Xinhua Book Store(新华书店案例分析——英语)

REGAINS ITS COMPETIVEADV ANTAGE-------A Proposal by team 11Team Members:JuliaVictoriaLeeExecutive summaryXinhua bookstore experienced a sharp reduction in sales and market shares because of external competition and internal factors, like inefficient decisions, lack of marketing tragedies. The attached report recommends wants to solve these problems separately in distribution, pricing, and marketing. We hope that it can regain its market competitiveness and recover its original glory.Key FindingsWe found that Xinhua bookstore are faced with problems, namely a continuous reduction in sales, low market share of online book sales, high price on the books, and disgraceful evaluation results of customer satisfaction. There exist external reasons and internal factors. The external reasons are other competitive online internet bookstores and other competitive physical bookstores. The internal factors are that:1) Xinhua bookstore has an umbrella organization，leading to ineffective decisions; 2) It is lack of online marketing strategy; 3) it has single type of book categories; 4) It has improper supply channels and high price as a result; 5) it kept inadequate human resources developmentConclusionsFaced with these problems, we propose five alternative solutions to resolve our problem: 1) reform the management system; 2) implement online marketing; 3) promote book diversification; 4) optimize supply channel, and thus reduce prices; 5) execute human resources development, and thus promote service qualityRecommendationsWe give recommended solutions separately in distribution, pricing and marketing to help Xinhua Bookstore regain its market competitiveness, including:∙Reassess store locations and increase stores closed to target market∙Build cooperation with research and teaching institutions and provide book ordering services∙Unify the purchase channel and payment∙Take advantage of national brand and seek for government financial supports∙Set a multiple pricing mechanism based on different consumer groups∙Sell more diversified products∙Establish a membership club and hold regular reader’s events∙Establish a unique online marketing platform in a long termTable of ContentsProblem Description (2)Statement of Purpose (2)Symptoms (2)External Reasons (5)Internal Factors (5)Alternative Solutions Considered (6)Recommended Solutions (11)Next Steps (14)Problem DescriptionXinhua Bookstore was founded in April 24, 1937 and once belonged to the China Central Propaganda Department and the China Publishing Group. The inscription of its signboard was written by Chairman Mao Zedong in December 1948. Xinhua Bookstore is the country's official bookstore and has branches in 34 provinces, autonomous regions and municipalities in China.Xinhua Bookstore owns strong fixed assets of more than 300 million yuan and business area and warehouse space of 80,000 square meters.Xinhua Bookstore was once the most influencing cultural brand for the majority of Chinese, it is celebrated for the variety and diversity of product, reliable reputation, and other good qualities. The morning sun never last a day, along with continuous sales reduction, which decreased from the most glorious 90% in the 1990s to 57% nowadays, both its on and off line market hare is alarming. People do not regard Xinhua Bookstore as the first bookstore that they want to spend their time on, which means Xinhua Bookstore should pay attention to rebuild its brand.Statement of PurposeThe purpose of this report is to recommend solutions for Xinhua Bookstore to regain its former glory and to increase competitiveness in marketplace.Symptoms1.A continuous reduction in salesThe following table and figure illustrate that Xinhua Book Store's proportional sales of book publication and distribution industry continues to decline, although its most glory sales accounted for 90% back in the 1990s.Table 1: Xinhua Book Store proportional sales changes from 2006-2012 (Unit: %/year)Figure 1: Sales proportion changes from 2006-2012 (Unit: %/year)2.Low market share of online book salesAt present, China's online book industry markets in general constituted by the four main markets: First, the most active online bookstores are built by non-publishing industry capital with great number of sales, such as Dangdang, Amazon, Taobao, etc.; Second, traditional bookshops extended their operation to online book business, mainly relying on physical bookstore business products to carry out online sales, such as Xishu Bookstore; Third, having established 349 websites, publishers offer more than 500 online bookstores, such as Renmin Press, etc.; Fourth, foreign trade companies open online bookstores mainly for overseas readers with considerate service, such as Bertelsmann. The following chart is the evidence:Table 2: Xinhua Book Store and other types of book stores' proportional share of online salesFiture 2: Xinhua Book Store and other types of book stores' proportional share of online sales3.High price on the booksUnless you have a membership card, Xinhua Bookstore will charge you for the original price. However, other bookstores normally give 20% to 30% off discount for each purchase while online book stores offer more discount. The following table and figure clearly show the difference:Table 3: Example of Moyan's "Frog" ( Unit: %/Yuan)Figure 3: Example of Moyan's "Frog" ( Unit: %/Yuan)4.Disgraceful evaluation results of customer satisfactionThe latest customer satisfaction survey turned out that our service did not satisfy our customers. Considering intense competition nowadays, we should pay attention to the following aspects:Table 4: Customer satisfaction survey's results (Unit: scores)Figure 4: Customer satisfaction survey's results (Unit: scores)External Reasons1. Other competitive online internet bookstores, like Amazon ChinaChins Bookstore, as the first mainland Chinese online bookstore officially opened online in 1995, the Chinese online bookstores have been experiencing extremely fast development. Among them, China's two most famous online bookstores are Dangdang and Excellent (in 2004 acquired by Amazon). Dangdang in 2007 achieved triple-digit growth in sales in 2008 which amounted to 1.5 billion Yuan, while Amazon China in 2007 also achieved remarkable triple-digit growth. These two online bookstores account for 60% of total book sales. In addition to these large online bookstores, some specialized online bookstores have quietly entered the fray, such as Dragon Advertising Bookstore, Jiangsu Exam Online Bookstore and Confucius Secondhand Bookstore, are generally known for providing specialized books for specific groups .2. Other competitive physical bookstores, like Xishu BookstoreSo far, Xishu Bookstore has opened 512 stores in more than 400 cities, 29 provinces and autonomous regions through chain stores and franchise stores. Its online market share is twice of Xinhua's and it became China's largest non-governmental chain bookstore and Xinhua Bookstore's competitor with strength in book retail industry. Xishu not only use the Internet to push their goods or service but also has the traditional physical storefront available to customers. Today, having the fame as second national bookstore brand, Xishu Bookstore is also a well-known cultural brand for the majority of scholars, book lovers which has been deeply rooted in people's minds. Each opening of Xishu Bookstore's physical store will cause widespread concern in the community, a local cultural accumulation point.Internal Factors1.An umbrella organization，leading to ineffective decisionsXinhua bookstore has an umbrella organization as the same as other national companies, which makes it not fit for the market economies. So it can`t seize the best opportunity to make a respond. Thus it often makes just ineffective decisions. What`s worse, it takes much time to pass on this decisions to everyone, but lose the opportunity to executive this decisions.ck of online marketing strategyTo every traditional industry, Internet becomes a more and more important tool. Internet has a much higher efficiency, so it can make the market much larger. According to the data, 56% of Chinese on the Internet bought books before. But Xinhua bookstore has a low increase in this market. Only several stores built the Internet departments, so that they could sell books on the Internet. Besides, as there is nearly no advertisement, only few people know it. So its Internet department can`t compete with other online bookstores, such as Amazonas.3.Single type of book categoriesThere are only a few kinds of books categories，mainly majoring in textbooks, reference books, policy-related books published by the Party and the State Council. However, Culture Diversification becomes more and more popular. Every kind of books is needed by different people. So the single type of books can`t fully meets consumers` needs.4.Improper supply channels, and high price as a resultAs we all know, consignment sale or distribution is the way Xinhua bookstore gets and sells its books. So it can`t get high discount from its suppliers because it need not pay cash for the books when it gets books from its suppliers. This means that its cost is higher than other bookstores, which leads to the high price to the consumers.5.Inadequate human resources developmentAs a state-owned company like others, it needs to pay much money for the salaries to the workers, which will increase its cost. Besides, they are lack of activity, because they are life-long employed workers. So they don`t want to get trained to promote their skills. So they can`t offer excellent service to the customers. This means that Xinhua bookstore doesn’t make adequate human resource development.Alternative Solutions Considered1.Reform The Management SystemAs is said above, an umbrella management organization results in efficient decisions. It takes much time to make the decisions so that it always loses the best time to make a respond.In order to improve the efficiency and competitiveness, Xinhua bookstore should integrate some departments, cut down some departments and leave the elites so that it can improve the efficiency.The pros and cons of this solution are as follows: Benefitsa)It can make and execute efficient decisionsBecause there are fewer departments, it will takes less time to communicate its information to the related departments. It will take less time to make a decision, for that there are fewer people to participate in making a decision. And the decision-makers are all elites so that they can make better decisions. Then it will take less time to executive this, because there are fewer departments.b)It