’ operating system which customers can use Microsoft Windows, iOS, BlackBerry,
Mac OS X and Android. Moreover, S E’s devices can connect the internet anywhere with Wi-Fi
3G with its price is satisfied customers. Furthermore, the customers can search the information
internet and get software and E-books that they want with satisfied price.

Beside, a new technology matures so is the product or service that uses this technology. The
change that occurs during a technology life cycle has a unique reflection on the customers and so
on the product life cycle. In the early days of a new technology, early adopters and technology
enthusiasts drive a market since they demand just technology. This drive and demand is translated
as the introduction phase of a new product by many companies. As technology grows old,
customers become more conservative and demand quick solutions and convenience. In this case a
product usually enters in the realm of its growth and as time passes its maturity.

Fig. 2: Change in customers as technology matures (Source: Norman D.)

The “chasm” shown in the graph above depicts the difference between the early and late adopters.
Each needs different marketing strategies and each is translated to a product’s different phase of
its life cycle. One should note that the late adopters hold the greatest percentage of customers in a
market. This is why most products begin their life cycle as technology driven and change into
customer driven as time passes by.

A good example of this is the E-reader market. In one hand customers ask for ease of use,
convenience, short documentation and good design. On the other hand customers rush out to
purchase anything new regardless of its complexity. This is why companies in the computer

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
industry withdraw their products long before they reach their maturity phase. This is the moment
that a product reaches its peak i.e. the time that both early and late adopters buy the product. 5
Therefore, S E has to get survey from the customer and fix mistake model devices with the
research and development new software, new function to product other generation devices.

2.2 STRUCTURE IN THE E-READER MARKET

Market structure is the pattern or form or manner in which its different constituents as sellers and
buyers are linked together. There are four main features of the market-structure containing:

• The degree of seller’s concentration for example the number and size distribution of SE
producing a particular commodity or types of commodities in the market.

• The degree of buyer’s concentration such as the number and size distribution of buyers for
the commodities in the market.

• The degree of product differentiation as the difference in the products of different firm in
the market.

• The condition of entry to the market: this shows the relative ease with which new firms as
SE which is new firm can join the category of sellers as firms in the market.

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1

2.3 MARKET ATTRACTIVENESS 6

Market attractiveness replaces market growth as the dimension of the industry attractive and it
includes a broader range of factors other than just the market growth rate that can determine the
attractive of an industry. With many tools such as BCG matrix, five key force and McKinney
matrix are available to assess market attractiveness prior to entering a new product and market
development cycle. However, McKinney matrix is the best tools to determine the attractive of an
industry.

Business Strength

Fig 2: McKinsey Matrix - Market Attractiveness-Competitive-Position Portfolio

Strategies

The McKinsey Matrix is divided into nine cells - nine alternatives for positioning of strategic
Business unit strength (SBU). Based on the strength of the business and its market attractiveness
each product offering will have a different position in the matrix. Further, the market size and the
current sales will distinguish each SBU. Beside, Industry attractiveness and SBU strength are
calculated by first identifying the criteria for each, determining the value of each parameter in the

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
criteria, and multiplying that value by a weighting factor. The result is a quantitative measure of
industry attractiveness and the SBU’s relative performance in that industry. The industry 7
attractiveness index is made up of such factors as market size, market growth, industry profit
margin, amount of competition, the degree of seasonal and cyclical fluctuations in demand, and
industry cost structure. The industry attractiveness index consists of factors like relative market
share, price, competitiveness, product quality, customer and market knowledge, sales
effectiveness, and geographic advantages. The nine cells in the matrix can be grouped into three
major segments:

Invest/grow This is the best segment. Competition in the Australian E-Reader device industry
is massive. According to Louisa (Lousia, 2010), “The e-book market has shifted
dramatically since the Kindle first arrived here last year, with new devices being launched at
almost every conceivable price point.” And US researcher Forrester predicts that the next five
years will "see an explosion of the E-Reader textbook market". And from what we’ve already
discussed there is large amount of competitors emerged since the deregulation of E-Reader device
industry in Australia. Although with high set up, highly competition as well as the price-war
between competitors but with great in return as Australian is the niche market, is the reasons
explain why it is hard for them to exist the market. Thus, SE has to be strong to attract in the
market. SE should allocate resources in this business and focus on growing the business and
increase market share.

