Copperfield\'s Books Inc. The Nature

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

General environment

The customer preferences have shaped many markets over the last twenty five years, among which also the bookstore in the U.S. As a general conclusion, the preference for books has diminished in favor of video or multimedia substitutes, leading to an overall decline of reading as a social trend. However, the bookstore market is growing steadily and predictions for the following ears are optimistic.

The social perspective is extremely important in this analysis. As previously mentioned, the customer dictates many times the success or failure of companies, and perceptions are extremely sensitive in an era dominated by communication. Also, a different lifestyle and rhythm of life have imposed changes in habits and attitudes. Books have become almost obsolete products for the young demographics. However, the preference for classic books has remained steady in the upper segment of the population. Not in the least, the dynamic technological frame influences deeply the bookstore industry, reshaping constantly demand trends and logistics.

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.

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