Overview and Analysis of the E-Book Market - Essay Example

?Management: Case Study Overview and Analysis of the e-Book market The recent decade has seen a sudden change in the bookstore market, with the advent and rise in popularity of digital publishing and influx of innovative and consumer friendly gadgets such as e-Readers which enable the consumers to read books online. Consumers' attitudes towards reading have changed substantially in favor of eBooks and eReaders, and publishers are finding such technologically supported tools as cost effective, as they offer higher profit margins as compared to the print. The sophistication of reading devices is a new trend which is soon catching on as more and more players are seen entering the market. Gadgets such as Amazon's Kindle and Apple's iPad which also doubles as an eReader are garnering huge popularity among the readers and book lovers alike. Furthermore with the increasing penetration of internet in almost all walks of life, a significant change in the patterns of reading and behavior of book readers is being observed worldwide. The consumers have shown a greater acceptability of such new gadgets and the publishers are cashing in on the popularity to drive their sales and increase their profits. The popularity of e-book readers can be estimated from the rising sales. According to statistics (see figure 1), the sales of eReaders in the first quarter of 2011 rose to 236 per cent, totaling 4.8 million units. It is expected to further rise to 27 million by the year end (Digitimes Research, 2011). Figure 1: According to research, Amazon is expected to be the frontrunner and retain its industry dominance by capturing approximately 60 per cent of the market share, followed closely by Barnes & Noble which is likely to settle on the second spot, followed by Sony. Challenges for the industry players The major industry players in the e-book reader market include Amazon, Barnes & Noble, Sony and Apple. Amazon has emerged as a strong player in the market, although Sony was the first company to initiate the product in the U.S. markets with its state of the art technology. The launch of Kindle has since far surpassed the sales of all other electronic book readers available in the market. However, on account of new entrants such as Google for instance, which is taking giant strides in digitizing books from all major libraries the current industry leaders are likely to face serious competition in the near future (DailyMarkets, 2011). With record number of sales observed in the first quarter of 2011 and strong predictions for the rest of the year, it is highly likely that the market for eBooks and eBook readers is going strong and growing steadily. More and more print editions such as newspapers and magazines have also joined in the eReader bandwagon owing to its incredible success. However, one of the greatest challenges faced by this industry is that of rising concerns over piracy. The publishers are wary of the proliferation of pirated copies floating freely on the internet, supported by the ease of pirating such copies and converting them in digital formats. There is a high and urgent need for product differentiation in the industry. Publishers are yet largely unaware of the choices of formats preferred by the readers of online books and the popular sections such as Science, fiction, non-fiction or academic books and target their customers accordingly (Dillehay, 2001). With regard to markets geographically, North America is likely to continue as the biggest market for e-book readers accounting for approximately 72 per cent of the global market share. However, at the same time newer markets are constantly opening up such as Europe, Japan and China. The global market for eBook readers is likely to reach 63 million units as shipments, by the year 2014 (Digitimes Research, 2011). 2. Comparison between Border Books and Barnes & Noble on the following grounds: a. Approaches taken by Barnes & Noble and Border Books to respond to the changes in the e-book market With the advent of new technologically enabled gadgets and proliferation of newer players in the market Barnes & Noble revised its strategy and introduced its own eReader –Nook to compete in and capitalize on the growing eBook market. Technology has invaded almost all spheres of the industry ranging from books (from print to eBooks), to music (from DVDs to online). Whatever product was earlier available in the physical stores are now available online, and added with better ease of shopping and greater deals, consumers are likely to be attracted to the online world. Barnes & Noble took advantage of such a changing trend, gauged its profitability in the future, and embarked on its online venture, at the right time. Borders on the other hand, made a series of wrong and fatal organizational decisions. Firstly, the firm experienced frequent change of hands, which dissuaded the management from focusing on one right strategy to pursue to