Selectivity/earning According to a result of Australian newspaper, monopoly brand as Apple’s

product is highly demand. As a result in the newspaper’s research shows that
in year 2010 that 93% of phones accessing into the internet in Australia was Apple phone and
providing wide range of stocks from difference suppliers are way of creating a bargain with the
suppliers (Gloria, 2010). For example, Optus are now providing many types of products such as
Apple Iphone, Ipad, many models of Nokia, Samsung, Sony Ericsson, Asus, HP, HTC, and
Blackberry. Therefore, if SE brand is not strong enough pursuing potential opportunities because
the market is strong. Decision makers should make judgment on how to further deal with these
SBUs. Some of them may consume too many resources and are not promising while others may
need additional resources and better strategy for growth.

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
Harvest/ divert This is the worst segment. With many reason such as the substitutes as laptop,
net-book, online books or even the original printed books can use as E-book 8
reader devices and other reason for example, customer who has low bargaining power. Australian
E-book Reader device industry is characterized by large amount of international and domestic
manufacturers and service providers. Customer in industry are very large in number, therefore the
cost of losing one customer are marginal. Customers in this industry are also subject to price and
value sensitive. The online booking system also has allowed customers to compare and contrast
the plans, device according to price, battery times and number of functions etc. If SE is weak, its
market is not attractive. Decision makers should consider either repositioning these SBUs into a
different market segment, develop better cost-effective offering, or get rid of these SBUs and
invest the resources into more promising and attractive SBUs.

2.4 SOCIAL & TECHNOLOGICAL DRIVERS

The Australian E-book reader devices industry has been operating in turbulent times. The first
devices were introduced to the market in 1998, just after the financial crisis in Asia Pacific region
in 1997 We also had the September 11th terrorism; severe acute respiratory syndrome (SARS),
H1N1 outbreaks in Asia followed by the Fijian political crisis in late 2005, World Financial Crisis
since 2007 and Australian Economic also facing the downturn with the high inflation rate as well
as high un-employment rate. Before 2002, the domestic market of e-book reader devices were
dominated by only a few players such as Nuvo Media Rocket eBook, RCA REB 1100 and 1200,
Microsoft IPM-NET My friend, Cytale Cybook, Palm Pilot PDA, etc, with new entrants Palm OS
Treo smart phone was entered in early 2002 and the first Blackberry in the same year, emerging in
niche markets. But major structural changes have occurred in the E-book reader device industry
with the first iPhone was released in 2007 and immediately created a shock where hundreds of
people were reported to have queued outside Optus retail stores days before the devices launch.
iPhone first generation was sold up to 6,124,000 units during it life cycle. It has created a new
revolution for the smart phone which should have touch screen; less indicate keypad, running
many applications, running multi tasks, and so on. Sophisticated technologies such as new and
improved iPhone 3G, 3Gs, and 4G as well as its rivalry like Nokia N97, Samsung Omina, HTC
Diamonds, Palm Pre, and Amazon Kindle, Kobo, Nook and iLiad eBook reader devices, iPad
Tablet PC were also introduced in the industry. Nevertheless, due to technical and other issues
some had failed in the market. In addition, Samsung's Q1 eventually found their way to the

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
market, but they were a bust, offering terrible battery life and costing more than $1,000, or
Microsoft Tablet XP Edition with the technology still hadn't caught up with the vision. 9

