Analyzing The Competitive Advantage Of Barnes And Noble Using Porter

Analyze the sector in which the Company Operates.What are its competitive advantages? We have to use Micheal Porter Model.

International business contains all the commercial transactions which take plays between two or more cultures, ethics, and countries beyond their political boundaries. In terms of definition, it is all those business activities that contain the cross-border trades of goods, services, and the possessions among two or more nations. As international business is about transporting the goods and services to another country, it helps in earning foreign exchange. It helps in the optimum utilisation of resources as it creates goods on a large scale of the international market.

This study will outline the international business strategy of Barnes and Noble, which is the world’s largest bookseller and chief retailer of content, digital media and educational products. The stated establishment functions more than 630 stores and 50 states and offers premier e-commerce websites and also offers a line-up of popular NOOK tablets and eReaders. This study will analyse the sector in which company operates and will use the Porter’s Model for its competitive advantage. The strategies of the company will also be outlined by using PESTEL analysis. Furthermore, the study will highlight the company’s international strategy by using transformative business models. At last, the study will portray the six features of transformative business model.      

Barnes and Noble Inc., is the world’s largest bookseller and leading retailer of content, digital media and educational products (Barnes & Noble, Inc, 2003). The stated company operates more than 630 stores and 50 states and offers premier e-commerce websites and also offers a line-up of popular NOOK tablets and eReaders. Barnes & Noble is a fortune 500 listed companies and has the largest number of retail outlets in United States. The organisation mainly operates through its Barnes & Noble Booksellers chain of bookstores. The business’s stores are open seven days a week and with an average of 26,000 square feet, it features the best service, depth of selection and confortable locations ("Barnes & Noble, Inc.", 2014). It also offers its customers with delicious food and beverages so that customers can enjoy their time.  

Barnes & Noble mission statement is to drive the best Omni-channel speciality trade in America in order to benefit both its consumers and booksellers to reach their ambitions while being a credit to the societies or societies they serve. As the booksellers, the company is ascertained to be the very best in the trade, irrespective of the size or business of its participants ("Barnes & Noble, Inc.", 2014). The company expect to be a credit to the society it serves, to be a valuable resource towards the customers it serves and to be a place where its devoted booksellers could grow and flourish.     

Mission Statement

New entrants- The discovery of digitalization and the devices that everyone can get in their phone like reading material rather than having a physical copy of it, has appeared to be an occurrence of new entries in the market. New entrants like, the kindle and ipad are the two devices that conducts vast population of buyers (Mick, 2012). And the device like the Android tablet is also entered as a new entrant in the market and gives high competitive challenges to Barnes and Noble.

Bargaining strength of customers- Barnes and Noble is considered as the specialty markets that’s gives vast ranges of products in bricks and mortar segment. The market is basically relies on how much money customers have left after purchasing requirements and demands (Mick, 2012). The company is now facing recession so the customer contribution has now become scarce when it comes to purchase the products as they are continuously shifting towards eBooks which are cheaper in costs.

Bargaining strength of suppliers- Barnes and Noble basically does not have strict safety and safeguard when it comes to good on which the company rely on suppliers like the services, contents, product availability, certain payment and the credit limit extensions. There is even no guarantee of the long term relationship developed among Barnes and Noble and the suppliers. Because of this company can be at a huge risk (Modi, Durkin, Kass & Ulin, 2017). If many of these suppliers have to stop selling the products to the company when they required for carry on sales then constant services can be maintained. Almost 50% of their purchased products value comes from Barnes and Noble’s five main suppliers.

Substitute threats- rather than visit to book stores or shops, consumers can even visit to the other firm which provides their preferred books at a rate of 50% off price cut. This involves firms like Amazon and Walmart. The company is even threatened by these two companies which is another way of getting books because of them they have quite less pricing strength for controlling it (Modi, Durkin, Kass & Ulin, 2017). The company also experiencing a same kind of substitute threats when it comes to its Kindle electronic reader and also the digital devices.

Competitors- Barnes and Noble and its rivalries are combating to be in the top in terms of source of getting reading materials. There are mainly two competitors groups which pretense a threat against Barnes and Noble. These two groups are specialty shops and bookshops. Bookshops which compete with Barnes and Noble are mainly Books-A-Million Borders. The company has even exceeds these bookshops and congealed themselves as the top book store in the country. Specialty shops which are competing with Barnes and Noble are mainly Walmart, Costco and Amazon (Phillips, Henry & Der Wal, 2007). The company is even not congealed as large of a market position when it comes to this retailers group. This is because of conducting less pricing strength unlike the specialty shops that are popular for giving discount price which many firms would struggle to compete.

Porter’s Five Forces

Political- E-commerce, Internet taxation, government reserves in ICT.

Economic- Adverse economic downturn, Economic growth in China and India, money fluctuations (Svensson & Wagner, 2011)

Social- online and social networking, ethical and religious issues, exaggeration and centralization

Technological- Three dimensional books tech, virtual libraries boom, e-book wars

Environmental- People are now more concern about ecological friendly issue and thus shifting towards eBook, more and more campaigns for green printing or eco printing for utilisation of recycle paper printing.

