Barnes and Noble Case Study

nidus Project 10th of december 2010 History In 1873, Charles Barnes undefended a support- chumping bank line in the regular army. The first prevail inst exclusively in tot exclusivelyy was set up by his son, William, in break outnership with G. Clifford alarming, in 1917 in New York and it is the advent of Barnes and magisterial. In 1932, at the height of the Great Depression, the curb workshop was moved to its actual office on Fifth A locale. Barnes & dire was acquired by Leonard Riggio in 1971, who oversaw the harvest-home of the business. Leonard Riggio, the lodges chairman, began his holdselling life story while attending New York University in the early 1960s.Working as a clerk in the university password hold on, he became convinced that he could do a better job serving students,and he opened a competing caudex of his take. With a small investment, Mr. Riggio established the Student Book Ex channel (SBX) in Manhattans Greenwich Village in 1965. The barge in quickly became ace of New Yorks finest bookstores, known for its knowledgeable staff, wide filling and bang-up service. In 1974, Barnes & overlord became the first bookstore to advertise on television.In 1975, the companionship became the first bookseller in the States to tax write-off books, by selling New York Times popular titles at 40% off the publishers list price. During the 1970s and 1980s, Barnes & overlord opened smaller dis see stores, which were at long last phased out in favor of big stores. They in analogous elan began to publish their own books to be interchange to mail- rescript guests, enabling them mail- sound out to off new customers nationwide done and through mail- grade catalogues. In 1979 Barnes & terrific acquired a kitchen range of sell stores called Bookmasters, and then bought up Marboro Books Inc. , a rebrinyder telephoner with discount sell outlets.Barnes & august continued to go throughout the 1980s, and in 1987, the comp wha tever make its hulkyst acquisition when it purchased B. Dalton Bookseller from Dayton Hudson. This acquisition of 797 retail bookstores thrust the alliance onto the subject scene, making Barnes & portentous a nationwide retailer overnight and the second-largest bookseller in America. The comp whatever too acquired Doubleday Book Shops from the Bertelsmann troupe and the estimables to the Scribners bookstore championship name from Macmillan. Barnes & frightful purchased BookStop, a phoner operating discount book superstores in Texas, in 1989.This acquisition gave the comp whatever key insights into the ingredients behind a successful superstore strategy, from real estate to operations to tradeing and securities laboring. In the latish 1980s, Barnes & courtly tested selling books online in an early generation venue called Trintex, a joint proceed with IBM. In the early 1990s, the society peachy its superstore concept and established the modern generation of Barnes & terrible superstores, which today conciliate over 96 percent of their retail gross sales. Barnes & stately became a publically traded company in 1993, listed in New York Stock Exchange.In the mid-1990s, it sold books on CompuServe and later opened a full-fledged book superstore on America Online in March 1997. Before Barnes & magisterial created its web site, it sold books at once to customers through mail-order catalogs. It first began selling books online in the late 1980s, exclusively the companys website was non launched until May 1997. According to the site, it now carries over 1 million titles, as puff up as a vast pickax of unison CDs and videodisks. (5) In the beginning of the millenium the company has make dickens acquisitions that spread out its publishing cap cap baron. * In 2001, Barnes & overlord purchased SparkNotes. om, a leading study assist website, set uping free online entree to literature notes and more than 1,000 study guides on e trulything from literature to chemis set about to computer science. SparkNotes converted its top study guides into print publications, and they watch rapidly perplex bestsellers. * In 2003, Barnes & majestic purchased Sterling publish. For 60 years, Sterling has been one of the worlds leading publishers of non-fiction books. Sterling strives to publish juicy-quality books that educate, entertain and amend the lives of their readers. In March 2009, Barnes alarming acquired Fictionwise, a leader in the eBook marketplace.Headquartered in New Jersey, Fictionwise was founded in 2000 by Steve and Scott Pendergrast. In July 2009, Barnes overlord launched the worlds largest eBookstore aspart of its boilers suit digital strategy. In October 2009, Barnes & nobleman introduced Nook, the worlds most advanced eBook contri merelyor. It was awarded as the Best New Gadget of 2009 in January 2010. institutional construction Stakeholders A stakeholder is defined as an individual or group with an fire in the success of an organization in delivering mean results and maintaining the viability of the organizations products and services. Analyzing the economic interactions of Barnes impressive closely, it finish be seen that on that point is a great variety of ingrained as well as external stakeholders victorious part in the economic and mo take inary closing making of the company as a whole. Internal amount of money stakeholders of Barnes Noble first of all include its 40,000 nationwide employees, which contrisolelye to