Harlequin Case

1. Industry analysis:

In book industry, we have four main categories authors, publishers, distributors and buyers. The decline of physical book and the fast growth of e-book is a big challenge for this industry.

• Publishing is dominated by four major’s players. They managed to maintain good margin and sells in printed books. Harlequin is a smaller player with 6% of their overall revenue but maintain the highest margin. They benefit from high barrier to entry with their historical experience, brand reputation and loyalty from their author. The entrance of Amazon and other self-publishing companies (mainly controlled by Amazon) does not seem to be the major threat but e-books require a big change in cost structure increasing fixed cost with bargaining power from authors with means more royalties and heavy technological investments.

• Distribution is the biggest challenge of the industry. In fact, Amazon is the main player with 29% of the market well before Barnes & Noble (16%). Amazon want to be “The Standard”, with their low pricing strategy, selling under-cost there are pushing competitor to reorganise (merge of Penguin and Random House to build scale) or exit. They let no chance to competitor to collude. E-book is their main call with 62% of the market they don’t let any space for competitor and use their Kindle e-reader (first support with 55% of the market) as their main competitive advantage, in line with to customer needs of availability, privacy and portability, to increase control. Amazon publicly turn down or imitate all attempts to collude and compete.

The book industry is not very attractive with well established player, the opportunity for growth and profit will come in the publishing category with differentiated and value-added product offering and in the distribution section with low cost structure and scalability, and solutions against Amazon retaliation. Actual player need to react quickly as the market is moving fast especially when facing substitutes like video games and social media.

2. Strategy analysis

Harlequin wants to be the leader in the women books edition but they want to increase their profit and secure their high margins. They compete with two completely different products but with the on-line offering the limits are less clear

• Serie romance fiction: a mature, worldly and weekly offering of 18 brands and product line for mid age educated and loyal women. Low price and low cost based and few advertising and strong distribution network.

• Women’s Single title segment, with MIRA imprint, bigger books extended in different line targeting different age segments more a Joint venture with the author relying the best seller power (quality, subject and author). More expansive with heavy fixed cost.

They believe they can offer a variety of book with consistency,

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