Harlequin Five Forces Analysis Essay

High economies of scale required. For an entrant to gain success in romance novel market, it must possess mature sales, production, and distribution to operate effectively, which also leads to great risk. High product differentiation required. Other companies start to add more features while Harlequin products remain relatively unchanged. Significant capital requirement required. This is evident in Simon and Schuster’s case, in which it bears a high upfront investment for this battle. Access to distribution channels is medium to difficult. Harlequin has gained exclusive access to groceries, but failed on stand-alone retails. Other competitors either choose regular bookstore or similar as Harleuqins’; however, it might be difficult to entrants to gain access to these channels by themselves. Government policy has been very protective to authors; however, no clear restrictions on product images. Buyers Power Increasing buying power due to additional competing products Low switching cost Changing target markets A variety of choices Poor retention rate, high return rate Loss of existing customers and high cost of attracting a new customer American Romance Series to meet consumer’s tastes Substitutes Threat of Substitutes is high due to technology advancement and demand diversification. Evident in Harlequin’s attempts of film, magazine and scholar’s choice (bookstore). Suppliers Power Increasing supplier power due to promising offer from Simon and Schuster Loss of excellent authors who later generate sales for Simon and Schuster shows that authors possess significant supplier power Other supplier powers such as sales force, printing business are relative stable Industry Competitors, Rivalry among existing firms Low growth rate as more competitors are competing for a stable market other competitors are earning market share at Harlequin’s expenses oligopolistic market is another factor of intense competition â€Å"Romance War† due to introduction of silhouette Simon and Schuster introduced Silhouette, a rival line of romance novels, in 1980 32% market share and rising Competes the oversea markets Emerging competitors as a result of Silhouette’s introduction; also evident in 5 additional rival lines launched in 1982 accelerate the intensity of competition and decrease Harlequin’s market share and volume sales Possession of competitive advantage (i.e. No best seller management and standardization) which ease competition temporarily Bitter rivalry with Sillhouette – S&S although losing money, but gaining market share underestimated by Harlequin hired Harlequin’s former vice president and best-selling authors advertising budget copied Harlequin’s Presents – confused buyers Financial Revenue increase slowly Profit dropped to half 1980-1981 ($44.7 –> 22.3) drastically decreased from 1982 -1983 ($25.8 –> 5.5) remove unprofitable subsidiaries – films, scholar’s choices, magazine etc Debt high debt ratio – rapid increase from 1980-1982, then lower in 1983 expensive bad debts from the Reader Service Cost 40 new stores eating up all the cash increasing costs of Reader Services reducing costs at corporate level – cut overhead expenses by 20% sales decreased, advertising expenses increased Working Capitals decreasing working capitals – lack of cash flow for investment – only 33 millions in 1983