Barnes & Noble External Analysis

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Barnes & Noble
Interim Report

One of the most popular leisure activities in the world is reading.  The reading industry is a multi-billion dollar industry, and Barnes & Noble is no small player.  Primarily a retail business, New York-based Barnes & Noble has cemented themselves as a pillar of strength in the industry by operating over 1300 retail stores in the United States.  More recently, they have entered the technology field as the reading industry moved more towards digital media.  Currently, Barnes & Noble provides retail services on over 600 college campuses, and operates one of the world’s largest e-commerce web sites.  With their entry into digital media, Barnes & Noble has expanded its profitability by selling digital e-books to its customers, as well as traditional paperback, hard cover, textbooks, reference, fiction, and all other types of print media.  Barnes & Noble remains one of the literary industry’s top firms, and looks to continue this performance long into the digital age.

Opportunities & Threats
With competition on the rise, the retail book industry has gone through numerous changes over the years, creating few opportunities and more threats. New developments in technology in the past decade and more businesses expanding their product offering have created intense rivalry between on-line based organizations and storefront organizations. “Intense rivalry among established companies constitutes a strong threat to profitability.” (Hill & Jones, 2010). Organizations such as Amazon.com and Barnes & Noble not only compete with each other, but also must fight to gain market share over retail stores such as Wal-Mart and Sam’s Club.

This increase in rivalry within the industry has created an unstable market, and a threat by limiting the price an organization may charge. This enables organizations to drive out the competition by offering superior quality products at a lower price. As the retail book industry continues to see an increase in rivalry, price wars will continue, creating a threat to firms without an absolute cost advantage (ex. Amazon.com cutting costs by being strictly web-based), along with creating high barriers of entry. These threats will continue to remain within the industry creating multiple problems for both organizations trying to gain market share and those trying to enter the industry.

In addition to threats, opportunities are also being presented in the retail book industry. With technology successfully reducing the barriers of communication, an opportunity is created for organizations to expand their services to both storefront and web-based retail, This allows them to compete with much larger organizations which have an absolute cost advantage. Technological forces have had a profound impact on the social environment, which have shifted much of the world population to favor web-based purchases. These forces create an opportunity for both organizations within the industry, as well as to new entrants by allowing them access to customers they would otherwise not have.

Overall, the retail book industry is not an attractive industry for new entrants due to the intense rivalry among established organizations, in addition to those organizations who have gained cost advantages. Organizations within the industry must adapt to the changing environment by slashing prices, along with developing on-line based stores in order to increase market share in a much broader, more competitive global marketplace. They must develop new innovative ideas if they want to stay ahead of the competition and gain a competitive advantage, along with decreasing the chance of threats.

Rivalry
Rivalry is a very strong force for Barnes & Noble. Some of the major rivals include Amazon, Kindle, Sony and even Apple. Amazon.com has the Amazon Marketplace that allows other stores and individuals to sell new and pre-owned books on their site. These...
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