Professor: Simon Dekker
Student: Yanhui Zheng
Student ID: 021244231
Date: 02- -2010
Borders Group Inc. is one of leading and well-known retailers of books, CD, and other educational items. Its idea is “To create richer, more satisfying lives through knowledge and entertainment.” In order to accomplish its mission, Borders provide additional services to make its customer enjoy spending in the store. Borders’ store is not just a bookstore that people go in, buy books, and leave. More likely, it is a place that people can relax and learn knowledge at the same time. Despite the stores throughout nationwide, Borders also has stores in Australia, Malaysia, New Zealand, Oman, Singapore, and United Arab Emirates, and in total approximate 600 stores. Its headquarter is located in Ann Arbor, Michigan. Borders Group Inc.’s history can be traced by two brands: Borders and Waldenbooks. Lawernce Hoyt ran a rent library in 1933. Later in 1962, Hoyt opened first independent bookstore named Walden Book Store. In 1971, an 800-square-foot used bookstore named Borders Book shop was opened. In 1984, Waldenbooks was purchased by Kmart Corporation, and in 1992 Kmart Corporation also merged Borders and named them as Borders-Walden Group. Three years later, it was renamed as Borders Group Inc., and moved headquarter to Ann Arbor. Recent years, Borders can not compete with online sellers, especially Amazon.com. It starts to lose business, and has to close stores in order to cut its expenses. Now, it is close to bankruptcy, and is preparing the files. As-is Condition
According to Moneycentral.com, from 2001 to 2006, Border Group Inc. made approximate 100 million dollars every year. Later it started to lose money. In year 2009 and 2010, it boomingly lost 184.7 and 110.2 million dollars. Borders as a leading traditional bookstore, its experience is a live example that shows the industry life cycle for the tradition bookstore industry. Following char illustrates the whole process. Chart1: Traditional Bookstore Industry Life Cycle
Combining the Borders’ financial statements, it shows that during maturity period, Borders made a lot profit. Later on, because of the new technology, the way to sell books and other related items is changed. Compared with the online sales, the traditional bookstore is getting out of fashion, and the whole industry is going to the decline period, or even phase-out period. Within this period, Borders started to lose business, and now can not even operate normally. Borders can not disobey the industry life cycle, it has to close its business or follow the new technology. Actually, Borders has already taken some actions. News form internetretaler.com, on August 1, 2010, CEO Mike Edwards announced that Borders was trying to open an e-books store with 1.5 million titles, and also provided 38 million loyalty program members incentives. The goal was that by this time next year, it would take 17 percentages of online market. Unfortunately, Borders did not recognize the potential of online sales at the first place. By the same time, its biggest online competitor Amazon has already taken 90% market share. Following char is used to illustrate the situation. Chart 2: The Impact of Speed to Market on Sales
According to Moneycentral.com, in 2003 Amazon.com broke even and made 35.28 million dollars of net income. After that it started to grow dramatically, by the end of 2010, the income went up to1,152 million dollars. Amazon took advantage of new technology, and made an early entrant to the new market. When the market was mutual, it already owned 90% market share before some other competitors realized the new trend, such as Borders, Apple and Google. (http://www.dailyfinance.com/) Due to late entrant, Borders is facing great challenge. To sum up, new technology forces traditional bookstores lose competitions. On the other hand, Borders missed the early entrant, and it is very difficult for...