the economic functioning of the company by their school interaction with customers in Barnes Nobles 720 stores and 636 college bookstores. alike they be apt(predicate) to contri besidese at once with their ideas, creativity and expertise. Their expectancies do-nothing be identified as job security, pecuniary compensation of their contributions in terms of a salary, esteem, pensions, elongated involvement in profit and a health c are insuranc e, as well as a pleasant working atmosphere. Further internal core stakeholders of Barnes Noble, who are vital for its business making through their contributions of not precisely(prenominal) risk seat of government, but as well of ideas and govern, are its various shareholders.The evaluate reward of shareholders resides capital gain in terms of dividends or a rising stock price, which usually is obtained through sustainable economic growth and a reasonable business strategy of Barnes Noble. Besides internal stakeholders, there are too umpteen external forces and groups which in runly influence the ending making of Barnes Noble. Especially enemys play an in-chief(postnominal) role, as their decision-making might directly influence or initiate changes concerning Barnes Noble operating markets.Besides its fundamental core business, which concerns selling books through its 720 local bookstores in all 50 States of the USA, Barnes Nobles online appearance, www. barnesan dnoble. com, has gained on sizeableness over the last years. Especially this cockeyedament is passing emulous as big players such(prenominal) as Amazon. com Inc. leave out the market. Possible interactions amongst contenders concern eventual collaborations in innovation. An another(prenominal) absolutely important group with respect of Barnes Nobles stakeholders are its clients. Their contributions to the company concern not nly purchases but also loyalty and most importantly feedback, which nookie be used to adjust Barnes Nobles business protrude depending on consumer preferences. The expectations of customers include quality, special offers and, in case of the book market Barnes Noble operates in, a broad variety of books available directly on demand. In a more general sense, also the Ameri drop organisation takes part in Barnes Noble, as it ensures a fair competition in the market through regulations and a framework of rules which has to be accepted by not exclusiv ely Barnes Noble but also by all its competitors.Rewards, which are expected by the government, include tax payments, employment, and economic growth. Also banks are part of Barnes Noble shareholders, as they provide loan capital upon request as well as advisory in tack for interest and mortgages. However, as Barnes Noble rents most of its stores, there has not been any significant need of loan capitals over the last decades. Ownership complex body part The ownership structure of Barnes Noble is determined and ranked by the amounts of shares possess by a certain individual or group.The assembly of shareholders is be slip the most important event in terms of force play and decision making for Barnes Noble, as it is symbolizes the top entity in the hierarchy of power dispersal. start of all, 49% of the innate available Barnes Nobles shares are in the possession of Insiders and the Top-5-Percent Owners. The most significant position, equivalent to 27. 8% of the total dist ributed shares, is held by Barnes Nobles chairman Leonard Riggio, as it can be seen in the chthonianneath graph. Also the American business magnate Ronald Burkle is heavily invested in Barnes Noble with roughly 18. % of Barnes Noble shares in the possession of his Investment whole Yacaipa Cos. another(prenominal) 49% of total Barnes Nobles shares are held by Institutional Mutual Fund Owners, such as Aletheia Research guidance Inc. which holds 15 % on Barnes Noble as seen in the underneath graph. The total form of Institutions holding Barnes Nobles shares was 161 in June 2010. Governance twist and its Mechanism Barnes Noble governance structure is equivalent to the standard American governance nonplus the assembly of shareholders elects the plug-in of directors.Then, it is the task of the get along with of directors to successfully control Barnes Nobles top managers (the executive committee) according to the expectations and conclusions of the shareholders and the b oard of directors. thus, the top managers are the ones who effectively control the daily business of Barnes Noble and who give feedback to upper entities upon developments. The underneath model summarizes the simple interconnection of Barnes Nobles managerial entities Assembly of Shareholders venire of Directors Top Managers Members of the Board of Directors Barnes Noble can be seen in the underneath diagramIt can be seen that the chairman Leonard Riggio unitedly with his son Stephen Riggio, controls the Board of Directors, whereas William J. Lynch, /as the CEO, is in delegacy of the executive committee of Barnes Noble. The members who are listed as Director are so called independent directors, who worked for other companies over the last years and who contribute chiefly with their begin sex to the overall decision making. The power within the executive director committee is distributed between three major committees, which are dealing with divergent areas of Barnes Noble economic functioning The Audit Committee, which is in charge of assuring the honor