Case Study of “Bookoff, Amazon Japan, and the Japanese Retail Bookselling Industry” 1. The reasons for the profitability of large Japanese retail booksellers relatively poor and their scale relatively small. One reason for this is that there is no significant industry consolidation has occurred, so there is no dominant bookseller, because there is a unique formal institution which is price-fixing system that makes it illegal for larger and potentially more efficient competitors to use price competition to drive out small competitors. Laws have allowed publishers to fix the price of new books, music, and newspapers in the bookselling industry, this means retailers are unable to compete on price. For a long time, sales has been in stagnation, even worse, the steady increase of costs over time has reduced the profitability of both large chains and small stores. Also because of the undifferentiated book in multiple book stores, the only way to compete is on price, but this is illegal, and also the entry to this industry is low, small entrants can enter this industry easily ,this lead to the scale relatively small. 2. The benefits for individual companies and the industry to participate in Saihan system and the costs. Under Saihan system, for individual companies, they sell books, musics, magazines at fixed price, the competition is not fierce and they can almost earn average profit of this industry, because there is no need to compete on price, this can make them more cautious of their diversity of products, so they would provide as more product as they can, which could increase customer loyalty if customers could always find what they want. Another benefit is that Saihan system encourages new tittles to publish, this enables individual company to bring many new books in their stores to attract customer. While the costs of this system for individual companies are becoming bigger, they have to spend large amount of money to process the new titles while they are making less profit on them. Because of fixed price, all the stores are providing undifferentiated books and also the less competition makes individual companies much less efficient. As the industry is under price fixing system, first benefit is that this system combined with Consignment sale system which allows retailers and wholesalers to return unsold books to the publisher free of charge, leading publishers and wholesalers prefer to supply larger retailers first, which drives small retailers out of business. Another benefit is that this system maintains market stability, the price is not volatile and the industry can grow steadily. On the other hand, costs are, as the industry entry is not high, many small book stores being set up in Japan, with the large number of stores, every company is earning lower profit but they can not compete on price. Because of the rigidity of price, customer would like to buy cheaper imported books and CDs and also buy second-hand books, online books, and also rental books instead of buying a new book, these substitutes are now threatening the industry and also hamper the growth of the industry. 3. Industry-, resource-, and institutional based views to explain the success of Bookoff and Amazon Japan. • Industry-based view
From industry-based view, rivalry among competitor in Japanese industry is characterized by large numbers of relatively small booksellers, as they are all selling products at the same prices, the rivals in the industry are similar in size, influence and product offering, so the competition with this saturated industry is vigorous. As the entry barriers of this industry is relatively low, some incumbents enjoys economies of scales, only large retailers are earning higher profits, small operations are being driven out of this industry, the profitability of the industry is not so attractive, so, potential entrants are few. In the area of book distribution channel, the competition is very low, as Nippon Shuppan Hanbai and...
References: 1. Peng, M (2009) Bookoff, Amazon, and the Japanese retail bookselling industy, Global Strategy, 2e, 387-395.
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