Book retailing industry has very thin profit margin and is very competitive. Amazon.com (Amazon hereafter) and Barnes & Noble (BN hereafter) represented two distinctive business strategic models. After careful examination of IT's function in each model, we conclude that in the long run BN will dominate this industry, as BN gradually incorporates Amazon's Internet-based commerce into its traditional brick-and-mortar retail.
1-1. Competitive Environment
Amazon's main threat comes from substitutes. Although Amazon has been spending heavily on marketing, some customers are still in favor of shopping at BN bookstores while chatting with other book-lovers. Threats of new entrants are also obvious. As Amazon rapidly expands business into products other than books, it becomes a new entrant to those areas and has trouble creating meaningful brand recognition. On the other hand, many new entrants are mimicking Amazon's business model trying to steal some market share. Rivalry among existing competitors is getting fierce, because other smaller e-sellers are forming alliances to take on the market leader and the current online retail monsters Buy.com
is growing fast as well. Bargaining power of customers is not a pressing issue, whereas the bargaining power of suppliers is quite powerful. Amazon can't get large quantity discount due to low inventory and the nature of small retail orders.
Since BN and Amazon are competitors in the same battlefield, the threat of substitutes and new entrants for BN are just those fast growing on-line retailers. Moreover, other retailers selling other consumer products might also sell books and erode the market share of BN. Rivalry among existing competitors is also fierce. Borders, the second largest brick-and-mortar chain in the US is, instead, going globally in the old-fashioned way by opening overseas stores. Bargaining power of suppliers is very low, since BN has been successfully using its size to...