Analysis of Major Issues
CREATED BY: TAMARA MYERS
CONTRIBUTORS: DANA KUBISSA
CHARLIE LAMM
PAULISHA RUFFIN
Major Issue 1
 Struggling digital media sales

Current strategic and financial objectives are
tied to digital media sales

Barnes & Noble aims to decrease EBTIDA losses
in digital media market, and increase overall
profit in this segment, so addressing struggling
digital media sales should be a priority

However, a 27% drop in digital content sales
occurred over 2013 holiday season, making this
a key issue to be addressed by Barnes & Noble
Issue 1, Alternative 1
Summary
• Lower cost of
digital media
content to make
it more
competitive
with other
retailers
Pros
•
Increase purchasing
power
•
Attract new
customers
•
Improve customer
loyalty
Cons
•
Costly strategy
•
Competitors sell
digital content below
costs
•
Would be expensive to
implement due to
need for enacting
profitless strategy
Issue 1, Alternative 2
Summary
•
Pros
Capitalize on licensed • B&N would be only ereader app outside of
NOOK apps on
iTunes that allows
competing devices by
direct purchasing on
selling digital content
Apple devices.
directly through apps • Would reduce
on Apple products.
synching
requirements among
users that would allow
easier use of NOOK
applications.
Cons
•
B&N would be required
to pay a premium on
each in-app digital
content purchase to
Apple.
•
Premiums for content
purchase may be up to
30% of profit for each
purchase.
Issue 1 Recommendation

Alternative 2 is the recommended option

Financial and strategic objectives for Barnes & Noble
are tied to increasing profits within the NOOK and
related digital media market

Utilizing the app related strategy will create an
additional advantage for B&N that competitors have
not adopted

Extending digital content to additional markets will
increase purchasing power

While it will cost B&N to use this strategy, the
additional purchases should outweigh the costs
associated with offering content through Apple devices
Major Issue 2
 Falling physical book sales

In previous years, all sales excluding NOOK
have fallen as much as 5.8%

Improving sales and profit margins are a key
part of strategic and financial objectives for
Barnes & Noble

Physical book sales loss have stabilized in
recent years, but sales loss in this core
division should be addressed immediately
Issue 2, Alternative 1
Summary
•
Diversify title selection
in stores
•
Include wider array of
titles in stores to meet
market trends
•
Allow customers to
notice that multiple
genres and titles are
well-represented in
store retail spaces
Pros
•
Customers who
previously felt
diversity and
available products
were missing will be
drawn to stores,
appealing to more
audiences, and
increasing sales
Cons
•
Increasing product
diversity in stores can be
difficult to manage when
high inventory levels
should be present.
•
Changing the inventory
ordering process will be
complex and potentially
costly to B&N
Issue 2, Alternative 2
Pros
Summary
•
•
Leverage loyal
customer market by
changing Rewards
Program
Lower or allow for
waiving of annual
membership fees or
add volume shopping
discounts
•
Increased purchases
due to added
discounts
•
Increased enrollment
in B&N Rewards
Program
•
Customers no longer
discouraged by costly
Rewards Program, so
satisfaction improves
Cons
•
Loss of annual recurring
revenue
•
With reduction or
elimination of Reward
Program fees, B&N may
potentially lose millions
in ARR
Issue 2 Recommendation





We recommend the second alternative
Benefits of lowering Reward Program fees outweigh the
costs of changing supply chain processes that may go
unnoticed by some consumers
Though lowering membership fees or allowing fees to be
waived will result in a loss of annual recurring revenue, it
should increase overall physical book sales
Customers who avoided enrollment or purchases due to
high costs will become incentivized to shop at Barnes &
Noble
Current and previous customers will develop
strengthened loyalty due to lower fees and new discounts.
Major Issue 3
 Declining NOOK device sales

Barnes & Noble entered market later than competitors,
and has struggled to keep up since developing the device

Sales growth for NOOK product line has been on the
decline

Some stabilization has occurred, but losses are still
occurring for this key product area

Sales growth for the NOOK segment is a key factor in
both strategic and financial objectives

