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In order for a business to remain competitive in their market, they need to be aware of whom their competition is; it is vital to the success of a business. A competitive analysis is “a statement of the business strategy statement and how it relates to the competition” (Entrepreneur Media, Inc., 2006). It gives a business the necessary data to remain competitive, providing detailed information about the competition; including strategies and assumptions, and that may hinder business’ success. Developing your own plan, without taking into account your competition, is potentially setting yourself up for failure.
A competitive analysis was conducted on behalf of CanGo to aid in the development of their marketing strategy within the Retail and Software Industries. This young business has experienced growth over the last few years, yet the growth has been slow, much slower than their competition. In order to remain competitive in the market, CanGo must understand both the Retail and Software industries, as well as knowing their competitors objectives within the market.
The analysis focused on three of their competitors: Amazon, Barnes & Noble, and Electronic Arts, Inc. (EA). Each of these competitors, being steadfast in the industry, indicates that there is definitely a market for selling books, CD’s, DVD’s and online gaming services. Unfortunately, there is no one competitor that provides both the products and online gaming services being offered by CanGo, as these are two different markets. Yet, each of these companies does have a common offering, that which is PC and Video games. This suggests that CanGo may benefit from offering online gaming as part of their portfolio, and even leaves room for growth into other market segments in the future.
Amazon.com, Inc. (AMZN on NASDAQ), headquartered in Seattle, Washington, started as a bookseller and today is one of the largest, well-known, worldwide media retailers. They were “founded in 1994 by Jeff Bezos and became an online retail merchant in 1995” (Amazon.com, Inc., 2010). They have over twenty-two subsidiaries, operating in two different countries, North America and Germany (Luxembourg) and this does not include their seven online e-commerce sites. They are partnered with several third-party companies, which represent “30% of their unit sales for 2009” (Amazon.com, Inc., 2010). Sales for the year 2009 were $24.51 billion, which was an increase of 28% over 2008’s sales of $19.17 billion (Amazon.com, Inc., 2010). This growth was due to Amazon.com, Inc.’s ability to minimize pricing increases for the consumer, and growing their stock both in inventory and selection for each of their product offerings (Amazon.com, Inc., 2010). Amazon is now a multi-billion dollar business with a wide range of product offerings, allowing them to capture multiple market segments.
Amazon.com, Inc.’s Strategy & Objectives
Consumer access is Amazon.com, Inc.’s primary strategy; the decisions regarding products offered along with which consumers they will target are based upon how they access their consumers. They strive to provide consumers with the best selection and price by making shopping convenient. Their product offerings are as diverse as their consumer base, and they have chosen to not sell any products that are difficult to ship. Their primary goal is not to reach the entire population, only the entire online population and this content spreads to their product offerings; if it’s difficult to ship, it doesn’t fit. The vision of Amazon.com, Inc. is to “be Earth’s most consumer-centric company” and they are achieving their goal (Amazon.com, Inc., 2010).
Amazon.com, Inc.’s Assumptions/Risks
Online shopping describes the entire Amazon.com, Inc. business; therefore, it is safe to make a few assumptions. The first assumption is that the diverse product offering will make for more faithful consumers, as they will be able to find almost any product that they are seeking, all in one place, at Amazon.com, Inc. Online purchases will improve at a steady rate, as consumers interest in online buying grows. Growth in digital offerings, such as Kindle books, newspapers, and magazines, is inevitable; paperback books will never become obsolete, but these sales may plateau or decline. Finally, regulations imposed by both local and international governments will not change in a manner to hinder online sales. Based upon these assumptions, Amazon.com, Inc. will be a tough competitor of CanGo.
Every business faces risk daily, and this risk is always affected by the economic climate; when consumers are comfortable in spending a business sees growth, but when a consumer is not comfortable sales decline. This is a key factor for Amazon.com, Inc. Additionally, Amazon.com, Inc. has “many competitors in different industries, including retail, e-commerce services, digital content and digital media devices, and web services” that pose a huge threat to their business (Amazon.com, Inc., 2010). As with any competition, this is in part due to things such as name brand recognition, resources, company history, better technologies, and a greater consumer base. Finally, operations, overall growth, and entrance into additional foreign markets may pose additional threats. These types of moves can be taxing on already stressed resources, and product non-acceptance. These risks may keep Amazon.com, Inc. a solid competitor of CanGo. They may also allow CanGo to gain a leg up in the market, as they attempt to make a name for themselves, in offering a service not currently available in the Amazon.com, Inc. portfolio.
Barnes & Noble, Inc.
Barnes & Noble, Inc. (BKS on NYSE), headquartered in New York, New York, was established as a bookseller and today, according to their “For Investors” page they are the “world’s largest bookseller” and a “leader in content, commerce and technology” (Barnes & Noble, Inc., 2011). On the “Barnes & Noble History” page, it states that they were “founded in 1965 by Leonard Riggio, as competition to the University Bookstore” (Barnes & Noble, Inc., 2011). They have two subsidiaries, including a publishing company called Sterling Publishing Co. Inc., and Barnes & Noble.com (Barnes & Noble, Inc., 2009). As of January 2011, they are operating under the Barnes & Noble and B. Dalton names in over 1,300 brick and mortar locations, which encompasses both retail and college bookstores, within all 50 states, as specified on the “For Investors” page (Barnes & Noble, Inc, 2011). Sales for fiscal 2010 were $5.8 billion dollars, which was an increase of 29.85% over 2008’s sales of $5.1 billion dollars. With the restructuring of their fiscal year; we can only make this comparison, rather than a year to year comparison. This growth was due to the addition of digitization to their portfolio; in 2009 they added the eBook Reader called the “Nook” (Barnes & Noble, Inc., 2010). Barnes & Noble, Inc. has been able to market effectively to both physical and online consumers, and they remain a consumer favorite, thus they remain strong in their market segment.
