SWOT Analysis of Amazon and Barns&Noble - Case Study Example

Amazon and barns & noble Introduction Barnes & Noble, Inc is a leading retailer of educational products and digital media materials in the USA. The company operates NOOK medial LLC which is a subsidiary in digital media reading segment and also Barnes & Noble College Booksellers LLC that operates about 700 bookstores that are spread across more than 50 States. The company offers the e-Bookstore, an eBook Reader that enables the customers share their own joy of reading. In order to tap the advancement in technology, the company also introduced NOOK Simple Touch in 2011 that could enable customers a full touchscreen that offers prolonged battery for the advanced E ink Pearl display (Ferrell and Hartline 140). SWOT ANALYSIS Barnes & Noble Inc has several strengths that it can utilize to gain a competitive edge in the industry. For instance, the company has several consumer incentives such as WI-FI stores and discounts in the stores. The E-Book reader facilities also provide for 3 G wireless connectivity and rooting capabilities that allow access to market (Morgan 22). Strengths Cost advantage. Barnes & Noble is a reputable distributor of books thus it is capable of attracting booksellers and publishers thus reducing the supply chain costs. The company owns NOOK technology that has been rated as the best consumer reader technology in the industry. High research and development activities. Barnes & Noble is committed to continuous research and development activities that have lead to new channels of product delivery and enhanced customer satisfaction. Weaknesses Limited presence compares to competitors Barnes & Noble has limited presence in the e-commerce market unlike competitors such as Amazon and Apple. Inefficient logistics and distribution channels. The company has a lean distribution network. The company has no on-time guaranteed delivery or emergency delivery services to the customers. The company is incapable of delivering the products to the customers at low costs due to inefficient physical distribution channels (Ferrell and Hartline 145). Opportunities Penetrate mass market. The company has the opportunity of expanding to the mass market through partnering with public libraries thus allowing access to information for library subscribers to the database of the company. Market segmentation and global expansion. Barnes & Noble should expand to the global market and customize its products to a particular market segment. The United States market is saturated by other players such as Amazon, Wal-Mart and Apple thus making it difficult for the company to gain considerable market share in the domestic market. Threats Stringent business regulatory framework. The e-commerce business is currently affected by the increasing harsh regulatory framework that requires e-commerce companies to ensure consumer protection, respect copyright laws and ensure data protection. For instance, the US government is considering increasing the taxes paid by e-commerce businesses. High competition. The e-commerce industry is currently expiring high competition. Established players such as Google, Apple and Sony also provide cheaper digital content products such as downloadable movies, music and educational materials. The company should customize its products to the needs of the target market. AMAZON SWOT ANALYSIS Amazon.com Inc is a leading online retailer globally. The company offers a wide product portfolio that includes health products, industrial items, consumer electronics, jewelry, movies and books. The extended services include home delivery, shipping to the overseas customers and web hosting for the clients. The company also sells merchandise through the subsidiaries that are located in the US and outside the US. Strengths High customer service and convenience. The company has implemented several technologies that have made the websites customer friendly. For instance, the company has been able to gain learning experience and customer feedback through the customer reviews, editorial section and gift guides. In this regard, Amazon has gained customer loyalty and expanded the market share across the world. Wide variety of products. The company stocks several brands that are sold to a diversified customer portfolio. The customers can enjoy one shop experience just at the comfort of their homes. The product portfolio comprises of jewelry, health products, movies, digital downloads, books, shoes, sporting equipments, and electronics. Strong business model. The company has a strategic business model that ensures customer satisfaction through aggressive pricing strategy and free delivery of the products. The company has a diversified product offering apart from the online bookstore. The company operates lean warehouses in several locations thus reducing the cost of operations. The company has also business agreements with third-party retailers across the globe and offers bundle services to the customers so that they can experience economies of scale. Weaknesses Declining financial position and liquidity. The financial stability of the company has been declining over the last few