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Leadership On Line: Barnes & Noble Vs. Amazon.Com

911 words - 4 pages

Based on your own experience of traditional bookselling and your exploration of online bookselling, compare willingness-to-pay for books supplied by these two business models.If I had to do segmentation for Amazon.com's online business I would define one of the most valuable segments as those customers who:- Don't have time (e.g. to go to a retail store just to find out that the book they wanted is not in stock!)- Know in 95% what they want, but are open for suggestions (e.g. other books that the same author has written)- "Bite more off then they can chew" (e.g. have 1000 unread pages in books sitting on their bookshelf, waiting for one of these periods where I will have to time to read them)- Are not worried about paying more (range of 10-30 %)This list of value attributes describes my personal preferences and I know from my buying behavior that I am willing to pay a slight premium to receive this value from an Online-retailer. One thing I want to note here is that my loyalty is based on convenience (Amazon.com is the URL that I know immediately) but is completely gone when I realize that BarnesandNobels.com provides similar service at a cheaper price, which in fact they do with their B&N Membership discounts!Also compare the forecast long-run cost position of a successful online bookseller to Barnes and Noble's traditional business model. (Assume that Exhibits 4 and 7 in the case reflect average discounts of 10% off list price for Barnes & Noble's traditional bookstores and 25% off list for the online bookseller.)In the short-run we typically focus on marginal costs that a business has to provide just the next unit of goods, while in a long-run analysis we look at a time frame that allows major decisions such as entry or exit of markets. The long-run perspective is focused more on fixed cost - including rent and opportunity costs of capital.B&N Amazon.comRevenues 2448124 668918COGS 1569448 64.1% 506706 75.8%S&M 456181 18.6% 68806 10.3%Rental Expense 225450 9.2% 0 0.0%Product Development 0 0.0% 21231 3.2%Inventories 732203 29.9% 19122 2.9%Working Capital 212692 8.7% 89736 13.4%Net Income 51,225 2.1% 7.26 0.0%By looking at the costs taken from Exhibit 4 & 7 it is obvious that Amazon.com has a strong advantage because it has no rental expenses, and its inventory is 2.9% of its overall sales compared to B&N 29.9% (factor 10 in inventory turn over!).Assess Barnes & Noble's response to the substitution threat from Amazon. How did Amazon respond in turn, and to what net effect?Barnes & Noble's response was to create its own online store that attempted to imitate Amazon.com's. From a delta model perspective we would see the strongest difference in strategies by looking at the "System Lock-in" positions.- Barnes & Nobels: Exclusive Channel position by signing exclusive contracts with AOL,...

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