Harlequin Case

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McMaster University *

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Apr 3, 2024

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Harlequin Case 1. Complete the 2X2 performance / health matrix. 2. What product is Harlequin offering? a. Best seller of romance novels worldwide, selling two major series Harlequin Present and Harlequin Romances. They standardized novels content, length, artwork, size, basic formats and print to make warehousing, distribution and cost more efficient. This made their rpoducts be sold like branded literature, since the books were recognized for the Harlequin name. 3. What are the key success factors in the industry? 4. Conduct an Environment and Resource analysis. 5. Is it possible that the alternatives developed in Tool #22: Decision Matrix could all be supported simultaneously by #R16: Resource Analysis because Harlequin is financially quite healthy (Tool #S2: Organization Performance)? Furthermore, are the alternatives being evaluated \ symbiotically? Might you suggest they all be implemented? 6. D evelop and evaluate alternatives and make a recommendation for action The market was growing faster than anticipated and the company was struggling to feel that it could keep track with growth o Searched for acquisitions but the major US paperback companies were not for sale and the small ones were not attractive The company contract with Pocket Books was set the expire at the end of 1979 where the company would have to decide to keep going or set up its own US sales force. T1: Harlequin Enterprises Limited is the largest publisher of romance novels in the world and has seen increasing profits since 1970. In the late 1970s the company was facing a fast rate of change, producing its first film and opening a retail store. Though the company was leaders in the industry they face challenges with the ever growing size of the romance fiction industry and had troubles keeping pace with market penetration.
T2: Rank 7. The company had mentioned that its facing diminishing economies of scales. WE can see this is net earnings on net revenue which had been growing since 1970, hitting 15.6% in 1977 and then decreasing to 13.3% in 1978. Another interesting measure of the company’s liquidity is its cash to total current assets ratio, where starting in 1970 they had 19% and now in 1978 it is 38%. Looking to sales growth, from 1977 to 1978 sales grew 56% whereas two years before sales growth was 17.5%. The company appears to be facing issue scaling with its increased sales generating substantial cash on hand. Moving forward they need to look to expanding increase operating facilities with cash on hand in order to keep up with sales and bringing production to economies of scale. T3: Rank 8. Harlequin had a good reputation in the romance novel industry as they carried the largest market share and offered a recognizable product. Their standardization allowed for uniformity across business sections. They hired top talent from large firms and led them to do well within the business. Some employees were concerned about the concentration in romance novels and that they should attempt to diversify. The company is strong but struggles with a heavy concentration in one segment of novels that could prove to be an issue down the line. T4: The company is in Quadrant 1 a desired state. The organizational health and performance appear strong and continues to look to be improving. An issue arises in that they may be growing too fast, leaving room for competition to enter if they can’t keep up with demand. They will need to determine the path forward; they have established a good brand and has significant liquidity to be flexible in its future operations. T6: Hard goals o Begin publishing romance fiction in Sweden and Finland in March 1979 at the rate of four titles per moth. Norway will be added in April 1979 at two titles per month o North American book division wanted to decrease the dependence on the presents and romance lines to 65% of sales and profits by 1985 Soft goals o Objective to keep steady growth in volume o 5-year plan within the North American book division for diversification in series T7: Market penetration. Harlequin sells romance fiction novels consisting of two major series, Harlequin Presents and Harlequin Romances. They operate primarily in North America and England but in 1975 began establishing foreign ventures. Harlequin is the largest romance novel producer in the world and has seen great growth given the lack of competition and difficulty of entry. Though they have diversifies, in terms of the romance novel market which takes the largest percentage of their sales, they will have to continue to keep up with the demand in the romance novel industry, likely through expanding operations and looking at acquisitions in key markets.
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