Barnes and Noble was established in 1873. The firm has grown tremendously to become one of the most recognized brands in the bookselling industry. It has hundreds of bookstores spread across different parts of the United States and offers full-time employment to thousands of people. Apart from books, the company is also involved in the sale of DVDs, music, comics, magazines, among others. Barnes and Noble also run an online service where it provides e-books through the Nook reader. The company finished its college business in 2015, through which it enhances brand loyalty.
The strategies in place at Barnes and Noble (B&N) have not been very effective, going by recent financial outcomes. The company has been recording reduced sales and profit margins over the past few years. This is attributed to stiff competition from other platforms such as Amazon and the poor performance of their e-reading device in the market. The firm roughly controls 17% of the market for books and other related items it trades in. The entry of new competitors, such as Amazon in 1995, has posed the biggest threat to the success of Barnes and Noble in the bookselling industry.
Amazon’s online bookstore has managed to record significant sales over the years, resulting in a decline in the market share and profit margins of Barnes and Noble. There are minimal barriers to entry in the bookselling industry, thus B&N cannot lock out potential competitors and faces stiff competition. The availability of substitute products which book readers can choose from instead of B&N stores or online services is also a threat. However, B&N also has some competitive advantages in some areas, especially in the aspect of having physical stores. These advantages can be exploited for maximum benefit by having proper strategies in place to guarantee the success of the company.
Grand Strategy Matrix
The Grand Strategy Matrix is a practical technique that enables companies to develop optimal alternative strategies. It is constructed on two measures that are mapped out along a vertical and a horizontal axis. The competitive position of a firm is outlined on the horizontal axis and varies from weak to very strong. The vertical axis depicts the market growth, which runs from slow to fast growth. When the data is plotted, it generates four quadrants which represent optimal strategies that can be pursued by organizations. The key determinants in this matrix are the competitiveness of the firm and the current growth of its market. The four quadrants and their accompanying strategies are shown below.
The Grand Strategy Matrix allows a firm to choose the strategy that is ideal for its competitive status and its market. Firms with various divisions or product groups can also use this matrix to determine the optimum strategies for each division. As shown in the above diagram, firms located in the first quadrant should explore market development, market penetration, product development, and so forth because of their exceptional strategic position. The objective in the first quadrant is to prompt firms to grow quickly and safeguard their competitive status. Firms positioned in the other quadrants strive to attain the best competitive capacity and enhance their market share.
B&N has two product groups that can be evaluated using the Grand Matrix Strategy; in-store book sales at their physical stores and online sales through its online platform. In-store book sales fall under quadrant IV. Two assumptions have been made in arriving at this conclusion; strong competitive status and slow market growth.
B&N has a strong competitive position in this division because it owns numerous book stores in the country. B&N recorded higher in-store sales than any of its competitors in 2007. The firm’s brick-and-mortar stores give it a competitive advantage over others because it provides customers with a relaxing environment to revel in their reading experience. Customers can also enjoy a cup of coffee as they read their favourite books. Employees at the firm’s stores also offer excellent customer service, enhancing the competitive status of the firm.
The second assumption is slow market growth of in-store sales. Changes in the bookselling industry and technological advancements have affected booksellers significantly. These changes include an increase in the popularity of e-books, increase in the availability of smartphones and other devices that allow book lovers to read electronically, surge in audiobooks, a decline in time spent reading books, among others. These changes have resulted in a decline in sales in the bookselling industry. The market is thus experiencing slow growth as more customers shift to online platforms to obtain their favourite books.
Given the assumptions made, in-store sales are in quadrant IV of the Grand Strategy Matrix. B&N can pursue various strategies. Having a strong competitive position is beneficial to the firm, while slow market growth provides options for developing a new market for its products as well as identifying innovative solutions. Concentric diversification is a viable strategy that B&N can pursue to enhance in-store sales. Provision of new products or services closely related to those B&N already deals in can significantly influence market growth.
