This is a powerpoint showing the competitive forces in the marketplace and how they impact both companies.

1. The Fight to Be the Best Bookseller
Prepared By: Tristan Geiger

2. As I began to read the case study,
“Amazon.com verses Barnes & Noble: The Battle of the
Bookstores,” I thought of how the Internet has offered
opportunities for retailers to bring in more money.
However, the Internet can also adverse effects when
too much money is invested in hope that a business
will prosper. When a company decides to become a
clicks-and-mortar store, they must make sure that
their business models are able to adapt their business
processes, can create new business strategies, integrate
new information technology, and re-organize their
supply chain management.
 Amazon.com Using the Value Chain and
Competitive Forces Models
Amazon.com developed many competitive
strategies in order to succeed in their market using the
value chain and competitive forces models.
Amazon.com produced a supply chain system and
customer relationship system, which let them expand
their business. To stand apart from Barnes & Noble,
Amazon.com used the value chain model to increase
the competition by broadening their inventory to
attract a variety of different customers. Amazon.com
learned that they would be more successful if they
were to offer unique services and enlarge their market
to provide more than books. By offering speedy online
ordering and their collaborative filtering system that
creates personal product
recommendations based on past purchases giving
more value to the customer. To bring their customers
in, they spend millions of dollars to advertise across
the Internet. As they provide suppliers with organized
billing and shipping systems, orders can be completed
fast making business processes run smoothly.
The competitive forces model is used at
Amazon.com when they react to new entrants into the
market, continue to learn about new products and
services, and address the position of traditional
industry competitors. To keep their standing of one of
the most successful companies on the Internet, they
constantly introduce new products to their existing
book database. Sales began to rise as they added new
products to their website. “. . . in the first three months
of selling CD’s, Amazon.com’s sales surpassed
established on-line music seller Cdnow.com’s
performance during the same period(327)” To compete
with other Internet and store front companies, they
offered other products that would appeal to people
while they were buying books at their website. As they
established partnerships with companies such as
Drugstore.com, they attracted customers who may
have taken their money to other websites or brick and
mortar stores.

3. Furthermore, With their excellent customer response
systems, they were able to respond to the demands of
the customer based on their buying habits and
customer feedback. In turn, Amazon.com was able to
gain lasting relationships with vendors and customers.
 Barnes & Noble Using the Value Chain and
Competitive Forces Models
Like Amazon.com, Barnes & Noble tries to
find competitive strategies in order to be the lead
retailer of the book market. The company uses the
value chain model to try to appeal to customers who
want a wide selection of books but still feel like being
in a small bookstore. Their shelves that carry more
than 150,000 titles appeal to the customer who doesn’t
want to go online. Barnes & Noble's size allows the
company to stock a variety of titles and obtain
discounts from distributors, thereby offering discounts
to customers. By constructing a value web with
companies such as Microsoft, Random House, and
The Ingram Book Group, Barnes & Noble can create
business relationships that will provide value for their
in-store and online customers.
Barnes & Noble uses the competitive forces
model to address the threats of new entrants into the
market and the pressure from new products and
services in the marketplace. When Amazon.com came
into the book selling market, Barnes & Noble had to
figure out how to compete. Unlike Amazon.com who
added more products other than books, Barnes &
Noble developed a relaxed in-store environment that
could appeal to people who wanted to sit and
physically see a book before buying it. In-store and
online customers received lower discounts forcing
Amazon.com to purchase their books from more
expensive sources. With the construction of Barnes &
Noble’s online store they were able to compete by
offering a more specialized inventory that would leave
Amazon.com struggling to catch up.
 The Business Model Used By Amazon.com:
What Are Its Core Competencies? What
Role Does the Internet Play in It’s Business
Model?
Amazon.com is regarded as "the first
significantly successful enterprise to sell traditional
consumer goods over the Internet."() The company's
business model is to use the Internet to attract
customers to buy products. Many Internet users
flocked to their website to buy products; such that in
1998 they earned more than $500 million annually. To
achieve this large income, Amazon.com provided
services to make users have a more valuable and
pleasant online shopping experience. Their core
competency that puts them ahead of their competitors
is their knowledge of e-commerce and a user-friendly

