Internal and External Environmental Analysis - Barnes and Nobles - Essay Example

 Internal and External Environmental Analysis: Barnes and Nobles Throughout the history of mankind literature and books have played a very important role in our history. The use of words for writing was invented by the Sumerians about 5000 years ago and the first books used Papyrus or parchment as writing surfaces (E-book, 2010). Ever since the Chinese invented printing books have become a mainstream artifact in our society. Books have played a very important role because they have helped society document their cultures and traditions. Books serve as the foundation for our educational system. Throughout the 20th century books represented a huge industry. The market leader in the book industry in the United States is Barnes and Nobles. The purpose of this paper is to analyze the internal and external environments of Barnes and Nobles. Company Profile Barnes and Nobles was founded by its chairman, Leonard Riggio, back in the 1960’s. He began the operation back in the 1960’s when he realized he could provide a better service to the college community he attended. He created his first book store to compete directly with the college bookstore of New York University. Barnes and Nobles began trading in the New York stock exchange on September 28, 1993 under the symbol BKS. A transcend business transaction that provided the firm tremendous growth was the acquisition of Dalton Bookseller. The transaction gave the firm an additional 797 bookstores. At the time the firm was able to move into the number two position in the bookstore marketplace. Today the firm is the market leader in the industry with revenues of $7 billion in fiscal year 2011. The company has both traditional bookstores and an online sales operation. Barnes and Nobles has taken advantage of its popularity and has implemented a product diversification strategy that has allowed the company to sell other items such as DVDs, toys, music and video games. The mission of the company is to operate the best specialty business in America, regardless of the product they sell. SWOT Analysis Barnes and Nobles is the industry leader in the book industry. Being the market leader in any industry is considered a strength due to the fact that the market leader generates the most amounts of revenues. The firm has been very innovative throughout its history including becoming the first book store to advertise on television. At the turn of the 21st century Barnes and Nobles realized that ecommerce was a major trend that affected everyone in the retail industry. The firm today is the internet’s largest bookstore with a product selection of over 1 million titles. Two years ago the company also became leader in e-books with over 1 million e-books to choose from. The management of the firm is highly qualified and over the years they have made a lot of smart decisions that have helped the firm become the best in the industry. The product selection in both the e-books and printed books is beyond what any other company can provide. The dominance in the e-book marketplace was achieved through the 2009 acquisition of Fictionwise (Barnesandnoblesinc, 2011). The tremendous selection of books has helped the company retain a lot of customers because the firm can satisfy the customer’s reading needs. Another strength of the company is its branding value. The firm was able to capitalize on its ability to generate customer traffic by diversifying into other products. The firm offers its customers a selection of over 60,000 blue ray DVD titles. The firm’s music store was categorized as the best on the net by Forbes (Barnesandnoble, 2011). The location of the firm’s bookstores is another strength the company has. Barnes and Nobles operates 705 retail bookstores strategically located in regional shopping malls, major strip centers and other freestanding location, and the firm also owns 636 college bookstore placed near major university campuses (Barnesandnobleinc, 2011). One of the strengths of the college book operation is that publishers and colleges are using a new version of the same book every one of two years. This ensures that college students purchase new textbooks instead relying on the used book market which is a secondary market. A weakness that the company has is that the firm operates in an industry that is in its maturity stage. Major book selling chains such as Borders recently went out of business because the demand for their product was not sufficient as the prices of many books have gone down. Borders did not enjoy the benefits of penetrating the college book market segment. Another inherent weakness that the company faces is lots of competition particularly in the online segment. Despite the fact that the company has diversified into other products their product diversity hails in comparison to other online book retailers such as Amazon. In 2009 books sales fell 1.9% in comparison with the previous year (Fowler & Trachtenberg, 2010). Barnes and Nobles has many opportunities that the firm could exploit to continue to grow as a corporation. The current trend in digital publishing is a great opportunity the firm can exploit. The company is positioned perfectly to take advantage of this opportunity. The sale of e-books in 2009 triple to reach $313 million and the trend is that by 2012 e-books and digital publishing will represent between 20% to 25% of total book sales (Fowler, et. al., 2010). Barnes and Nobles has to become aggressive in its marketing of e-books. The firm can achieve that goal by entering in numerous marketing alliances with other companies. Another way for the firm to exploit this opportunity is by forming better partnerships with universities. The firm can serve as an intermediary between the publishers and the academia to facilitate in the designing of more textbooks for classrooms in e-book format. This way the firm could negotiate exclusive rights to sell these e-books to millions of college students. Another major opportunity for the company is to acquire or form a joint venture with the firm Papyrus Australia. This company has patented technology that created a new form of paper known as banana ply paper. This new form of paper is made out of the trunk of banana trees which is currently a waste product. The advantage of using banana trees instead of normal trees to make paper is that banana trees are a renewable source of energy. Currently Papyrus Australia is in its start-up phase of the project. The firm is a publicly traded company which would allow Barnes and Nobles to attempt a hostile takeover to acquire the firm. The book industry faces many threats from different aspects of the business. Reading has not become as important in people lives as before. In 2011 people have so many varieties of entertainment options including video games, movies, recreating parks, television, sporting games, and the internet among many others than buying a good book to read at home has become a rare tradition among American consumers. In the internet in itself is also a major threat to the publishing and book industry as a whole. People no longer have to really on books to gain access to the knowledge they seek. The internet is the ultimate substitute to books whose information is free of charge in majority of cases. An environmental threat that poses a major potential problem for the publishing industry is deforestation. Deforestation can be defined as the permanent destruction of indigenous forest and woodlands (Collins, 2001). The de facto problem with the industry is over dependency on wood to create paper. The problem the industry faces is similar to what is occurring in the transportation industry with its dependency on gasoline. As deforestation continues to reduce the world’s supply of wood paper is going to become scarcer and as a consequence the book industry as we know it may seize to exist. The government could impose quotas on book publications to reduce the consumption of wood of the industry. Conclusion The SWOT analysis performed on Barnes and Nobles identified many strengths, weaknesses, opportunities, and threats the company faces in its internal and external environments. One of the greatest strengths of the company is its product selection. The company has over one million books and one million e-books available. A weakness the company faces is that sales in the book industry are declining and the competition in the industry is intense particularly in the e-commerce segment. A potential opportunity for the company is the acquisition of Papyrus Australia. Two major threats the firm faces are deforestation and the internet. References Barnesandnoble.com (2011). About Barnes and Noble.com. Retrieved July 4, 2011 from http://www.barnesandnoble.com/help/cds2.asp?PID=8184 Barnesandnobleinc.com (2011). Barnes and Noble History. Retrieved July 4, 2011 from http://www.barnesandnobleinc.com/our_company/history/bn_history.html Collins, J. (2001). Deforestation. Retrieved July 4, 2011 from http://www.bcb.uwc.ac.za/envfacts/facts/deforestation.htm E-book.com (2010). A History of the Book. Retrieved July 4, 2011 from http://www.e-book.com.au/bookhistory.htm Fowler, G., Trachtenberg, A. (2010). ‘Vanity’ Press Goes Digital. Wall Street Journal. Retrieved July 4, 2011 from http://online.wsj.com/article/SB10001424052748704912004575253132121412028.html Read More