Temple University Barnes & Noble Could Succumb to the Retail Apocalypse please read Barnes & Noble Could Succumb to the Retail Apocalypse. (and to write Cr

Temple University Barnes & Noble Could Succumb to the Retail Apocalypse please read Barnes & Noble Could Succumb to the Retail Apocalypse. (and to write Critical Analysis)here is a sample and the case reading Barnes & Noble Could Succumb to the Retail
Apocalypse
The once-dominant bookstore chain has survived, but it still
hasn’t solved its Amazon problem.
Adam Levine-Weinberg
(TMFGemHunter)
Mar 11, 2019 at 9:16AM
Over the past few years, a combination of declining retail traffic and rising competition has led
to a slew of retail bankruptcies. Many well-known retailers have disappeared recently, including
Toys R Us (and sister chain Babies R Us), fashion retailers like The Limited and Wet Seal, and
electronics stores HHGregg and RadioShack (with the exception of some dealer-operated
franchise stores). Mall standbys Payless ShoeSource, Gymboree, and Crazy 8 are going out of
business in 2019, while Sears and Kmart barely avoided liquidation earlier this year.
So far, Barnes & Noble (NYSE:BKS) has survived this big shakeout despite being one of the
first companies to have its business disrupted by Amazon.com (NASDAQ:AMZN). That said,
the bookseller’s recent results suggest it could be living on borrowed time.
Revenue and profitability are declining
Barnes & Noble’s revenue has been shrinking for years thanks to a series of comparable-store
sales declines and occasional store closures. Total revenue fell from $4.2 billion in fiscal 2016 to
$3.9 billion in fiscal 2017, $3.7 billion in fiscal 2018, and an estimated $3.6 billion in fiscal 2019
(which ends next month).
While Barnes & Noble has implemented aggressive cost cuts to offset these sales declines, they
haven’t helped much. Adjusted EBITDA fell from $186 million in fiscal 2016 and $187 million
in fiscal 2017 to $145 million last year.
Barnes & Noble’s initial guidance for fiscal 2019 called for adjusted EBITDA to rebound to
between $175 million and $200 million. However, management recently revealed that the
company will fall far short of that mark.
Decent holiday season performance wasn’t good enough
In early January, Barnes & Noble reported that comp sales surged 4% between Black Friday and
New Year’s Day. This offset weak performance in early November, driving a 1.3% comp sales
gain for the nine-week holiday period. However, Barnes & Noble needed to ramp up advertising
1
and promotions to achieve this level of sales growth. As a result, management warned that the
company might reduce its earnings guidance by as much as 10% when it reported earnings.
The outcome was even worse. Last week, Barnes & Noble reported that comp sales rose 1.1% in
the third fiscal quarter — the company’s best sales performance in several years — but adjusted
EBITDA still declined to $133 million from $139.5 million a year earlier. Furthermore, Barnes
& Noble now expects full-year adjusted EBITDA to come in between $140 million and $155
million. That’s more than 20% below its previous guidance, based on the midpoint of the range.
This result is particularly disturbing because Barnes & Noble benefited from several tailwinds
last quarter. The liquidation of Toys R Us provided a lift for Barnes & Noble’s educational toys
and games business. Meanwhile, there was a strong lineup of new titles last quarter, led by
Michelle Obama’s memoir, the best-selling adult book since 2015.
Posting sales growth will be a lot harder after Barnes & Noble laps the Toys R Us store closures
— especially in quarters that have a less favorable new title lineup. Management acknowledged
during the earnings call that Barnes & Noble’s sales continued to decline in the first month-plus
of the fourth fiscal quarter.
The future doesn’t look bright
Barnes & Noble’s projected adjusted EBITDA for fiscal 2019 will barely cover its annual interest
expense of around $13 million and its planned capex of $110 million to $120 million. Free cash
flow probably won’t be sufficient to cover Barnes & Noble’s dividend, which costs about $11
million per quarter. That’s a dismal result for a year in which the company has benefited from
strong retail sales trends, along with some unusual tailwinds.
Looking ahead, Barnes & Noble faces secular challenges. Amazon plans to continue expanding
its brick-and-mortar Amazon Books chain. The e-commerce behemoth has also made it virtually
impossible to compete for online sales. Amazon’s superior scale gives it a cost advantage for
shipping books — particularly when it can ship the books along with other items. The result is
that Barnes & Noble’s e-commerce sales peaked years ago.
Given that Barnes & Noble is struggling to eke out a profit and post positive free cash flow when
market conditions are favorable — and that Amazon’s expansion will continue to pressure the
business — the company seems likely to fall into distress in the next recession.
The one thing in Barnes & Noble’s favor is that it has only $129 million of debt — although that’s
up from just $60 million a year ago. On the other hand, the company is trying to sell itself, which
might benefit shareholders but could result in the buyer taking on more debt.
Despite the return to comp sales growth last quarter, Barnes & Noble seems to be as far as ever
from finding a viable strategy to deliver sustainable, profitable growth. And without that, the
company is probably doomed to failure.
2
How to Do a Critical Analysis?
Purpose: Develop a Plan To Compete
Key Objectives:
a) Identifies Strategy to Pursue


