Strategic Analysis:Barnes & Noble Inc.

Strategic Analysis:Barnes & Noble Inc.

The problem faced by Barnes & Noble is declining sales and losing out market share to the competition. As such, the strategic tools selected to address this problem must seek to improve the competitiveness of the company and offer a way to increase the company sales. The three strategic tools considered for addressing this problem are Michael Porter’s 5 forces, SWOT analysis, and VRIO analysis. The justification for these tools is that they help establish the current competitive position of the company and identify the gaps that when filled will improve the competitive position.

Michael Porter’s five forces analyze the industry – these forces are rivalry between current competitors, threats of new firms entering the market, bargaining power of the consumers, bargaining power of sellers, and the threat of substitutes (Bruijl, 2018). Using this strategic tool will allow the company to identify the forces that shape the competition and adjust accordingly (Porter, 2008). SWOT analysis also analyzes the industry alongside the firm itself (Sammut-Bonnici & Galea, 2014). The strengths and weaknesses are used to examine the internal capability of the firm to do business, including financial power examined using financial ratios such as profit margin given as net income divided by sales. SWOT analysis can be extremely useful in determining the opportunities in the external environment to pursue in order to record better financial ratios like the profit margin; that is, opportunities that increase the net income figures. VRIO analysis also examines the internal environment in the form of resources and capabilities that can be used to beat the competition (Cardel & António, 2012). These strategic tools are justified by the fact that they address the competition, the major reason the company is recording declining sales.

Among the tools that I would not consider using are Michael Porter’s value Chain analysis and the 4 types of business level strategies. Michael Porter’s Value Chain Analysis focuses on value chain activities (McGee, 2014). Considering the kind of business Barnes and Noble does, most of the elements discussed like inbound and outbound logistics may simply not apply directly to improving the sales of the company. The same case applies to Miles and Snow Typology, whose focus is on generic strategies (Smith, Guthrie, & Chen, 1986) considered herein not to have immediate outcomes in terms of improving the company’s sales.

Michael Porter’s 5 Forces

1. Threat of new entrants

This threat used to be higher with the brick and motor industry. With technology, however, the threat has shifted to new emerging online stores like Amazon. With brands such as Amazon, it is quite hard now for new firms to make it in this industry.

1. Rivalry among current competitors

As mentioned above, Barnes & Noble faces stiff competition from Amazon. With Apple also entering the E-book market, the rivalry intensifies with the competitors gaining an edge to their stronger brand names.

• Bargaining power of suppliers

There not many too many retail chains for books. However, there several publishers and writers, an aspect that gives the retail outlets a better bargaining power. Even with the competition, Barnes & Noble does not need to be concerned with the power of suppliers.

1. Threats of substitutes

This is one thing that the firm should not be concerned with – there are no other materials to serve the same purpose as the books.

1. Bargaining power of buyers

The buyers have a high bargaining power, and the actions of the company will easily reflect on the buying behavior of buyers. With the possibility of getting the same products from better companies, Barnes & Noble should be concerned.

This tool examines the industry and show where the company can achieve an edge and where the company can lose an edge. The only force that shows positive results for the company is the bargaining power of suppliers, which is low in this case. Publishers hardly have an option but to agree with the demands of these retail outlets. The threat of new entrants is mixed, with the possibility of tech companies like Apple joining the industry deemed high. Ordinary entrepreneurs would not make, and the company should improve its brand name to compete with brands such as Amazon. A case can be presented for the substitutes, with the unavailability of close substitutes also seen as positive for the company. All the other forces show that the company does have to overcome great challenges to be competitive. With buyers having a huge say and with top brands leading the industry, the chances for the company’s success are limited.

