The external analysis of a firm focuses on those factors that the management of a firm cannot have control over. The factors are environment related and a firm can only use these factors as opportunities if at all they contribute to profitability of the business. If the factors in question appear as threats to the firm, it’s up to management to devise new ways of eradicating or minimizing the effects of the threats. Porter, (1988). In Japan, the business of selling books is a booming industry because of its large number of readers. The almost $10 billion annual sales of books shows how thriving the bookselling industry is. Population of Japan is half that of America but according to a survey carried out in year 2008, Japanese retail book stores were 17,000 while those in America were only 11,000. The business industry has been in existence since the Second World War. The existence of multitude book readers makes the bookselling industry prone to competition. One of the opportunities enjoyed by the old bookselling industries is the ban imposed on new entrants concerning the discounting of books. The most convenient strategy the new entrants, Bookoff and Amazon Japan, can use comprises of price reduction in order to take possession of part of the market occupied and possessed by businesses that have already been in business for long. The ban of discounting by cartel was formed by the incumbents is an entry barrier that has been a great threat to new businesses wanting to join the industry.
Suppliers of books in Japan are few but they are efficient and with good terms of opera ions. Availability of a constant supplier is a great opportunity to a firm because it is able to meet the demands of his customers hence creating a cordial seller-customer relationship. Firms are privileged to have access to unlimited books from their suppliers because of a system known as the consignment sale system. The system allows the retailers and wholesalers to carry many books and return the unsold books to the publisher free of charge. The service helps the firms reduce risk and levels of inventories. Despite the presence of a favorable supplier power, large retailers benefit most because the publishers tend to give them the first priority of giving of giving them the books first. Their excuse is because of the high profit and the low book return rate by the retailers. Small retailers are disadvantaged because the rarely receive the newest bestsellers and in turn, they lose customers and finally go out of business. Internet has been a major cause of the overall drop in book sales because many people have started buying books from online for use. Internet has become the best alternative to book readers for it has enabled them order and read books trough their phones.
The market book selling industry has been subjected to a great threat of continuous decrease in number of buyer. Firms that can use internet to their advantage and start selling their books online are most likely to blossom in the competitive market. Interfirm rivalry has only been portrayed by the relatively small number of the booksellers. Dominance of Japanese market by booksellers have been a challenge because of the unique price-fixing system that obstructs large and more efficient booksellers from driving away small competitors through the use of price competition. The price-fixing system is in fact the laid out laws known as the resale price maintenance system. This system has mostly benefited the customers and the authors by increasing the number of booksellers and publishers. This has in turn increased the competition in Japans’ book selling industry. The firms competitors are small in terms of size but they are many. This poses as a serious threat to a business as compared to American where the retail book stores are relatively small but rather large. The fact that Japan has many but small retails book stores can affect a business because the supply is often too high and distributed evenly over the environment. This comes as a great disadvantage to competitors and that’s the reason why the Japanese book market has steadily been shrinking while the market of American books has been indicating progressive growth over the years. The over 20% drop in industry sales has forced many book stores out of business over the last decade due competition.
When analyzing any given firm internally, we consider those factors that affect a business and can easily be controlled by its management. Internal attributes that gives a firm competitive advantage are those favorable factors considered as strengths. Barney, William, (2005). Any shortcomings that a firm can encounter during its operations are weaknesses which call for quick address by the management. Bookoff and Amazon Japan are new entrants that have surpassed threats like competition, discounting bans and Interfirm rivalry by use of different strategies that have seen them succeed in this industry. A firm can use those resources are rare to find, those that are readily valuable to them only and resources that are hard to imitate in order to gain control or leverage against its competitors. Bookoff can come up with better competition strategies, make pacts with the authors or identify the weaknesses other competitors and use them to its advantage. Bookoff managed to use a loophole in price-fixing system in order to gain the sole power of lowering the prices of their stock. It does so comfortably because it is a used-book store. These books have been exempted in the price-fixing system because they have all been published from outside the boundaries of Japan. The firm has been able to employ new techniques of rehabilitating the used books and grinding those that have dog eared pages making them look as if they were new. Bookoff is also unique from its competitors in terms of organization by the fact that it has franchised its stores. The firm uses price tags as the only physical difference between it and its competitors. It also encourages the owners and the employees to act like entrepreneurs.