sustain their competitive positioning in the market. Secondly, the company was seen investing in other competitive areas such as the music industry, during the early 1990s however, with the drop in sales in the music industry, owing to the internet revolution, the company suffered huge losses. Furthermore, where its competitors, in this case, Barnes & Noble were involved in launching their own technological platforms for catering to the online market, Borders on the other hand, outsourced a substantial part of their business to Amazon, a strategy which ultimately failed leading to disastrous results. Basically, as compared to its other competitors such as Barnes & Noble and even Amazon, for that matter, Borders, failed drastically to adjust to the changing demands of the technology savvy consumers, develop a platform for effective retail chain operations and it failed to leverage its brand name, unlike Barnes & Noble which owing to its strategic alliance with Starbucks managed to achieve, and hence garner substantial support from the consumers, and in the process succeeded in enhancing its brand image. Thus, the country’s biggest bookstores are now following different paths, and largely due to the digital divide, which has led one of them to achieve immense success even in the face of the global economic downturn, while the other continues to struggle to establish a foothold in the industry, which it once used to dominate. Barnes & Noble, succeeded in coping with the changes in the industry, and invested in its hardware and software development to make Nook a saleable item, with the result that it is now regarded as a threat to other players in the industry such as Amazon’s Kindle and Apple’s iPad. b. The development and implementation of their strategies The following strategy was adopted by Barnes & Noble, which Borders failed to achieve: Establish an online platform to cope with the changes in the external environment Companies such as Amazon and Barnes & Noble shifted their strategies to include development of an online platform in response to the changing tastes and preferences of the consumers, Borders on the other hand, chose to outsource its online division to Amazon, another competitor and a key player in the industry, which was competiting with it for a share in the market. They offered eBooks and established a robust payment gateway such as Paypal and credit cards system. Furthermore they also took advantage of the craze and rising popularity of the social networking sites such as MySPace and advertised their products aggressively via the same. It established strategic relationship with a host of its online partners, such as eBay, Craigslist, and Google Base, where its products were widely advertised, and included a long list of payment options for ease of payment for its consumers. This included, popular online payment site Paypal, Google Checkout, Click Bank etc among others. Such online transactions and way of dealing was new and at a time when other players such as Borders were struggling to adapt to such changing market demands, Barnes & Noble and Amazon had already embarked on their online journey, recording substantial profits and achieving record sales in the process. Borders on the other hand was already embroiled in a range of financial problems and failed to invest in the changing trends. Establishing strategic partnerships and alliances: Barnes & Noble entered into strategic alliances with vital industry leaders such as Starbucks. Such an alliance is regarded as a natural fit between books and a coffee shop, and garnered much expected positive response from the consumers. It helped in adding more value to their products (Gillman, White, 2001). According to William Dennis (in Gillman & White, 2001), “Increasingly, when you're selling not as much product as services and skills, marketing yourself is the most important thing you can do” (Pp. 70). Borders, failed to attract consumer attention through such strategic alliances, as developed by its competitors, and thus failed to capitalize on its brand value and image. Frequent changes in management Borders went through a series of changes in its top management, which dissuaded the company from focusing on the changing external environment, and hence it failed to effectively acknowledge a shift in consumer preferences and adjust to the growing demand on the virtual world. The company lacked stability at a crucial period, and its competitors in the meanwhile grabbed substantial market shares, leaving Borders far behind and out of competition. Furthermore, the company lacked to generate adequate funds to invest in the new trend, and as a result lagged behind in the already competitive eBook market. c. The impact of leadership and vision on their success and failure Leaders are required to steer their organizations towards success by gauging the changes in the external environment and aligning their strategies with their internal strengths and weaknesses (Lewis