Dianne Louise Cuevas BSBA 4 MGNT 106 September 1, 2019

Case Study – Barnes & Noble College Bookstores

Power Struggle and Conflict in the Textbook Channel

1. What environmental factors are contributing to the conflict between B&N

College and McGraw Hill?

A conflict rose between Barnes & Noble College Bookstores and McGraw-Hill
publishing due to the issuing a fee on returned books. In addition, many environmental
factors that contributed to such conflict. Moreover, one of those factors is the
development in technology that has encouraged online retailers like Amazon.com to sell
E-books with relatively low cost than physical bookstores and the heat of competition is
still increasing over the time. As a consequence, the market share and profit of the
physical bookstores have decreased; as a result, B&N college bookstore was not able
to pay back their imposed fees due to low revenue and profit. Plus, the increased
governmental regulation on the purchased books for students and decreasing students
government funds and supports and cutting back students enrollment, thus decrease in
the student book demand. Furthermore, student enrollment in US has been declining for
a college age population falls about 2% annually. Moreover, over 66% of students paid
dollars for books is counted for the publisher and the rest is dived among university
professors & authors, fright & shipping companies, university or college campus and
only 15% is left for the bookstore. Thus, production of educational and academicals
books is relatively small compared to the mass market book and cost of producing and
printing books is increasing. Thus, due to the increase in the production cost, only those
large publishers can offer subsequent price reduction to increase returned textbook
sales volume in the secondary market. In addition, college sector experience has the
highest book return approximately 23% of all new books.

2. Discuss the balance of power in the channel. Who has the advantage?

In this case McGraw-Hill publishing has more power than Barnes and Noble.
Because, B&N has a lack of security; due to the full depends on book suppliers and
publishers. Plus, there is no long-term contract between McGraw-Hill and Barnes and
Noble that would increase the B& N risks. Still there is a substantial power lies on the
hand of student and professors; those people can influence the type of books are
purchased and ordered from suppliers. Furthermore, the balance of power is more into

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 the side of McGraw-Hill publishing leaving them with a strong supplier bargaining power.
Not to mention, professor may insist on ordering McGraw-Hill’s books for their students
as their known for their high quality, if they contracted with another publisher the quality
of teaching may be affected; as a result, student enrollment will be effected; college and
universities will force Barnes and Noble either to draw back from the contract or to order
McGraw-Hill’s book.

3. What causes of channel conflict can you identify within the channel?

The causes of channel conflict The conflict began when McGraw-Hill has
imposed a restocking fee for returning the new unsold book for a fee of 5% present for
those bookstores that has returning level of 15% or above. The Barnes & Noble College
Bookstores were ordering large number of books more than they need, it is estimated
that they stock book titles approximately over 60000 and 200000. Plus, there were lack
and miscommunication between all parties starting from students, professors, text book
store to the Barnes & Noble College and McGraw-Hill. Plus, the bookstores claimed that
it is too difficult to estimate the student book demand. However, McGraw-Hill argued
that there is no need for any bookstores to hold such a large inventory due to the issue
of estimating book demand, because McGraw–Hill guarantees the delivery of the books
within 5 working days after receiving the orders.

4. What solution might you recommend to Amberly as a potential avenue

for consideration?

B&N Bookstores College is recommended to make a study and statistics on the

estimated books inventory and demand for every year; to solve the problem of
estimating the inventory required level. Plus, they have to find new potential revenue
stream offering a collective of E-books and magazines, Wi-Fi and coffee on the B&N
bookstores to increase the revenue by a substantial level. However, in this case of
conflict B&N bookstore should communicate their good well for the professors and
McGraw-Hill instead of sending email to professors force them not to order from
McGraw-Hill. Moreover, McGraw-Hill should decree their restocking fee for a specific
period of time. In addition, McGraw-Hill should communicate their offers and contracts
terms to every bookstore.

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