Reference no: EM131268216

Below is the topic that are the student responses in regards to the topic.

***Only respond to the students responses, NOT THE DISCUSSION****

Borders Books - Did the Internet contribute their demise?

We will be discussing the Internet and its effect on the brick and mortar businesses. It wasn't too long ago that Borders was a thriving business that, while a ‘big box' retailer, sold books directly to customers with real people to help you find exactly the book you wanted. They offered an information tool that helped readers locate and order books that were not available in the store and provide a quiet atmosphere to sit and peruse a book while drinking a cup of coffee. Then came the Internet and Amazon. The question is - what killed Borders and could they have been saved? In general, the answer would seem to be their failure to embrace the Internet, but it goes deeper than that. Compare their story to Barnes and Nobel, while struggling, they are still in business and competing head-to-head with Amazon. Read on to learn more and then provide your own insight on why you think Borders failed after nearly 40 years in business.

Remember - the Group B initial posting is due by Thursday midnight; it should be about two short paragraphs in length and it should be posted by clicking on "Start a New Thread". Then, members of Groups A, C and D should reply to at least two different postings by other classmates before Sunday midnight. Everyone has a responsibility to check back and see if any questions have been posed to them, and to respond as you would in a classroom setting.

The Amazon Story

Amazon, which launched in 1995, is an Internet business meaning, they do not operate any physical stores. Their strategy for competitive advantage is cost leadership, and they strive to provide the lowest possible price for books and merchandise. Since all of their sales occur through the website, they consistently push the technological envelope providing a satisfying, personalized experience for its customers. For instance, they developed and ‘1- click ordering' making it extremely easy for shoppers to find what they want and make the purchase quickly; this feature along with Amazon Prime which offers free shipping to members has led to strong customer loyalty and created a one- stop shopping establishment (Baltzan, 2012, page 121).

From the beginning, Amazon has been capturing the comments and recommendations of buyers for site visitors to read- similar to the friendly salesperson in a store offering advice on which books to buy. These comments and reviews are provided when you select a book and have helped to drive book sales. The company uses technology to personalize each customers visit by tracking customer traffic, the number of visitors who access the site, how long they stay, what pages they click on, and so forth. The company then uses the information to evaluate buying and selling patterns and the success of promotions but to provide customers with recommendations based on their buying patterns. The addition of a ‘wish list' feature allows customers to place a virtual remainder and then share with their friends or use it to monitor for price drops. (Baltzan, 2012, page 121).

The Borders Story

Borders business strategy for a competitive advantage was differentiation in the form of physical stores and, in fact, they pioneered the ‘big box' concept that is now so common. One of the key features that differentiated them from other book stores was ‘Title Sleuth', an innovative self-help computer station located inside Borders stores. They considered the application their advantage over all competitors, including the Internet. In 2000, the company's annual report stated, "Our online investment will be channeled to support our in-store platform, while Borders.com will continue to be utilized as a convenience retail channel" (Lowrey, 2011, paragraph 4).

Like many other businesses, they ignored the Internet early on feeling that customers preferred to examine books before they purchased them. In 2001, Borders begin to notice a drop in revenue and sought to reduce the loss by opening a virtual Borders on the Internet. However, rather than developing a website they decided to outsource their core business to Amazon, which meant they lost their competitive advantage; in fact, site didn't even include ‘Title Sleuth',' which would have allowed customers to order any book that Borders didn't carry. Users quickly discovered that Amazon offered a far wider selection; it was seven years before Borders finally reclaim the website May 2008 (Lowrey, 2011).

Another failing was Borders was their inability to foresee the rise of e-books in the manner that Amazon and later Barnes & Noble did. Amazon first released the Kindle in 2007 and offered e-book downloads directly from the device. Barnes & Noble followed 2009, offering the Nook reader, which they developed. In contrast, Borders didn't develop their own e-reader instead they selected an off-the-shelf e-reader (Kobo) in 2011, to compete with the Kindle and Nook. While they offered the e-reader and e-books you wouldn't have known when walked into Borders; in fact, you barely knew they sold e-books for devices like the Kobo. Compare that with B&N where as soon as you walk into the store, the Nook kiosk stares you right in the face (Sullivan, 2011).

