Case Analysis: HW3_Barnes_and_Noble_vs_Amazon_Homework_Case_Question-1

MEMO
TO:
FROM:
DATE: 8 march 2012
TOPIC: Case analysis
REF: Paper no. (A) (HW3___________________________________________________
An analysis of the competitive rivalry between Barnes & Noble and Amazon.com, comparing the degree of market commonality and resource similarity between Barnes & Noble and Amazon.com and identify factors that enable them to engage in a sequence of competitive actions. A description and assessment of Barnes & Noble’s response to the substitution threat from Amazon.com and Amazon.com’s corresponding competitive actions in turn.
INTRODUCTION
Competition among business firms operating in same industry have existed for many years as each one strives to outdo the other and continue not only to exist but also to achieve their goals and objectives. In the increasing competition, all firms have to take an assessment of their competitors’ strengths and weaknesses in order to come up with defensive and offensive strategies and identify opportunities and threats.
The analysis of industry is essential as this will help the firm in formulation, implementation and monitoring their business strategies. Competitive rivalry between Barnes & Noble and Amazon.com intensified in the mid 1990s as both firms extensively engaged in book retailing business. The paper is organized onto sections and subsections as follows.
DEGREE OF MARKET COMMONALITY AND RESOURCE SIMILARITY
The two companies were engaged in retailing of books to customers. They hard millions of copies in their superstores and distribution chain. They had large superstores and warehouses in major cities of America. However, though they later diversified the services into related areas their major objective was to sale books to customers.
Both companies had their customers in the American states until the introduction of online retailing when they went global. For example in page 5 par 2 where it is clearly stated that Barnes & Noble sold books only in the United States of America.
They both offered discounts and rebates to customers. For instance through mid 1997, Amazon discounted approximately one third of its titles by 10% and bestsellers by 30% (page 11 par 1) as compared to Barnes & Noble which offered large discounts to selected tittles through as indicated in page 5, par 4.
They both diversified their products and services beyond sale books to provision of information about books: conducted interview with the authors, links to other sites, book reviews, recommendations and publishing for the case of Barnes & Noble
The two companies used print media and TV advertisements to create awareness of their products to the public. It is stated that Barnes & Noble brand which had been built up through pioneering and humorous TV advertisement (page 8.par 2) a clear indication of wide usage of these forms advertisement.
The initial capital for both companies were raised by owners, Leonard Riggio, chairman and CEO, purchased fledgling Barnes & Noble chain for $1.2 million in the year 1971. Jeff Bezos started Amazon.com, which was financed by venture capital to a tune of $8 million in 1997.
In resour...