and reliability of the ? nancial records and the protection of assets though internal control as well as the external control through an annual independent embrace of BDO Seidman. -The Nominating Committee, which controls the composition of the members through recommending and acquireing qualified individuals to the full board in order to elect them as new members. -The corporate Governance Committee, dealing with the overall economic efficiency of Barnes Noble, as well as with the distribution of rewards for employees.Core Institutional Goals Core institutional goals of Barnes Noble describe the overall strategy of the Board of Directors, to be carried out by the Executive Board. Primarily, Barnes Noble wants to become the biggest bookseller in the United States and therefore ontogeny its market share. Also Barnes Noble wants to expand its product line by not only focusing on book sa les, but also by successfully selling its eBook Reader Nook. Even though the expansion on international markets was already under discussion, this is not yet part of its core objectives.Also Barnes Noble wants to invest in restructuring its stores in order to make the stay at a Barnes Noble Book Store an experience and thus incr sleep its loyal customer base. Interaction of Elements The interconnection of the mentioned elements is vital for the understanding of the functioning of not only Barnes Noble but of every company. Metaphorically it can well be compared to the mechanism of a automatic watch if one element is lacking(p) or separated from the others, the whole mechanism will not work.Despite their different contributions and expectations, all stakeholders together form the base of the company Barnes Noble. Essentially it is the interaction of provided capital, a business plan and employees, which forms the first preliminary framework of a company. However, power within a company has to be distributed, as only a structured hierarchy amongst employees ensures an efficient functioning of all sectors. Therefore a governance structure has to be developed in order to distribute tasks effectively.In order to be able to plan ahead and give investors an outlook in the potential future, institutional goals have to be stated. Thus, all these core elements are absolutely vital for not only Barnes Noble but for all companies in order to successfully argue in their market environment. Institutional Components influencing the pecuniary Performance Having analyzed the ownership structure of Barnes Noble, it can be seen that Leonard Riggios amount of shares owned combined with Ronald Burkles proportion of shares together sum up to just about 50 % of the total shares in the market.Therefore the constitutional governance structure mechanism is heavily dependent on their, eventually subjective, opinions, which makes the mechanism inefficient. Even though this is a very particular observation, I personally think it might be of significant importance, as the unforesightful work of the organization in my opinion is mainly due to a lack of innovation. As the founder and chairman Riggio is said to be a very conservative shareholder, he might hinder Barnes Noble to formulate as well as to eventually readjust its institutional goals.Corporate strategy The participations principal business is the sale of trade books ( chiefly hard frustrate and paperback consumer titles, mass market paperbacks, childrens books, eBooks and other digital content, eReaders and relate vexories, bargain books, magazines, gifts, cafe products and services, medical specialty and movies direct to customers through its bookstores or through its subsidiary Barnes Noble. com.In October 2009, Barnes Noble also launched NOOK, the Companys patented eReader that the satisfying considers the worlds most advanced eBook reader, because it features groundbreaking modify technology, a color touchscreen and lets readers download books in seconds. In addition Barnes Noble has expanded its approach to bookselling and the products it offers through its self-publishing program and through its Sterling Publishing and through the acquisition of SparkNotes.The company publishes over 500 titles annually, under a variety of imprints including Sterling, Sterling Childrens Books and Barnes Noble Classics. In 2009, the Company also acquired Fictionwise, Inc. (Fictionwise), a leader in the eBook marketplace, enabling the launch of one of the companys eBookstore. Finally, as a result of the acquisition of BN College (2009), the Company sells textbooks and fertilize-related materials, emblematic apparel and gifts, trade books, school and dorm supplies, and public lavatory and cafe concomitants on college and university campuses.BN College sales account for approximately 14% of the Companys fiscal 2010 sales. Products and Services Because Barnes Noble retail business is very complex, a deeper psychoanalysis is crucial to understand its main features Since 1997 Barnes Noble has started redesigning its position in the business from a store-based model to a multichannel model centered in internet and digital commerce by insertion its website barnesandnoble. om, but the biggest step forward has been done in July 2009 with the outset of its Ebookstore and digital newsstand, which now al piteouss customers to purchase over one million eBooks, electronic newspapers and magazines. Barnes Nobles eBookstore is available on a wide range of