Porter’s Five Forces The Book Publishing industry in Australia 20% of books are sold via independent retailers that tend to specialize in a particular genre or prefer unusual (not mainstream) books 70% of books are sold via large retail chains that only deal in mainstream books published by large or long-established publishers who also provide promotional dollars to support their books 10% of books are sold via the internet (e.g. Amazon) and this is expected to dramatically increase as they increasingly capture the time-poor or budget-conscious market segments Book sales have been fairly stable in this mature industry; however, they are expected to decline in the future as internet and cable-TV usage increases Australia has one of the highest per capita magazine sales in the world There has been a dramatic increase in self-publishing over the past 10 years, however these books are typically not accepted by retailers and tend to have print runs of less than 1,000 E-books would be in the early growth phase of their product life cycle. They currently have relatively low sales but are expected to steadily increase over time There is an increased number of authors in the marketplace, appearing to be driven by easy access to research material (via the internet) and by the increasing popularity of blogs Despite more authors available, there is only a small number of “brand” authors (such as Bryce Courtney) who can attract significant book sales on their name alone Excluding self-published books, there are around 500 new books available in the Australian market each month (including books published internationally) There is an increasing number of large book publishers, as the larger ones battle for market share by acquiring smaller publishing houses QUESTIONS 1. Assess the book publishing industry using Porter’s Five-forces model. 2- What key insights have you gained by assessing this industry using this structured model? 3- Therefore, what is your overall assessment of the attractiveness of the industry? 4- How could a firm use Porter’s Five-forces model in their strategy and planning activities?

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Porter’s Five Forces The Book Publishing industry in Australia 20% of books are sold via independent retailers that tend to specialize in a particular genre or prefer unusual (not mainstream) books 70% of books are sold via large retail chains that only deal in mainstream books published by large or long-established publishers who also provide promotional dollars to support their books 10% of books are sold via the internet (e.g. Amazon) and this is expected to dramatically increase as they increasingly capture the time-poor or budget-conscious market segments Book sales have been fairly stable in this mature industry; however, they are expected to decline in the future as internet and cable-TV usage increases Australia has one of the highest per capita magazine sales in the world There has been a dramatic increase in self-publishing over the past 10 years, however these books are typically not accepted by retailers and tend to have print runs of less than 1,000 E-books would be in the early growth phase of their product life cycle. They currently have relatively low sales but are expected to steadily increase over time There is an increased number of authors in the marketplace, appearing to be driven by easy access to research material (via the internet) and by the increasing popularity of blogs Despite more authors available, there is only a small number of “brand” authors (such as Bryce Courtney) who can attract significant book sales on their name alone Excluding self-published books, there are around 500 new books available in the Australian market each month (including books published internationally) There is an increasing number of large book publishers, as the larger ones battle for market share by acquiring smaller publishing houses QUESTIONS 1. Assess the book publishing industry using Porter’s Five-forces model. 2- What key insights have you gained by assessing this industry using this structured model? 3- Therefore, what is your overall assessment of the attractiveness of the industry? 4- How could a firm use Porter’s Five-forces model in their strategy and planning activities?

EXPERT ANSWER

This theory is based on the concept that there are five forces that determine the competitive intensity and attractiveness of a market. Porter’s five forces help to identify where power lies in a business situation. This is useful both in understanding the strength of an organisation’s current competitive position, and the strength of a position that an organisation may look to move into. Strategic analysts often use Porter’s five forces to understand whether new products or services are potentially profitable. By understanding where power lies, the theory can also be used to identify areas of strength, to improve weaknesses and to avoid mistakes.

As per the above given information.

Threat of new entrant is high as new large scale retailer have started entering the market because tha mnajor share are held by them only. And also there is a dramatic increase in the independent wrtiers publish their books but that is not a great threat because there is not much of sale from them but still they are growing rapidly.

Threat of substitute product and services is also high as there is open internet are people can research as more as they can so there is a increase in blogs which target habitual readers as well. Also e-books is also in there starting phase but they are also increasing at a steeper rate which is almost a perfect substitute of the hardcopies available in the market.

Bargaining power of the supplier gives rise to increase in cost as well and the mainstream authors who have there book sold by name are only few as well.

Bargaining power of customer will also get affected from the substitutes available in the market of the good and also different independent retailers can sell at lower price also.

Rivalry among existing firms are not much as there are only few large scale retailers who have main stream books and on the other hand few independent sell non mainstream books.

The overall atractiveness of the industry is high because large retailer have a major part of the profit so to devide that more sellers can also enter into the industry