Business Problem

Business Problem Paper

University of Phoenix

MBA 510 – W6

Instructor: Mike McEuen

May 28, 2008

Business Problem Paper

The Amazon Kindle is a wireless, “convenient, and portable reading device with the ability to download books, blogs, magazines and newspapers” from almost anywhere in the United States (Amazon, 2008). Michael Lewis, the author of Moneyball and Liar’s Poker predicts, “this (the Amazon Kindle) is the future of book reading. It will be everywhere.” (Amazon, 2008). This report will determine whether the current $399.00 price tag is reasonable to successfully support and sustain the sale of the Kindle. It will clearly define the dependent and independent variables of the study, state the null and alternative hypotheses, and the methodology used to test the hypotheses. It will compute the sample size required which will provide clear support for the criteria used. The samples that are selected and produced are described, including the methodology used to collect the data and a description of the survey instruments. A final recommendation is offered regarding whether the Kindle is a good buy at $399, or if Amazon needs to alter the price or product.

What is the Amazon Kindle?

The Kindle is Amazons version of an eBook reader. It has been in the making for three years, first offered to the public in November 2007. It uses eInk, a screen that offers non-glare viewing, and no backlighting which mimics a traditional paper publication feel. Using Whispernet technology and the Sprint network, the Kindle uses wireless access at no cost to the consumer. It offers over 120,000 eBooks that range from $.25 to $2,386.80, with the average eBook costing $9.99. There are 10 national newspapers available for a monthly fee of $5.99 to $13.99 (for the New York Times), as well as 333 blogs, and 15 magazines. See Table 2 for a list of specifics. The Kindle has a QWERTY thumb-keyboard on the top, and holds like a folded book. Other interesting features include the long battery life, adjustable reading fonts, the ability to holds more than 200 titles at a time, and it only weighs 10.3 ounces (Amazon, 2008).

Independent Variables

Independent variables are the presumed cause, stimulus, “predicted from…” manipulations, and predictors (Cooper, 2003). The focus group for this study was interested in the relationships between the independent and dependent variables. The primary independent variable for this study was consumer age. Age seems to indicate other independent variables, such as income levels, available disposable income, and the current interest level. For example, the $399 price plus monthly subscription fee could be perceived as high to some consumers with limited incomes, such as students, or lower income families. On the other hand, for avid readers the price may be justifiable for their budgets. In the eBook market, the Kindle’s price is comparable to its competition, particularly considering the features it offers. For example, the Pepper Pad 3 is currently selling for $659, while the Nokia N810 Portable Internet Tablet and Cybook Gen3 readers’ sale for $397 and $449 respectively (Amazon, 2008). See Table 2 for a list of the current competition. Other independent variables to consider are gender, location and occupation. One important independent variable is the wireless availability of the Kindle. Amazon offers wireless access via their optimized technology called Whispernet in conjunction with Sprint’s national high-speed (EVDO) data network. This allows the user wireless access to search, download, and read on the go (Amazon, 2008). This means the Kindle is currently only available in the United States excluding Alaska and Montana. There are “dead spots” throughout the country which limit Whispernet access; however, coverage near all major cities is excellent.

Amazon has the opportunity to control a key independent variable, the sales promotions for the Kindle. Since Amazon owns the Kindle technology and design, it has the latitude to advertise the product on its website. Consumers who visit the website will find the Kindle front and center with a link to more detailed information. Further, there is a FAQ page, and feedback page on the website for Kindle aficionados to gather or share information.

Dependent Variables

The dependent variable is a “variable whose value is the result or is a function of the control or independent variables”