E-book reader device industry is also highly depending on the supply of the e-book titles as well
as the tax regulation as most of the devices are not produced in Australia. Moreover, pricing is
another problem with the industry. Most of the E-book reading devices are cost more than $200,
but only has one function of reading book. In accordance with international trend, there is the
demand on the hybrid technology which requires the devices are not only function as book reader
but also has combine PDA and tablet functions as faster processor, larger memory, better
resolution, touch screen, dialling function, SMS, MMS, Web surfing, Bluetooth connection
functions as well. Therefore, the hybrid technology will be the new trend of the industry with the
success of iPad is an example. Research shows that 93% of phone access to Internet is iPhone and
iPad. (Gloria, 2010)

Lastly, the social culture has changed also create a great impact into the industry. ABS 2009
shows that more than 72% of Australian can access to the internet. Another research shows that
43% of online Australians now own a Smartphone, over one quarter of social networkers (26%)
participated in mobile social networking in the past year and 66 % of mobile social networkers are
under 35 years of age (Heidiallen,2010).

Therefore, with the new trend in the industry, the producer needs to find ways to satisfy different
needs.

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
3 COMPETITOR ANALYSIS
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3.1 KOGAN TECHNOLOGY

After the success of Amazon Kindle on the hybrid technology ebook reader device industry,
Kogan Technology, a Melbourne based company has launched it product, Kogan 6 this year. To
gain the competitive advantage, Kogan also provides preloaded 1500 title free.

3.1.1 STRATEGIC CHOICES

3.1.1.1 Low cost strategy:

As the newest manufacture operates in the Australian ebook reader device industry, Kogan
Technology Australia has both opportunities and threats from its rivals as well as the strength and
the weakness from itself.

Kogan Technology Australia inherited the cultural experience from local customers, Tiger, and
wants to increase the total market size (number of customers), control operating costs of the
manufacturer. It will keep cost low by providing the basic function of the device, no internet
connection; therefore customers have to use usb to upload the books into device.
(Louisa,2010).Besides, by providing the basic functions of the device and not tie-up with any local
book retailers, Kogan can provide competitive price with it rivalry.

3.1.1.2 Customer services

Not only trying to reduce the operation cost, Kogan Australia also provides the high quality
customer services. For example, online stores, 1 year warranty, 7 days money back guarantee, free
postages, provide high quality product with long battery, slim and light weight, multi file format
supported, memory expandable, extra gift, give customers more choices such as color, title to
preloaded, delivery services, extra warranty. (Kogan Australia, 2010)

3.1.1.3 Marketing
However, with the limit of capital, Kogan Australia does not choose mass media as its main
marketing tool, but by focusing on customer referral to improve the image of the company at the
same time maintaining the low cost model. (Kogan, 2010)

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
3.1.2 MARKET SEGMENTICATION
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Kogan Australia has a difference customer target. It focuses on the low-price strategy with the
basic function provided in the device. Kogan is one of the cheapest ebook reader device 100
percent made in Australia, therefore, it has the major market share in the product under $190.

Overall, Kogan Australia will be the strong rival of Amazon Kindle and BeBook Mini/Neo as well
as the new comers Toshiba's Libretto, Samsung's e-reader device and Sony e-ink device on the
ebook reader device industry.

3.2 BEBOOK MINI/NEO

BeBook came to Australia in early 2010 are in strong strategic position compare to other ebook
reader device industry in Australia.

3.2.1 CUSTOMER NEEDS AND PRODUCT DIFFERENTIATION

BeBook provides high quality products, high quality services and provide a multi-function ebook
reader device. The BeBook Neo features a 6-inch e-Ink display offering eight shades of grey, and
is roughly the same dimensions and weight as Amazon's 6-inch Kindle. The e-Ink display only
chews through power when you turn the page, so the Neo's battery life is measured in days, as
opposed to hours for an LCD-based device such as Apple's iPad.

The Neo lacks the Kindle's built-in keyboard, instead relying on a five-way silver navigation
rocker which is surrounded by another four-way button. The outer ring features Prev and Next
buttons on the left and right, making it easy to hold the Neo in either hand and turn pages with
your thumb. The button makes a soft click which is far less distracting the Kindle's loud click.
Turning a page takes less than one second, during which the screen image inverts so it flashes
black. The Neo also utilises an onscreen keyboard operated with a stylus, which slips into the top
of the reader just like a PDA. Pressing the rocker's Go button while reading a book lets you enter a
page number and skip to it.

