internationally—and taking on debt. It strove to improve the in-store experience for shoppers, added cafes, and experimented with new concepts. Such a strategy may have worked a few decades earlier, but while Borders was investing in physical real estate, shoppers were flocking to the Internet. Borders was left with a conflicted strategy: Declining sales forced it to close hundreds of stores (including its entire Waldenbooks chain), while it doubled down on other retail outlets. Unfortunately, it treated the Internet like a passing trend instead of as a transformational phenomenon. The company outsourced its Web operation to Amazon—which obviously became a fierce rival. It waited until 2008 to develop its own Web strategy. Meanwhile, Amazon became the dominant player in online bookselling and e-books, introducing the Kindle e-reader. Its big brick and-mortar rival, Barnes & Noble, a laggard itself, later introduced the popular Nook e-reader and invested heavily in its own website. Borders was clearly late to the party—by then it had taken on quite a bit of debt and had little to invest. In essence, it was forced to rely on third-party readers from Sony and Kobo, which made it impossible to distinguish its Web offerings. During its last eleven years, Borders was led by six different CEOs. None were around long enough to make a lasting change or provide the vision that could maneuver the debt-laden company through a shifting landscape. To the end, it kept a traditional mindset—focusing on rivals with which it was most familiar. As the book industry continued to consolidate, this meant Barnes & Noble. However, discounters like Walmart and Target sell a ton of books—at big discounts—and their prices are usually matched by Amazon. Borders was faced with a dilemma: It could take the losses and match the discounters, or it could justify its higher prices by convincing customers that they’d enjoy a premium experience. Neither worked. As noted by Michael Souers, an analyst at Standard & Poor’s: “They over-expanded and built up some debt on their balance sheet. Instead of leading and being innovative, they were certainly a follower.” A concluding note: Amazon continues to outdistance its rivals. Its sales have grown from $25 billion to $57 billion over the last three years. During the same period, Amazon’s stock has soared over 100 percent, and its market capitalization stands at an impressive $121 billion as of mid-2013. Jeff Bezos, Amazon’s founder and CEO, can boast a net worth of over $23.6 billion. In contrast, Borders is extinct. In the context of Borders, what were the competitive advantages and strategic actions that the business was built on? What was lacking in their decision-making?
internationally—and taking on debt. It strove to improve the in-store experience for shoppers, added cafes, and experimented with new concepts. Such a strategy may have worked a few decades earlier, but while Borders was investing in physical real estate, shoppers were flocking to the Internet. Borders was left with a conflicted strategy: Declining sales forced it to close hundreds of stores (including its entire Waldenbooks chain), while it doubled down on other retail outlets. Unfortunately, it treated the Internet like a passing trend instead of as a transformational phenomenon. The company outsourced its Web operation to Amazon—which obviously became a fierce rival. It waited until 2008 to develop its own Web strategy. Meanwhile, Amazon became the dominant player in online bookselling and e-books, introducing the Kindle e-reader. Its big brick and-mortar rival, Barnes & Noble, a laggard itself, later introduced the popular Nook e-reader and invested heavily in its own website. Borders was clearly late to the party—by then it had taken on
quite a bit of debt and had little to invest. In essence, it was forced to rely on third-party readers from Sony and Kobo, which made it impossible to distinguish its Web offerings. During its last eleven years, Borders was led by six different CEOs. None were around long enough
to make a lasting change or provide the vision that could maneuver the debt-laden company through a shifting landscape. To the end, it kept a traditional mindset—focusing on rivals with which it was
most familiar. As the book industry continued to consolidate, this meant Barnes & Noble. However, discounters like Walmart and Target sell a ton of books—at big discounts—and their prices are usually matched by Amazon. Borders was faced with a dilemma: It could take the losses and match the discounters, or it could justify its higher prices by convincing customers that they’d enjoy a premium experience. Neither worked. As noted by Michael Souers, an analyst at Standard & Poor’s:
“They over-expanded and built up some debt on their balance sheet. Instead of leading and being innovative, they were certainly a follower.”
A concluding note: Amazon continues to outdistance its rivals. Its sales have grown from $25 billion to $57 billion over the last three years. During the same period, Amazon’s stock has soared over 100 percent, and its market capitalization stands at an impressive $121 billion as of mid-2013. Jeff Bezos, Amazon’s founder and CEO, can boast a net worth of over $23.6 billion. In contrast, Borders is extinct.
- In the context of Borders, what were the competitive advantages and strategic actions that the business was built on? What was lacking in their decision-making?
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