New products or services that B&N can offer include organizing plays for children, book signing events, among others. Such services result in increased visits to stores which increases the possibility of making greater in-store sales. The firm can also increase its online presence and tap into the growing market. B&N can also diversify to provide unrelated products such as beauty products, clothing, shoes, and so forth like Amazon did. An additional strategy B&N can implement is getting into a partnership with similar firms such as independent booksellers in the form of a joint venture. Both firms continue to operate but they complement each other in different areas as well as sharing various costs. This can result in increased sales and reduced costs.
The online sales division of B&N falls in quadrant II. The assumptions made are that the firm has a weak competitive position and the market growth is rapid. B&N has a weak competitive position in online sales of books and related products, as compared to Amazon, its leading competitor. Amazon has invested heavily in technology and specializes in online commerce rather than having physical stores. The company has not managed to compete effectively in this division. B&N has tried to penetrate the market by offering its products online, but still has significant strides to make to operate at Amazon’s level.
The market growth of online sales is high. This is largely attributable to technological advancements that have made digital content more attractive and convenient. Content is mainly distributed through electronic means, rather than print media. People prefer e-books and audiobooks instead of hard copies. Technology has also made digital devices more affordable, thus contributing to the increased demand for digital content and surge in e-commerce. The market growth of online sales is thus bound to continue rising in the future.
The online sales of B&N fall under quadrant II, which provides several feasible strategies. Market penetration is one key strategy the firm can use. B&N can expand its operations in online platforms to gain an improved position in the online market. Market development should also be pursued to obtain new markets, thus increasing B&N’s reach. B&N should also execute a product development strategy. A variety of products results in an increased number of clients and improved returns. B&N should improve their website infrastructure and features to make it more attractive and easier to use for customers. Integration and diversification are also possible strategies, though they should be considered as last options.
BCG matrix
The BCG matrix is a model used to evaluate products with respect to relative market share and market growth rate. It enables companies to establish the products that are effective in aiding them exploit market share growth opportunities.
Products or units are categorized into four quadrants under the BCG matrix. The stars are the products that have the largest market share and have a high growth market. They consume and generate a lot of cash. Cash cows generate more cash than they utilize. They are made up of products that have whose market share is huge but the market grows slowly. Dogs are the products that have an insignificant rate of growth and share of the market. They generate minimal amounts of cash and spend less as well. Question marks are the units that have high market growth rates but have a minimal share of the market. These products generate minimal returns but consume a lot of resources.
Brick and mortar stores are categorized as Cash cows. B&N physical stores generate more cash for the firm than they consume. The stores have a high market share but the market growth is low. Cash cows avail funds used to cover various costs, settle debts, finance research, among others. B&N should maintain the productivity levels of its stores and enjoy the gains it provides over time .The strategy B&N should utilize is harvesting. This is achieved by reducing the investment in stores and strive to obtain the maximum cash flow from them. This enhances overall profitability generated by the stores.
The internet business is classified under question marks. B&N’s internet business has high growth potential but the firm controls a small proportion of the market. The internet business has cost B&N a significant amount of resources compared to the returns it has generated. However, this business has the potential to turn into a star due to rapid market growth. B&N should invest more in the internet business because it has a high capacity for growth. Building is the strategy that B&N should adopt for its online business. The firm should increase investment in the business to enhance its market share.
The results from the BCG matrix backs the strategies arrived at using the Grand Strategy Matrix. The BCG matrix categorizes the brick and mortar stores as cash cows and suggests that investment should be reduced and enjoy the cash flows generated. The Grand Strategy Matrix suggests that B&N should pursue diversification and joint ventures. The strategies provided by both models are geared towards increasing the overall profitability of the firm. The BCG matrix classifies the internet business as a question mark while the Grand Strategy Matrix positions it in quadrant II. The strategies offered by the two matrices are different but they both focus on increasing investment and enhancing B&N’s market share in the internet business.
Barnes and Noble should follow a blend of strategies to remain relevant in the ever-changing and competitive book industry. The firm needs to enhance its online business by concentrating its efforts on market penetration, product development, and market development. B&N should increase its investments in the online business so as to improve its share of the lucrative market. The firm should also consider diversification into related products so as to enhance its in-store sales. B&N can also seek joint ventures with similar firms that can draw on each other’s strengths and share various costs. Strategic leadership is also of great significance in advancing the effectiveness and competitiveness of Barnes and Noble.