Barnes & Noble, Inc.’s Strategy & Objectives
Barnes & Noble, Inc. has several key factors to their strategy; locations, consumer proximity, ambience, title selection, departmental variety, and pricing. Their locations are strategically placed throughout the 50 states, to be within close proximity to their consumer base. They offer a comforting and quiet environment in which one can pull a book from the shelf and read it while drinking a cup of tea or coffee from their in-store café. They offer hundreds of thousands of titles per location, in books, magazines, CDs, DVDs, and e-books. According to the company’s “Frequently Asked Questions” page (Barnes & Noble, 2011), they offer everyday low pricing for books, usually 20% to 30% off the suggested retail prices. Their “Our Mission” page claims “Our mission is to operate the best specialty retail business in America, regardless of the product we sell” (Barnes & Noble, 2011). Consumer loyalty has proven that their vision has come true.
Barnes & Noble, Inc.’s Assumptions/Risks
The Barnes & Noble, Inc. business encompasses both retail and online; therefore, it is safe to make a few assumptions. The first assumption is due to their extensive knowledge in book selling; their consumer loyalty will continue to grow. They will not lose business, due to brand recognition, as Barnes & Noble, Inc. has superior recognition against its competitors. Online purchases of e-Books will improve at a steady rate, as consumers interest in online buying grows as well as the ease of use, along with convenience, of the Nook grows. Finally, regulations imposed by the government will not change in a manner to hinder either retail or online sales. Based upon these assumptions, Barnes & Noble, Inc. will be one of the toughest competitors of CanGo.
Barnes & Noble, Inc., along with all other businesses faces risk daily, and one of the major components of risk is the economic climate; consumers won’t spend, if money is tight, thus sales are impacted. Additionally, Barnes & Noble, Inc. finds itself in competition with the internet, and other bookstores, and retail merchandisers who also sell media content such as books, CDs, DVDs. As with any competition, technological advances can set a company back, if they are unable to keep up the pace with other key players. Finally, a disruption of key suppliers may stall any advancement in technology or products. This could be crucial in allowing Barnes & Noble, Inc. to remain as competitive, and could potentially allow CanGo to gain some forward momentum in these same markets.
Electronic Arts, Inc.
Electronic Arts, Inc. (ERTS on NASDAQ) is a company who specializes in video and computer games software for multiple platforms, including mobile and web-based. They were founded in 1982 by three former Apple Computer employees: William (Trip) Hawkins III, William Bingham (Bing) Gordon, and Tom Mott (Funding Universe, n.d.). They have eight subsidiaries, in six different countries including Australia, Canada, France, Germany, Japan, and the United Kingdom and this does not include their three online e-commerce sites. Electronic Arts, Inc. operates under four labels: EA Games Label, EA SPORTS Label, EA Play Label, & EA Interactive Label, with each label offering a different portfolio of games (Electronic Arts, Inc. [EA], n.d.). Along with their corporate headquarters in Redwood City, CA, they have a total of twelve other locations for development, including three in Canada, five in Europe, and four in Asia. Sales for fiscal year 2009 were $4,212 million, up 15% from 2009 which came in at $3,665 million. Electronic Arts, Inc. is a million dollar business offering virtual entertainment to people of all ages, worldwide; they are continuing to grow in their niche market.
Electronic Arts, Inc.’s Strategy & Objectives
The key element of strategy at Electronic Arts, Inc. is their ability to develop games that span multiple gaming platforms, including wireless devices. They also want to appeal to multiple markets of individuals, thus their games encompass many categories, including strategy, family, sports, and more. It is important to them, that they are able to “iterate or sequel” the games they publish (EA, 2009). With the development of games for the PC, Internet, Wi-Fi, and other gaming systems such as “Xbox 360, PLAYSTATION 3, Wii, and PSP,” Electronic Arts, Inc. has achieved their goals (EA, 2009).
Electronic Arts, Inc.’s Assumptions/Risks
As Electronic Arts, Inc. is the leader in gaming, it is safe to make a few assumptions. First, one can assume that with their diverse offering of games for all different platforms that their consumers will remain steadfast in their purchases of the EA game products. Online gaming, and purchases will increase, as the number of internet users increases and the economy improves. As their brand recognition is strong with games like “Madden NFL Football, NHL Hockey, The Sims, Bejeweled, and Need For Speed,” their consumer base will continue to choose Electronic Arts, Inc. as their supplier for this type of media. With the stressors of daily life, interest in gaming will increase, as a means for stress reduction and entertainment. Finally, the government will not make changes to the regulations that will adversely affect retail or online sales. Based upon these assumptions, CanGo is going to have to work twice as hard to compete in the online gaming market, but with their current consumer loyalty, they may be a welcome competitor to Electronic Arts, Inc.
Risk is a guarantee that is faced by businesses daily. Unfortunately, the economic climate is a major risk to the success or failure of a business. If the economy is in a negative state, consumers will not buy, thus affecting overall sales for leisure items and those who sell them. Electronic Arts, Inc. is also susceptible to this particular risk. Additionally, Electronic Arts, Inc. finds itself competing with other entertainment providers such as “television, theater, music, and social networking” (EA, 2009). They also face competition in their development for wireless devices, as this is not their niche market, and competition is fierce with the daily technological advances. The online gaming market is quickly evolving with several key players, such as Popcap and Yahoo, and this too may be a threat for Electronic Arts, Inc. Finally, sales could be adversely affected by the unavailability of hardware systems from third parties, a wane in consumer demand, or an unpopular new product. These risks could make any company fragile, but as the competition is fierce, Electronic Arts, Inc. must remain at the top of their game, if not, they will give CanGo the potential to become a strong opponent.
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