Random House - Assignment Example

A Porter’s Five Forces analysis of the book publishing industry reveals that a profitable market with the potential to yield high returns attracts new firms. In acknowledgment of this fact, Random House acquired other printing houses in order to grow its operations and decrease new entrants’ profitability. The concept of the threat posed by substitute products is also manifested by the advent of e-books, where customers tend to switch to alternatives. Customers’ buying power is also seen in the book publishing industry when they are presented with more options in the form of e-books. On their part, publishers can exercise their bargaining powers by becoming the largest players in the industry through, for example, mergers and acquisitions (Bickert et al 4). Competitive rivalry is manifested by the presence of numerous publishers offering diverse products.

Consolidation in book publishing affords a publisher more presence in both local and international markets, enabling them to reach a wider and more diverse market. For example, following consolidation with a publisher that focuses on a particular language or area of interest, the parent company will be able to bring the market targeted by its new merger or acquisition into its profitable operations (Bickert et al 5). Based on the operations, for example, of a publisher that targets a Spanish-speaking market, the benefits can be considerably large, since the Spanish-speaking market is widespread. Another example of a large benefit would be consolidation with a publisher that targets the Chinese market, where 51 percent of citizens in China live in cities with stable consumption of education in the form of published books.

Random House’s five elements of strategy included digitalization; internationalization; mergers and acquisitions; strengthening of the core business; and responding to the shifting consumption of media (Bickert et al 5). Digitalization would ensure that they conform to the emerging trend of online reading and, hence remain relevant in the industry. Internationalization was meant to reach a wider, global market while mergers and acquisitions would facilitate the internationalization strategy. Strengthening of the core business meant that the existing assets for example the 20-meter high warehouse, would continue being in use while responding to shifting media use meant the publisher would serve emerging markets as well.

The main benefit Random House draws from being part of a corporate parent like Bertelsmann is that it operates under an already-established and trusted name that can easily sell itself. Although advertising would still be necessary, the loyalty such an established parent company demands is enough to drive sales.

The most salient threat Random House faces is from established publishers of e-books, which have changed the buying behavior of customers from print to e-books. This could render its conventional printing methods, which they have invested in heavily and for long, obsolete and drive them out of business. The internationalization goal, which focused on the Chinese market, also presented another threat. Although China was a fast-growing and important market, Random House did not have familiarity with the attitude and culture around the book-buying habits of the country. Further, and more importantly, it was an unknown operator in the country (Bickert et al 7).