can save much management costSome workers will be laid off because of the integration, so there will be fewer workers left in this company. Then it can pay less money for them. This can reduce some cost for the company so that it can improve its competitiveness.Costa) A deal of money must be paid to laid off workers, because of the Labor LawReforming the management departments means that it must lay off some workers so that it can improve the efficiency. But because they have worked here for a long time, the company must pay much money for the pension, in order to obedience to the Labor Law.b)It encounters the objection of vested interest groupsIt is always difficult to reform the management part, because they all have power. Integrating and cutting mean that some leaders will lose the power. So it will encounter the objection of vested interest groups. If this happens, it will result in much loss to this power dispute.2.Implement Online MarketingWith the development of information technology, Internet becomes more and more popular among persons. According to AC Nielsen’s research, 63% of Chinese people bought goods on the Internet and 56% bought books. We made a research in our school, and the result suggests that the online market is a large market. The advantage of online marketing is that it is beyond the regional limitations and is able to make the deals at different time. So people in different places can buy the books at any time. By this way, Xinhua bookstore can promote its brand and expand its original market sothat it can sell more books.Benefitsa)It can expand the target markets and enhance the brandSince many people are surfing the Internet and buy books online, online market is becoming more and more important. For example, Amazonas is famous for its online book market. So Xinhua bookstore can have a larger market if it can build the online department. Besides, more people will know it and become its consumers. Certainly, it can expand its target markets and enhance the brand by this way.b)It can increase the salesSince there are many online bookstores, consumers who like to surf the Internet don`t need to go to the physical stores to buy books. So Xinhua bookstore can attract more consumers if it can set up online departments to sell books. It can increase Xinhua bookstore`s sales by this way.Costa)It needs special online management department, increasing the costWebsite is easy to be built, but there needs many persons and much money to manage it. When consumers bought the books, the store needs to send it as quickly as possible. And it needs to construct another storehouses where there is a well-developed transportation to store the books. This needs money, so it will obviously increase the cost.b)Advertisement and discounting are needed to make online channel widely knownSince five years ago, some stores in about two provinces have built the online stores. But there are few people who know that Xinhua bookstore built the online departments. So its online sales remain very low. So some measures must be taken to make it widely known. Like other bookstores, it needs advertisement and discounting. Only by this way can it make itself known and accepted by more and more people. And this also needs investment in advance.3.Promote Book DiversificationAs we all know, Xinhua bookstore majors in the textbooks, reference books, policy-related books published by the Party and the State Council, because it is a state-owned company. And it obtained high profits in the 1990s and 2000s. But cultural diversity has been a tendency. People in different ages buy books nowadays. Xinhua bookstore is faced with all the social books, not only the students. Literature books and novels are becoming more and more popular among the youths. So it is necessary to make a change to the book diversification, so that it can be suitable for the tendency.Benefitsa)It is adaptable for the diverse cultureCultural diversity suggests that specific people may focus on specific kinds of books. They are interested in different books. So the textbooks and reference books are only parts of the whole markets. In fact, this part is becoming smaller and smaller, because many schools have their own presses and bookstores. So book diversification is accordance to the market economy rules.b)It can attract more types of consumersBesides, more and more people buy books, including students, young workers, leaders, and even the old. So if Xinhua bookstore can promote book diversification, it will certainly meet their needs. Then it will attract more types of consumers and sell more books. This will surely increase its market shares.Costa)It needs more cost because it needs more suppliers and channelsAt first, Xinhua bookstore must get such kinds of books before selling them. This is very important, because it can not publish such kinds of books. So it should get in touch with more suppliers and make deals with them to keep the channels available to it. So finding and keeping in touch with the suppliers need money, which will increase the cost.b)It may weaken its core part by the way of proliferation of fundsThe best way to survive in the market is to focus on specific products, so that it can make outstanding performance in this field. Maybe proliferation of funds will result in the failure in