OM in the News: The Making of Amazon’s Kindle Fire

The Wall Street Journal (Nov.18, 2011) has an interesting  article on the manufacture  of Amazon’s new Kindle Fire, and asks: “Is the company making any money on the $199 device”?  Two research firms that follow Apple’s production closely come up with different answers. UBM TechInsights says Amazon pays $143 for the components in the Fire.  ISuppli estimates the cost to be $203. The main difference is in the price of the 7 inch display and touch-screen assembly, which UBM puts at $50, but which ISuppli estimates to be $87.

Both firms agree that Amazon used a lot of techniques to save costs. The box the Fire comes in is the same one used to package the Fire for other retailers like Best Buy. The only accessory inside is a wall charger and cord. “Amazon’s approach was to take out everything they didn’t need”, says iSuppli.

I like this product for class discussion because its one the students care about, yet likely have very little knowledge about its inner workings.

Discussion questions:

1. Why do firms, such as iSuppli and UBM, analyze  products like the Kindle so closely?

2. Why does Amazon view the manufacturing process and component costs as a trade secret?