It should be noted that, as is the case with many brick and mortar businesses, Borders viewed the Internet as a separate entity. They did not consider that the stakes of rivalry, threat of substitute products or buyer power were being affected by the new technology. In contrast to their either or philosophy, Porter (2001), stated that "the Internet complements, rather than cannibalizes, companies' traditional activities and ways of competing" (page 73). Had they considered this factor the outcome might well have been different.

Of course, it wasn't the Internet that ultimately shuttered Borders but it was a contributing factor. Other factors included opening too many stores, carrying too much debt and, in general, poor management. However, for this class we are only going to concern ourselves with the missteps in relation to the Internet.

Now, consider the following questions as a starting point and using the tools from week 1 to analyze the causes for Borders demise:

1. How has Amazon used technology to revamp the bookselling industry?

2. Identify which of Porter's Three Generic Strategy's each business uses? How did the differences in strategy affect them?

3. Amazon provides a personalized experience to keep customers loyal. Did Borders perceive this as a threat of substitute products? Would you?

4. Discuss your thoughts on the Internet's contribution to Borders demise.In the video, what did the commentators say about this?

5. Does every business need an Internet presence to ensure success?

6. In your opinion, can the Internet and physical stores peacefully exist?

References

Baltzan, P., & Phillips, A. (2011).Business driven information systems (3rd ed., p. 121). Boston, Massachusetts: McGraw-Hill/Irwin.

Porter, M. E. (2001). Strategy and the Internet. Harvard Business Review, 79(3), 62-78. Retrieved May 18, 2015, from UMUC Library Database.

Sanburn, J. (2011, July 19). 5 Reasons Borders Went Out of Business (and What Will Take Its Place) | TIME.com. Retrieved May 18, 2015, from https://business.time.com/2011/07/19/5-reasons-borders-went-out-of-business-and-what-will-take-its-place/

Lowrey, A. (2011, July 19). Borders bankruptcy: Done in by its own stupidity, not the Internet. Retrieved May 18, 2015, from https://www.slate.com/articles/business/moneybox/2011/07/readers_without_borders.html

***Student responses***

Naadira:

1. How has Amazon used technology to revamp the bookselling industry?

Amazon used technology to provide customers a new experience from going into a live store trying to locate a book. Amazon not only offered a much larger selection of books, they offered the customers personal recommendations and reviews from other customers who read the books. Then they came out with the Kindle which allowed customers to download eBooks and provided customers with the convenience of receiving a book in minutes from their home or anywhere and being able to carry it with them wherever they went.

2. Identify which of Porter's Three Generic Strategy's each business uses? How did the differences in strategy affect them?

In my opinion, I feel Amazon uses the "Cost Leadership Strategy". They offer a high volume of products at a low cost. Amazon's innovation of products, processes and efficient distribution channels enabled them to offer a cheaper product where incumbents' costs and prices have become too high.[1]

Border used the "Focus Strategy". They focused on a specific audience. Their narrow view of selling actual hard books allowed them to suffer in business.

3. Amazon provides a personalized experience to keep customers loyal. Did Borders perceive this as a threat of substitute products? Would you?

I don't think Borders perceived Amazon's methods to keep customers loyal a threat. They continued to outsource sales of books to Amazon for 7 years. Once I saw Amazons revenue and customer base increase and mine decrease that would have been an automatic flag to me. I truly would have considered Amazon a threat for substitute products.

4. Discuss your thoughts on the Internet's contribution to Borders demise. In the video, what did the commentators say about this?