digital platforms, including iPad, iPhone , iPod touch and several smartphones, as well as most laptops or desktop computers. In Barnes Noble retail stores the company offers a large excerpt of books, ranging from 20,000 to 200,000 titles.Complementing this extensive on-site selection, all Barnes Noble stores provide customers with access to the millions of books available to online shoppers at Barnes Noble. com while offering an choice to have the book sent to the store or shipped directly to the customer. The online channel also offers the adjunct opportunity to buy not only putting green hard see to its but also out-of-print, rare and used books. Moreover, many of the Barnes Noble stores have harmony/DVD/BluRay departments that typically stock over 20,000 titles.The Companys DVD and BluRay selection is focused on foreign films, documentaries and episodic TV shows. The music selection is focused on classical music, opera, jazz, blues and pop rock. The music department features RedDotNet, an advanced listening station technology that is connected to the Companys online electronic music catalog and enables customers to listen to any union disc in the store, sampling up to 300,000 music titles using digital scanner technology.In every store it is also possible to find an Home talent section that offers items for the office and electronics and also Toys Games and PC Vide o Games departments with a selection of thousands of titles as well as consoles, accessories and strategy guides. Many stores are also have some cafes inside that offer costumers Starbucks beverages, and other products such as candies and sandwiches. Although the cafes are owned and operated by Barnes Noble, servers fol low-down Starbucks standards in beverage preparation.From 2004 all the stores offer a free Wi-Fi access using the AT&T FreedomLink network. Horizontal and Vertical Boundaries While the company has a complete control on sales and hence has never franchised its retail stores, it has anyway gestural many different trading agreements with one- ordinal parties concerning purchases of most of the products sold, manufacturing, logistics and IT complements with the objective to load its operating costs. Below the most important are enlisted NOOK, the Companys eBook reader, and other Company products are manufactured by a third-party manufacturer outside the United States and Barnes & Noble relies on components provided from a number of different manufacturers both within and outside the United States. Many of these manufacturers are concentrated in geographic areas outside the United States.. Barnes & Noble relies also on third-party digital content and applications. * The company is provided with national freight distribution, including trucking services by Argix Direct Inc. The companys B&N Retail segment purchases physical books from over 1,700 publishers and over 50 wholesalers or distributors. Barnes & Noble also acquires rights to distribute digital content from publishers and distributes the content on Barnes & Noble. com. * The company uses Intel-based server technology in a fully supererogatory configuration to power its website, which is master of ceremoniesed in two locations. At these locations, the company maintains computers that store its web pages in electronic form and transmits them to requesting users (known as hosting).The Com pany utilizes two hosting locations. One location is hosted internally by the company and the other is hold by a third-party hosting vendor. Instead, the company decided to invest in the acquire of two huge distribution centers one in Monroe Township, New Jersey, which ships ware to stores throughout the country and to online customers and one in Reno, Nevada, which is used to facilitate distribution to stores and online customers in the western United States.The company also owns another distribution center capacity for facilitating sales by Sterling Publishing to third parties. This investment has clearly enabled the company to source an increasingly larger plowshare of its breed through its own distribution centers, resulting in incr ministrationd direct buying from publishers sooner than wholesalers. Greater saturation through the companys own distribution centers makes it possible to lower distribution costs per unit, to increase both blood line publishs and product mar gins.This has also led to improved just-in- time deliveries to stores and the ability to offer Fast&Free Delivery through its website and for in-store orders placed by customers for home speech. The improvement in technologies and the changes in culture and society are making books obsolete goods whose demand is getting lower and lower, this reality constrained an institution in book retailing like Barnes and Noble to change its strategy and to concentrate in new markets such as e-books work and selling as well as e-book readers manufacturing.This change in the course of action also drove the company to transform its superstores into union centers that host the most important social events as well as to turn into a multichannel distribution company by readinessening its position in the e-commerce industry. These improvements have do Barnes & Noble the only enterprise that nowadays offers readers the option of store visits, e-Commerce, and digital preservation of books to Barnes & Noble- tainted devices or other devices of their choosing.The company also makes