Copperfield's Books Inc.: niche strategy for competitive advantage

Copperfield's Books Inc.

The nature of business nowadays is not static; hence the understanding of industry competition from a static economic model is not sufficient. What is needed is an emphasis on the interdependence of forces leading to a dynamic analysis. Copperfield's Books Inc. faces a competitive environment dominated by large superstores and bookstore chains, and needs to make a strategic decision - either to expand into new markets and build new stores, or to refocus strategy on the original geographic area that is currently underserved and presents a series of market opportunities, adopting a niche approached concentrated on rare books.

Given the internal and external analysis highlights, the best option s to adopt a niche strategy, building on the special characteristic of the market in the area and the association with the wine tradition that best represents the local flavor. In this business model proposed, less is more and the focus is put on quality.

Internal Analysis

Present situation

Copperfield's Book Inc. is an independent book store operating in a harsh environment. However, the company has a series of key advantages that can differentiate it on the competitive market. Also, weaknesses should not be overseen, as any mistake can be vital. The main advantages of the company are the geographical positioning, offering good market opportunities due to an above average financial and educational level of the population, and the orientation toward used and rare books, a niche with good potential.

Financial resources

The financial situation of the company shows a good increase of business over the last years. Net operations income has grown from $98,566 in 2000 to $950,505. However, the threats from the external environment call for an increase in profitability in order to assure the market position currently occupied by the company. The costs have to be contained in order to assure profits. The current level of expenses is $3,353,757 compared to $2,406,277. Also, the financial growth objective stated by the Operations Manager requires a thorough management of resources. Further expansion is possible, but it can throw the company is a sea of debt if not efficiently managed.

External Analysis

Operating environment

Among the opportunities present in the operating environment, the niche approach targeted at the upper class and the still very vital preference for old rare books can be considered an alternative with promising business potential. Also, the good level of demographic indicators in the Sonoma and Napa Counties should be built on.

Main market threats are represented by the consolidation of the market, leading to the disappearance of many independent small size booksellers and to an increasing concentration of power in the hands of the large supplier chains and supermarkets. Second, the Internet boom has changed market dynamics at a fast pace, throwing traditional booksellers in a whirlpool of challenges to their business model and its profitability. Competitive forces are constantly increasing on the market. Third, the used books segment is rapidly growing, eating out of the new books market and lowering the average annual quota spend on books per household.

Decisions/Issues/Problems

The main strategic decision that Copperfield's Books Inc. is facing is whether to expand business (focusing on size and quantity) or to adopt a niche approach, focusing on the competitive advantage offered by rare books (hence on quality). The choice of business model is vital for the future development of the company.

Strategic recommendations

The most important recommendation that should be mentioned is to build a clear and strong positioning. Products and many services today are so much alike that the consumer cannot tell them apart unless they see the package or the brand name. Technological progress has leveled physical qualities of products. This is why it is essential to identify and promote a point of difference. The consumers' minds resemble ladders on which they rank products; each with a single position. To be able to penetrate the ladder a company has to find that one thing about itself that can meet a consumer need or desire at a certain moment in time. In the case of Copperfield's Books Inc., the niche strategy of focusing on rare books and tailor made services, also connected to high life habits and wine (as a social statement and as a means to value the specificity of the geographic region) could become a very strong positioning. Another possible strategy is to reposition the competition, to relate your own product/service to the competitor's. In this case, the best thing to do for the company would be to build on the perception of tradition and to position itself against that standardization and centralization that are characteristic of large supermarkets and bookshop chains.