Internal Analysis of Booktopia an Australian Book Company - Case Study Example

Assignment: Complete an in-depth capability (internal) analysis of their target organisation (Booktopia). Student’s Name Course Tutor’s Name Date Introduction An in-depth capability analysis looks at the internal abilities possessed by a firm, and therefore reveals the firm’s competitive abilities. Moreover, it has been noted that such an analysis can reveal whether indeed the firm has a strategic plan, or it has embraced strategic management. According to Hambrick and Fredrickson (2005, p. 51), the term ‘strategy’ has been thrown around in most business talk, and has been given different meanings depending on what the user wants it to mean. Strictly though, the two authors describe strategy as an integrated and an extensive or far-reaching concept that guides a business into achieving set objectives (Hambrick & Fredrickson, 2005, p. 51). This paper will conduct an internal analysis of Booktopia – an Australian book company. Booktopia was created in 2004 with the mission of becoming everybody’s local bookstore; this is despite being based in Sydney and facing stiff competition from e-book retailers and other physical bookstores. To conduct an internal analysis of Booktopia, this paper will consider the company’s use of its assets, knowledge, information, capabilities, processes and firm attributes. According to Barney (1991, p. 101), an effective strategy is one that uses all resources owned and controlled by a firm in a manner that enhances the firm’s efficiency and effectiveness. Moreover, Barney (1991, p. 102) indicates that a good strategy is one which creates value for a firm and one which is not being implemented in the same market by the firm’s competitors. Such a strategy thus enables the firm to have a competitive advantage over its market rivals. Barney (1995, pp. 49-61) generated the VRIO (valuable, rare, inimitable and organisation) model, which this paper will use to analyse Booktopia’s internal capability. It is however important to acknowledge that the VRIO model has its genesis in the resource based view (RBV) theory, which argues that firms can attain competitive advantage by utilising their resources (Kostopoulos, Spanos & Prastacos, 2002, p. 2). Booktopia’s in-depth internal analysis By 2013, Booktopia had doubled its revenue to almost 30 million Australian dollars compared to 2011 (Swift, 2013). One possible explanation behind the revenue increase is that Booktopia had not only embraced innovative technology but also upheld the traditional form of customer service. For example, the company had moved away from ordering supplies based on customers’ orders and instead started holding stocks for purposes of ensuring that any orders made by the customer were delivered in good time (Swift, 2013). The firm’s chief executive officer Tony Nash, as cited by Swift (2013), indicated that the decision to hold stocks was partly inspired by understanding that e-books were Booktopia’s major competitive force. Therefore, to appeal to the market that still prefers the printed copies, Booktopia had to embrace a delivery strategy that worked really fast. Booktopia however still sells e-books for customers who prefer them. Analysing the option to hold stocks in one central place and mail them to customers on order using the VRIO model, the following is evident. First, the approach is valuable to customers, who are able to access a wide range of books on Booktopia’s website, and upon purchase, are assured that their orders will reach them at a specific day. When analysed for being rare, this service approach by Booktopia is no doubt uncommon. Arguably, it is a combination of online ordering and waiting for the books to be delivered by mail. While other international players like Amazon.com have a similar service approach, Booktopia is uniquely Australian. hence appealing to locals who want to promote Australian businesses. Additionally, Booktopia competes with local physical bookshops by having every possible title (or knowing where to order for the same) and sending them to customers in good time. The service provision approach adopted by Booktopia is arguably inimitable, because the costs involved in setting up a system similar to what the firm has (including the large distribution centre in Sydney) would be prohibitive. The books, DVDs and magazine retailer has organised its activities to ensure a flawless functionality between orders, payments and deliveries. Booktopia also has a call centre that caters for all customers’ questions and concerns. Arguably, the call centre offers a traditional customer care service, which has in most other competing companies been replaced with online services. Booktopia’s approach arguably offers customers some personal human touch and makes them feel appreciated for opting to order their paperbacks from Booktopia. Undoubtedly, the customer care approach has value for customers since they feel appreciated. The traditional customer service approach is also rare especially among firms that have digitalised all their processes. It is however, easy to imitate, but firms that choose to adopt it must be willing to shoulder the costs of (for example) hiring people to man the customer care stations. Booktopia has also arguably been able to organise its practices to make most use of the customer care service, hence encouraging repeat purchases and referrals from satisfied customers. Booktopia further has a 4000 square feet