Random House: Shifting To E Books In A Globalized World Harvard Case Solution & Analysis

Strategy Paper

PART 01

VRIO Analysis

Random House has been one of the most successful firms in terms of revenues and market share in the market. Random House being one of the oldest firms in the book industry has been gauging in more customers than all the competitors. The major resources and capabilities that provide the company strength to compete with the rivals and to sustain in the market have been its financial stability. Since it is being financed by the parent company; therefore Random House has been a successful firm.

Moreover, another major resource for the firm has been its constant effort of merger and acquisition. Random House has a partnership with various companies globally to present itself for the new market and culture simultaneously. Another major resource and capability of the company has been its access to the top authors in the market. Since Random House has a strong brand name, therefore, most of the successful and renowned authors work with the company and become a part of it.

Therefore, as per the VRIO analysis, the resources and capabilities discussed above make the company lie in the quadrant of temporary competitive advantage. If the firm can value its current resources, it can sustain in the market. However, these resources and the capabilities can be copied in the future, therefore; it can be considered that Random House has a temporary competitive advantage in the industry.

Major source of competitive advantage

Renowned Authors:

The major source of competitive advantage for Random House has been its access to the most renowned and high-profile authors. Since Random House has a strong brand name in the market, therefore, most of the top selling authors have become a part of the network of Random House.

Mergers and Acquisitions:

The company while entering any new culture or country has been quite keen to associate and join hands with a local player. This attribute has again helped Random House stay ahead of competition because by joining hands with local players, the company becomes aware of the local atmosphere and culture that helps it to grow in the market and rather penetrate.

Financial stability:

The financial strength of the company has also been a source of competitive advantage. The reason is simple since it has been financed by the parent company. Therefore, Random House does not face a financial dilemma.

Major sources of competitive disadvantage

Limited access to e-books:

In spite being the top seller in the industry, Random House does not have the strong presence in the e-book segment. This has been a disadvantage for the firm. Although it is financially stable, the company has overlooked this segment of the market which now has been held by Amazon.

Slump in publishing market:

In the past, Random House enjoyed the competitive advantage of being into the publishing industry. However, with the advent of information technology and the internet, things have changed. Now the publishing market does not hold the competitive advantage.

PART 02

Porter Five Forces Model

Bargaining power of buyers: High

The bargaining power of buyers in the publishing industry is high. The reason why it is high is because of the low switching cost. Moreover, with the introduction of e-books and online portals the customers are accessed to more libraries that are most of the times quite cheap and affordable. Along with this, the prices of the books have also declined, which it makes easier for the buyers to purchase at low cost.

Bargaining power of suppliers: Low

The bargaining power of supplier is low for the industry. The reason that makes the industry highly competitive for the industry players is that the industry suppliers do not have the ability to introduce breakthrough innovations.

 Along with this, the industry consists of price-conscious majority people who are in need of low-priced products. Industry suppliers attract customers on minimal margins; therefore, suppliers have to charge minimal costs to attract customers.

Competitive Rivalry: High

The competitive rivalry is high for the industry. It is high because of the number of competitors competing in the market. Random House being the major player has been affected by the introduction of e-book players such as Amazon, Google, Apple, etc. Therefore, it can be said that the competitive rivalry has been quite high for the market.

Threat of new entrants:

The threat of new entrants in the industry is low. The market is already a mature industry that makes it less attractive for new entrants. Along with this, the profit margins for all industry players is low which again makes it less attractive for new companies. The high capital investment to start a business in the market makes it less attractive to the new players........................

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