Barnes and Noble business strategy
Barnes and Noble Pushes Books
Conceptual Application? by Rusty Korhonen
Barnes and Noble’s strategy is simple; capitalize on a customer demand for inexpensive books. This was a cost leadership and a differentiation strategy. Barnes and Noble identified a gap in the publishing industry, which primarily focused on blockbuster types of books and marquee authors that “rocketed to the best seller list” that the publishing industry in turn sold at a premium. These best sellers were not big profit sources for Barnes and Noble, in contrast Barnes and Noble identified, perhaps through its process of data mining and customer focused research, that its customers wanted less expensive books. Barnes and Noble hoped to get a bigger piece of a shrinking pie; research showed that the number of households that purchased hardcover books actually declined and book sales dwindled throughout the industry. Barnes and Noble created a capability and possibly a core competency through its discovery of this demand and the intimate knowledge of its customer’s demands.
The cost leadership strategy consisted of publishing less expensive books that their customers demanded. By publishing these books internally they increase their profits. Differentiation was also prevalent in this strategy. Barnes and Noble focused outside of best seller categories, which account for only 3% of their sales, and thus they didn’t compete with their high profile publishers. This also allowed Barnes and Noble to retain the magnet of best selling books that attracted customers to their stores. The focus of publishing classics, atlases, illustrated coffee table books, and niche publishing markets such as out of print books, allowed Barnes and Noble to reconfigure new value and will eventually affect the share price.
Barnes and Noble’s strategy was sound and with the reallocation of resources should be poised to succeed. The conservative implementation of this strategy doesn’t commit all of Barnes and Noble’s resources at once and the success of the self published illustrated “coffee table” books points toward the success of this deeper venture into publishing. The mistakes made by Tommy Hilfiger Corp and Borders aren’t good comparisons because the venture of Barnes and Noble focuses on a market niche. Hyperion Robert Miller’s comments that “the niches Barnes & Noble is targeting will still leave room for general-interest publishers.” I agree with Mr. Miller’s assessment that Barnes and Noble’s move is savvy "since they don't pay a 50% markup [to a publisher], they can apply that advantage to price and still make more money than publishers selling the same Charles Dickens title." This makes solid business sense and the by not alienating the best selling publishers it stands to loose little.
Barnes and Noble also leveraged its buying power to force changes on the publishing industry. Some of its current supplier publishers are adapting to this demand as Stuart Dolgins aptly described his firm’s changes to accommodate Barnes and Noble’s demand, "we're competing against ourselves, but if I didn't do this, [next page]