LED560 Case Study #3
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Trident University
LED 560: Leadership and Strategy
Case Study #3: The Action Compass
Dr. Virginia Johnson
2
Introduction
In 2007, Barnes and Noble was considered the world’s largest bookseller with 798 stores in operation under the Barnes and Noble name and 85 under B. Dalton’s name (Hall & Gupta, 2010). The organization has been opening, closing, and realigning its stores to keep its business afloat while keeping positive revenue during the shifts from hardcopy books to digital books. While the company has been known to be the world’s largest bookseller, online companies like Amazon and Books-A-Million are slowly creeping into the market and are slowly taking over business from the company, through in-person sales and online sales. These changes are making Barnes and Noble have to change their strategy to be able to stay in business. In this paper, there will be a discussion about assumptions made in applying the grand strategy matrix to Barnes and Noble’s strategy, applying the BCG Matrix to Barnes and Noble’s core strategic choices, comparing results between BCG Matrix and Grand Strategy Matrix, and which strategy or strategies Barns and Noble should follow.
Assumptions Made in Applying the Grand Strategy Matrix
Barnes and Noble is a company that grew from its humble beginning in 1917 to becoming a superstore in 1992. As it has become the world’s largest bookselling store brand, it has had to shift its strategy numerous times to be able to keep up positive revenue while still being successful within the market. However, with experts stating that a recession might be coming to the economy and competition starting to take their share of storefront businesses by increasing their online presence and lower prices, Barnes and Noble is starting to slip in the way that it has control of the market over the years. Reading about the company, it is easy to see that the organization used to fit in quadrant one of the Grand Strategy Matrix (GSM) but is slowly moving to quadrant four as the book market is slowing down. In quadrant one, the company had
3
great market penetration, backwards integration, and concentric diversification (Introduction to Grand Strategy, n.d.). With so many bookstores around the world, usually in malls, it was easy for them to be able to advertise a massive selection of books at reasonable prices and the ability to see the book yourself instead of looking at a picture online. Barnes and Noble were able to backwards integrate their company to be able to sell products online and was able to integrate this into them launching a how-to website and positioning themselves to be a leader in digital how-to publishing. Additionally, the company had in-store cafes that offered means for customers to come in, grab a meal, and read a book, thus expanding the amount of time the customer is inside of the store. However, with the changes of digital media and companies coming along that started selling books at a cheaper price, Barnes and Noble went from being in quadrant 1 (Rapid Market Growth and Strong Competitive Position) to quadrant 4 (Slow Market Growth and Strong Competitive Position). “In 1992, 60.9% of adults were reading, which dropped to 56.6% in 2002… this trend is likely to continue in the future” (Hall & Gupta, 2010). The market for purchasing books has quieted down and the economy is slowing down, which effects market growth and hurts the revenue that Barnes and Noble is able to make selling hard copy books. They do not have a mainline application or hardware to be able to sell or provide digital books provided to consumers which hurts their marketability and future chances of being successful. There is still room to be competitive as the organization has fierce competition from companies like Books-A-Million, Amazon, and Boarders, each which have different discounts or
member exclusive programs that allow for each company to compete with each other. While the Grand Strategy Matrix is a good indicator of strategy using the market and competition, the BCG
Matrix may be a better indicator about the framework to prioritize their business.
Applying BCG Matrix to Barnes and Noble’s Core Strategic Choices
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