Legal- Law for protection of copyright of books are in favour of booksellers, product labelling and consumer rights and laws  

The strategy of Barnes and Noble is getting better. But there are still many issues to handle for the largest bricks-and-mortar book retailer as it battles with its largest rival Amazon for the minds, hearts and wallet of the readers (Best, Zeigler, Smith, Whitley & Cornwell, 2010). Barnes & Noble wants to become more than just books. It is evident that people always have a soft spot for the physical books. With rise in the Amazon and losses from the company’s Nook e-reader division and closing of many stores, Barnes & Noble has surely something to worry about. According to Mr Boire, CEO of Barnes & Noble, there is lot of opportunity for the brand as everything that company does fits the brand. For its expansion, the stated company is probing for the ways to enhance the foot traffic and to initiate the sales (Best, Zeigler, Smith, Whitley & Cornwell, 2010). For Barnes & Noble, the main problems in its international strategy are the pressures on the bricks and mortar retail business, fierce competition from Amazon and others and lack of international foothold. With rivals like Amazon, Apple, Google, the completion for the company’s device Nook is not getting easier. But the stated company could increase its international business.    

The management of Barnes and Noble have to make a difference abroad. The company have to be a content company and it would have to scale up across nations as it cannot rely on the physical locations. Barnes and Noble have to sell tons of Nooks in other countries and it has to be done quickly. Barnes & Noble should also aggressively look for partners across the international markets. Another benefit for the company is its deal with Microsoft for its international expansion ("Barnes & Noble, Inc.", 2014). The company also have opportunity from the falling of e-book sales and stability of print could reverse and help the customers to get back towards the brick and mortar bookstores.  

PESTEL Analysis

Business model can be defined as the theoretical tool that contains set of substances, concepts and their dealings with the purpose to portray the commercial idea of a precise establishment. A business model can be referred as an effort by a firm’s organization to define the value that commerce could offer to one or more consumers or one or more marketplaces (Fehrman, 2015). It is also the explanation of a way in which a firm need to be considered to configure its resources to deliver its value. There are four main elements of a business model. These elements are described below:

Figure 1: Elements of Business model

Source: (Gorissen, Vrancken & Manshoven, 2016)

Customer Value Proposition

This element is the means by which a business enterprise has achieved to arrange its capitals in order to offer values to its customers in a methodical and maintainable manner. This element usually includes the capability offer products and services which are either dissimilar due to innovation and vale addition and delivering it in a much lower costs than the rivals (Bilton & Cummings, 2010). Barnes & Noble could start the customer value preposition by dividing its customers into some logical elements which are based on the things such as level of expenditure per purchase, buying behaviour, and industry sector. Once Barnes & Noble identifies its customers, the company would manage to learn on how to satisfy its all segments.   

Profit Formula

Profit model is the second element of the business model. This element describes to the procedure utilised by a business firm that recognises how it will create or produce revenues for its shareholders while offering value to the customers at the same time. One of the important characteristics of profit formula is the revenue model (Fehrman, 2015). The revenue model defines what price an organisation should charge to a given quantity of sales for covering the overhead and fixed costs and to achieve the profit margins. Barnes & Noble while considering its profit formula must recognise the revenue that could be produced for each of its product or market area and must also identify what fixed and variables cost it will incur while producing the sales.  

Resources

The third division of a business model is related to the key possessions which are acquired by a business firm to deliver the customer value preposition. The resources mainly include the equipment’s, funding, people, services and amenities required to manufacture the products and to deliver the services. While recognising the resources, Barnes & Noble must consider its core competencies and what alliances and partnership they should form. The stated firm must list all the services, aptitudes and resources that it needs to deliver its customer value preposition to the customers and the market sectors.  

Procedures

The fourth element of a business model is related to the key procedures that a industry firm must follow to transport its customer value preposition. Such procedures need to be embedded in the firm’s administrative and operational systems. Barnes & Noble in order to address the procedures in its operations must draw a list of the types of customer relationship it needs to develop with each target market segment. As for illustration, some customers of Barnes & Noble may want to take a specific book on rent or some want an online version of a book. A survey of the key customers and their feedback will surely help the Barnes and Noble business strategy and will also help the company in finding the gaps and the steps to improve it.       

For Barnes & Noble, the overall aim of the company will be to identify the target customers’ needs and then configuring the company’s resources and procedures to offer its customer value preposition in a consistent and sustainable manner.

In the success of a business, the core element in it is the effective matching of the novel technologies towards the need of the customers by a compelling commercial offering. People subordinate a business alteration through the acceptance of the new knowledge, but it surely doesn’t transform an industry of its own. Transformative business model is about linking the new technology with the emerging needs of the market (Gorissen, Vrancken & Manshoven, 2016). Just implementing the technology surely doesn’t create success in Barnes & Noble but depends on how the company executed it and linked it with the market trends. It is important to have to be meeting as these are non-static over time.     