Due to heavy emphasis on NOOK segment, sales loss
should be addressed quickly
Issue 3, Alternative 1
Summary
•
Implement promotional
or penetration pricing
strategies to sell
additional NOOK devices
•
Consider previous sales
strategies that lower
prices and offer free
digital content at time of
purchase
Pros
•
Cons
Shoppers will be
• Cutting device prices and
incentivized by lower
offering free digital content
priced devices and free
can be detrimental to profit
digital content
margins
•
B&N has already struggled to
maintain profits in both
divisions, so cutting prices
temporarily may not fully
resolve the issue
Issue 3, Alternative 2
Pros
Summary
B&N can capitalize on
student market
segment through
Flashnotes
implementation
• Flashnotes allows users
to buy and sell class
• Brand loyalty will
notes
increase among
students
• Technology has been
• NOOK devices will
purchased as part of
become useful study
education service
tools for student users
strategy
•
Implement Flashnotes
application on NOOK
system
•
Cons
•
Primary focus is on
student users in
NOOK segment
•
Does not address
NOOK sales
concerns for nonstudent users
Issue 3 Recommendation

We recommend the second alternative

A Flashnotes application will increase durability and
product diversity among NOOK users

Customer loyalty will be renewed amid current device
owners and new consumers will be drawn to the
market

Increasing loyalty and drawing new customers will
increase revenue and meet competitive strategic
objectives
Major Issue 4
 Heavy competition with online
retailers

Rivalry is a strong competitive force within the
industry

Competition is vigorous with retailers such as
Amazon, Apple, and Oyster

Maintaining market share is difficult among strong
competitive forces, so this should be addressed
quickly
Issue 4, Alternative 1
Pros
Summary
•
Form strong
partnerships with
publishers
•
Sell inventory on
consignment to reduce
costs associated with
poorly selling books and
increase compensation
for better performing
products
•
•
•
Cons
Publishing interest may
• Biggest advantage with
be increased by
consignment
consignment agreements
opportunities,
will be realized with books
strengthening
that are not top sellers
relationships with
publishing partners
• Little to no advantage for
Sales opportunities will
consumers with this
increase
strategy
Strategy will help prevent
cannibalization of
physical book sales by
competitors
Issue 4, Alternative 2
Summary
•
•
Aggressively lobby for
exclusive content rights,
including those offered
by best-selling authors
Tap into beneficial
relationships and
partnerships to provide
customers with content
they cannot find at
competitors
Pros
•
•
Creating agreements
that provide B&N
customers with
exclusive content will
help them stay
competitive
Using this strategy will
spark public interest
and draw additional
loyalty
Cons
•
Agreements may be costly
to Barnes & Noble
•
Authors and agents may
view contracts in terms of
profit or ease of use, either
of which may be costly for
B&N to implement
Issue 4 Recommendation

We recommend the second alternative

Entering into direct competition with chief competitor
Amazon for access to exclusive content will likely have a
larger impact in the competitive landscape than other
partnerships

Barnes & Noble who faces strong competition in the retail
industry should find ways to improve their position in the
market.

Offering exclusive content will have the advantage of
making B&N an exclusive provider, and should help to
improve their position as desired
Major Issue 5
 Difficulty maintaining brick-and-
mortar stores

Many stores have closed in the last 5 years

By August, 2014, 63 stores have closed

Even the flagship store on 5th Avenue in Manhattan
has closed

Recurrent profit losses, shrinking physical book
sales, and heavy competition have contributed to
financial strain and brick-and-mortar closures
Issue 5, Alternative 1
Summary
•
Increase number of
store-hosted author
events
•
Include advertising via
B&N email, website
postings, and social
media to attract
customers to events and
obtain store-wide
discounts during them
Pros
•
•
Current and new
customers will be
inspired to visit stores
and meet their favorite
authors
Offering discounts in
conjunction with
author events will
incentive shoppers to
visit and make
purchases
Cons
•
Authors may request
costly reimbursements
for events
•
Scheduling these events
may be difficult to
coordinate due to
conflicting itineraries
•
Store-wide discounts
may temporarily reduce
potential profits
Issue 5, Alternative 2
Summary
Pros
Dedicate store segments • Will draw more
(or entire stores
attention to B&N
depending on number of
College segment
stores in proximity) to
College & Education
• Will be helpful in
drawing customers to
• Supplement B&N College
brick-and-mortar
locations in universitylocations when
heavy areas where the
company has not been
campus bookstores
able to establish onare unavailable
campus bookstores
•
Cons
Costs associated with
rededication and/or
restructuring can be
very high
• Some estimates include
costs of several million
dollars per store
• ROI may not be
realized if upheaval
only addresses limited
markets
•
Issue 5 Recommendation

We recommend the first alternative

Due to high potential renovation costs, hosting more
author events in brick-and-mortar locations would be
more cost effective

Since financial strain has been prominent, Barnes &
Noble should implement a strategy that can address
multiple markets and be most cost efficient for the
organization
References
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References
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