How Do We Want to Compete
Which Segment(s) to Target/Who Are The Customers?
b) Describes Tactics to Implement the Strategy
c) Describes Metrics to Evaluate Performance
Big Picture
An Industry within the Environment
E
N Factors
Changing
V Environment
I Govt. Laws
R Resources
Technology
O Skills
N Economy
M Society
E Weather

N
T
Multiple
Suppliers
Factors
Affecting
Suppliers
Goals &
Objectives
Govt. Laws
Resources
Heterogeneous Groups of
Customers
Products
Delta
Environment
-Human Mind
– Norm
– Culture
ABC Products
Charter
Air
Technology
Skills
Have needs which
are affected by
Products
Southwest
-Personal Variables
-Age, Gender,
Income
– Influence of others
– Innovation
-Exchange
-Experience,
Satisfaction
How to Develop A Marketing Plan
Strategy
Tactics
Metrics
2-3
How to Do a Critical Analysis
1. Read the Article Few Times
2. Conduct SWOT Analysis (Search Appropriate Sources
Academia, Google, Wikipedia …)


Think About Core Competence of the Company
Identify Strength, Weaknesses, Opportunities, and
Threats For the Company
Sustainable Competitive Advantage
How to Do a Critical Analysis
3. Decide on the Opportunity or Threat You Want to
Address. Identify Alternatives To Resolve the Key
Opportunity or Threat The Company is Facing

Strategic Alternatives (Preferred) or Tactical Solutions
(to implement an identified Strategy)
Six Basic Strategies
• Broad Cost Leader
• Broad Differentiator
• Niche Cost Leader
• Niche Differentiator
• Cost Leader with Product Lifecycle Focus
• Differentiator with Product Lifecycle Focus
Note: Your Strategy Should Dictate Your Tactics
How Strategy Dictates Tactics
Example: Broad Cost Leader From User’s Guide
A Broad Cost Leader strategy maintains a presence in
all segments of the market. The company will gain a
competitive advantage by keeping R&D, production
and material costs to a minimum, enabling the
company to compete on the basis of price, which will
be below average. Automation levels will be increased
to improve margins and to offset second shit/overtime
costs.
Note: Description For the Other Strategies Given in the
User’s Guide, Section 12 “Six Basic Strategies”
How Strategy Dictates Tactics
Example: Niche Differentiator From User’s Guide
A Niche Differentiator strategy focuses on the high
technology segments (High End, Performance and Size). The
company will gain a competitive advantage by distinguishing
its products with an excellent design, high awareness, easy
accessibility and new products. The company will develop an
R&D competency that keeps designs fresh and exciting.
Products will keep pace with the market, offering improved
size and performance. The company will price above average
and will expand capacity as it generates higher demand.
Note: Description For the Other Strategies Given in the
User’s Guide, Section 12 “Six Basic Strategies”
How to Do a Critical Analysis (Continued)
4. Evaluate Solution(s) and Recommend