physical facility in Sydney, which serves as its distribution centre (Swift, 2013). Arguably, maintaining such a large facility in a market where some of its other book-selling competitors prefer to do business on the online platforms only adds to Booktopia’s operating costs and could therefore be interpreted as a disadvantage to the firm. However, as Swift (2013) notes, Booktopia has been able to use technology in a manner that offsets inventory-related costs. Specifically, the company’s CEO wrote an algorithm that predicts what books customers would be demanding and recalibrates the stocks. Consequently, the average stock turnover at Booktopia is 30 days. The firm also has an algorithm that manipulates prices for specific books that do not move as fast as the firm would like them to. Arguably, the algorithms are some of the most unique resources that Booktopia has. Notably, the algorithms enhance customer value since they predict demand and price the books accordingly. Consequently, customers are able to find book titles that they prefer, and the same are delivered fast, hence increasing customers’ perceived value. The algorithms are also arguably rare because they were uniquely developed by the Booktopia CEO in response to the unique challenge that the firm was facing. Additionally, the algorithms are arguably inimitable since they are part of the unique knowledge capital which is not easily transferable to competitors. Finally, it is evident that Booktopia has been able to organise its activities to make full use of the algorithms. Specifically, and as Swift (2013) notes, the company is able to predict demand and hence stock up whatever book titles will be demanded most by customers. Such preparations mean that customers are able to purchase a book of their preference and have it delivered within days (and in some cases hours) to them. Finally, Booktopia appears to have succeeded in organising its business activities in a manner that utilises the opportunities created by the algorithms. For example, Swift (2013) notes that prices of books that do not move fast are lowered in order to create the necessary demand in the market. The company however creates compressions in the same algorithms to avoid creating too much demand, especially for titles that are no longer being printed. Discussion and conclusion It is clear that Booktopia is able to utilise its resources – i.e. its distribution centre in Sydney, its call centre, its algorithms, and its unique blend of online orders and physical deliveries of books, DVDs and magazines. As noted by Barney and Hesterly (2006, p. 41), a firm is only able to enjoy a sustained form of competitive advantage if its resources are valuable to its customers, uncommon and hence rare, hard or costly to imitate, and when the firm has an organisation that enables it to make use of its resources to attain efficiency and effectiveness. Arguably, Booktopia, though still categorised as a small to medium enterprise, scores well in the VRIO framework. The foregoing observation means that Booktopia could be enjoying a phase of sustained competitive advantage in Australia’s book and DVD market. However, it is worth noting that sustained competitive advantage only lasts until competitors are able to duplicate what a firm is doing or offer substitute products (Barney & Hesterly, 2006, p. 18). This means that if Booktopia wants to assume a market leading position, then it must be willing to utilise more of its resources to create value, attain rare and inimitable processes or services, and organise its business activities in a manner that makes full use of all its resources and opportunities. Overall, Booktopia has seemingly done impressively in utilising its unique resources despite stiff competition from international players like Amazon.com and local competitors like the physical bookstores that are positioned close to where customers are. About a decade after Booktopia was established, it is clear that the firm has a clear understanding of how it can create internal capabilities from its resources, but it is also evident that the firm understands the type of competition it is facing. Also notable is the indication that Booktopia understands the customers that it is targeting with its service provisions, and as such, has developed unique service offers that address their specific needs and preferences. It can therefore be argued that customer satisfaction is the hallmark of value, rare, inimitable and organised use of resources in any firm. References Barney, J.B. (1991). Firm resources and sustained competitive advantage. Journal of Management 17, 99-120. Barney, J.B. (1995). Looking inside for competitive advantage. Academy of Management Executive, 9(4), 49-61. Barney, J.B., &Hesterly, W.S. (2006). Strategic management and competitive advantage: Concepts and cases. London: Pearson. Hambrick, D.C., & Fredrickson, J.W. (2005). Are you sure you have a strategy? Academy of Management Executive, 19(4), 51-62. Kostopoulos, K.C., Spanos, Y.E., & Prastacos, G.P. (2002). The resource-based view of the firm and innovation: Identification of critical linkages. The 2nd European Academy of Management Conference, Stockholm, 1-19. Swift, B. (2013). Case study: How to keep energy when your growing company starts moving beyond the mid-market. BRW Fairfax Media Publications Pty Ltd. Retrieved July 20, 2015, from http://www.brw.com.au/p/business/mid-market/beyond_study_starts_company_market_1xDcfkvGj471EycgIAJV2H Read More