Analyse external failure causes including market conditions, competition, economic change, exchange rates, interest rates, regulation, suppliers and natural events.
Sources for use with
Extract E
Amazon to close China Kindle store
Amazon will close its Chinese e-book store in 2023, the latest retreat of western technology companies reducing their operations in the world’s largest consumer market. Airbnb said it would close its China business and Microsoft’s LinkedIn announced the closure of its social networking site in the country in 2022. Kindle users in China will no longer be able to purchase new e-books following the closure. Amazon said that it had stopped supplying dealers with Kindle e-books and offered a refund for customers who purchased a device in 2022. Amazon did not give a reason for leaving the Chinese market, which was once an important source of sales. In 2016, three years after Amazon started selling its devices in China, the country became the largest market for Kindle devices. It has since lost market share to domestic rivals that launched their own e-reader devices, including Xiaomi, iFlytek and Huawei. Amazon will leave behind a growing customer base of digital book lovers. According to research, more than 500 million Chinese users listened to or read books on a digital device in 2021. China’s digital reading market generated more than $6bn of sales revenue in 2021, an increase of more than 18% from 2020.
Extract F
How the Kindle lost China
Reactions to the announcement that Amazon Kindle is to leave China have ranged from indifference to confusion. Many joked that they only learned the Kindle e-reader was for sale in China by reading Amazon’s leaving notice. However, for many Chinese, the Kindle was the introduction to the world of e-books. One of the platform’s key selling points in the early days was Amazon’s good relationship with Chinese publishing houses, such as the CITIC Press Group and Commercial Press. With its industry-leading hardware, good service, and publisher support, the Kindle seemed likely to succeed in China but Amazon was never able to build on its early lead. The Kindle did not suddenly fail in China but declined slowly over 10 years. As the Chinese e-book market changed and evolved, the Kindle did not. The Kindle remains an excellent e-reader but the Chinese market is highly competitive and saturated with niche brands. The competition includes desktop-sized screens, lightweight, iPhone-sized e-readers, and even colour e-ink screens for reading comics. The Kindle neglected online fiction, with popular titles such as the ‘Harry Potter’ series either incomplete or missing altogether. Support from Amazon is poor and the Kindle also failed to win over price-sensitive readers. Unlike in the US, print books in China are often cheap and easy to order online, leaving retail e-books with limited price advantages.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of the
points that candidates may make but this does not imply that any of these must
be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- Internal causes of business failure include poor cash flow management,
overestimation of sales, poor marketing and poor quality
- Amazon may have overestimated sales of its Kindle in China following
the country becoming its market leader three years after launching there
- As a result, Amazon may have been complacent about developing the
product, failing to offer enough support to Kindle users or to introduce
new e-books such as online fiction, including the Harry Potter range
- Although quality of the e-reader is not seen to be a problem, failure to
develop the Kindle with e.g. desktop-sized screens or colour ink may
partially have led to the failure in China
- Amazon did not meet the needs of its customers because it did not adapt
the Kindle to suit the needs of Chinese consumers
- More than 500 million Chinese users listened to or read eBooks in 2021
and the number of customers is growing, meaning Amazon's problems in
China are not due to a lack of demand for e-readers and e-books
- Jokes were made about not knowing the Amazon Kindle was for sale in
China. This shows that marketing was not always effective in making
consumers aware of the product
- Therefore, internal causes may have been more to blame for the failure
of the Amazon Kindle in the Chinese market
- External causes of business failure include market conditions,
competition, supplier problems and government regulation
- Market conditions have led to a number of western technology companies
reducing operations or leaving the Chinese consumer market
- These include businesses in other types of market, such as Airbnb and
Microsoft, that have left or reduced operations in China recently
- Domestic businesses in China, such as iFlytek and Huawei have taken
market share from Amazon meaning competition may have been a major
factor in the Kindle being withdrawn
- However, an 18% increase in sales revenue in a year to $6bn in 2021,
means even a lower market share may still have been a significant
revenue for Amazon
- Additionally, the highly competitive Chinese market means competing
with traditional print books, which are price-competitive with e-books
- Amazon had a good relationship with the publishers CITIC Press Group
and Commercial Press, meaning supplier problems were not likely to
have been a cause of the business failure in China
- Consumer trends change over time meaning businesses need to adapt
their products to meet the changing needs or they may risk failure. This
could be seen as both an internal and an external cause of failure for Amazon
- Overall, a combination of internal and external causes could be seen to
have resulted in the withdrawal of the Kindle
- Several external causes are apparent but perhaps internal action could
have lessened their impact, preventing the business failure of the Amazon Kindle in China
| Level | Mark | Descriptor |
|---|---|---|
| 0 | No rewardable material. | |
| Level 1 | 1-4 | Isolated elements of knowledge and understanding. Weak or no relevant application of business examples. An argument may be attempted, but will be generic and fail to connect causes and/or consequences. |
| Level 2 | 5-8 | Elements of knowledge and understanding, which are applied to the business example. Arguments and chains of reasoning are presented but connections between causes and/or consequences are incomplete. Attempts to address the question. A comparison or judgement may be attempted but it will not successfully show an awareness of the key features of business behaviour or business situation. |
| Level 3 | 9-14 | Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Uses developed chains of reasoning, so that causes and/or consequences are complete, showing an understanding of the question. Arguments are well developed. Quantitative and/or qualitative information is introduced in an attempt to support judgements, a partial awareness of the validity and/or significance of competing arguments and may lead to a conclusion. |
| Level 4 | 15-20 | Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Uses well-developed and logical, coherent chains of reasoning, showing a range of cause and/or effect(s). Arguments are fully developed. Quantitative and/or qualitative information is/are used well to support judgements. A full awareness of the validity and significance of competing arguments/factors, leading to balanced comparisons, judgements and an effective conclusion that proposes a solution and/or recommendations. |