Reason: Strengths and Weaknesses, Core Competence




Select a Strategic Alternative Where the Company’s Core
Competence and Strengths is Applicable or a Tactical
Alternative to Improve the Weakness in Implementing the
Strategy.
If No Core Competence/ is Not Applicable Than Identify it as
a Potential Constraints.
No Personal Feelings/Beliefs
Identify What are the Segments and Which Segment(s)
to Target
How to Do a Critical Analysis (Continued)
5. Identify Tracking Mechanisms

How Would You Determine If Strategy/Tactics Have
Been Implemented and Goals/Objectives Stated in the
Problem Statement are Met.
Report Write Up/Format (page 1)
1. Background
i.
First (Short) Paragraph Summary of the Article (5
Points )
ii. Next Paragraph: Discuss Few Strength and Few
Weakness (Internal to the Company; 10 points)
iii. Highlight Core Competence (5 points)
iv. Next Paragraph: Discuss Few Opportunity and Threats
(Based on the Changes in the Environment. Conduct
PEST Analysis or Apply Porter Model; 10 Points).
Report Write Up/Format (page 1)
2. Problem Statement
i.
State What is the Purpose of the Critical Analysis?
Conceptually it is About “How Should Company X
Compete in Y Market? Also State Financial Goals to
Achieve From Implementing the Proposed Solution. (5
Points)
Report Write Up/Format (page 2)
3. Propose and Describe Alternatives (at least two) to
Address the Problem and to Achieve the Goal/
Objective Stated in the Problem Statement. (10 Points)
i.
Either: Strategic Alternatives (which strategy to pursue: e.g.
broad cost leader, niche differentiator etc. given in Section
12 of Capsim Users Guide)
ii. or Tactical Alternatives (state the strategy the company is
pursuing and then describe tactical options such as changes
in R&D, marketing, production and finance Decisions).
iii. Note: You Can Propose to Enter a New Market/Introduce
New Product. However, you still need to suggest
Strategic/Tactical Alternatives to Compete.
Six Basic Strategies
• Broad Cost Leader
• Broad Differentiator
• Niche Cost Leader
• Niche Differentiator
• Cost Leader with Product Lifecycle Focus
• Differentiator with Product Lifecycle Focus
Note: Your Strategy Should Dictate Your Tactics
Report Write Up/Format (page 3)
4. Evaluate Solutions and Recommend an Option
i.
Choose the Solution Where Company Can
Differentiate Through Core Competence.
ii. Describe Why Did You Chose This Solution (10 Points)
iii. Describe how to implement the recommended option.
Use/Apply Tactics Described in Section 12 of Capsim
Users Guide (10 Points)
iv. Identify Segments and point out which segment to
target (10 points).
How Strategy Dictates Tactics
Example: Broad Cost Leader From User’s Guide
A Broad Cost Leader strategy maintains a presence in
all segments of the market. The company will gain a
competitive advantage by keeping R&D, production
and material costs to a minimum, enabling the
company to compete on the basis of price, which will
be below average. Automation levels will be increased
to improve margins and to offset second shit/overtime
costs.
Note: Description For the Other Strategies Given in the
User’s Guide, Section 12 “Six Basic Strategies”
Report Write Up/Format (page 3)
5. Tracking Metrics
i.
Intermediate Metrics: How would you verify that all
the tactics to be implemented for the proposed
strategy are carried out?(15 Points)
ii. Conclusive Metrics: How would you verify that
financial goal stated in the problem statement is
achieved? (5 Points)
6. Take Away (5 points)
Report Write Up/Format: FYI (page 4)
A.
Format: 3 pages maximum, double-spaced using standard font (11 or 12 pt.) and
page format, and page numbers. Write Your Full Name, Course Section and Class
Time/Day similar to the sample analysis, (- 3 points for a different format)
Make sure to use section (Background, Problem Statement.. Metrics) and
subsection titles (Strength, Weakness… Core Competence, Intermediate Metrics)
B.