Figure 2 Link between Technology and Market

Source: (Kavadias & Ladas, 2015)

From the above diagram, it can clearly identify that the dynamics of biological fitness recognises the dynamics of business innovation. It happen when the unpredictable experiments around new technologies match the changing demands or requirements of the customers markets (Svensson & Wagner, 2011). Thus the important features of transformational innovations happen over the industries as a result of broad technological trends. Here are the features that create a business model transformative:

Personalised products or service

There are many new models that propose products and services which are developed healthier than the customer’s individual needs and requirements. For gaining the competitive prices, organisations often influence technology (Gorissen, Vrancken & Manshoven, 2016). Personalised products or service develops successful matching due to enhancement in the variations in the customer’s preferences. The amount of data collected through the emerging technological trends permits to customize the solutions to the need of a particular individual. As for illustration, the advertising made by Barnes & Noble tries to grab the customers for their needs. Organisations could practise cost-effective one to one customers for the concept of personalisation as it quickly assimilating the online marketing mix. 

A closed loop process

This feature is about the products that are made, used and then disposed of. This model replaces a linear consumption process which is used when the merchandises are recycled. This shift decreases the general resource costs (Gupta, 2004). The emerging prices of many commodity materials and its consequences effectuate an indirect constraint for the design and development of any new offering. The concept of a closed loop process is challenging the traditional model where the products were produced, consumed and then discarded. In the current business context, the procedure of recycling is something that benefits both organisation and customers. 

Asset Sharing

Asset sharing is another feature in transformative business model which is driven by the rising costs of commodities and also of the transportation and labour costs with the effective utilisation of the assets (Gupta, 2004). These kind of innovations success as it enables companies like Barnes & Noble to share the cost of costly assets. Barnes & Noble could also divides the shares of costly assets with booksellers in the same way in which Uber shares assets with the car owners. With shared assets, there will be decrease in the total cost of ownership which is very significant during the rising cost of commodities.

Usage based pricing

There are many industries in which there are shared ownership and are accompanied by time or volume driven pricing agreements. Shared utilisation enhanced for such revenue generating mechanisms. This feature charge customers when they use the product or service rather than purchasing them (Kavadias & Ladas, 2015). It is certain that there are books which are very costly; in that case, Barnes & Noble could implement the strategy of charging customers according to the usage of books. Customers benefit from this approach as they incur costs which are only for generating value and company benefits as the customer’s number will surely grow.

More collaborative ecosystem

In the current business context, the importance of collaboration has enhanced. The emerging constraining landscape in respect to costs but also increase in the demand volume on global basis develops a complicated and uncertain value chains. When e-commerce re-shaped the industry, the barriers in entering in to a new market were very high (Kavadias & Ladas, 2015). Barnes & Noble was able to keep the new entrants out of competition with the help of aggressive price tactics and unbeatable inventory. The stated firm enhances its collaboration with its supply chain partners and helps to allocate the business risks.

An agile and adaptive organisation

New technologies permit access to a gathering of statistics that incline to be discrete among dissimilar stakeholders of an establishment. It is evident that innovators sometimes develop and use technology that move away from the traditional hierarchical models of decision making to make better conclusions which reflects the marketplace trends (Kavadias & Ladas, 2015). Barnes & Noble can reduce the product cycle by considering the purchaser’s feedback and that could be a successful innovation for the company.  

All these features stated above are knotted to long-term trends in both technology and request. Many companies are recognising the new decentralised forms of innovation in order to become more flexible and also to investigate the market potentials in the new product and services. The six keys of innovation advocate the six matching patterns between the trends in technology and market needs that occur with transformative business model.

Conclusion

It has been found in the study that business model can be labelled as the theoretical tool that contains set of substances, concepts and their relations with the objective to portray the commerce idea of a specific establishment. A business model can be referred as an attempt by a firm’s management to label the value that a trade could offer to one or more consumers or one or more marketplaces. The study identified that for Barnes & Noble, the overall aim of the company will be to identify the target customers’ needs and then configuring the company’s resources and procedures to offer its customer value preposition in a consistent and sustainable manner.

References

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Mick, D. (2012). Transformative consumer research for personal and collective well-being. New York: Routledge.

Modi, T., Durkin, M., Kass, C., & Ulin, M. (2017). Strategic Audit: Barnes & Noble. Strategic And International Management. Retrieved from https://teknirvana.com/documents/BarnesAndNoble.pdf

Phillips, H., Henry, A., & Der Wal, C. (2007). STRATEGIC REPORT FOR Barnes & Noble, Inc. Retrieved from https://economics-files.pomona.edu/jlikens/seniorseminars/gotham2007/reports/bn.pdf

Svensson, G., & Wagner, B. (2011). Sustainable Business Models. Bradford: Emerald Group Pub.