1.0 Executive Summary
In today’s competitive market economy, when a company is encountered with tremendous changes in its industry, it is advised to take agile reactions to adapt itself. Otherwise, the company is very likely to be eliminated in the fierce competition. For example, the book industry has been gradually experiencing the shift from print to digital and the rapid development of e-books are exerting big challenges on traditional print publishers. How well the traditional print publishers cope with and react to the challenges determines their survival and development in the industry. The successful rise of Amazon.com and Amazon’s e-reader Kindle has been incurring challenges for traditional print bookshop chains Borders and Barnes & Nobel. In the face of the challenges, Barnes & Nobel executed necessary change management to launch its electronic reading device the Nook in 2009 to fight to maintain its market share. However, Borders implemented no change and still clung to its brick and mortar chains, which ended up filing for bankruptcy in February 2011 (Sanburn, 2011). It is clear that as consumer spending in the print book industry is continuously declining, Borders Books failed to boost sales by catering to the market trend and wound up lacking the needed capital resources to be a viable competitor while Barnes & Nobel managed to avoid Borders’ fate with necessary changes.
In the light of this, this report will firstly give a brief analysis about the e-book market and the corresponding challenges for the traditional print players to manage change. Secondly, it will comment on and make comparisons between Borders Books and Barnes & Nobel in terms of their approaches to changing, the development and implementation of their approaches and the impact of leadership and vision on their success and failure. The last but not the least, this report will illustrate the potential market threats for the industry leaders like Amazon and Barnes & Nobel and the measures the leaders should take to maintain their leading positions and competitive advantage in the market.
2.0 The E-Book Market and the Challenges
Back to the middle 1990s, the digital potential was ignored in the book industry. Even though some analysts had predicted the industry shift from print to digital, the sales of e-books and corresponding digital devices were close to being ignored. In the early 2000s, the industry began to pay attention to the increases of digital downloads and the evolutionary development of digital devices. Although some people still prefer print books, it cannot be denied that the e-book market has been prosperous. This report will give a SWOT analysis of the e-book market to illustrate the strengths, weaknesses, opportunities and threats of the e-book industry.
Firstly, the cost of e-books is much less than that of print books which kill trees, cost money and rely on crude oil. Due to the big cost, the profitability of print books becomes quite slim as the profits have to be divided among authors, production, inventory, market and others. In addition, about 35% of print books that are bought by bookstores have to be returned to the publishers due to the lack of buyers. On the other hand, in the e-book industry, as the cost is much lower, the publishers are able to carry much more titles and step into various markets besides the mainstream one so as to attract more buyers. Additionally, the portable digital e-readers actually equip the buyers with a personal library on the way as one digital reading device can store hundreds and thousands of books and still weighs less than one single print book. The weakness of the e-book market lies in that there is not a universal e-book publisher and every digital reading device requires its own unique platform. In this way, when users want to buy e-books from different publishers, they need to purchase several e-readers, set up various accounts, operating systems and different software. In this situation, the development of the e-book market may attach more value to strategy instead of to user needs, which are in fact significant to the taking off of the industry (Crowley, 2011).
As long as the above issue is solved, the e-book industry can be revitalized by the e-readers, which are more convenient for the eager readers than going the long way to a bookstore or a library and risking lost-book fines or late fees. In addition, in this new model, ordinary people can become new writers and even compete with professional publishers as long as they have some talent. However, there are some unavoidable threats in the market as well. For example, when hackers take advantage of the forbidden digital right for their own purposes, the profits of the e-book authors may be damaged due to piracy, and the issue may be more severe when the hackers share their cracking knowledge with others (Crowley, 2011).
With the above strengths and opportunities of e-books, the e-book market is now hot and crowded in spite of some weaknesses and threats the industry faces. Nowadays, the market is prosperous in many countries around the world with the good performance of various e-readers, increased consumer awareness, boost of e-book distribution concentration, easy availability of the dedicated digital devices and the expansion of customer market like Japan and China (Herther, 2005). The rapid development of the e-book market is undoubtedly bringing some challenges to the traditional players as a great number of readers are shifting from print to digital with the market trend. In the light of this, the traditional industry players either stick to their old pattern and get eliminated by the market trend or positively adapt themselves to the market trend and execute change management to compete with other players and win back the readers they once lost.