Bookoff has outstood the traditional used-book stores because of their simple buy-pack policy i.e., it buys books from customers at 10% of its list price and later sells them at 50% of its list price. The list price is always fixed by the publisher as it’s a law dictates so for all booksellers to sell at a common price all over the country. Second hand books have been having a lot of demand in Japan because of the financial hardships gone through by its citizens. The hardships have been caused by the recessions that have been through since the early 1990s. Young people are now getting on Bookoff wave as statistics show that almost 40% of the students in Japan prefer new-used books. The firm have obtained support from all over the country for taking part in environmental sanitization by recycling books. Bookoff has helped in preservation of knowledge because it stocks ancient but educative books that are no longer published. To the public, Bookoff is offering a money making opportunity as people can sell back their old books hence creating a win –win situation. They firm have many branches making it hard for competitors to imitate it. Resources that complement a firm’s competitors consist of employing highly trained staff, building on its brand name in order to have power over its competitors, use of superior technological knowledge, advancement of its manufacturing capacity, strengthening customer relationship and use of loans to expand the business.
Bookoff is likely to incur losses in the future because of accumulating books that are outdated and out of syllabus which are unlikely to be bought in the future. They key strategies used by Bookoff are the recycling of old books and selling them at a lower price. The strategies are excellent for they prevent environment pollution and help the low income earners access the same books the rich are buying at a reduced cost respectively. Amazon Japan has had its roots from American Amazon. The Japanese branch had a magnificent brand image making it superior than its competitors. The market was by then large and competitors were less. However, as more competitors entered the market and the firm could not avoid the new wave of national decrease in sales. They reported a disastrous $150 million drop in sales in 2001. Financial strength of the firm enabled it to sell its stock at low prices but the introduction of the price-fixing system started affecting its sales. In spite of these shortfalls, it was able to stay on top of it competitors in 2007 ranking with a staggering $1.3 billion sales. Amazon was the first to sell a wide variety of products besides the books and it also became an online bookseller. With other products exempted from in the price-fixing system, the firm has been able to discount these products making the customers prefer them over other competitors. Amazon was able to stand out from its competitors by starting a service that allowed citizens to make payments at any of its ATMs and stores throughout the country. This was a smart and a remarkable move as it bestowed trust on consumers against the online fraud. Unlike its competitors, the firm allowed the look inside option where the customers could pick up magazines and any of its books and read excerpts before purchasing them. Another smart move that was not restricted by the price-fixing system was the opening of the Amazon marketplace where third party users could sell both used and new products to each other.
In the quest of gaining leverage over other competitors, Amazon started using the points system that allowed customers to accumulate points every time they purchased items which could later be redeemed for gift certificates. To bypass the price-fixing system and offer products at lower prices, Amazon was clever enough to offer free shipment on purchases putting them at par with other strong competitors. This was an advantage to them over other online stores that could not offer this service. Amazon has been able to stay ahead of the game in this industry but should the government pass laws in the future targeting the Amazon’s culture of outsmarting the price-fixing system, heavy losses could be easily incurred by its stores all over the country. The success of Amazon has been due to its relentless efforts to pursue better services for its customers and possibly evade the price-fixing system in order to maximize on profits. These strategies are good to the customers in various ways; introduction of Amazon marketplace allows the customer to know the contents of a book before buying it, accumulation of points is a form of compensation to the customers and payments through ATMs and its stores bestows customer confidence.
Amazon Japan and Bookoff have succeeded in the bookselling industry due to their strong strategies that have helped them attract more customers and at the same time avoid the price-fixing system that can restrict them from maximizing on profits. Bookoff has been able to dominate in the used book industry. The firm should also start offering the sale of second hand different variety of goods. With its handful number of customers willing to buy their price reduced books, there is a high personality that demand of other goods would be high from customers in Japan. This should the first strategy to implement. Amazon Japan offers many other goods, its services to the customers are unique and so is their pricing. I would recommend that they open outlets all over the major cities in the world as their strong brand image is bound to make their business succeed wherever it is started. With the Amazons’ ability of having successful business in other parts of the world, collecting and selling new second hand books in Japan is an easy venture that can see them make large profits.