every field. So it will face this risk of losing its core part by the way of proliferation of funds.4.Optimize Supply Channel, and thus Reduce PricesConsignment sale or distribution weakens its ability of bargaining power with the suppliers, so that it can`t get the books by the lowest cost. So it needs to optimize supply channels. Keep in touch with more suppliers and optimize the supply chains. By this way can it reduce the cost per book, so that it can reduce its price. Most netizens said that they could only accept the 5% of the price fluctuation. They would turn to the online bookstore if the price is over 5% higher than the online price. So maybe reducing price is the best way to improve its competitiveness.Benefitsa)It can weaken the bargaining power of suppliersOptimizing supply channels will guarantee that Xinhua bookstore will have more suppliers. More suppliers mean more intense competition among the suppliers. Then it will weaken the bargaining power of per supplier. So it can get books by lower cost.b)It can enhance competitiveness by reducing pricesBecause Xinhua bookstore can get books by lower cost, it will have larger interval about every book. So it can sell its new books by lower price, which many consumers think is the best way to improve its competitiveness.Costa)It needs more cost during the optimization procedureIt will cost some money to find more suppliers and check out whether the supply chains can be optimized. Besides, optimizing the supply chains will cost more money, because it needs to rebuild the supple system.b)It may reduce profit marginsBy optimizing supply channels, Xinhua bookstore can sell books with a high profit margin, because the cost is lower. So if it reduces the price to sell its books, it will acquire fewer profit margins.5.Execute Human Resources Development, and thus Promote Service Quality Workers in state-owned companies are lifelong employment. They are not able to be employed by the companies. So they have no enthusiasm and don`t like to create new ideas to improve company. So it needs to executive incentive plans, and execute human resources development to help to improve workers` enthusiasm and creativity,so that workers can offer better service and make the circumstance in bookstores more suitable for the readers and consumers.Benefitsa)It can enhancing the quality of staffs so that they can offer better serviceExecuting human resources development will enhance the quality of staffs in skills and service. It will help workers to change their attitudes and then enable them to offer better service to their consumers so that the stores can leave a good impression to the consumers.b)It can promote their innovation consciousnessExecuting human resources development can change workers` attitudes to their work, so that they can actively work. Incentive plans will also encourage them to create new ideas to make the company better, because they work in the stores and are very obvious about the advantages and disadvantages of the stores.Costa)It needs more cost to train the recruiters and incentive planIt needs to invite experts to come to the stores to teach and the workers. And it needs to rent classrooms, buy the studying materials and offer them some food. Besides, incentive plans suggest that it will take some measures to encourage the workers, like wages, subsidies or other things. These all need much money.b)It may have no obvious effect because of lifelong employment systemSince workers in this company are lifelong salarymen. They are not worried about being unemployed. So maybe the training and incentive plans will not be able to encourage them to improve their service and change their attitudes for a long time. What`s worse, as these workers have worked in this way for a long time, it will be very difficult to change their actions or attitudes for a short time.Recommended SolutionsBased on the above analysis, the internal problems constitute the root reason leading to declining market share of Xinhua Bookstore. As the nation's largest chain bookstore，if Xinhua Bookstore want to regain its competitive position, it must fully utilize its internal advantages and resources on scale, number, brand and policy to solve the internal problems. Meanwhile, due to changes of external environment and market factors, it’s also essential for Xinhua Bookstore to learn experiences from external competitors. Therefore, we would like to give recommended solutions for both internal and external problems.1. Address Internal Market FactorsXinhua Bookstore was responsible for the official publications’ national sales becauseof historical factors, so when compared with other ordinary bookstores and online bookshops, Xinhua Bookstore has the special internal strengths including: large scale and number of physical bookstores, wide distribution, national brand and support of government policies. Under these strengths, measures that can be taken are as follows:(1)Distribution StrategyFor physical bookstores, the store sale is the main sale channel and through this way physical bookstores can sell books to consumers directly. Therefore, both effective location selection for target market and establishment of long-term fixed supply channels are critical.a) Reassess store locations and increase stores closed to target marketAs Xinhua