In this marketing assignment help, we explained the Business Comparison of Amazon.com and Borders Books.
In 1990s, popularity of internet and World Wide Web reached across the world. Companies are looking the web as a new source of commerce. It offers variety of choices and opportunities for customers. Jeff Bezos, founder of Amazon.com was the pioneer of e-commerce (Mellahi& Johnson, 2000). He launched his website in July 1995 and the firm went public in 1997. Bezos had 41% share of the company and 10% was accounted by family members. In the beginning, company had sold only books, but now, it sells CDs, videos, DVDs, electronics, toys, tools, home furnishings and housewares, apparel, and kitchen gadgets.
The company has third party agreements with well-known retailers such as Toysrus.com Inc., Target Corporation, Circuit City Stores Inc., Waterstones, Expedia Inc., Hotwire, National Leisure Group Inc., Ingram and Virgin Wines that help to sell online products without any inventory. Ingram provides 50% of books titles (Kha,2000). Company has focused on market share rather than profits, so it did not get profits in starting few years. It had secured its first net profit during the fourth quarter of 2001.
History of Borders Books
In 1970s, Louis Borders developed a software system that allowed the store to manage inventory and accurately project sales, which had given a competitive advantage for the company. The company started to sell music and movies into some of its stores in 1991. In 1992, Kmart Corp. acquired Borders and created the Borders-Walden Group. At this time, company had 21 large stores and valued itself about $190 million (Kuniavsky, 2010). In 1995, the book store chain renamed Borders Group Inc. and went public on the New YorkStock Exchange. In 1998, the company launched online retail stores. In 2001, company announced a deal with Amazon.com to re-launch its e-commerce site.
In 2006, Bill Ackman of Pershing Square Capital Management took 11% stake in Borders to boost its financial position. The company sold its UK and Ireland subsidiaries. It had $42.5 million loan of Ackman’s company and faced liquidity problems in the organization. In 2009, company had only 50-60 stores to survive in long run that was 564 in 2006. In 2010, Ackman offered a merger with Barnes & Noble (Bomey, 2011). In Feb 2011, company filed for Chapter 11 bankruptcy protection in Manhattan and in July18, Borders announced plan to liquidate.
Comparison of Management Approaches
Both companies started their business with the books. So, basically both are book selling companies. Amazon.com used effective marketing and selling strategies. For the promotion and increasing brand awareness among customers, company had built partnership with various search engines like Yahoo and creating various offline promotional activities and continuing innovations in its sites (Bellomo&Elad, 2006). Along with this, Borders books also used online marketing and retailing in 1998 that provided effective results. In 2010, company launched e-book store and started selling for e-readers and gets 17% market share in e-books within a year. Both companies used software systems to manage inventory and their distribution networks.
Contrast of Management Approaches
Borders had a business strategy, but they didn’t have a marketing strategy and it is main reason of business failure. For the success of the business, it is important for marketers to develop differentiation strategy (Harris& Dennis, 2007). On the other hand, Amazon.com signed multi-year agreements with over 100,000 independent sites. At the same time, Borders Books sold books through its retail stores. Borders brought United Kingdom-based Paperchase Products Ltd. for the expansion of the business, while Amazon.com expanded its business by purchasing two online book retailers such as Bookpages in Great Britain and Telebook in Germany. In recession period, Borders faced financial problems, but Amazon.com continued by staying top of the list.
Reasons for Amazon’s Success
Market and industry knowledge: It is important for the company to know the customers and market. Before starting the business, Amazon.com understood the importance of internet in every person’s life. Company saw the opportunity in internet marketing that cannot be seen by others in book industry (Dave, 2008). The company understood that people has the ability to connect with internet for purchasing any products at easy convenience. This strategy helped to develop the market that had given profits after a period of 4-5 years.
Innovation: Amazon is a retail company that is leader in e-commerce. Technology helped the company to perform effective services and find new and better services in the same market. Company identified the customer needs and worked to predict their needs in near future. The company was innovative and focused on change not for technologies, but for opportunities and market(Kha, 2000). Through technology, company monitored competitive sites to determine similarities and track the needs of potential customers.
Develop unbeatable logistics: Company used internet not only for sales, but also for distribution channels that provided safe and quick delivery and minimized risk of competitors acquiring its suppliers(Mellahi& Johnson, 2000). The company decided to do distribution in house that provided customer satisfaction by fulfilling the order in house. Its warehouse management system had information on the velocity, length, width, height and turnover rate. These are helpful to develop market and establish business successfully.
Reasons for Borders ended in chapter 11
Size of stores: In starting, Borders offered a wide variety of books in single store around ten thousands books under a single roof. It built a reputation of the company in the market and provided success to the company (Kary& Sandler, 2011). For the expansion, company provided franchise to open the store, but it was difficult to maintain huge variety of books that decreased its reputation.
Technical advantage: Borders had an early technical advantage with a superior inventory system that could optimize and predict what consumers would buy. But in the mid-1990s, Borders lost its competitive advantage due to various competitors (Cox&Dale, 2001).Company didn’t use this technique for e-commerce or online business that was the trend of consumer shopping.
E-commerce: The Company started online stores and e-commerce business in 1998 that was too late, because competitors had established their business in market and captured market share of e-commerce(Harris& Dennis, 2007). When competitors sold online books, company expanded its physical plant and refurbished its stores. Customers started to buy books through online, so Borders lost its business. In 2006, the last time it turned a profit and in 2011, it filed for bankruptcy protection.
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