GMGT4010 Midterm Case Essay

Submitted By wonderful-sunshine
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GMGT 4010

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Instructor: Jijun Gao
A04
Wednesday 2:30-3:45

MIDTERM TAKE-HOME EXAM.
FALL 2014

Dear CEO,
Since Random House is continuing its expansion in the global region, I have some recommendations about the future business. Consider about the issues that customers’ behaviors change, the usage of large warehouses and the merge with other publishers, I have some analysis and alternatives to provide. Because your company is going to merge Penguin, the Chinese market it your next main market I have three business plans to help penetrate the new market.
All three strategies suggest enter Chinese market. First is to use broad cost leadership in the printed book market and use focus differentiation in the e-book market. The second strategy is to work with government to produce “political” books, which build an authoritative image. In addition, developing online distribution channel is another mission. The third strategy is to work with universities to provide books in different languages as well as develop an online-learning system.
All these three business plans are evaluated by three criteria: Net Present Value, the degree of easiness to enter the market and easiness to manage. When all assessed by these three standards, I recommend the third strategy. Although it dose not generate the highest NVP, it is relatively easy to penetrate the market and operate well. In my opinion, this project can grow steadily though not the fastest.
Finally, I make a five-year implementing plan. In this action plan I give the suggestion to enter the market step by step. The first step is building warehouses and sign contract as well as build the online system. Then lunch systems and grow. I believe this is reasonable since I consider the different levels of Chinese universities.
I hope this analysis report is useful for your future development.
Key Issues
There are three issues that I concern to be key problems for RANDOM HOUSE. First issue is that how to balance the traditional book market and the digitalized book market. We know that Random House has strong competitive advantages in traditional printed book market; they have many resources in that area, like Bertelsmann Club which provides convenient distribution services as well as retains customers. However, the customers buying behavior changes, there is an increasing number of people who prefer e-books. Therefore, how to sustain the large market share in traditional book market and gain much market share in new market should be considered.
The second issue is the usage of their high rack warehouse whose capacity is large and needs high fixed costs to maintain. Since customers’ preference changes, this large warehouse may waste money. Thus how to use this warehouse efficiently or how to dispose this warehouse is important.
The third issue is planning consistent strategies when merge with Penguin. Penguin is a publisher that has different strategies with Random House and it also has plan to entry Chinese market, so how to make two companies work effectively and efficiently and avoid chaos are also significant.
External Analysis
Companies are in a book publishing industry that publishes printed books and e-books. Basically, these firms are publishers and online retailers that sell similar products—books. Broadly speaking, there are many threats in this industry for companies. The entry barriers are low in e-book market, the competition is relatively high, the value added tax can cost companies large sum of money. Although there are some positive factors like economy recovery, firms need to face challenges in the industry and quickly response. I will give one opportunity and two threats in the following paragraphs. The increase in global GDP is an opportunity for enterprises. Although the global economy was suffered from the…