SWOT Analysis

The table below summarizes the strengths, weaknesses, opportunities and threats of Barnes & Noble:

From the SWOT analysis tool, the internal and external elements can be assessed enabling the company to identify those areas it can improve internally and how to adjust to the external environment. The company’s strengths are relative and thus do not give the company an absolute advantage. With these strengths, the company has something to build up on. The weaknesses reveal where the company need to make immediate efforts to improve. Its innovativeness has been slower, something that has allowed Amazon to swiftly grab a huge market share in the e-commerce platform. The profits are also relatively low meaning the company need to improve its financial performance.

In the external environment, the company can identify where to gain more edge and there it can lose it. In terms of opportunities, the company can make internal changes to adjust to the external environment, something it has already done with online presence. The threats also tell the company what factors threaten its success, for example, better brand names such as Amazon. In a nutshell, Barnes & Noble’s existence is under serious threat, unless it can make the necessary adjustments.

VRIO analysis

1. Valuable

Finances are a valuable resource that can help the firm make the appropriate investment decisions either to take advantage of an opportunity or to eliminate a threat. Another valuable resource is the company’s distribution network which, even though not the best, allows the company to access its consumers and potential consumers. Its brand is also valuable since its strength determines how well the company performs in the market. The ecommerce platform, lastly, should allow the company gain a new innovative face to compete effectively with Amazon.

1. Rare

Patents and exclusive property rights are the only resources seen to be rare for Barnes & Noble. These are resources that the company can capitalize on to gain an edge. Distribution networks and ecommerce platforms for such companies in the industries are also rare.

1. Imitable

The only resources that would be hard to imitate are the property rights. Other companies can imitate resources such as exclusive rights with different suppliers. They can also imitate the distribution channels, if not develop better channels. The ecommerce platform, in an era when businesses are going online, is also a highly imitable resource.

1. Organization

The company can develop internal capabilities in the form of skills and expertise. Operational capabilities are hard to spot right now for Barnes & Noble, especially other companies showing better signs of internal capabilities

From the VRIO analysis, Barnes & Noble also find itself in an unsuitable competitive situation. The company needs to build resources that can give it an edge in the market.

References

Bruijl, G. (2018). The Relevance of Porter’s Five Forces in Today’s Innovative and Changing Business Environment. SSRN Electronic Journal. Retrieved from https://www.researchgate.net/publication/326026986_The_Relevance_of_Porter’s_Five_Forces_in_Today’s_Innovative_and_Changing_Business_Environment

Cardel, N., & António, N. (2012). Valuable, rare, inimitable resources and organization (VRIO) resources or valuable, rare, inimitable resources (VRI) capabilities: What leads to competitive advantage? South African Journal of Business Management, 10159-10170. Retrieved from https://www.researchgate.net/publication/236221830_Valuable_rare_inimitable_resources_and_organization_VRIO_resources_or_valuable_rare_inimitable_resources_VRI_capabilities_What_leads_to_competitive_advantage

McGee, J. (2014). Value Chain. In J. McGee, & T. Sammut-Bonnici, Wiley Encyclopedia of Management. New York: John Wiley & Sons. Retrieved from https://www.researchgate.net/publication/280246631_value_chain

Porter, M. (2008). The Five Competitive Forces That Shape Strategy. Harvard Busines Review. Retrieved from http://www.ibbusinessandmanagement.com/uploads/1/1/7/5/11758934/porters_five_forces_analysis_and_strategy.pdf

Sammut-Bonnici, T., & Galea, D. (2014). SWOT Analysis. In C. Cooper, Wiley Encyclopedia of Management. New York: John Wiley & Sons, Ltd. Retrieved from https://www.researchgate.net/publication/272353031_SWOT_Analysis

Smith, K., Guthrie, J., & Chen, M.-J. (1986). Miles and Snow’s Typology of Strategy, Organizational Size and Organizational Performance. Academy of Management Annual Meeting Proceedings, 45-49. Retrieved from https://www.researchgate.net/publication/274758491_Miles_and_Snow’s_Typology_of_Strategy_Organizational_Size_and_Organizational_Performance