4. site. Since amazon.com has been one of the major
Internet retailers, they have the advantage of knowing
how users surf the web; where they go for information,
what they want to shop for, and where they will
probably go to buy. Soon after sales boosted with CD’s,
Amazon.com added The Internet Movie Database that
helped them boost video sales. To keep their sales up
and attract customers, they needed to create a user
friendly website. For example, they added single
mouse click checkouts and user accounts, which
archive customer billing options and shipping address
for faster future purchases.
Their collaborative filtering information
system targets specific customers with
recommendations and reviews on products that
change continuously. Potential customers can also
find reviews on books from authors, staff, and other
customers who bought the book. These personalized
features are convenient and let a user interact with the
site leaving with the feeling of quality customer
service. In addition to these services, Amazon.com
bought out the companies Junglee Corp. and
PlanetAll, to give benefits such as birthday reminders
and gift ideas, which attract returning customers. As
they broaden their product database, Amazon.com
appeals to a wider range of customers because when a
customer is looking for a book and also sees a DVD
link nearby then instead of going to another website
they can buy what they need in one place.
 The Business Model Used By Barnes &
Noble: What Are Its Core Competencies?
What Role Does Its Internet Play In Its
Business Model?
Similar to Amazon.com, Barnes & Noble's
business model is to offer a pleasant shopping
experience with product at a lower price. However,
Barnes & Noble wants to offer an option of in-store or
Internet shopping. The company's core competences
are to offer a pleasant shopping experience and to have
a variety of books. The company has over 1000 super-
size stores but wants to give the customer a feeling of
being in a small town bookstore. To achieve this,
Barnes & Noble encourages customers to bring coffee
and read and participate in "children's story-time"
readings. With In-store author signings and Internet
services such as online links to author and book
reviews, it allows customers to have a variety of ways to
shop.
Barnes & Noble readily re-stocks shelves and
updates its Internet databases with new titles allowing
for more diversity than a traditional bookstore. This
space provides room for best sellers and a variety of
other books promoting customers to return to search
for new titles.

5.  How Viable is Amazon.com’s Business
Model?
As more people learn how to shop online
and learn about Amazon.com's website, the company
looks as if it may succeed. As well as pleasing the
customer, their efficient and speedy business
processes show how the company succeeds in its
market. With its organized cash flow, they are able to
gain revenue faster thereby making more profit. For
example, when a customer’s item is shipped,
Amazon.com charges their credit card and gets a
payment from the credit card company within a day.
Since Amazon.com doesn't have to pay the distributer
for about a month and a half, the company uses their
profit to expand their store and improve customer
service.
However, from this case study there are
details that lead me to believe that Amazon.com may
be spending too much money on services such as
advertising and not bringing in enough profit. For
example, In 1998 Amazon.com spent more than $50
million dollars on advertising at sites such as American
Online (AOL), Yahoo!, and Excite in hopes of gaining
customers. The company also launched an Associates
Program in 1998, which allows any website to display a
link to Amazon.com’s website. When a sale results
from the link, the website would get 15% of the sale.
Furthermore, the company seems to gamble with their
money to offer new services and product in hopes that
customers will buy their product. In the long run,
Amazon.com could lose customers resulting in
bankrupcy.
 How Viable is Barnes & Noble’s Business
Model?
While Amazon.com dominates the Internet
marketplace, Barnes & Noble continues to expand its
physical stores and is slowly offering new services to
their online store. By serving customers in their brick-
and-mortar and online stores they become more
versatile, attracting new customers, and gaining more
profit. Since they don't spend as much money on
advertising and different products, they are able to
expand on their existing services such as customer
discounts and a more variety of book inventories.
Barnes & Noble is able to gain revenue with their
brick-and-mortar stores and can slowly build on their
Internet site to compete better against Amazon.com.

6. Figure 1.1: Where Do People Shop Online?
General Purchases
Book Purchases
37%
3%
60%
Amazon.com Bn.com Other
56%27%
17%
Amazon.com Bn.com Other
• What Model Is Working Best?
To further my evaluation of Amazon.com's
and Barnes & Noble’s business models I created a two
question survey to see what type of shopping people are
conducting online today. Similar to Lauren Cooks Levitan's
survey, I questioned people about what Internet site they
thought of when they heard Internet shopping. The first pie
chart in figure 1.1 illustrates my results. 37% of users
thought of Amazon.com and only 3% thought of Barnes &
Noble. 60% of users chose other sites on the web. When I
asked the “Other” people why they chose their sites, they
said that they liked going to company websites that sold
their favorite product. When I asked those people if they
would consider shopping at Amazon.com or Bn.com
(Barnes & Noble), they said that they would probably go
there for reviews and suggestions but look on other sites to
find the cheapest price. Some people said they would look
on Ebay.com or Craigslist.com before they would go to
Amazon.com or Bn.com.
The second question I asked was what store
people would think of if they were to buy a book online.
There was a dramatic change; the second pie chart in figure
1.1 displays the outcome of the data. 56% of the people
stated they thought of Amazon.com, 27% thought of
Bn.com, and 17% said other websites. Everyone who chose
Amazon.com said they liked their
pricing, suggestions, recommendations and the ease of
finding books on the site.