big effort in marketing and merchandising campaigns in order to drive traffic to both its stores and website at the center of this program is Barnes & Noble. com, which receives over 450 million visits annually and most of all leverages the power of the Barnes & Noble brand by offering online customers a premier destination for all the products sold by the company. In this way, Barnes & Noble. com serves as both the Companys direct-to-home delivery service and as an important broadcast channel and advertising fair for the Barnes & Noble brand.Geographical scope From the point of view of the geographical scope, the aim of B&N has always been to collocate its retail stores and its college stores only in the USA in order to gain the leadership in the book-retailing market of the country. The firm has reached its goal thanks to its huge number of retail stores (720 located in all the 50 states plus the District of Columbia and 637 college stores) and has still no plans to open its stores anywhere else. Concerning the e-commerce B&N hasnt instead created any geographical boundaries in the USA b&n. om has a consolidated power that is still chasten just by Amazon. com whereas in Europe the firm is try to gain shares in the market especially through a joint venture created in October, 1998, with the German publishing giant Bertelsmann AG. The purposes of this venture are mainly two Bertelsmann wants to compete with Amazon. com in the U. S, while Barnes & Noble expects its partnership with Bertelsmann to help it expand into European markets. Organizational structure David Deason V. P. of maturement Barnes & Noble, Inc.Chris Troia Chief Information Officer Barnes & Noble, Inc. Alan Kahn President of Barnes & Noble Publishing theme Leonard Riggio Founder and Chairman Barnes & Noble, Inc. William F. Duffy Executive V. P. of Distribution and Logistics Barnes & Noble, Inc. . Allen Linds trom Control Allen W. Lindstrom V. P. , Corporate ascendency Barnes & Noble, Inc. William J. Lynch Chief Executive Officer Barnes & Noble, Inc. Andy Milevoj Manager of Investor Relations Joseph LombardiChief Financial Officer Barnes & Noble, Inc Jaime Carey Chief Merchandising Officer Barnes & Noble, Inc. Mary Ellen Keating Senior V. P. of Corporate Communications and Public Affairs Barnes & Noble, Inc. Stephen Riggio Vice Chairman Barnes & Noble, Inc. Mitchell S. Klipper Chief Executive Officer Barnes & Noble Retail Group Barnes & Noble, Inc. Michelle Smith V. P. of Human Resources Barnes & Noble, Inc. go after Bottini V. P. and Director of Stores Barnes & Noble, Inc. Marcus E. Leaver President Sterling PublishingThere are no direct information about the organizational structure of the firm, but by expression at the chart it is sort of clear that the company is divided in several functions that deal with both the two main operating segments B&N Retail and B&N College anyway the Company board of directors has decided to treat these two businesses as independent from one another, considering the manner in which the business is managed (focusing on the financial information distributed) and the manner in which its chief operating decision maker interacts with other members of focus.The company has flavour management teams for its digital business and retail stores, including those for real estate, merchandising and store operations. According to its main strategy, the Company management team employs exclusively exceedingly skilled professional with both media expertise and supply ambit management skills in order to guarantee a positive customers experience regardless the preference for either physical or digital products.Field management includes regional directors and order managers supervising multiple store locations for each one store generally employs a store manager, two assistant store managers, a cafe manager and approximately 50 full and irre gular booksellers. Many Barnes & Noble stores also employ a full-time community relations manager.Field management for all of the companys bookstores, including regional directors, district managers and store managers, participate in an incentive program tied to store productivity. The company believes that the compensation of its field management is competitive with that offered by other specialty retailers of comparable size. Store managers participate in annual merchandising conferences, and district managers participate in semi-annual education and merchandising conferences.Store managers are generally responsible for training other booksellers and employees in accordance with detailed procedures and guidelines appointive by the Company utilizing a blended learning approach, including on-the job training, e-learning, facilitator-led training and training aids available at each bookstore and for adjusting the buyers selection to the interests, lifestyle and demands of the store s local customers.Organizational Culture Since its foundation, the Firm has been trying to reach mainly one aim to make its stores centers and active part of the community life, places where people can meet, interact with the others, feel at ease and share their common passion for books.To achieve this goal the Company first off has built imposing bookstores in loftyer(prenominal)ly visible areas open 7 days a week, secondly has focused on creating a tippy and cozy environment with ample public spaces, comfortable settings, including lounge chairs and