Perspectives of Book Publishing Houses in Germany - Outline Example

?Strategic Perspectives of Book Publishing Houses in Germany In Light of the Current Sector Structure and Prospective Trends Table of Contents Introduction 3 2. Market Analysis and Segmentation of the Book Publishing Industry 4 2.1. Porter’s Five Forces Model 5 2.1.1. Potential Entrants 6 2.1.2 Bargaining Power of Buyers 7 2.1.3 Substitute Products 7 2.1.4 Bargaining Power of Suppliers 9 2.1.5 Competitive Rivalry 11 2.2 Porter’s Value Chain 12 3. Current Development and Future Trends 16 4. Deduction of Strategic Recommendation of Three Top Players 17 4.1 Bertelsmann AG 18 4.2 Holtzbrinck Publishers LLC 18 4.3 Springer 19 5. Conclusion and Recommendations 20 References 22 Bibliography 25 1. Introduction One of the most significant and remarkable industries stimulating the economic growth is the publishing industry. In the current day context, Germany counts on more than a hundred different industries related to manufacturing, producing and service and technology sectors. Undoubtedly, these industries participating in the economic growth including the publishing industry have a great significance on the German economy. The German Publishing Industry, in a wider perspective involves several sub-divisions such as the news publishing and the book publishing sectors. Elaborating on the milieu that concentrated on the Book Publishing sector, it was witnessed to contribute a total of 9.6 billion euro to the economy in the fiscal year 2007. Therefore, the growing impact of the industry, i.e. the book publishing industry in the German economy is invariable (Magazine Dutchesland, 2008). Recognising the strengthening impact and the future prospects of book publishing industry in German economy, the paper shall be aimed at the industry analysis implying various marketing approaches and models such as Porter’s Five Forces model and the value chain approach. The goal of the paper thereby shall be to identify the strategic challenges and advantages served by the industry to its contributors with reference to three top book publishing houses, i.e. Bertelsmann, Holtzbrinck and Springer. 2. Market Analysis and Segmentation of the Book Publishing Industry The book market of Germany in its recent experiences has witnessed certain frequent influences in terms of technology and environmental aspects as well. For instance, the German Book Industry was recently alleged to hamper the rainforests and in turn affect the environmental balance of Asia. This evidently influenced the market growth and the industry at large affecting the production of papers from pulps. The affect was termed as strongly impulsive due to the fact that the industry in 2008 was ranked as one of the largest industries of Europe printing more than 1 billion books annually (Space Mart, 2009). Hence, it is quite evident that the book market similar to any other industry is influenced by various factors active in the macro and micro environment of the industry. These factors, henceforth, shall be discussed further in the paper with the assistance of Porter’s Five Forces and Value Chain approaches. 2.1. Porter’s Five Forces Model Figure 1: Diagram of Porter’s Five Forces Model. Source: (Smart KPIS, 2010). Relating the concept to the context of German book industry, these five influencing factors, as can be revealed from the above represented image, shall have a great impact on its growth trends which in turn shall also affect the major players of the book market. Moreover, the implication of the model shall be helpful in identifying the current and future trends of the industry. 2.1.1. Potential Entrants An industry in the related context attracts potential entrants due to the advantages or opportunities rendered by the industry and vice-versa. Therefore, analysing the opportunities and the challenges of the industry can provide an unambiguous outlook to identify the possibility of increase in the total numbers of potential entrants. The opportunities of the industry therefore are: It is termed to be quite successful in holding its position even during the recession period, which provides it a risk free outlook to an extent The books published by German Publishing Organisations were rewarded three times with the Noble Prize which shall in turn enhance the market value The industry is termed to be among the sellers of most of the best titled and best designed books which in turn attract the potential customers and therefore enhances the scope of the industry The market was slowed down in 2009 in comparison to 2008 due to less number of mergers and acquisitions, which can hamper the interest of new entrants as an advantage for the market players (Licher, 2010) To be summarised the industry render high amount of opportunities and low amount of risks which increases the possible new entrants of potential players in the market. Therefore, the market is likely to face an increase in the competition in its near future. 2.1.2 Bargaining Power of Buyers The bargaining power of the buyers is determined by the ratio of book publishers and book buyers. In this context, according to the 2007 statistics, the industry was recorded to include more than 200 small and large book publishers serving the targeted market through more than 4,400 outlets scattered all around the country (Magazine Dutchesland, 2008). On the contrary, the decreasing rate of taxes and increasing awareness of publishers related to the promotional activities are in turn accelerating the growth of sales in the industry. For instance, the industry’s sales turnover was recorded to increase at a rate of 0.8 percent in the year 2009 with 18.8% of the total population strongly favouring the activity of reading books which is likely to rise in the upcoming dates (Frankfurter Buchmesse, 2010). Therefore, the market trends of the German Book Publishing Industry are highly favouring the bargaining power to be comparatively high in the hands of buyers. This shall in turn affect the pricing structure of the product and therefore prove to be a constraint on the annual revenue of the publishers. 