3.0 Comment on and Comparisons between the Change Management of Borders Books and Barnes & Noble
3.1 Approaches to Change in the E-Book Market
Confronted with the book industry’s shift from print to digital simultaneously, Borders Books and Barnes & Noble took dramatically different approaches while Barnes & Noble actively reacted to the change yet Borders preferred to sit back. On the one hand, Barnes & Noble adopted the structural approach, or socio-technical approach called otherwise. With this approach adopted, the senior management of Barnes & Noble cautiously researched the industry change and formed a steering committee to assess the change and develop recommendations for the company. In the global trend of book market going digital, they decided that the only way to face the challenge is to go digital too. This active approach brought success to Barnes & Noble as it dealt with the change challenge up-front and did not choose to avoid them; it changed some production and notion aspects within the company which would have far-reaching influences on productivity; and it also demonstrated that the senior management at Barnes & Noble was serious about the change in the industry and the company’s future (Graetz et al., 2011). By contrast, Borders Books was quite passive toward the change. The senior management at Borders Books was rather unwilling to deal with the changes, and the only measure they took in the digital age was to connect their sales to Amazon. If there was any change approach adopted by Borders Books, it was the incremental approach as the senior management of the company was quite ambivalent toward the change and they made no effective measures to face up the challenge. They failed to focus on the future trends in the industry and only dealt with problems the company faced presently one at a time without changing or reviewing any further issues (Young, 1997). When the socio-technical approach paid off at Barnes & Noble, the incremental approach easily collapsed at Borders Books (Palmer, Dunford and Akin, 2009).
3.2 Strategies to Change in the E-Book Market
In practice, there were three change strategies that Borders Books and Barnes & Noble could have adopted including the competitive forces model, the strategic conflict model and the resource-based model. Under the industry shift challenge, Barnes & Noble took the combination of the competitive forces model and the resource-based model. The competitive forces model indicates that industry structure of the five forces has strong influence on the competitive rules of game and the range of strategies open to organizations while the resource-based model requires the company to deploy its superior or unique resources effectively to gain above-average profitability (Markus and Robey, 1988). On the one hand, Barnes & Noble identified the five forces in the e-book market including few entry barriers, heated rivalry, uncertain supplier bargaining power, little but increasing consumer bargaining power, and threatening substitutes. In this case, Barnes & Nobel came to the conclusion that it needed to enter into the e-book market instead of being a mere brick-and-mortar bookstore to sustain and increase its market share and the company realized that it had to make the best use of its resources to improve its performance and gain competitive edge in the market. Therefore, Barnes & Noble took full advantage of both its tangible assets and intangible assets including brands as well as capabilities like aptitudes, knowledge and skills of both individuals and groups. Barnes & Noble deployed its resources from the traditional brick-and-mortar bookstore to the digital market and launched the electronic reading device the Nook in 2009. As a result, holiday sales at BarnesAndNoble.com were up 78% over 2010 and store sales also increased by almost 10%, which was to say that the change strategy of Barnes & Noble paid off. However, Borders Books just sat back to the industry change and challenge and it failed to go digital alongside, making the company finally subject to bankruptcy in the fierce market competition.