years. For instance, the current ratio decline from 1.32 times in 2010 to about 1.17 times in 2011. The cash reserves have also declined from 0.8 times to 0.6 times thus affecting the ability of the company to expand in new markets. Low price margins. Amazon offers some prices at almost zero margins in order to generate sales and expand the market share. The strategy may be useful in attracting revenues in the short term, but will ultimately affect the company profitability in the long run. Negative public image. Amazon has attracted harsh criticism across the US and UK due to allegation of tax avoidance, anti-competitive business practices and poor working conditions in the warehouses. The company has also been criticized for its discriminatory pricing strategies and exposure of customer information to unauthorized people. Opportunities Positive growth outlook of e-retailing. With the increasing internet penetration and increasing awareness and use of online shopping, the company will experience high growth. In addition, increase in the number of online payments methods will also increase the sales revenues due to enhanced customer convenience and cost savings. Expand to emerging economies. Though Amazon is an online retailer, it has the opportunity of strengthening global market presence in the emerging markets. For instance, the company launched Amazon Appstore in European countries such as Spain, Italy and UK thus allowing customers to shop conveniently from their Android phones. Other promising initiatives that the company should focus on in order to attain a competitive edge include AWS Storage Gateway that enables customers to upload data for reliable storage. Strategic acquisitions and alliances. Acquisitions are a key opportunity for Amazon.com. Strategic alliances will strengthen the ongoing expansions, geographic market share and enhance technology. Some notable strategic partnerships include Marshall Cavendish Children’s books partnership and acquisition of Kiva systems. The company should argue several online entertainment companies and book selling companies in order to strengthen its market presence. Threats Competition. Amazon is experienced a lot of both direct and indirect competition from other players in the industry. Some of the direct competitors include Netflix in media segment, Apple in media downloads, e-bay in the electronics and bookstore markets, Barnes & Noble in the book and educational content and also Wal-Mart in the electronics and consumer goods segment. Other indirect competitors include Google in the web hosting services and traditional brick and mortar stores in the UK and US markets. Some of the competitors have e-commerce platforms, access to greater customer base and competitive edge such as superior technology (Morgan 16). Online security. Safeguarding the privacy of customers’ financial data especially the credit card numbers has been a challenge for Amazon. Several customers have complained over online fraud while shopping with Amazon. Decline in consumer spending. The company business is often affected by changes in the consumer income levels and economic activity in the US. Due to the recent global financial crisis and economic slowdown, Amazon sales have declined tremendously. With the global economy projected to expand at just 3 percent in 2013, the company may experience a decline in revenues due to a shift in the spending patterns and consumer preferences in the industry. Future projections In the future, Amazon.com will experience more success that Barnes & Noble due to the aggressive pricing strategy and also increased global presence. Amazon will benefit from the diversified product portfolio and enhanced customer loyalty. Amazon will also experience more growth due to superior web technology and strategic partnerships with the suppliers. Managerial and strategic recommendations Barnes & Noble The management of Barnes & Noble should diversify the product portfolio since the company relies mainly on digital content and educational content for its revenues. The educational content segment is crowded with several established players such as Google that provide free electronic books for the students and universities. Barnes & Noble should explore the possibility of expanding to the global market and enhancing the technology in order to increase customer satisfaction and ultimately gain customer loyalty. Other strategic measures include establishing partner-discounts and money guarantee back initiatives. Amazon.com Though the company has a well established global presence, the company should explore other marketing channels and increase the sales margins that have negatively impacted on the profitability. In addition, the company should pursue strategic alliances and partnership with suppliers in order to attain economies of scale. Amazon.com should address the numerous customer concerns on data privacy and payment security through implementing safe customer shopping environment. Works cited: Ferrell, O.C and Hartline, M.D. Marketing strategy. Mason: South-Western Cengage. 2011. Morgan, K. Barnes & Noble: groundbreaking entrepreneurs. Minnesota. ABDO publications. 2010. Read More