7. The people who answered Bn.com said they
recognized the name from when they shopped in their
brick-and-mortar store and knew that they had an
online website. However, all participants said that they
would shop around until they found the lowest
prices, even if the book they wanted was on another
website. As I look at my survey results, not so different
from Levitan’s survey conducted around 1998, it leads
me to believe that Amazon.com has a better business
model and knows how to bring customers in to buy at
their site.
 Amazon.com Dominates the Book
Retailing Market
Based on the information found in the case
study I believe that Barnes & Noble is the company
that will dominate the book retailing industry. By
having thousands of brick-and-mortar stores around
the United States and an online branch, the company
can let customers have the option of shopping in both
places and still make a profit. Furthermore, by offering
more benefits, cost discounts, and a more variety of
books, Barnes & Noble will attract more customers.
However, since the case study is outdated I
decided to look at the online sites and compare
options and pricing before I made a final decision.
The business market has changed since the twentyeth
century and now more customers are going online to
buy books. When I clicked on Amazon.com's book tab
I found many options that were similar at Barnes &
Noble’s site. For example, there were categories for
textbooks, bestsellers, and new and future releases.
Amazon.com also has a link to a third-party site that
sells eBooks that appeals to specific groups of
people, which Barnes & Noble does not have on its
site. Although customers will be shopping for these
eBooks on a separate site, Amazon.com will still get
profit off the sale.
To see if Amazon.com raised their prices and
did not have the selection of books that Barnes &
Noble had, I went to Bn.com and compared them to
Amazon.com. I chose twenty different books and
found each book on both sites. Furthermore, In most
cases I found that Amazon.com had the better price
for a new copy of a book and even offered it cheaper
used. In many cases Bn.com had a similar discount as
Amazon.com; however, you need to have a $25 per year
membership in order to get the low price. In figures 1.2
and 1.3, I included a picture of the web page displaying
the new Harry Potter book at Amazon.com and the
Bn.com website. I found it cheaper at Amazon.com
than at Bn.com’s membership price.

8. Although Barnes & Noble offers a relaxing
in-store environment and specialty links on their
website such as "Meet the Writers," Amazon.com
offers lower prices, special deals, reviews, and a user-
friendly website, which promotes returning
customers.
 Amazon.com and Barnes & Noble Today
In summary, I realized it began to bother me
that the case study did not have current information
about the profit of the two companies. Due to the
explanation in the case study that Amazon.com was
losing money rather than gaining a profit, I decided to
search for more recent information on the Internet. I
found two articles which stated some more recent
earnings of the company.
In his 2003 Internet article, "Jeff Bezos and
Amazon.com: Profit by the Numbers," Wally Bock
states that Amazon.com made an annual profit of $39
million dollars. Bock explains that much of this profit
was due to acquiring and keeping lasting customers
with services such as free shipping and discounts on
products. By offering products by other merchants on
Amazon.com's site its earnings would most likely not
come from books.
In a more recent article posted in April
2007, "Amazon.com reports quarterly net profit more
than doubles," USA Today states that Amazon.com has
Figure 1.2: The new Harry Potter book
at Amazon.com is $17.99.

9. doubled since 2006 proving that it is dominating the
e-commerce world. In this first quarter of this year
sales were at $3.02 billion. With their variety of
inventory, satisfied returning customers, and user
friendly site, the company no longer operates in the
red.
In contrast, Barnes & Noble seems to be
losing money. Today, Barnes & Noble relies on
products other than books to gain revenue. At their
website they sell a variety of products such as
DVD's, music, video games, toys, and office supplies.
In the February 2007 article, "Disappointing
Earnings Forecast Hammers B&N Shares," Jim Milliot
states that Barnes & Noble's sales have fallen in 2007.
Although sales in February 2007 rose in their
superstores to $4.5 billion, their Internet sales fell to
$433 million. They have also consolidated their
Internet company to one facility, which probably
means that their online store is not bringing in as
much revenue as they would like. Furthermore, with
their new loyalty program, which will give customers
more discounts, Barnes & Noble’s CEO, Steve
Riggio, says that it will have loss of revenue. Although
he says this loss is short term, he has already closed
more stores this year than he has opened and this gives
Amazon.com the advantage of gaining more profit in
the book selling business.
Figure 1.3: The new Harry Potter book
at Bn.com is more expensive priced at $18.89.

10. Works Cited
 Bock, Wally. Jeff Bezos and Amazon.com: Profit by the numbers – Wally Bock’s Monday Memo, Author, Business
Futurist, Keynote Speaker. 2003. megastarmedia.com.
11 May 2007 <http://www.mondaymemo.net/040202feature.htm>.
 Amazon.com reports quarterly net profit more than doubles – USATODAY.com. Reed Business Information.
24 April 2007.
11 May 2007 <http://www.usatoday.com/money/companies/earnings/2007-04-24-amazon_N.htm>.
 Milliot, Jim. Disappointing Earnings Forecast Hammers B&N Shares – 3/5/2007 – Publishers Weekly.
5 March 2007. Reed Business Information.
12 May 2007 <http://www.publishersweekly.com/article/CA6421441.html>.
 Amazon.com: Harry Potter and the Deathly Hallows (Book 7): Books: J.K. Rowling, Mary GrandPre. 2007.
Amazon.com, Inc.
14 May 2007 < http://amazon.com/o/ASIN/0545010225/ref=s9_asin_image_1-2288_g1/104-5127949-
6663959?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=center-
2&pf_rd_r=16A4EFP92A84RFMMMC5V&pf_rd_t=101&pf_rd_p=278240301&pf_rd_i=507846 >.
 Barnes & Noble.com - -Books: Harry Potter and the Deathly Hallows (Harry Potter #7), by J.K. Ro . 2007.
Barnesandnoble.com.
14 May 2007 < http://search.barnesandnoble.com/booksearch/isbninquiry.asp?
isbn=9780545010221&z=y&cds2Pid=9481>.