I do believe the internet contributed to Borders demise. If Borders had taken advantage of continuing their "Title Sleuth" and the e-readers like Barnes & Noble and Amazon, it would have given them a more competitive advantage. Customers enjoy the convenience of being able to locate and order the book they want, need or something they may be interested in at a drop of a dime. Per Anne Lowry Borders downfalls were they outsourced sales of books to Amazon, Amazon offered a larger selection for customers, Borders loss their Starbucks contract to Barnes & Noble and they did not take advantage of the e-readers sales as much as they should.

5. Does every business need an Internet presence to ensure success?

I feel in today's use of technology a business will successfully benefit from an internet presence. One example is when I am looking for a good place to eat, I google it or I ask Siri where is the closest location or the best place to eat. (you can tell I love to eat rightJ) However, taking Business classes and through experience, good work, customer service leads to the word of mouth, which is always the best way to succeed.

6. In your opinion, can the Internet and physical stores peacefully exist?

Yes the Internet and physical stores can peacefully exist. It is very well shown today with Walmart, Macys, JCPenny's Target and a whole network of other stores. Even though internet shopping has increased. According to results, shoppers now make 51% of their purchases online, compared to 48% in 2015 and 47% in 2014. As online shopping accelerates, so does the use of smartphones to make purchases. The survey showed that 44% of smartphone users made buys through their devices, compared to 41% a year ago. However some shopper just prefer to go inside the stores for specific reasons. [2]

1 Porters Generic Strategies, October 29, 2016, https://en.wikipedia.org/wiki/Porter%27s_generic_strategies

2 Consumers Are Now Doing Most of Their Shopping Online, June 2016, https://fortune.com/2016/06/08/online-shopping-increases/

Hanna:

Amazon is an internet based company, therefore relies heavily on the efficient utilization of technology. Their use of the cost leadership strategy has single handedly taken over the bookselling industry by offering them at the cheapest price possible for regular books and e-books for an even cheaper price. They are able to do this because they have deals with major publishers such as Random House who sells their books to them at 53% off selling price (Bercovici, 2014). They build and keep relationships they have with their customers with simplified purchasing processes and not limiting themselves to only the Kindle by offering their e-book app to Apple e-readers as well. In addition, Amazon personalizes the customer's experience by digitally keeping track of their taste in books and giving suggestions to keep them interested to possible sell more books, whereas a store like Boarders cannot because their interaction with customers is generally transactional.

Several factors contributed to Borders's demise such as their resistance to change, decrease in differentiation, and poor marketing decisions. By failing to recognize the shift in consumer behavior, Borders lost out on keeping what loyal customers they may have had who began shopping online more. They also outsourced to their competitor, Amazon, and basically handed over their customers. The company even failed to sell any of their own e-books when they did get on board with the internet because no one even knew they had an e-reader available to access them. Although consumers could still peruse books and hang out at the store, when Borders lost their contract with Starbucks, their differentiation strategy took a massive hit. With nothing to enhance the boutique experience or provide any personalized service, they could not compete and were substituted easily by those who could.

Overall, I do believe the internet and physical stores can coexist peacefully, but the stores must learn to embrace technology and the importance of the internet. According to Laura Stevens (2016), online shopping has rapidly increased over the years with no signs of slowing down; and in 2016, over 51% of all shopping was done online. In 2014, 30% of book sales were from e-books and have continued to increase (Bercovici, 2014). Companies need to stay abreast of the changes in consumer behavior and learn how to influence the customer's decision making process to stay relevant in the industry.

References

Bercovici, J. (2014, February 10). Amazon Vs. Book Publishers, By The Numbers. Retrieved November 1, 2016, from https://www.forbes.com/sites/jeffbercovici/2014/02/10/amazon-vs-book-publishers-by-the-numbers/#70a5d51765a3

Stevens, L. (2016, June 08). Survey Shows Rapid Growth in Online Shopping. Retrieved November 01, 2016, from https://www.wsj.com/articles/survey-shows-rapid-growth-in-online-shopping-1465358582