Barnes and Noble vs Amazon - Case Study Example

Barnes&Noble vs Amazon Introduction Modern companies are on the edge of development. This research paper is devoted to very famous companies of books sales, such as Barnes and Nobles and Amazon. These companies are remarkable not only for their success or high profits, but also management style of the company is a perfect example for many other companies. There are many differences and similarities between these two Companies. On the one hand, Amazon positions itlesf as the Company, which is able to operate globally and sell a wide range of goods and products, but on the other hand, Barnes and Noble is looking forward to occupying a vacant niche of unique books sales. Amazon goes global Bezos, who invented Amazon Company, has been always fought against negative predictions, which outlined that the Company should have bankrupted in 2001. Jeff Bezos claims that he is a very happy person and he likes managing his personnel. Bezos readily takes risk and he thinks that it is important to avoid risk in any enterprise. Amazon had a challenging situation and a difficult financial situation in 2002 showed that it suffered $3 billion operating losses. Currently Amazon plays a leading role in online market practices. Starting from 1994 book sales market was not overcrowded by the competitors. Amazon gained one of the leading roles in the market at that time (Isckia 334). Jeff Bezos has always been focused on sales increase, but not only financial gains interested him, but also a high-level satisfaction of the customers gained. Advertising in printed media and on TV were the most saving tactics for Bezos and his company. Innovative practices of many businesses are on the way of their fast development and Amazon illustrates their ability to be a sound competitor in the modern market of book sales. Nowadays Amazon is providing “wider selection, lower prices and fast, reliable delivery” (Joshi & Yermish 2000, p. 18). Amazon is mainly focused on the needs of the customers and there is no doubt about that. Bezos ensures: “In the old world, you devoted 30% of your time to building a great service and 70% of your time to shouting about it. In the new world, that inverts” (Isckia 334). Potential options of innovative development should be considered by the modern managers for sure. Bezos has been always focused on long-term profit gains and he did not focus on near-term profitability. An individual-centered approach was chosen by Amazon as the most reasonable policy. It was very important for products' differentiation and price policy to pay attention for every individual. Amazon was on the way of innovative development. Thus, it took into account opportunities opened by the Internet. Products availability on the web was one of the main concerns for the Company. In the result of Company's going virtual, it has experienced the following positive changes: traffic improved goods availability on the web; Amazon promoted a market share; financial losses of the Company were decreased; cash flow operation was significantly improved; profitability was one of the main concerns for the company; Amazon gained a position of a profitable business. Amazon can be distinguished by the following factors: “price, selection, availability, convenience, information, discovery, brand recognition, personalized services, accessibility, customer service, reliability, speed of delivery, ease of use and ability to adapt to changing conditions” (Kargar 2004, p. 102). Currently, retail sales of Amazon are rather diverse: from selling DVDs, videos, electronics, camera and photo items, cell phones and services, tools and hardware, software, video games, kitchen and house ware products (Whittaker 2004, p. 24). It is possible to claim that Amazon exceeds the limits of a traditional book seller. Initially this Company intended to occupy a position of a successful bookseller, but with a course of time the world's leading position in different spheres of trade were occupied by Amazon too. Jeff Bezos shows a great talent of a global leader in the sphere of management and trade. His policy in trade is in line with the modern market requirements: he wants to satisfy the needs of every customer and it is very important for the modern sellers to implement an individual-centered approach. Barnes&Noble: a Golden Mean in Trade? Barnes & Noble, Inc. gains a position of the largest book retailer in America. Nevertheless, the Company expands its activities and it includes many different cafes, gifts, games and music. Video games were also chosen by the Company as the most profitable activities. There are more than 717 stores, which are operating across America and Barnes & Noble intends to expand its network even further. They are operating basing on an innovative and interesting strategy: inexpensive books are sold, but huge profits are gained. They were focused on the tastiest piece of book selling pie: to sell the books, which are the most popular and have rocketed in the best sellers list. They found out that the main attention of the customers was paid to inexpensive books and it was one of the most important facts to satisfy the needs of customers (Hershon 18). Barnes and Noble understood that price decrease in the policy of the Company, a choice different type's hardcover for books resulted in the customers' ability to buy less expensive books. The highest degree of competency was reached by Barnes and Noble and they discovered that intimate knowledge of the customer’s needs resulted in retail sales increase. There are a few words to be mentioned about the strategy of the Company. This consisted of publishing of less expensive books and the customers were focused on purchasing those books. They were not competitors for the most famous books sellers. Barnes and Noble claimed that they wanted to sell the cheapest books at the most convenient price. Even book bestsellers were very popular for the Company and they managed to attract customers to their stores. The main attention of the Company that was focused on classics, atlases, coffee table books, and ability to sell books, which were out of print, enabled Barnes and Noble to restore the existent value of bookseller an affected price policy and the share price (Is Barnes and Noble Business Model in Trouble). "Coffee table" books were very popular and success in publishing was reached for sure. They have a savvy strategy, because the Company does not have "a 50% markup [to a publisher], they can apply that advantage to price and still make more money than publishers selling the same Charles Dickens title" (Is Barnes and Noble Business Model in Trouble). Table 1. Sales and Profits of Barnes&Noble There are many difficulties for current sales of Barnes&Noble. For example, as far as we can see from the table, the stores of the Company are closing. Nevertheless, there is a gradual increase of sales: from $6.8MM per in 2008 to $9.2MM in 2010 (Is Barnes and Noble Business Model in Trouble). There is a coming merger of Borders and B&N, which can lead up to $100 million, market capitalization. The story of shops closing is very intriguing. There is a need to pay a certain price for closing of every store, which reaches up to $200,000 per store. It has been recently found out that: "Borders sales for 2010 were $2.8 billion. Assuming only 25% of Borders business flows to a nearby Barnes and Noble at their standard 24% margin, this adds $168 million per year to B&N’s bottom line and effectively doubles their market capitalization adding another $900 million" (Is Barnes and Noble Business Model in Trouble). Barnes & Noble are on their way in changing their business model. There are the following intentions of a current business model in Barnes & Noble: to become a little bit better coffee bar, a little bigger shop and a little bit better book reader, but this model is inefficient at all. Conclusion As far as we can see, there are different intentions and visions practiced by Amazon and Barnes&Noble. The former is looking for profits increase and expansion in all possible directions, but the latter wants to occupy a vacant niche in book selling, but, at the same time, it wants to be the last but not the least. Otherwise Barnes&Noble would hardly develop other different directions of their activities, such as video games sales, for example. Jeff Bezos is a more inspired manager and he goes global in different directions. Therefore, it is better to develop in different directions and take risk in business if the business owner has big intentions. In case he wants to be in the middle of the market and gain half-profits, then he should be more focused on satisfying the demands of his usual customers. It is possible for modern businesses to expand in different directions, but such activities take much time and effort of managers, as well as are focused on diverse needs of the customers. Works cited Hershon, R. A. Telecommunications Management: Industry Structures and Planning Strategies. Mahwah, NJ: Lawrence Erlbaum Associates, 2001. Is Barnes and Noble Business Model in Trouble? Web. http://ceofocus.com/blog/page/7/ Isckia, T. Amazon's Evolving Ecosystem: a Cyber-bookstore and Application Service Provider. Canadian Journal of Administrative Sciences, 26(4), 2009, p. 332+. Joshi, M. P., & Yermish, I. The Digital Economy: a Golden Opportunity for Entrepreneurs? New England Journal of Entrepreneurship, 3(1), 2000, 15+. Kargar, J. Amazon.com in 2003. Journal of the International Academy for Case Studies, 10(2), 2004, 99+. Read More