yarn tables, a cafe, public restrooms and also children playgrounds, thirdly has added a calendar of on-going events, including author appearances and childrens activities and also supports communities through efforts on behalf of local non-profit organizations that focus on literacy, the arts or K-12 education.As well as its stores, also the website reflects the efforts made by the company to offer a pleasant shop experience i t is easy to browse thanks to a clear site symbolize and a useful search bar and moreover is it organized in order to show to the visitors all the ranges of products and most of all the special offers. It is common knowledge that the artifacts are the direct expressions of some values that every company considers crucial and strives to teach to all the employees, from just a superficial analysis of the firm some of them appear quiet clearly firstly the importance of quality and customers satisfaction.But what is considered absolutely vital for the effectiveness of the firms performance its both the collaboration among colleagues that can be maintained and fortify by respecting, supporting and helping each other and the alignment with Barnes and Noble commitment and ethics. As it has already been said, the company has always believed that by concentrating its efforts on becoming a community institution and by satisfying in every aspect the customers it would encourage customer loya lty, word-of-mouth publicity and media insurance coverage and it would have a successful and effective performance.This strategy has clearly worked and hence allowed the firm not to bother too lots on competitors strategies and become anyway a leader in the book retailing market and one of the most powerful firms in the e-Commerce field. It is evident that the stores havent been created to be considered Just as dealers the relationship that the customers establish with the company is rather more complex per excellence books- buyers are hesitant, but in B&N stores they have the chance not only to be helped by highly skilled booksellers but also to feel at ease in special relax areas where they can peruse a book over some coffee.Also analyzing the company strategy in the e-Commerce field, the satisfaction of the customer is still the unique priority. The exploitation of the well furnished distribution centers through fast deliveries to all the USA guarantees an standoffish online ser vice. Punctuality and fast delivery made Barnes & Nobles a leader in the e-Commerce. Competitive strategy Barnes & Noble competes in the book selling industry. The industry can be examined by using the five basic competitive forces.The scourge of new entrants depends on the barriers to entry and the threat of avenging. There is low capital requirement for the industry, because the books can also be sold online, but the economies of scale is significantly high, because of its large inventories and diverse selection capacity. The book selling industry is a highly competitive market. The company has to compete with e-Commerce businesses (Amazon. com, Apple), mass merchandisers such as Wal- Mart, increment market for electronic books and digital distribution of book content.Additionally, it has to face a challenge because of specialty retail stores, furthermore, it competes with large bookstores such as Borders and Book-A-Million, as well as smaller bookstores such as Waldenbooks. Th at is why, the threat of retaliation in the book selling industry is low, because the profitability in the industry is already low due to intense competition. Legal restrictions are low for the e-commerce business and brand loyalty is also low for the industry. All of these factors sanction that the barriers to entry for the book selling industry is low.The suppliers for Barnes&Noble are the third party manufacturers located outside the United States who are the producers of the books and store leasers. The threat of integration for the book manufacturers is low, so their barganing power can not be high also depending on their quantity. Besides, all of Barnes&Nobles retail stores which are leased premises effects profitability in a very essential way. Its profitability depends on the companys ability to find the optimum point for its store lease portfolio. number of retail store, store locations, lease terms &conditions). On the other hand the customersvolume of purchase is not that high, but the availability of information is pretty high especially for the Internet. Consequently the bargaining power of customers is high. There are no substitutes for real books except e-books, but Barnes & Noble also exists in that business. Barnes & Noble retail stores primarily compete on the store experience, quality of shopping and the price and availability of the products.Barnes & Nobles most powerful competitor is Amazon. com. Amazon. com is the firm that dominates in the online book selling market, as well as web shopping. It has many advantages over Barnes&Noble, such as easy access and a highly secure information system. Also it has a book recommendation system which takes the information of every customer by collaborative filtering and recommends books depending on the customers previous purchases. Unlike Barnes&Noble, Amazon. com does not have a physical bookstore.The firm has a very small inventory, but Barnes&Noble has to have a large inventory to provide a vari ety of selection to satisfy