2.1.3 Substitute Products The book publishing industry with an overall perspective does not posses the risk or threat related to the availability of substitute products. However, to be summed up certain major challenging substitutes of the industry are e-articles, blogs and other similar products. It is worth mentioning that books in the current perspective are not only treated as educational requirements but are also categorised as leisure time activities. With this point of view, the industry suffers the growing challenges of numerous substitute products such as television, internet, newspapers, and magazines. The affect of these substitute products can be witnessed clearly from the image below (Frankfurter Buchmesse, 2010). Figure 2: The Preferences of Customers According To the Leisure Time Activities. Source: (Frankfurter Buchmesse, 2010). 2.1.4 Bargaining Power of Suppliers Notably the figure went up to 1,833 publishing companies according to the Borsenverein des Deutschen Buchhandel – German Publishers & Booksellers Association by the mid of 2010. This indicates a steep rise in the total number of participants which in turn affects the bargaining power of the suppliers (Frankfurter Buchmesse, 2010). The structure in this case strongly influences the efficacy of the industry. Inclusively, the suppliers of the book publishing industry from a general point of view are the paper manufacturers. With a wider perspective, authors can also be termed as the significant suppliers of the industry at large. Noteworthy in this context, the book publishing industry in Germany is observed to face certain major issues related to the paper manufacturing in terms of the affect to the environmental balances (Hansen. 1999). The incident is of considerable significance due to its influences created on the bargaining power of the suppliers as a result of increase in the demand and scarcity of the supply. To be specific, the bargaining power in the hands of the industry suppliers is likely to be stronger, creating a major challenge for the publishers. 2.1.5 Competitive Rivalry The current and the past trends of the industry depict that it is likely to witness an increase in the number of potential entrants in the market with the provided opportunities. However, the constraints active in terms of substitute products and the bargaining power of buyers shall restrict the increase of competition in the market to an extent. Conclusively, it can be stated that the competitive rivalry the publishing firms are facing in the current scenario, has a moderate chance to increase in the near future. 2.2 Porter’s Value Chain Figure 3: Porter’s Value Chain Model Source Source: (Enduragement, 2008). The value chain approach introduced by Michael Porter is a significant approach to identify the risks and opportunities active in depth of the internal and the external environment of an industry or even an organisation. As included in the approach, the primary activities and the secondary activities of a firm are highly influenced by the market structure of the industry. In this context, the market structure of German Book Publishing Industry comprises of more than 1,833 publishing companies and over 3,814 book traders according to the German Book Market report 2010. To state about its inbound and outbound logistics, the market has been designed in an effective manner to serve the huge number of wholesalers within a short span of time all around the country. In addition, the market also tends to develop in terms of technology and procurement, serving the international demand through several business centres (i.e. Frankfurt Book Fair), translating the German books into more than 47 different languages (German Book Office, 2010). On the other hand, the marketing and sales figure accumulated by the industry retail outlets happen to be the most significant participators contributing almost 52.3% of the total sales. The sales break down in this case can be well depicted from the image below (Frankfurter Buchmesse, 2010). Figure 4: Estimated Book Trade Sales at Consumer Prices 2009 Source: (Frankfurter Buchmesse, 2010). Inclusively, the human resources also play an important role in the industry. The HRM of the industry encompasses the book publishers, the retailers, the wholesalers and the writers. Even in terms of technology the book market in Germany has developed at large. Today, a person or a potential customer of the industry can easily access the required book by ordering it online for a minimal amount of pay or the customer can also download a printable copy utilising the facility of internet services. This kind of publishing fundamentally relates the e-book market which is termed to be another dimension of book publishing industry and therefore plays a crucial role in determining the efficacy of the services rendered by the industry (Moya, 2009). Analysing the various attributes of the book publishing industry in Germany, the current trends shall be depicted in the next topic. Furthermore, the future forecasts according to the market trends shall also be included in the further discussion. 