ASSIGNMENT

INFOMAX COLLEGE OF IT AND MANAGEMENT

(MB033-3-M)

(MANAGERIAL ECONOMICS)
HAND OUT DATE: (11/11/2019)

HAND IN DATE: (20/11/2019)

WEIGHTAGE: (50) %

INSTRUCTIONS TO CANDIDATES:
1. Submit your assignment at the administrative counter.
2. Students are advised to underpin their answers with the use of references (cited using the
Harvard Name System of Referencing)
3. Late submissions will be awarded zero (0) unless Extenuating Circumstances are upheld.
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6. Where the assignment should be submitted in hardcopy and softcopy, the softcopy of the written
assignment and source code (where appropriate) should be on a CD in an envelope / CD cover
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7. You must obtain 50% overall to pass this module.
 ABSTRACT

The main objective of this paper is to determine the strategies that, the publishing
industry, Bloomsbury can implement for the purpose of profit maximization through
J.K Rowling’s Harry Potter book sequel.

The tales of Harry Potter, written by the British author and philanthropist J. K.
Rowling (Joanne Kathleen Rowling), have swept the world since its 1997 publication.
The books have gained remarkable recognition and record sales globally since the
publication of the first book, Harry Potter and the Philosopher's Stone. Harry Potter
proceeds to captivate readers all around the globe till date, even several years after the
publishing of the last book and the release of the last film. Harry Potter's books are
almost as appealing as Harry Potter's story from a context of marketing and
stigmatization, from which both advertisers and company owners’ benefit.

As of February 2018[ CITATION 50018 \l 1033 ], more than 500 million copies
massive global were sold, rendering them the number-one book sequence in history,
and were translated into eighty languages. They have drawn huge adult as well as
younger readers and are also deemed foundational pillars of contemporary young
adult literature.

The story Harry Potter’s brought a new fusion of urban fantasy, drama and mystery
into the literature world making it a differentiated brand in the early days. Offering
such a unique product in the publishing industry, Bloomsbury’s profit maximization
strategies as a monopolist is discussed further in this paper.
 CONTENTS

ABSTRACT.......................................................................................................................................... i

INTRODUCTION............................................................................................................................ 1

DISCUSSION..................................................................................................................................... 3

Sales Maximization strategy........................................................................................................... 3

Profit Maximization strategy.......................................................................................................... 4

Strategy based on Price Discrimination..................................................................................... 4

CONCLUSION.................................................................................................................................. 7

REFERENCES..................................................................................................................................... 8
 INTRODUCTION

Harry Potter is a compilation of seven fiction books written by the British author and
philanthropist J. K. Rowling (Joanne Kathleen Rowling).The novels narrate the
adventures of Harry Potter, a teenage sorcerer, and his colleagues, Hermione Granger
and Ron Weasley, both of whom are learners of Witchcraft and Wizardry at Hogwarts
University. The central story line comprises the battle of Harry versus Lord
Voldemort, an evil sorcerer who seeks in becoming invincible, destroy the sovereign
government of the wizard identified as the Ministry of Magic and enslave all wizards
and Muggles (non-magical individuals).

The novel series have gained remarkable recognition and record sales globally since
the publication of the first book, Harry Potter and the Philosopher's Stone, dated 26 th
June 1997.In 1995, the British finalized her manuscript for her first book. She
struggled very hard to publish the story of Harry Potter, but no publisher agreed it to
publish her work. Finally, after long struggle, Bloomsbury, A minor independent
publisher that managed about two percent market share for British books,
acknowledged and published her work. Only 500 copies of Philosopher’s were
published at first for the market, which briefly became Bloomsbury’s bestseller. As
the top-selling novels in history, the last four novels sequentially established
milestones, with the conclusive novel selling nearly 11 million copies in the USin24
hours of the publication.

Five months after the first publication of the novel, it achieved its first honour, a
Nestlé Smarties Book Prize. The book also earned the British Book Prize for
Children's Book of the Year in February. As of February 2018[ CITATION 50018 \l
1033 ], the novels have sold over 500 million copies internationally, creating them
the number-one novel sequence in till date, and have been interpreted into eighty
languages. They have drawn huge adult as well as younger readers and are also
deemed foundational pillars of contemporary young adult literature. As per to Forbes
in 2004, Rowling grossed over $1 billion (£ 627 million) for her books and associated
sales, making her the world’s first billionaire author.
 GURUNG 2

The Harry Potter series has flourished with several related works due to the popularity
of the books and films, a travelling show that debuted in Chicago in 2009, a exhibit
tour in London that launched in 2012, a streaming channel on which Rowling revises
the series with fresh knowledge and perspective, plus, among several other
innovations, a pentalogy of films featuring Fantastic Beasts and Where to Find Them
in November 2016.
 DISCUSSION

Rowling's novel featured a range of aspects and story twists that were not exclusive to
literature, but the fashion in which she constructed her comprehensive storyline and
portrayals in a mystical environment provided her work an instant spot of uniqueness.
The Harry Potter brand's product lifecycle kept broadening due to readers’ interest
and likeability in the unique and mythical story. Moreover, the book series broadened
its market place by acquiring two audiences at once (children as well as adult
readers), which also added in improving its long-term growth potential.