3.3 The Impact of Leadership and Vision
In today’s era of economy globalization, the role of an organizational leader has become increasingly difficult, who has to possess sustainability, workforce diversity and business ethics in order for the organization to win and stand above competition. Sustainability is always linked with environmental problems while it has to be noted that as e-book can save money, trees and crude oil, it is indeed a more sustainable option than print books. Workforce diversity is important for the organization as it can always inspire original invention but the leaders have to balance diversity and inclusion in case of any employee conflicts. Business ethics are the moral beliefs or principles that guide a business in dealing with other businesses and they provide a basis for deciding whether certain behavior is right or wrong (Freeman, 1984). To be successful, the leaders need to handle regular duties, respond to pressure and possess brevity as well as variety. Successful leadership usually features three kinds of managerial roles including interpersonal, information and decision-making. To be more specific, the leaders need to be proficient in both guidance and liaison; they should monitor and disseminate information as the spokespersons; and they should be able to handle disturbance, allocate resource and negotiate as entrepreneurs (Thurley and Wirdenius, 1973). While the success of Barnes & Noble can be partly attributed to its corporate leadership, it cannot be denied that the poor leadership at Borders Books partly resulted in the company’s financial trouble. Borders Books has been experiencing quite a few executives over a short period, which basically slowed the company down.
Apart from leadership, effective corporate leaders also need to posses the ability of vision, which is why Barnes & Noble survived the industry change while Borders Books didn’t. The leaders at Barnes & Noble focused on the future to launch the digital reading machine the Nook, they created change and the corporate culture based on shared values, and they established an emotional link with followers. However, the leaders of Borders Book refused to face up to the challenge and they only focused on the present to maintain status quo and stability. However, they only ended up losing their status quo and stability even worse. Hence, successful leaders need to be able to create new visions for the company and face challenges therewith (Thurley and Wirdenius, 1973).
4.0 Threats for the Industry Leaders
As the industry leaders, Barnes & Noble and Amazon are confronted with a number of threats. Firstly, as the entry barriers into the e-book market are quite few, the leaders are easily up with rivals such as Apple’s iPad. Since the e-book market is still in infancy, market prices are quite uncertain. Among different manufacturers of electronic reading machines, prices fluctuate widely. For example, Amazon’s Kindle entered the market at a rather high price yet Apple’s iPad now offers much more competitive prices and it is likely to attract some potential customers from the two industry leaders. The second threat for the industry leaders is from suppliers of both technology and publishing. On the one hand, as the e-book market is still in the beginning stage and there are not too many e-book producers, the suppliers of technology such as screen and electronic paper do not have much bargaining power over the industry leaders, yet the same cannot be said for publisher bargaining power as each publisher has a monopoly for one title. In this case, if Amazon or Barnes & Noble wants a specific book for their e-readers, they need to pay prices of monopoly, meaning much of the profit will go to the publishers. Worse still, the publishers can decide which books can become e-books, making the industry leaders’ book options quite limited. The following factor is purchaser bargaining power. Since the e-book market is still young and every version of electronic reading machine is equipped with unique platform and devices, buyers have costs to shift producers, making the buyer purchasing power quite little, yet it cannot be denied that with the development of more affordable e-readers like iPad, consumers now have more choices and their bargaining power is improving. The last but not the least threat for Amazon and Barnes & Noble is the substitutes including libraries and bookstores both online and brick and mortar. Some readers still prefer to print books as they can take notes and participate in active reading or they like the feeling that they actually possess the book rather than the right to read the book. Another substitute for the industry leaders is Google Books, the online library. Compared with Google Books, the advantages of Kindle and Nook are that they do not need a computer and the free wireless access can enable users to download books from appointed devices, saving them the trouble of travelling all the way to libraries or bookstores.
5.0 Conclusion and Recommendations
In the face of the e-book market change from print to digital, Barnes & Noble survived and developed itself by actively adapting to the change while Borders Books failed because of its resistance. Hence, in likely situations, other businesses need to learn from Barnes & Noble as change is the mere principle of market competition nowadays. However for Barnes & Noble, there are some recommendations as well. In the short run, the company is advised to expand its advertising so as to enlarge the market base and cooperate with media like newspapers so as to enlarge the content supply from being only e-books. In the long term, the company needs to focus on hardware profits so as to decrease the prices of its e-readers to attract more price-sensitive consumers in the competitive market. Only in this way can Barnes & Noble achieve a stable and leading position in the e-book market.
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