C.
Make sure that strength and weakness are internal (Skills/Something the
company is good/bad at)

D.
5 points deduction if not internal
Make sure that opportunities and threats are environment driven (PEST Analysis,
Porter Model).



E.
5 points deduction if missing any.
Discuss how the environment is changing.
Do not focus on what the company could do.
5 points deduction if content is not about changes in the environment
At Least Three Citations Required (-2 points per missing citation)
Microsoft reports weak results despite
turnaround effort
By Brandon Bailey, Associated Press
Apr. 21, 2016
SAN FRANCISCO (AP) — Microsoft reported a surprise drop in sales and profit for the first
three months of the year, a sign the tech giant is still trying to find its way in the post-PC era.
Wall Street was expecting the company to show positive results from a series of changes that
CEO Satya Nadella has been making. Instead, revenue for the January-March quarter fell 6
percent to $20.5 billion, while profit plunged 25 percent to $3.76 billion.
Thursday’s report came as other industry stalwarts reported their own struggles with seismic
shifts in the way people use technology.
On Monday, IBM reported its 16th consecutive quarter of revenue decline, as commercial
customers abandon the once-standard model of buying programs to install on their own
computers, and instead use more software online. A day later, Intel said it’s cutting 12,000 jobs
as fewer people buy PCs that run on Intel processors, opting instead for mobile devices such as
smartphones and tablets.
But many analysts were expecting Microsoft to do better. While sales of personal computers
have been sliding for the past four years, Nadella has been working to make Microsoft less
dependent on revenue from its flagship Windows operating system, used mostly on PCs.
Microsoft said revenue from Windows software licenses declined 2 percent during the quarter,
after adjusting for currency fluctuations. That’s better than the overall drop in PC shipments,
which analysts at the Gartner research firm estimated at nearly 10 percent.
But revenue from business software and Internet-based services, known as cloud computing,
didn’t grow as much as analysts expected. In particular, Microsoft saw only a 3 percent increase
in revenue from its “Intelligent Cloud” business, where the company has invested heavily to help
business customers run their operations on Microsoft’s servers. The division’s operating profit
fell by 14 percent.
In a few bright spots, the company said sales of its Surface tablet computers rose 56 percent to
$1.1 billion, while revenue from ads shown with results from its Bing search engine grew 55
percent to $1.5 billion. After spending billions of dollars to develop Bing as a rival for Google’s
highly lucrative search business, Microsoft said the service started showing a profit last fall.
Some of that growth can be credited to Windows 10, which comes with a redesigned Web
browser and Cortana, a Siri-like digital assistant. Both are designed to encourage more use of
Bing.
Microsoft says Windows 10 is now running on more than 270 million machines, a healthy figure
for software that was released only nine months ago. But some of that is the result of free
upgrades offered to users of older Windows versions, rather than as software sales to PC
manufacturers.
Under Nadella, the company has also released free versions of programs like Word and Excel for
smartphones and tablets that run competing operating systems from Apple and Google. The
company hopes to make money by charging users for extra features, and for related services like
Skype messaging and online file storage.
Microsoft is also nudging users to change how they buy software. Subscriptions to its Office 365
service are growing rapidly. And because Microsoft delivers regular updates over the Internet,
analysts say that should help the company sell extra features, particularly to business users.
But the turnaround is taking time to materialize. Microsoft said it earned 47 cents a share for the
fiscal third quarter, or 62 cents after adjusting for one-time charges. Analysts surveyed by
FactSet were expecting adjusted earnings of 64 cents a share and revenue of $22.1 billion.
Microsoft Corp. executives blamed higher-than-expected taxes for cutting into its profit for the
quarter.
“Overall, we had a solid quarter,” Nadella said during a conference call Thursday.
Some analysts were inclined to accept that report. In an email, Mark Moerdler of Bernstein
Research said Microsoft’s earnings per share would have met Wall Street expectations if not for a
“tax technicality.”
Microsoft’s stock price has been rising in recent months, as investors have generally supported
Nadella’s turnaround effort. But the earnings report sent shares down more than 5 percent in
after-market trading, after closing at $55.78.

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