Barnes and Noble operates a large chain of bookstores and as a matter of fact it is the biggest book retailer. It has concentrated its operations in the USA through its Barnes & Noble booksellers (Tavani, 2010, p. 16). The company is mostly known for its discounts on bestsellers and large bookstore outlets. In addition, its stores sell a variety of newspapers, games, music etc. Its other well renowned products include Barnsie (a teddy bear) and Barnes and Noble Nook. As a matter of fact, it has 636 college bookstores and 717 stores.
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The bookstores and booksellers industry has a lot of competition. Competition has been enhanced by advancement in technology. In this case, more book sales are being done online. This explains why Barnes and Noble has developed Barnes and Noble Nook, a brand of electronic book readers. The company’s Nook faces stiff competition from Sony Reader and Amazon Kindle (Tavani, 2010, p. 13). Therefore, the five forces model can be used to assess the competitive threats to Barnes and Noble.
This is because there are various forces that determine the attractiveness of the market and its competitive intensity (Ketchen and Eisner, 2009, p. 36). The five forces model was advanced by Michael E Porter (Porter, 2008, p. 23). These forces can either emanate from the micro environment or the macro environment that the business operates in.
Porters’ five competitive forces are the bargaining power of suppliers, intensity of competitive rivalry, bargaining power of customers, threat of entry of new competitors and threat of substitute products and services (Porter, 2008, p. 18).
There is a high threat of entry of new competitors because of low costs of doing business. The booksellers market has high returns and this is why it has attracted a lot of new entrants (Tavani, 2010, p. 9). Most of these new entrants are selling their books online. This has been enhanced by technological advancements that allow them to reach as many customers as possible. As a matter of fact, technology has increased access to distribution (Ketchen and Eisner, 2009, p. 9).
New entrants in the bookselling industry like Amazon and EBay pose a great competitive threat to Barnes and Noble (Tavani, 2010, p. 14). These companies have posed a serious competitive threat to Barnes and Noble forcing it to start an online website. In a broad perspective, there are many online competitors with an urge to win a large market share. This is a big threat to Barnes and Noble and it needs to reinvent itself for sustainability (Tavani, 2010, p. 21).
The intensity of competitive rivalry has also increased because of technological advancements. In this case, companies like Amazon feature greatly. Competitive rivalry has been shifted to emerging markets through the internet. This has therefore enhanced the competitiveness of the booksellers industry. Barnes and Noble should increase its competitive advantage by continually embracing innovation.
This should be done by increasing its visibility on the web. Because the industry has a lot of competitors, there are a lot of competitive strategies that have been employed for sustainability. Intensity of competitive rivalry has also increased because of various dimensions like quality, price and innovation.
Barnes and Noble has traditionally operated bookstore outlets and stores thereby selling bestsellers, music, games, DVDs and others (Tavani, 2010, p. 28). Because the market is saturated, there are new products and services in the market. Changing trends and lifestyles have also enhanced the threat of substitute products and services. These new products and services include graphic novels and DVDS that are mostly embraced by readers.
As much as the company has ensured that it sells graphic novels and DVDs, its competitor’s have also come up with new products to entice the market. As a matter of fact, there is an increase in the existence of products outside the common book boundaries (Tavani, 2010, p. 6).
This has increased the ability of consumers to switch to alternatives like graphic novels. Such online products are replacing material products that the market was used to. Amazon has reinvented graphic novels and it is enticing customers with great discounts (Tavani, 2010, p. 9).
The threat of new products and services has forced the company to develop a new electronic reader (Nook). It was specifically developed t compete other readers like Amazon kindle from Amazon and Sony reader from Sony. These are new and innovative products that will continue defining the booksellers market.
There is a high level of product differentiation in the market and this has increased the availability of substitute products. As a matter of fact, there is a great ease for substitution because of information technology. Price wars have also been witnessed as different companies develop market friendly products (Ketchen and Eisner, 2009, p. 45).
Current consumers have a lot of bargaining power because of increased awareness (Ketchen and Eisner, 2009, p. 27). They are aware of their needs and preferences and will always demand for the best products. Access to information has been increased by the Internet and information technology. Many customers have put the company under pressure which has increased its sensitivity to prices. Because there are many competitors in the market, customers are able to access substitutes more conveniently (Tavani, 2010, p. 12).
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For instance, Amazon has been giving customers discounts to increase its market share (Tavani, 2010, p. 42). This has forced Barnes and Noble to cut down prices in a bid to retain more customers who are price sensitive. Currently there is more information about products (books) through various sites and social networking sites like Twitter and Face book. Such aspects have ultimately increased consumers’ bargaining power (Ketchen and Eisner, 2009, p. 65).
Barnes and Noble most notable consumers include college students, faculty members and the general public (Tavani, 2010, p. 24). Because of increased consumer bargaining power, companies have enhanced their differential advantage to strengthen products.
Bargaining power of suppliers has also been changing and can be described as the market of inputs (Ketchen and Eisner, 2009, p. 78). Barnes and Noble publishes some of the books that it has been selling in the market. In addition, it reprints other titles more cost effectively. The company’s suppliers are book publishers. This means that it has to engage in good contractual agreements to ensure that it has enough stocks to sustain the market.
The company is also supplied with labor and other services that it needs for effective operations. Because the market has a large number of book retailers, there is a high intensity in supplier competition (Tavani, 2010, p. 24).
This means that they have the ability to integrate and cut out buyers in relation to their policies and targets (Ketchen and Eisner, 2009, p. 35). Since the industry is going online, the strength of distribution channels has been changing as time goes by. The company works with various suppliers and it has been engaging them in an interactive manner to keep off competition.
Digital revolution and technological advancements have increased competition in the books industry. This has seen the emergence of Amazon as the world’s leading online bookstore (Tavani, 2010, p. 14). As much as the company has a large product line, it needs to be more innovative to keep up with its key competitors like Amazon and EBay.
Ketchen, D., & Eisner, A. (2009). Strategy. New York: McGraw hill.
Porter, M.E. (2008). The Five Competitive Forces That Shape Strategy. Harvard: Harvard press.
Tavani, A. (2010). End of an Era for Barnes & Noble in Hoboken. New York: Hoboken Patch