customers and it has to pay to the distributor within (at most) 3 months after the purchase which means that the firm has to carry the cost of the inventory for up to four months. This situation creates a disadvantage for Barnes&Noble, against its strong competitor Amazon. com. On the other hand, having many stores can be an advantage, because it reduces the advertising expenses of the firm.Only online book seller Amazon. com, has to advertise by links from other web sites and it has to have an advanced information technology which can offer individualized recommendations for the customers, complaint and shipping systems. Barnes&Nobles information system is worse than Amazon. coms but it also has brick and mortar stores which can never face any technical problems that can lock up all of its sales for a period of time. Therefore, these stores have both advantages and disadvantages for the company.Another specialty that Barnes&Noble has is related to its flat boundaries. It majorly sells books but it also sells DVDs, toys, games and music albums. Therefore it does not have a narrow horizontal boundary. So just like Amazon. com it also has to compete with eBay, which is a very popular online auction site. As it can be understood from Amazon. coms features, it has the market dominance, with the contribution of being the first one in the online book selling market. Still, Barnes&Noble has an advantage over Amazon. om, because Barnes&Noble is a profitable company unlike Amazon. com. It does not have high marketing expenses, because it markets its merchandise by creating a nice atmosphere and opening a coffee shop inside the stores, letting customers have a nice experience which increases their willingness to buy. Nevertheless, Barnes&Noble has to compete with Borders which is an international book and music retailer located in United States. Barnes&Noble is the largest bookstore chain in the US, but it still increases the concentration of the industry.One of the main competitive disadvantages of Barnes&Noble is its high overhead expenses and high cost of production, because the company has more than honey oil stores and 40,000 employees. (Amazon. com has only 7600 employees, and 1600 of them are for book sales) On the other hand, its size allows it to offer some discounts to its customers and lets it have highly diverse selections, which also means that high economies of scale is an important factor for the companies in this industry.Therefore, another effective competitive strategy of Barnes&Noble is its nationwide discount price strategy. The current pricing is 30% off publishers suggested retail prices for hardcover bestsellers and 20% off select feature titles in departments such as childrens books and computer books. The Barnes & Noble Member Program offers members greater discounts. For an annual fee of $25, members receive discounts of 40% off publishers suggested retail prices on hardcover bestsellers, 20 % off giving hardcovers, and 10% off on almost all other merchandise.These discounts are available to members for purchases made at Barnes&Noble stores. Barnes&Noble. com implemented an everyday low pricing model that provides a sensation, low price for each item site wide for members and non members and enables the Company to offer better value to its customers. Members also receive free express shipping on eligible purchases made on Barnes&Noble. com. In addition, members receive exclusive offers and promotions via direct mail and email. Consequently, the switching cost of the industry gets higher.Barnes&Nobles online customer base is a component lower than Amazon. coms. Therefore it developed or copied some strategies to overcome this dominance. For example, it made a deal with Microsoft to become the exclusive book seller for the book shopping category on the MSN network, which is an imitation strategy, because also Amazon. com has a similar agreement with Microsoft. Also, i t sold 50% of its shares to the German Publisher Bertelsmann AG, right after Amazon. coms similar partnership with it. Barnes&Nobles main purpose was to grow into European markets.Besides, Barnes&Noble started to move into other markets such as the sales of dvds, toys and music albums, after Amazon. com. Amazon. com, manages to sell a lot in these areas with no profit, because of its high advertising expenses. So it is pretty worthless for Barnes&Noble to copy this strategy of Amazon. com. Since Amazon. com has the dominance for the online book selling industry, only a few consumers prefer Barnes&Noble on its new market, unless it does not make any differentiations about it. Also this situation, prevents both companies to have a significant brand recognition.To sum up, Barnes&Noble, uses the Wal- Mart strategy to compete in this industry, which includes huge stores, low prices and a sophisticated technology to track its inventory and get rid of the undemanded products from its supp ly, but this situation can not truly help the firm to raise its profit, because an innovation is needed in this diverseness of a highly competitive industry. The company needs essential differentiation. Another copycat like strategy of Barnes&Noble was to create Nook (which looks like an imitation of Amazon. oms Kindle). But this time there was a deviance about this copying strategy, the company created an additional e-book software for PC, Mac and iPad and its own content library. With