The main success element of the quality is the value of the novel itself. J.K Rowling
created a quality insight to the literature world. Other factors that helped in Harry
Potter’s success include emotive implication, word-of-mouth, internet hype, and
persistent promotion and brand stability. Some other marketing factors used were
internet leaks and even early releases in some locations as well.

The successful Harry Potter’s movie series based on the Rowling’s novels was also a
major factor helping boost the novels sales.

In its initial lifecycle stages, the Harry Potter books were priced lower due to its new
entrance to the market, low brand value, and as a strategy to hit high demands with
low price value. Later, receiving positive response in the market of the novel series
and applying various profit maximization strategies, Bloomsbury gradually improved
and peaked its sales and profits. Rowling’s Harry Potter’s novel series is still the
major money maker of Bloomsbury till date.

Sales Maximization strategy

The book publishing industry for J.K Rowling’s Harry Potter novel series lied in a
monopoly market, which involves single seller selling unique or differentiated
products. Hence, Bloomsbury publisher played in the market as a monopolist.
In this case, Bloomsbury published the books in with low profit margin in the
beginning phase where the publisher itself was only a minor publisher. This helped to
enhance sales at enormous quantity, although profit was minimum. This is a short-
term market approach for brand awareness and market coverage purpose.
 GURUNG 4

Profit Maximization strategy

Maximization of profit applies to strategies and objectives engaged in the
organization's attempt to raise net profit to the maximum extent possible considering
the actual resource of the firm. Through measuring the marginal sales and marginal
costs of producing an additional unit, monopolist (Bloomsbury) can assess its profit-
maximizing price and quantity. The profit maximizing production level of the
monopolist is determined by equating its marginal profits with its marginal cost.

Strategy based on Price Discrimination

The strategies based on Price discrimination involve an organization charging
different price to varied segments of customers for a same product or service,
regardless of almost similar cost of production. A monopoly firm with exclusive
pricing authority uses Price discrimination. The monopolist practices this tactic to
achieve market advantage or to obtain market share. Applying the price
discrimination strategy, the Harry Potter novel series were published globally in
eighty languages for children as well as adults.

Price discrimination is also referred as monopoly price discrimination or yield

management in economic terminology.[ CITATION Art20 \l 1033 ] contrasted
between price discrimination in the first, second and third degrees, based on the
volume of knowledge provided to the seller on customers' needs. The degree of price
discrimination varies in various industries.

 First Degree Price Discrimination

As this degree of price discrimination involves extreme consumer exploitation, this is
also recognized as perfect price discrimination. For each unit, the company charges
the highest possible profit from customers, and thus collecting the entire economic
surplus for itself. Here, the seller considers the actual cost of each customer and given
that differential pricing is practicable, will charge each customer for his or her
particular booking price.
Perfect price discrimination is often characterized as happening when the seller gives
each customer a simple take-it-or-leave-it bid that collects the highest possible value
from the market. By using implementing proper market research, a monopolist can
 GURUNG 5

determine its customer segments in accordance to their maximum willingness to pay

for the product or services. Here, the seller must obtain perfect information of demand
of possible buyers.
In case of Harry Potter’s novel here, Bloomsbury is providing books to its different
customer categories that can be differentiated as per their fandom (who cannot await
for soft cover versions) for the Potter books and willingness to pay for special editions
books or premium books. Regardless of cost, prices are charged for different
customers as per their personal demand elasticities.
Nonetheless, individual pricing is seldom encountered, but such a pricing approach
has the conceptual potential that contributes to a successful competitive result, though
clearly with a very different distribution of offers.

 Second Degree Price Discrimination

It arises when customers face nonlinear price schedules and is also referred as or non-
linear price distribution. It involves the distribution of bundles or sections of a product
by firms, which are deemed to be surplus resources at cheaper prices than the one
originally reported or marketed, such as quantity discounts for bulk purchases.
[ CITATION Var89 \l 1033 ]A low-demand customer has a (marginal) value for the
product that exceeds marginal cost, consuming an inefficiently small amount of the
product. While, high-demand customer has a marginal power to pay, which is
equivalent to marginal cost at the optimal nonlinear prices, hence consuming
efficiently correct amount. Although such utility consumption is not applicable to all
goods and services and in tactics like discounts.
Bloomsbury can use such price strategies towards local bookshops by selling larger
quantities of books with discounted price creating increase in sales of product.