The Neo has a few key advantages over the Kindle. For starters it features built-in wifi, with a web
browser and the ability to download eBooks via the web. It also supports a wider range of formats
than the Kindle, including TXT, HTML, RTF and MOBI as well as DRM-protected ePub and
PDF files. The ability to adjust the font size on PDFs is particularly useful. The Neo also features
an SD card slot and USB port, which is handy because downloading books via the web is
cumbersome using the Neo and you're probably better off transferring them from your computer

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
(something I'll get back to later). You can use Adobe Digital Editions to transfer eBooks from
your computer to your eBook, or just drag and drop them. 12

While a stylus may seem passé, the Neo features Wacom tablet technology which allows you to
use the eBook reader as a note taker and sketchpad. It's not an iPad-esque touch screen which
works with your finger, you need to call upon the stylus. You can even write on an eBook book
using the stylus, which is useful if you're studying. The ability to listen to MP3 while you read is
also handy. To top things off, the Neo comes with a great leather case so you can easily slip it into
your bag without fear of scratching the screen.

3.2.2 MARKET SEGMENTATION

BeBook has focused on the customers who only demand on an ebook reader device only, not the
hybrid devices, however, their expectation of this level are very high with the carefully design,
light and easy to handle, larger screen with longer battery and glossy screen so the customers can
read at any aspect. This strategy allowed BeBook an opportunity to only focus on it range of
customer needs and wants, by offering high quality products and stylus .

3.2.3 IPAD AS A SEGMENT RIVAL

BeBook have introduced in Australia in early 2010 to counter the rise of iPad and other tablet PC
as Microsoft Tablet PC windows 7 Edition in domestic market. iPad was targeting customers who
after a hybrid, stylus, fashion, and highly functional demanded device. It gains competitive
advantage by the quality products, the number of application available, multi functions as well as
the customer services. Therefore, iPad has created a significant impact on the market as well as the
industry with 40,000 unit sold within the first month. (Stuart, 2010)

3.2.4 STRATEGIC CHOICES

BeBook, and other comers as Toshiba, Microsoft PC windows 7 Tablet edition device which
target the same market segment forced iPad to respond either by reducing prices to compete with
Kogan, Kindle, BeBook mini ( low-price focus) and other low cost product or by increasing costs
to compete with BeBook, Toshiba and Sony in the same market segmentation or giving up the
market and focus on the smart phone market share. This strategy, using two brands to target
different markets, aimed to close the gap at the lower end of the market and also to reduce the risk
of "cannibalization" of the industry

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
3.2.5 STRATEGIC POSITIONING
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BeBook mini is a product range of BeBook. It has the advantage of guidance and financial support
from BeBook, including manufacturing, design, parts, labours and finance.

3.2.6 SOURCES OF COMPETITIVE ADVANTAGE

Their investments in Innovation have led to increased Efficiency. Their new technology of
producing processors, parts, assembly lines will allow them a significant reduction in labour,
operation cost. Also by selling products by internet, BeBook can avoid the middle cost as well as
the faster customers respond. This will give BeBook cost advantage over competitors.

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1

14
4 CONCLUSION

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1
Recommendation
15

VO, Thi Thao Nguyen

ID Number: 114 06560
 MKT340 - Strategic Marketing Management
ASSIGNMENT 1

16
5 REFERENCE
Kim, W. Chan and Mauborgne, Renee; “Charting Your Company’s Future”; Harvard Business

Review; June 2002.

McKinley. Retrieve from 29/08/2010:

http://www.valuebasedmanagement.net/methods_ge_mckinsey.html

GE matrix. Retrieve from 29/08/2010: http://www.mrdashboard.com/GE_Matrix.html

Technical Analysis of Stock Trends, R.Edwards, J. McGee, WHC Bessetti, CRC Press, 2007, p.17

VO, Thi Thao Nguyen

ID Number: 114 06560