this strategy the company has vertically integrated. (only by a single layer which is content) Moreover, Barnes&Noble, sells content and makes its platform available to IREX and Plastic Logic devices users. This push-down storage strategy, brings additional revenue to the firm and also makes the companys options unprocurable for its competitors.Unfortunately, this strategy is not good enough for the firm to dominate in the market, because scale, efficiency and little differentiations is not enou gh for a market with many competitors. The increased competition is likely to reduce Barnes&Nobles sales and profits Finances consolidated balance sheet of Barnes & Noble Inc. (2010-05-01) (in thousands of USD) Assets topical Assets Cash And Cash Equivalents 60,965 Short Term Investments - Net Receivables 106,576 Inventory 1,370,111 another(prenominal) circulating(prenominal) Assets 181,825 Total sure Assets 1,719,477 Property, Plant and Equipment 812,034 Goodwill 528,541 Intangible Assets 580,962 compile Amortization - Other Assets 64,672 Deferred Long Term Asset Charges - Total Assets 3,705,686 Liabilities Current Liabilities Accounts Payable 1,624,408 Short/Current Long Term Debt 100,000 Total Current Liabilities 1,724,408 Long Term Loans 260,400 Other Liabilities 505,903Deferred Long Term Liability Charges 311,607 nonage pastime 1,550 Total Liabilities 2,803,868 shareholders Equity Issued Common Stock($0. 01 per share) 89 bear Earnings 681,082 Treasu ry Stock -1,052,356 Capital Surplus 1,286,215 Other Stockholder Equity -13,212 Total Stockholder Equity 901,818 Total Liabilities + Equity 3,705,686 Consolidated Income Statement of Barnes Noble Inc. (2009/05/02 2010/05/01) (in thousands of USD) Total Revenue 5,810,564 Cost of Revenue 4,133,819 consummate(a) Profit 1,676,745 Operating Expenses Research Development - Selling General and administrative 1,392,207 Non Recurring 3,518 Depreciation and Amortization 207,774 Earnings Before Interest And Taxes 73,246 Interest Expense 28,237 Income Before Tax 45,009 Income Tax Expense 8,365 Net Income 36,644 favourite(a) Stock And Other Adjustments - Net Income Applicable To Common Shares 36,644 BarnesNoble Inc. financial ratios of the latest annual report (2009/05/02 2010/05/01) yield on equity 4. 06% Return on total assets 1. 1% Return on sales 0. 77% Asset swage 1. 57 Current ratio 0. 99 immobile ratio 0. 2 Debt/equity ratio* 2. 2 Interest cover 1. 29 Cost of capital 1. 42% *deb t = long term loans + current liabilities BarnesNoble Inc. financial performance evaluation The profitability of BarnesNoble Inc. is very and despite it is mainly competing in the retailing business ROE = 4. 06% is insufferable comparing to the average 5-year ROE=10. 5%. The same tendency can be seen looking at the ROTA which is 2. 7 times lower than the 5-year average.Companys profit margin is even below 1% and this means that BarnesNoble does not manage to earn enough money but at least they are able to cover all their expenses on time without losses. Low profitability ratios as well as asset turnover can be partly explained that market was facing a corking decline, which was caused by global financial crisis and even though it did not cause the reduction in sales which actually increased but made larger costs (i. e. interests) which increased more than sales and caused some financial problems for the company.BarnesNoble Inc. current ratio is almost 1 and this theoretically allow s for the company to cover all their short term financial operations but quick ratio is very low (only 0. 2) and this means that company has much inventory which is about 80% of current assets. This means that company could mayhap improve its profitability ratios by increasing sales of the inventory but since BarnesNoble is in the diminish market which cannot buy all the goods it is almost impossible to reduce high inventory significantly.Turning to BarnesNoble Inc. financial strength ratios situation is a bit better. Companys debt/ratio (2. 2) looks quite normal and we can deduce that it exploits all the available financial resources to keep its sustainability as well as possible. On the other hand, interest cover is particularly low (only 1. 29) and since company is facing the shrinking market this can cause trouble in the near future and lead to minus net earnings. On of the factors which allows BarnesNoble Inc. o have positive net earnings is low cost of capital and this means that average interest rate is 1. 42% and is lower than return on the risk capital. In overall, BarnesNoble Inc. financial results are not very pleasant and refreshing since company is facing decreasin market there is not much it could do in order to improve its situation firstly, it should try to reduce their administrative expenses, maybe close less than the average profitable which generates higher costs.Secondly, it could try to reduce inventory by lowering prices but as I have mentioned before it is a very dfficult task to acomplish since it is facing shrinking market. Finally, it could try to use their cash which even though does not count much of current assets but this could allow company to pay at least part of their debt and increase its liquidity in the short run. Bibliography http//www. google. com/ pay http//www. barnesandnobleinc. com/ http//www. fundinguniverse. com/ www. barnesandnoble. com www. maths. tcd. ie/nora/FT351-3/CS. pdf www. ichnet. org/glossary. htm