et al., 2006; Hesselbein & Shrader, 2008). Barnes and Noble were successful in estimating the scale of changes in the environment and in the sudden shift in consumers’ tastes and preferences towards online books. The senior executives at Barnes & Noble, thus invested their funds in a timely manner, in the development of online portals, and capitalized on the trend. Furthermore in order to sustain their competitive positioning in the market, they launched an eBook reader - Nook to rival that of their competitor, Amazon's Kindle. This strategy helped them in retaining their market share and stays afloat in the midst of the changing environment. Furthermore in order to compete in the increasingly competitive virtual environment, Barnes & Noble adopted an aggressive pricing strategy whereby they offered huge discounts on purchase of books online through their websites (Stroud, 1998). During this period however, Border Books focused on the music industry, which eventually came crashing down due to the shift in trend, and increasing consumer preferences with regard to purchasing music online. The sales of CDs and DVDs had begun to decline substantially, thus leaving one of the largest bookstores in the country in a turmoil. Ideally, it is the leaders who steer their organizations towards achievement of its goals and objectives by devising long term strategies which would ensure them a safe standing in the industry. However, for the leaders to chart out a long term strategy, stability of management is a pre-requisite. In case of Border Books, there was a continuous change in its top management, leaving very little or no time for them to focus on or deal with the changes occurring in their external environment. This took a toll on their profitability and in the process significantly affected their competitive positioning in the industry, thus giving a chance for their competitors to steer ahead and eat away a substantial portion of market share in the online segment. 3. Potential threats in the market for industry leaders: One of the key threats faced by the industry leaders in the online book store industry is that of substitution. When Barnes & Noble was at the peak of its success and enjoyed the tag of being one of the largest book stores in the country, Amazon with its innovative marketing strategies and online model, took over the industry leaving Barnes & Noble far behind. Similarly there are new entrants continuously entering the market with substitute products, which are equally favorable among the consumers. For instance, new electronic gadgets with multiple functionality such as iPhones, iPads, Smartphones and other similar devices which offer more than one functionality than just reading, as offered by Amazon’s Kindle or Barnes & Noble’s – Nook, have the potential of capturing the online book market. Furthermore there is a constant threat of new entrants in the market for instance, the popular internet giant Google which offers support for eReader, and is compatible with any platform which supports the poplar .pdf format such as Barnes & Noble’s Nook and Sony's Reader. Furthermore there are various Asian products launched by Japan and China, with its competitively priced products entering into the market, which may pose a serious threat to the existing market leaders in terms of product pricing. Thus in such a competitive environment, Amazon and Barnes & Noble must continue to establish strong strategic alliances to maintain its strong brand presence and continuously strive to maintain a hold in the virtual world via popular networking sites such as Facebook and / or Myspace to attract consumers. References: Digitimes Research (2011). Digitimes Insight: 2011 global e-book reader shipments to reach 27 million units [Online] Available at: http://www.digitimes.com/Reports/Report.asp?datePublish=2011/04/28&pages=PD&seq=206 [Accessed: May 2, 2011] DailyMarkets (2011). The E-Book Reader Market: Battle Between Sony, Amazon And The 800-Pound Gorilla That Is [Online] Available at: http://www.dailymarkets.com/stock/2009/09/03/the-e-book-reader-market-battle-between-sony-amazon-and-the-800-pound-gorilla-that-is/ [Accessed: May 2, 2011] Dillehay, J., (2001). Your guide to Ebook publishing success: how to create and profitably sell your writing on the internet, Warm Snow Publishers, Pp. 27-30 Gillman, J., White, S., (2001). Business plans that work: includes actual business plans that successfully attracted financing, Adams Media Publication, Pp. 71 Hesselbein, F., Shrader, A., (2008). Leader to Leader: Enduring insights on leadership from the leader to leader institute's award winning journal, John Wiley & Sons Publication, Pp.309-312 Lewis, P. S., Goodman, S. H., Fandt, P. M., Michlitsch, J. F., (2006). Management: Challenges for tomorrow's leaders, Cengage Learning Publication, Pp. 102-105 Stroud, D., (1998). Internet strategies: a corporate guide to exploiting the internet, Palgrave Macmillan Publication, Pp. 141-145 Read More