Barnes & Noble
City University May 2013
Barnes & Noble is the largest retailer of books in the United States. They operate nearly 700 stores in all 50 states (barnesandnobleinc.com). Having the most bookstores in the United States was a competitive advantage for Barnes & Noble in the past. With the rise of Internet and e-book technology Barnes & Noble has had to change its business model. In this case study I will use Porter’s Competitive Forces and Value Chain models to analyze how these technologies have affected Barnes & Noble and its competitors. I will also write about how Barnes & Noble is changing its business model to compete in a changing industry. Lastly I will at Barnes & Noble’s new strategy and if it has been and will be successful. The internet and e-book technology has changed the way that Barnes & Noble, its competitors and book publishers conduct their respective businesses. Using the Porter’s Competitive Forces model and Value Chain model it is easier to understand how and why that has happened. The competitive forces model is “used to describe the interaction of external influences, specifically threats and opportunities, that affect an organization’s strategy and ability to compete.” (Laudon & Laudon p. G2). The model describes a company’s business environment. Porter uses five competitive forces that help describe the business environment for a company. The internet and e-book technology can be found effecting the business environment in these five forces. The first force is Traditional Competitors. Barnes & Noble’s competitors are competing for market share. Market share can be gained by the development of new products that help build the brand of the company. The internet has helped Barnes & Noble as well as its competitors develop new products and services. Laudon & Laudon write, “In a sense the internet is ‘transforming’ entire industries, forcing firms to change how they do business.” (p. 101). Before the rise of the internet and e-book technology Barnes & Noble was able to use their size and influence on book publishers to keep costs low and gain market share. Other companies in the industry have used the internet and e-book technology to gain market share. This has forced Barnes & Noble to change its business model. Laudon & Laudon write, “Booksellers were one of the many industries disrupted by the internet and, more specifically, the rise of e-books and e-readers. B&N hopes to change its business model to adapt to this new environment before it suffers a similar fate as many of its competitors, like Borders, B. Dalton, and Crown Books.” (p. 117). The impact of losing market share has caused Barnes & Noble to focus more on new technology to develop new products and business strategies. Another force in Porter’s competitive forces model that shows the impact of the internet and e-book technology is the force of Substitute Products and Services. The internet and e-book technology have become a substitute for traditional brick and mortar book stores that sell hard copy books. Laudon & Laudon describe the effect of technology has by writing; “New technologies create new substitutes all the time. The more substitute products and services in your industry, the less you can control pricing and the lower your profit margins.” (p. 95). Barnes & Noble used their size to gain a pricing advantage but with more substitute products becoming available because of the internet, they are not able to control the pricing and they are losing profits. With more substitute products available “more than ever, consumers are reading books on electronic gadgets—e-readers, iPods, tablets, and PCs—instead of physical books.” (p. 117). The internet and e-book technology has provided more substitutes and changed the way consumers are purchasing books. The new technology has provided a...