Bookstore has established for a long time, the sale environment of lots of previous stores has undergone great changes. So it is necessary for Xinhua Bookstore to re-evaluate the sites by investigating the amount of potential readers, atmosphere for learning, etc. After reassessment, Xinhua Bookstore should close or sell the stores far away from the consumers, while concentrate funds on creating stores nearby the reader gathering areas such as campus. It will help shorten the distance to readers and facilitate purchases.b) Build cooperation with research and teaching institutions and provide book ordering servicesInstitutions such as schools have a huge demand on books, especially for primary and secondary schools without self-publishers and bookstores, and the nearby Xinhua Bookstore is the main channel for the teachers and students to buy textbooks and reference books. So Xinhua Bookstore can build all-directional cooperation and sign contracts with schools on book orders. It can help obtain accurate information on the number of demand, avoid lack of some book types and reduce costs of procurement.(2)Pricing StrategiesThe higher book price of Xinhua Bookstore has been the main reason for its declining sales. While short-term and irregular promotional activities can not fundamentally solve the sales problem and it in turn may cause loss of profits. Therefore, to solve the pricing problem, reducing the purchasing cost should be considered first, followed by setting a multiple pricing mechanism based on different consumer behaviors.a) Unify the purchase channel and paymentXinhua Bookstore owns a large quantity of sale branches (more than 14,000 by 2006). By canceling small bookstores’ purchase rights and unifying the business chain including purchase and settlement, Xinhua Bookstore can enhance its pricing negotiation capacity with suppliers and publishers. It can also save costs in payment procedures and personnel.b) Take advantage of national brand and seek for government financial supportsXinhua Bookstore is the country's official bookstore with a national brand and the government has supported its development for a long time by preferential tax policy such as V AT exemption. Nowadays, the government has prepared to increase supports for cultural industries, and Xinhua Bookstore should take this opportunity to seek for more financial supports such as relief on business tax and rent to help reduce costs.c) Setting a multiple pricing mechanism based on different consumer groupsXinhua Bookstore should differentiate the book pricing by market segmentation. Different customers vary in read types. Therefore, Xinhua Bookstore should set a multiple pricing mechanism based on different consumer groups. For example, teachers and students can enjoy more discounts on textbooks and reference books, while housewives can get cookbooks and parenting books at a much lower price (3)Marketing StrategyCompared with online bookshops, Xinhua Bookstore has a big advantage on its physical storefront. It will provide places for diversified sales and a variety of value-added events.a) Sell more diversified productsAs a bookstore, Xinhua Bookstore should first base its sale on books. But also, it need to sell more related products such as stationery, audiovisual products, e-learning tools to meet the diverse demands and attract more consumers. Some larger stores can also operate other consumer businesses such as cafes while providing reading areas. It can help expand Xinhua Bookstore’s business scope and spread risk.b) Establish a membership club and hold regular reader’s eventsXinhua Bookstore can add value-added business by establishing a membership club and hold regular reader’s events such as reading salon and seminar, book signing event and so on. The membership club will regularly release the event information and recommend new books on sale. It’s a more creative promotion method for Xinhua Bookstore to carry out value-added business, foster a long-term relationship with readers and make a new growth point of profits2. Address External Market FactorsThe concrete recommended solutions based on the internal problems can help Xinhua Bookstore utilize its internal strengths and enhance the competitiveness. Meanwhile, in such a network era, it’s also essential for Xinhua Bookstore to learn experiences from external competitors.Xinhua Bookstore needs first to learn advantages from online bookstore, especially on updating the book types and establishment of new book recommendation and reader feedback systems. More importantly, Xinhua Bookstore should not simply copy the existing online bookstore sales model, but establish a unique online marketing platform combined with value-added services from its physical bookstores. However, this may be a long process to make it.Above all, we think Xinhua Bookstore need to make improvement in distribution, pricing, products and services to regain its market competitiveness as China's largest chain bookstore.Next StepsThe next steps Xinhua Bookstore should take are as follows:∙Implement a project of reassessment (1 month)∙Make order contracts with primary and secondary schools (2 weeks)∙Launch new pricing negotiations with suppliers and publishers (1 month)∙Set a multiple pricing mechanism (2 weeks)∙Establish a membership club (by 2nd quarter 2014)。