 Third Degree Price Discrimination

The classical principle of a monopolist's third-degree price discrimination is simple:
the ideal price-discriminating prices are identified by implementing the common
inverse-elasticity concept to each segment individually [ CITATION Sto07 \l 1033 ].

The third degree price discrimination applies to pricing discrimination in which the
monopolist segments the whole market into submarkets and charges varying prices
for each submarket, hence it is also referred as market segmentation. This form of
 GURUNG 6

price discrimination allows the monopolist to break the market in such a way that the
items offered in one market cannot be resold in another market. For this, research
must be done to determine different price elasticity of demand of different segmented
markets. The segments are categorized based on certain characteristics like age,
gender, purchasing power and location.
Rowling’s Harry Potter’s books are also published in different built quality for
customer with different level of purchasing power. Those books also come in
different designs and forms taking in consideration of children and adult preferences.
Children books are more captivating with pictures and fun features, while normal
novel designs are available for adults.
In this form of price discrimination, addressing the issue of price discrimination
eliminates the result in many independent markets of an ideal monopoly price.
 CONCLUSION

J.K Rowling’s Harry Potter’s story has set a history in not only literature but also in
the publishers’ industry globally. Harry Potter attracts to so many readers because,
while maintaining conventional elements of the genre, it is versatile and convincing.
The fantasies, complex humour and drama in the stories have highly attracted younger
aged as well as adult readers throughout the globe. In illustrating that an extremely
literate and enthusiastic audience existed to fuel demand for great stories, Harry Potter
changed the publishing industry. Harry Potter encouraged millions in reading and
developing lifelong learners.

It has also proved as a vital product for Bloomsbury Publication in earning profit and
winning over the market. It is still the best seller and the best money making brand for
Bloomsbury till date. The paper has discussed Bloomsbury’s monopolist nature and
the strategies that can be used for sales maximization and profit maximization
purposes by Bloomsbury publication with Rowling’s Harry Potter books as a brand.

The major success feature of the novel is the quality of the novel itself. J.K Rowling
created a quality insight to the literature world. Other factors that helped in Harry
Potter’s success include emotive implication, word-of-mouth, internet hype, and
persistent promotion and brand stability. Some other marketing factors used were
internet leaks and even early releases in some locations as well. The successful Harry
Potter’s movie series based on the Rowling’s novels was also a major factor helping
boost the novels sales.

Bloomsbury published the books in with low profit margin in the beginning phase and
enhanced sales at enormous quantity, although profit was minimum. Eventually, the
firm adopted the strategy of price differentiation to expand the reach of market. Price
discrimination helped firm in maximizing profits. Perfect, Non-linear and market
segmentation price distribution are used by Bloomsbury in maximizing its profit and
sales through broad range of customers throughout the globe.
 GURUNG 8

REFERENCES

Baker, RJ 2006, PRICING ON PURPOSE: CREATING AND CAPTURING VALUE, John

Wiley & Sons, Inc., New Jersey.
Beckwith, H 2000, The Invisible Touch: The Four Keys to Modern Marketing,
Warner Book, New York, USA.
Brown, S 2002, 'Marketing for Muggles: The Harry Potter way to higher profits ',
Business Horizons, vol 45, no. 1, pp. 6-14.
Brown, S 2005, 'Wizard! Harry Potter's Brand Magic'.
Gunelius, S 2008, Harry Potter: The Story of a Global Business Phenomenon,
PALGRAVE MACMILLAN, New York.
Pigou, AC 1920, 'The Economics of Welfare'.
Stole, LA 2007, 'PRICE DISCRIMINATION AND COMPETITION', Handbook of
Industrial Organization, vol 3, pp. 2223-2286.
The Pottermore News Team 2018, 500 million Harry Potter books have now been
sold worldwide, viewed 5 March 2020,
<https://www.wizardingworld.com/news/500-million-harry-potter-books-
have-now-been-sold-worldwide>.
Varian, HR 1989, 'PRICE DISCRIMINATION ', in R Schmalensee, RD Willig (eds.),
Handbook of Industrial Organization, Elsevier Science Publishers B. V.
Waetjen, J & Gibson, TA 2007, 'Harry Potter and the Commodity Fetish:
Activating Corporate Readings in the Journey from Text to Commercial Intertext',
Communication and Critical/Cultural Studies, vol 4, no. 1, pp. 3-26.