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Case 2:Barnes & NobleContentI. Barnes & Noble

HistoryII. TechnologiesIII. Financial InformationIV. Summary and Analysis

Group Members• Aki Inoue• Anuar Beibytov • Yihua (Elaine) Pan• Kheamasuda Reongvan

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I. Barnes & Noble History

http://www.thestreet.com/stock-market-news/10833790/barnes-noble-timeline.html

1873

1917

1971

1975

Became first book seller in the U.S. to discount book

1987

Expanding super store

1980 s ~1990s 1993

Amazon.com launched

1995

Bn.com launched

1997

Amazon released kindle

Sony released Liblie

Barnes & Noble released Nook

Apple released iPad

http://www.youtube.com/watch?v=uS0px5OFOWg

2004

2007

2009

2010

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Internet Presence• First shop in 1997 was a success• Developed logistics• Agreements with search engines

II. Technologies

E-books• Microsoft Reader and PDF• Initial issues in 1990s and early 2000s

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Electronic Readers• Sony LIBRIé EBR-1000 EP reader • Amazon’s Kindle• Apple’s iPad• B&N NOOK

http://www.youtube.com/watch?v=iJ6kRtr6dSY

Current Status• Nook sales down from 1.4 to 1 million last year• Leaving full-color Nook• Outsourcing remaining production

http://www.youtube.com/watch?v=pfLC4gneLnQRecent news

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1. Operational StructureThree Operational

Segments(1) B&N Retail (2) B&N College (3) NOOK

• 691 book stores • e-commerce

website • publishing

operation

• 647 book stores on college and university campuses

• Company’s digital business

• Development and support of the NOOK product offering

III. Financial Information

2. Financial

Performance

64%23%

12%

Proportion of each segments to total sales

B&N Retail B&N College NOOKUnfavorable Sale of NOOK Devices

Sale

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Earning

2003

2005

2007

2009

2011

2013-1000

010002000300040005000600070008000

Revenue and Net Income (Loss)

RevenueNet Income (Loss)

In U

SD

Mil

lio

ns

Lunched NOOK in holiday

season in 2009

Losses incurred since 2009

In 2013, consolidated revenues decreased 4.1%

2010 2011 2012 2013

-600

-400

-200

0

200

400

EBITDA of Each Segment

B&N RetailB&N CollegeNOOK

In U

SD

mil

lion

s In 2013, NOOK EBITDA losses were increased 81.7%

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Cost

2003

2005

2007

2009

2011

2013

0

20

40

60

80

Cost of SaleGross MarginSelling and Admin Expenses

Perc

en

tag

e o

f T

ota

l S

ale

sLunched NOOK

in holiday season in 2009

Since 2009, cost of sale increased and gross margin declined

2010 2011 2012 20130

50

100

150

200

250

300

350

Cost of Sales

B&N Retail

B&N College

NOOK

Perc

en

tage o

f T

ota

l S

ale

s

2010 2011 2012 20130

50

100

150

200

250

Selling and Admin. Expenses

B&N Retail

B&N College

NOOK

Perc

en

tage o

f T

ota

l S

ale

s

NOOK: • High cost of sale and selling and admin expenses • B&N cannot sell enough NOOKs to reach economy of scale and

profitable level.

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3. Comparing to

Peer VS

B&N 2013 2012 2011 2010Total Assets 3,723 3,765 3,596 3,705Net Income (Loss) (154) (68) (73) 36

Amazon 2012 2011 2010 2009Total Assets 32,555 25,278 18,797 13,813Net Income (Loss) (39) 631 1,152 902

Percentage of Total SalesB&N  2013 2012 2011 2010Cost of Sale 75.4 73.2 74.4 71.1Gross Margin 24.6 26.8 25.6 28.9Selling and Admin. 24.4 24.4 23.3 24.0

Percentage of Total SalesAmazon  2012 2011 2010 2009Cost of Sale 75.2 77.5 77.7 77.4Gross Margin 24.8 22.4 22.3 22.6Selling and Admin. 15.9 14.3 12.9 12.5

(In USD Millions)

B&N has higher selling and admin expenses than that of

Amazon.

SWOT Analysis

•Innovation in digital content technology

•Price competition among competitors

•Increasing alternative e-book resources suppliers

•Potential Spin-off of NOOK Media

•Growth opportunities in B&N College

•High operating cost•No presence in international market

•Late entry to e-commerce

•Fortune 500, #1 bookseller in US

•Multiple channels for product distribution

•Partnership with Starbucks S W

TO

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High

High

Low Barriers

High Rivalry

High Potential

Five Forces Analysis

IV. Summary and AnalysisProblems• Changing in market environment as

book industry is moving towards electronic book (e-book)

• Decreasing in sale revenues in both traditional retail book selling and e-book selling

• Facing high competition from market leader, i.e. Amazon

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Recommended Strategies

• Establish clear marketing strategy in order to get mass volume of sale.

• Differentiate NOOK features from other brands to make product more interesting.

• Spin-off of e-business is not highly necessary as they have some synergy among its three segments, i.e. selling and marketing NOOK through Retail and College channel.

Financial Perspective• A cause of company’s net losses mainly come from

NOOK segment • Retail and College segments still have acceptable

performance • The company need to manage its cost more effectively