3. Current Development and Future Trends The market is at its growth with an increasing sales turnover from the past few years, i.e. in 2007, the high street book outlets raised a growth rate of approximately 3.9% in comparison to 2006 (Sieg, 2008). In 2008 the growth rate of the industry recorded stood at the figure of 0.4% whereas in 2009 it rose to 0.8% (Frankfurter Buchmesse, 2010) The number of book sellers according to the report published by the Borsenverein des Deutschen Buchhandels included over 2000 literary publishers (Magazine Dutchesland, 2008), while on the other hand the number of total publishers in the industry jumped to almost 5,787 by the mid of 2010 (Frankfurter Buchmesse, 2010) The translation of books have witnessed a slight decline from almost 11,900 in 2008 to 11,800 in 2009 which affected the export ratio (Frankfurter Buchmesse, 2010) The import of books is also facing a decline with its growth rate 0.2% in 2009, as a reason of decline in the USA and the UK markets (Frankfurter Buchmesse, 2010) All these variances depict that the industry is at a growth despite a downfall in the revenue earned from imports and exports. With an in depth analysis, it can be stated that the industry with a freshly developed e-commerce outlook and regaining impulse on the potential customers, is serving greater opportunities to the including parties in comparison to threats. To be summarized, the future forecasts of the industry tend to grow at a moderate rate, thus increasing the competition in the market on the contrary. 4. Deduction of Strategic Recommendation of Three Top Players Figure 5: Global Ranking of Publishing Houses Including Bertelsmann, Random House, and Holtzbrinck Source: (Wischenbart, 2010). 4.1 Bertelsmann AG Bertelsmann AG is a German based publishing company which was incorporated in 1835. Presently the company is termed among the market leaders of the media industry in Germany. The business areas of the publishing house relates with audio-visual media, print media, media clubs and direct marketing and book publishing. The division of the company that deals with the book publishing sector is formally titled as Random House. With over 5,432 employees, subsidiaries operating in 50 countries and revenue structure of € 1.7 billion (as on 2008-09), the company follows a strategy of market segmentation and differentiation emphasising on general-interest books such as story books and personality development books (Bertelsmann AG, n.d.). 4.2 Holtzbrinck Publishers LLC Georg von Holtzbrinck GmbH is a Germany based private company operating in more than 80 countries. The company was set up in 1948 and therefore is quite younger in the market than Bertelsmann AG. Apart from trade publications, the company also deals with newspapers and magazines publishing along with a special emphasise on book publishing through both the print and the electronic media. The strategy of the company thereby, is to serve any and every kind of educational book focused on the market segment comprising students and children fundamentally (Holtzbrinck, n.d.). 4.3 Springer Springer is another famous name in the global book market. The publishing house was established in 1842 in Germany. The publishing house renders its services in more than 20 countries of USA, Asia and Europe through print and electronic media. The company specialises in educational and general interest books and journals in the book publishing sector. Apart from the sector related to book publishing, the company also publishes newsletters, databases and other publications related to significant conferences, protocols and so on. From the strategic point of view, the market segmentation of the company emphasises on the targeted customers preferring books and journals related to science, technology innovations, business, architecture and transport. To be precise, the targeted market of the company solely targets the professionals and the higher education students as the potential customers (Springer, n.d.). With these certain features and characteristics on the strategic perspective, all the three companies pose certain advantages and major limitations in relation to the current developments and future trends of the industry in Germany. In the further discussion of the paper, the facts related to the limitation of the companies and the opportunities of the industry shall be studied in order to recommend certain significant measures to the companies. 5. Conclusion and Recommendations From the facts and figures revealed in the above discussion, it is quite evident that the Book Publishing Industry in the German economy beholds a significant position rewarded by it rich culture and heritage. For example, the global ranking of the industry is at the 48th position. However, its current developments also conclude on the part of its growth within a short span of time (Buchmesse, 2010). Being one of the most important industries the book publishing industry comprises numerous related industries such as the technology industry, the paper manufacturing industry and in turn is subject to the macro and micro economic fluctuations. These influences certainly have a great impact on the operations of the major players in the industry for which companies should focus on certain strategic concentration. For instance, the industry trends reveal that the market segment comprising of children and teen customers were recorded to grow by 9.1% in the year 2009. Among the various categories of interest in the market group, the geography and health related books were the least contributing subjects (Frankfurter Buchmesse, 2010). Hence, the companies dealing with the particular market segment centred on the children and teen readers such as Holtzbrinck Publishers should accelerate the promotional techniques used for these segments. They should also render the services and products to other market segments to gain most of the opportunities of the industry. On the other hand, the companies dealing in the book market of Germany excluding the children and teen buyers such as Springer should also emphasise on this particular market segment. This shall not only enhance the potential of the companies but shall also reward a certain amount of competency which can prove beneficial in the near future in order to face the circumstances raised by high competition. Consequently, it shall be stated that the companies participating in the industry shall be quite effective in facing the future challenges in terms of the competition, considering the significant facts related to the industry. References Bertelsmann AG, No Date. 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